A recent decision by the Ninth Circuit regarding the timing of removal to federal court has gotten a fair amount of attention in the legal media.  It potentially opens the door to later removals of cases more than 30 days after service of the complaint, although I don’t expect that defendants’ practices will change significantly.  And in circuits outside the Ninth Circuit, caution is likely to dictate that removal happen during the initial 30-day period, as has been defendants’ practice.

In Roth v. CHA Hollywood Medical Center, L.P., No. 13-55771, 2013 U.S. App. LEXIS 13224 (9th Cir. June 27, 2013), the Ninth Circuit construed 28 U.S.C. § 1441(b)(1) and (b)(3), which provide that a notice of removal shall be filed within 30 days of receipt by the defendant of the initial pleading, or, “if the case stated by the initial pleading is not removable, a notice of removal may be filed within 30 days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable.”  Id. at *6-7.  The defendants had removed the case under CAFA more than 30 days after receiving an amended complaint that, together with further investigation by one of the defendants, created a basis for establishing minimal diversity and that the amount in controversy exceeded $5 million.  It appears that the reason for the late removal might have been difficulty in locating a putative class member that was a citizen of a state other than California and establishing that class member’s citizenship (the Ninth Circuit characterized this as having been done “quickly,” but it appears it was done more than 30 days after receiving the amended complaint).  The district court remanded the case based on a rationale that the defendants could not remove the case based on information they discovered, but only based on the amended complaint or some other paper received from the plaintiffs, within one of the 30-day periods specified in § 1441(b)(1) and (b)(3).  Id. at *4-5.  This rationale appeared inconsistent with how the vast majority of removals proceed, since most involve the defendant developing information regarding the amount in controversy that goes beyond what has been received from the plaintiffs.

The Ninth Circuit explained that a defendant can remove a case outside of the 30-day periods based on its own investigation, where the complaint and other documents received from the plaintiffs do not demonstrate on their face that the case is removable.  What is most significant here is that the defendant’s investigation in that regard is not required to be completed (at least preliminarily) within the first 30 days after service of the complaint or amended complaint:

We held in Harris v. Bankers Life and Casualty Co., 425 F.3d 689, 693-94 (9th Cir. 2005), that a defendant does not have a duty of inquiry if the initial pleading or other document is “indeterminate” with respect to removability. Thus, even if a defendant could have discovered grounds for removability through investigation, it does not lose the right to remove because it did not conduct such an investigation and then file a notice of removal within thirty days of receiving the indeterminate document. Harris did not address a case in which a defendant conducted its own investigation, even though not required to do so, and discovered that a case was removable.

We conclude that §§ 1441 and 1446, read together, permit a defendant to remove outside the two thirty-day periods on the basis of its own information, provided that it has not run afoul of either of the thirty-day deadlines. For good reason, § 1446(b)(1) and (b)(3) place strict limits on a defendant who is put on notice of removability by a plaintiff. A defendant should not be able to ignore pleadings or other documents from which removability may be ascertained and seek removal only when it becomes strategically advantageous for it to do so. But neither should a plaintiff be able to prevent or delay removal by failing to reveal information showing removability and then objecting to removal when the defendant has discovered that information on its own. Similarly, a plaintiff’s ignorance of the citizenship of would be class members should not defeat removal if defendant independently knows or learns that information.

Id. at *8-9. 

The court recognized that its ruling could lead to defendants delaying a removal until a point in time when it was “strategically advantageous” to remove a case.  But the court noted that plaintiffs could protect themselves from this by providing the defendants with some document that would demonstrate removability, and thereby trigger the 30-day deadline.  Id. at *13.

This decision potentially solves, at least in the Ninth Circuit, one of the difficulties that defendants have faced in removing cases under CAFA.  Such a removal often involves complicated internal and sometimes external inquiries to demonstrate that the amount in controversy exceeds $5 million.  Performing that investigation, at least preliminarily, within a 30-day period can be challenging in some cases.  This case provides a defendant some flexibility on this, at least in the Ninth Circuit (although a defendant concerned about the Supreme Court potentially overturning this result would want to remove within the initial 30-day period).  Whether defendants will utilize this as a strategic option, as the Ninth Circuit suggests, seems less likely to me.  Defendants preferring a federal forum typically want to be in federal court from the outset, so they have the federal court deciding initial dispositive motions, managing any initial discovery, etc.  But if there is a state court procedure that provides a defendant with a particular strategic option, such as a procedural device, that is unavailable in federal court,  that might be a circumstance where deferring removal would be considered.  In circuits outside the Ninth Circuit, I would expect cautious defendants not to delay removal, although if it is simply not possible under the circumstances to develop the necessary information for removal until later in the case, this decision now provides a strong hook to attempt a late removal. 

In cases that were not removed under CAFA because circuit law authorized “binding” stipulations that the amount in controversy was below $5 million, which were rejected by the Supreme Court in Standard Fire Ins. Co. v. Knowles, this new Ninth Circuit decision potentially might allow a late removal, depending on the circumstances.