Chan Healthcare v. Liberty Mutual, 1/3/17, 9C
The Class Action Fairness Act (CAFA) significantly expanded federal diversity jurisdiction to require only minimal diversity in high value class action cases. See 28 USC 1332(d). Here, Defendant removed the case to federal court, not at the outset of litigation, but within 30 days of receiving a Reply brief that provided the first notice that plaintiff would rely on a federal due process argument as part of its case – In other words, the removal was not based on the new minimal diversity jurisdiction authorized by CAFA, but was based instead on the old-fashion federal question prong. The trial court held the removal was late because defendant had notice of plaintiff’s federal claims through papers/communications in other, related cases. The trial court granted remand and awarded attorney’s fees against Liberty. Liberty appealed the remand order and the fee award. Held: Appeal of remand order dismissed for lack of appellate jurisdiction; order granting fees reversed.
The biggest problem with Liberty’s appeal of the remand order – “an order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise.” 28 U.S.C. § 1447(d). 9C rejected Liberty’s argument that section 1453 (the removal statute enacted as part of CAFA) changed that rule. Section 1453(c)(1), entitled Review of Remand Orders, provides that, when a case is removed “under this section,” “a court of appeals may accept an appeal from an order of a district court granting or denying a motion to remand a class action.” 28 U.S.C. § 1453(c)(1). 9C looked at the text, structure and purpose behind CAFA, and had no problem concluding that section 1453 expanded discretionary appellate jurisdiction of remand orders of CAFA cases – i.e., cases that are removed based on minimal diversity jurisdiction established by section 1332(d). Therefore, 9C lacked jurisdiction to review the trial court’s remand order.
Footnote: Liberty also appealed the award of attorney’s fees, which was a final decision and reviewable under 28 USC section 1291. The trial court found that Liberty lacked an objective basis for removal and awarded fees. 9C reversed. The initial pleading did not provide a basis for removal; if “the case stated by the initial pleading is not removable, a notice of removal may be filed within thirty 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. § 1446(b)(3). The Reply brief was the first document that provided notice of plaintiff’s federal claim in this case. The fact that Liberty knew about the potential of a federal due process claim based on what happeend in other related cases (including one in which it was involved) didn’t matter: The focus remains on whether the case “is or has become removable,” and counsel’s clairvoyant sense of what actions a plaintiff might take plays no role in the analysis. A defendant is not put to the impossible choice of subjecting itself to fees and sanctions by filing a premature (and baseless) notice of
removal or losing its right to remove the case by waiting too
long.