In McLaren v. The UPS Store Inc., No. 22-1379 (3d Cir. Apr. 25, 2022), the Third Circuit vacates an order remanding a case to state court on timing grounds, holding that the district court erred as a matter of law in finding that the 30-day clock for removal under 28 U.S.C. § 1446 started running when defendants had sufficient knowledge of the grounds for federal jurisdiction.
Two plaintiffs filed separate class actions in New Jersey state court alleging that defendant The UPS Store (TUPSS) and several franchises overcharged for notary services. “Each Plaintiff brings New Jersey state law claims that permit compensatory damages, treble damages, and attorneys’ fees. [Plaintiff] Tripicchio also asserts a claim that carries a $100 statutory penalty per class member.”
The pleadings in neither case alleged a claim in excess of $5 million, the amount-in-controversy for the federal Class Action Fairness Act (CAFA). But in discovery, during December 2020, TUPSS “produced a spreadsheet showing that the New Jersey UPS stores had more than one million notary transactions during the six-year class period. Because it disclosed the number of transactions at issue, the spreadsheet, together with the complaints, revealed that each case had an amount in controversy that satisfied federal jurisdiction under CAFA.”
Defendants removed the complaints to federal court under CAFA in July of 2021. The district court remanded the cases to New Jersey state court, though, finding that the original complaints “allowed Defendants to ‘reasonably and intelligently’ conclude that the cases were removable under CAFA because the complaints disclosed sufficient information for TUPSS to calculate the amount in controversy when considered alongside TUPSS’s transaction records,” citing 28 U.S.C. § 1446(b)(1). It found that defendants were aware no later than the production of the spreadsheet of grounds for CAFA jurisdiction, but waited seven months to remove, well longer than the 30-day removal period.
The Third Circuit vacates the remand order. It adopts a “bright-line,” plain-language interpretation of Section 1441 that plaintiff must serve a “pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable.” It is not enough that the defendants were on inquiry notice about the grounds for federal jurisdiction.
“Two thirty-day clocks limit the time within which a defendant may remove a case. Id. § 1446. First, under § 1446(b)(1), a defendant has thirty days to file a notice of removal ‘after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief.’ Second, ‘if the case stated by the initial pleading is not removable,’ then, under § 1446(b)(3), a case may be removed 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.’”
The panel easily finds that the original complaints did not reveal grounds for removal under (b)(1), because they did not set forth claims worth at least $5 million. Each at most alleged claims worth $13,750 to $15,000, far below the CAFA amount-in-controversy. But plaintiffs argued that the complaints combined with the December 2020 spreadsheet gave defendants enough knowledge to conclude that the case was worth more than $5 million.
But the Third Circuit holds that “the text of § 1446(b) requires that courts focus on what a defendant receives, and not on what knowledge it possesses. Thus, whether removal is timely under § 1446(b) depends on ‘whether [a] document [the defendant receives] informs the reader, to a substantial degree of specificity, [that] all the elements of federal jurisdiction are present’ . . . . Here, because the four corners of each complaint Defendants received did not provide facts from which they could ascertain federal subject matter jurisdiction, the (b)(1) clock never began to run.”
Moreover, under § 1446(b)(3), the 30-day removal clock does not begin to run until the defendant is in “receipt . . . of a copy of an amended pleading, motion, order or other paper” from which federal jurisdiction can be ascertained. “The plain language of the statute focuses only on what a defendant receives. Thus, the statute does not contemplate that the thirty-day clock would be triggered by information that the defendant already possesses or knows from its own records.” The panel cites decisions from six other circuits adopting the same “bright-line rule.”
The panel recognizes that the strict application of “receipt” of a paper can mean that a defendant could long be aware of a basis for removal, and can even time it strategically, but has no time-limit to remove until a party serves them with a filing that sets forth jurisdictional grounds. “These legitimate concerns, however, do not allow us to ignore the plain text of the statute. Moreover, as other courts have explained, plaintiffs ‘are also ‘in a position to protect themselves’ from the gamesmanship of which they warn’ because they can file a complaint or conduct discovery and thereafter provide the defendant with a paper from which federal jurisdiction can be ascertained and thereby start the removal clock.”
On remand, the Third Circuit instructs the district court to consider an alternative ground for remand: that the local controversy exception under 28 U.S.C. § 1332(d)(4)(A) applies.