Second Circuit: Time Limit for CAFA Removal Not Triggered Until Plaintiff Indicates Specific Amount of Damages Sought | Practical Law

Second Circuit: Time Limit for CAFA Removal Not Triggered Until Plaintiff Indicates Specific Amount of Damages Sought | Practical Law

The US Court of Appeals for the Second Circuit held, in Cutrone v. Mortgage Elec. Registration Sys., Inc., that a defendant's time to remove a Class Action Fairness Act (CAFA) case is not triggered until the plaintiff serves a paper specifically identifying the damages sought or the facts concerning the amount in controversy, and that where the time limits under 28 USC § 1446(1) or § 1446(3) are not triggered, the defendant may remove the case based on its own investigation of the facts.

Second Circuit: Time Limit for CAFA Removal Not Triggered Until Plaintiff Indicates Specific Amount of Damages Sought

by Practical Law Litigation
Published on 21 Apr 2014 • USA (National/Federal)
The US Court of Appeals for the Second Circuit held, in Cutrone v. Mortgage Elec. Registration Sys., Inc., that a defendant's time to remove a Class Action Fairness Act (CAFA) case is not triggered until the plaintiff serves a paper specifically identifying the damages sought or the facts concerning the amount in controversy, and that where the time limits under 28 USC § 1446(1) or § 1446(3) are not triggered, the defendant may remove the case based on its own investigation of the facts.
In an April 17, 2014 decision, Cutrone v. Mortgage Elec. Registration Sys., Inc. (MERS), the US Court of Appeals for the Second Circuit held that when removing a CAFA matter:
  • The 30-day removal periods under 28 USC § 1446(b)(1) and § 1446(b)(3) are not triggered until the plaintiff serves the defendant with a paper specifically identifying the amount of monetary damages sought or setting out facts to determine the amount in controversy.
  • If the 30-day removal periods have not been triggered, the defendant may remove the case when it determines that the case is removable after its own independent investigation.
(No. 14-455, (2d Cir. Apr. 17, 2014).)
The plaintiffs in this matter filed a putative class action in New York state court on February 20, 2013. They alleged common law breach of implied warranty and violations of New York law in connection with defendant MERS's facilitation of certain types of mortgages. In the complaint, the plaintiffs neither specified the number of members in the putative class, nor stated the precise amount in controversy, but did allege that they had to pay $6,835.20 in mortgage recording tax due to MERS's actions. On May 24, 2013, more than 90 days after the action was filed, MERS removed the matter to federal court, asserting diversity jurisdiction under CAFA. In its notice of removal, MERS alleged that it examined its own records and concluded that more than 3,000 mortgage promissory notes were affected, and that given this large number, there was a reasonable probability that the amount in controversy exceeded CAFA's $5,000,000 threshold. The plaintiffs moved to remand, asserting that MERS's removal was untimely.
When removing a case to federal court, a defendant is subject to certain statutorily-imposed time limits:
  • The defendant must file its notice of removal within 30 days of the service or receipt of the initial pleading (28 USC § 1446(b)(1)).
  • If the case is not immediately removable, a defendant may file its notice of removal within 30 days of receiving of a paper from which it "may first be ascertained" that the case is removable (28 USC § 1446(b)(3)).
Neither statutory provision specifies the information that must be contained in the initial pleading or other paper to trigger the 30-day time limit. In Moltner v. Starbucks Coffee Co., (a personal injury action) the Second Circuit adopted a bright-line test for determining when the 30-day limit is triggered and held that the removal clock does not start to run until the plaintiff serves the defendant with a paper that explicitly specifies the amount in monetary damages sought (624 F.3d 34 (2d Cir. 2010)). The Second Circuit joined the Eighth Circuit (In re Willis, 228 F.3d 896 (8th Cir. 2000)) and the Tenth Circuit (Atkin v. Ashland Chem. Co., 156 F.3d 1030 (10th Cir. 1998)) in adopting a bright-line test, which was also later adopted by three other circuits:
The plaintiffs in Cutrone argued in their motion to remand that the complaint provided sufficient information for MERS to determine the likely number of plaintiffs and the amount in controversy, and therefore, removal was limited to the 30-day removal window under § 1446(b)(1). MERS argued that the bright-line test in Moltner should be applied to CAFA cases. The district court refused to apply Moltner to CAFA actions, and remanded the action. MERS appealed.
The Second Circuit vacated the district court's decision, holding that Moltner applies to cases removed under CAFA and that MERS's removal was not precluded by the two 30-day time limits in §§ 1446(b)(1) and (b)(3) because the plaintiffs failed to explicitly specify the amount in controversy or allege sufficient information for MERS to ascertain removability. The court also held that MERS was entitled to remove the case based on its own investigation because neither 30-day time limit had been triggered. The court followed the reasoning of the Ninth Circuit in Roth v. CHA Hollywood Med. Ctr., L.P., and explained that § 1446(b) imposes a time limit only where the plaintiff's initial pleading or subsequent document explicitly has demonstrated removability (720 F.3d 1121 (9th Cir. 2013)).