Eighth Circuit Weighs In on CAFA Removal, and the "Other Paper" Clause

ABSTRACT: Exactly when, during the course of a state court class action, that case may have become removable to federal court, can be a tricky question. Defendants must act within 30 days from when it can "first be ascertained that the case is one which is or has become removable", or forfeit their right to remove. On the other hand, if the court deems a removal premature, the case may be remanded.

The Class Action Fairness Act of 2005 ("CAFA") provides the federal courts with original jurisdiction to hear a class action if the class has more than 100 members, the parties are minimally diverse, and the matter in controversy exceeds the sum or value of $5,000,000. Whether this jurisdictional threshold has been met can sometimes be determined from the face of the state court complaint. At other times, the crossing of this threshold may only become apparent during the course of the lawsuit, when the defendant receives “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”. 28 U.S.C. § 1446(b)(3).In either instance, a defendant must act swiftly, filing a removal petition within 30 days after it first became apparent that the case was removable, lest it forfeit its right to remove.

Case law under CAFA has identified various types of “other paper” that justified removal during the course of a lawsuit, such as demand letters, a letter to an insurer valuing a claim, deposition testimony, expert reports, and proposed jury instructions.

In Hurst v. Nissan North America, Inc., - F.3d - , 2013 U.S. App. LEXIS 10957 (8th Cir. May 31, 2013), a case filed under the Missouri Merchandising Practices Act, with trial two weeks away, plaintiff filed a proposed jury instruction on the subject of punitive damages. Plaintiff had filed an original petition in Missouri state court, and two amended petitions, which did not include claims for punitive damages. Promptly upon receiving the proposed jury instruction, Nissan removed the case to federal court, asserting that the instruction was “other paper” from which it first could ascertain that the case was removable; and that the inclusion of the terms “motion” and “other paper” in the removal statute evinced congressional intent not to make formal amendments to a pleading a prerequisite to removal, under 28 U.S.C. § 1446.

The Eighth Circuit disagreed, ruling that “§ 1446 merely sets forth the procedural requirements for removal to federal court; it does not inform the substantive question of whether the action is removable in the first place.” Citing Missouri state court case law that where punitive damages have not been pled in the state court petition, they are legally unrecoverable, the Eighth Circuit (affirming the U.S. District Court) held that because plaintiff had not yet amended his petition, it was “legally impossible” for him to recover punitive damages; hence, the $5 million CAFA damages threshold was not met.

The Court observed that Nissan “understandably felt ambushed” by counsel’s “peculiar if not questionable” eleventh-hour proffer of a punitive damages instruction, holding that on remand, “should punitive damages find their way into the case for consideration by the jury (whether by formal amendment to the pleadings or otherwise), immediate removal would be timely and almost certainly proper.”

The Hurst case highlights a class action defendant’s need to be vigilant as to whether plaintiffs, during the course of a case, have taken measures that move the case beyond the $5 million CAFA jurisdictional threshold; and the complexities associated with making that determination. And it illustrates that if a state trial court were to first allow punitive damages into a case during trial – e.g., by granting a motion by plaintiffs to conform their pleadings to evidence adduced at trial – the case would instantly become removable, even if both parties had put in all their evidence and the case was in the process of being submitted to the jury.