Class Action Improperly Removed to Federal Court (Twice) because Defendant Failed to Establish $5 Million Amount in Controversy Required by Class Action Fairness Act (CAFA) and Basis for Defendant’s Removal of Class Action Warrants Sanctions Sua Sponte California Federal Court Holds
Plaintiff filed a putative class action in California state court against Motricity alleging violations of every conceivable statute, including the kitchen sink (see NOTE), arising from Motricity’s alleged act of billing for unwanted mobile content. Walker v. Motricity Inc., 627 F.Supp.2d 1137, 1139-40 (N.D. Cal. 2009). According to the allegations underlying the class action complaint, Motricity “allegedly operates mobile transaction networks to help companies develop, deliver and bill for ‘mobile content’ services to compatible mobile devices in California and the nation,” including such services as “customized ring tones, premium text messages, and sports score reports,” and is purportedly “able to reach and bill millions of wireless subscribers nationwide and has registered thousands of transactions and processed thousands of dollars in California over recent years.” Id., at 1139. Plaintiff alleges that Motricity billed her for “unwanted mobile content services on her cellular telephone bill in the form of premium text messages” that she did not authorize, leading to the filing of her class action. Id., at 1139-40. But plaintiff’s act of excessive pleading was more than matched by defendant’s act in response. Defense attorneys removed the class action to federal court under the Class Action Fairness Act (CAFA), but the district court granted plaintiff’s motion to remand the class action on the ground that Motricity failed to show the requisite $5 million amount in controversy. Id., at 1139, 1140. Defense attorneys again removed the class action to federal court under CAFA “just fifteen days later,” based on a declaration filed by plaintiff’s counsel in an unrelated action which (Motricity alleged) set forth a ratio for revenue that would (if applied in this case) meet the $5 million threshold for removing class actions under CAFA. Id., at 1140. Plaintiff again moved to remand it to state court. Id. The district court granted plaintiff’s motion, and awarded sanctions for frivolous removal of the class action.
After summarizing CAFA and noting the removing party’s burden of demonstrating that removal jurisdiction exists, see Walker , at 1140-41, the federal court observed that Ninth Circuit authority establishes “different burdens of proof for establishing removal jurisdiction in the CAFA context, depending on what has been pled in the complaint,” id., at 1141. If the class action complaint specifically alleges the amount of damages at issue, then it must appear to a “legal certainty” that the amount prayed for is incorrect; in other words, “If the complaint alleges specific damages in excess of the jurisdictional minimum, then the amount in controversy is presumptively satisfied unless it appears to a ‘legal certainty’ that the claim is actually for less than the jurisdictional minimum, whereas if the specific damages are less than the statutory minimum, it must be shown to a legal certainty that the amount in controversy exceeds that minimum for removal.” Id., at 1141 (citation omitted). But if the complaint does not specify the amount in controversy, then “then the court must look beyond the facts of the complaint and apply the preponderance of the evidence standard.” Id. (citations omitted). In its initial order granting plaintiff’s motion to remand the class action to state court, the district court noted that the class action complaint is silent as to the amount in controversy so Motricity was required to show that the amount in controversy exceeded $5 million. Id., at 1141-42. Because it failed to meet that burden, the court remanded the class action to state court. Id.
“To meet its burden of showing the amount in controversy is satisfied, Motricity this time around creatively relies on a declaration submitted by plaintiff’s class counsel Jay Edelson as part of a separate action brought against a different defendant….” Walker, at 1142. That declaration stated, in relevant part, “Based upon information that Class Counsel has collected in this and the Related Action, and from experts, government agencies, and in litigation involving the aggregators and wireless carriers, Class Counsel estimates that approximately 20% of all mobile content charges are unauthorized.” Id. This declaration is arguably an “other paper” within the meaning of 28 U.S.C. § 1446(b), but in that event defendant would have been required to seek removal within 30 days of its filing. Id. Moreover, “‘Almost without exception, [courts] have held that the paper required in [section] 1446 must be a part of the underlying suit rather than an outside development in removal jurisdiction.’” Id. (citation omitted). Accordingly, the declaration does not qualify as an “other paper” for removal purposes, id.
But defendant’s misery did not end there. The federal court observed that “[t]his is not the first time Motricity has attempted this ploy,” and summarized a similar situation in the Western District of Washington, involving “some of these very same lawyers and law firms,” where Motricity “produced the very same Edelson declaration under nearly identical circumstances as here: a second removal approximately two weeks after remand based on the same pleadings plus the Edelson declaration; failure to disclose a related case on the civil cover sheet as required, thus eluding the eye of the remanding judge and leaving it up to the plaintiff to file papers notifying the court of a related case.” Walker, at 1142. The district court also concluded that the Edelson declaration, even if considered for removal purposes, would have failed to support Motricity’s removal because it was speculative. Id., at 1143. Accordingly, the district court sua sponte awarded monetary sanctions “in light of the frivolous nature of Motricity’s second attempt at removal.” Id., at 1143-44. Even more importantly, the federal court ruled that “in view of this repetitive and contemptuous conduct, the court orders that in all future cases where this defendant or these attorneys have removed or remove an action under CAFA defendant and/or counsel shall file a copy of this order with the court and serve it upon opposing counsel.” Id., at 1144 (italics added).
NOTE: The putative class action asserted claims “for restitution/unjust enrichment, tortious interference with a contract, violation of the California Legal Remedies Act under California Civil Code, section 1770, violation of California’s Unfair Competition Law under California Business and Professional Code section 17200, violation of California’s Computer Crime Law under California Penal Code, section 502, an accounting, and trespass to chattels….” Walker, at 1140.