In Jordan v. Nationstar Mortgage LLC, No. 14-35943 and 15-35113, 2015 WL 1447217 (Apr. 1, 2015 9th Cir.), a Ninth Circuit panel held that cases subject to the Class Action Fairness Act (“CAFA”) become “removable” only when removal under CAFA is first ascertainable even if the initial pleading earlier disclosed a separate non-CAFA basis for removal which the defendant chose not to pursue.  This holding changes Ninth Circuit law which ordinarily requires courts to strictly construe removal statutes against removal and to generally treat as untimely any notice of removal filed more than 30 days after receipt of an initial pleading disclosing a removal basis.  The panel considered itself no longer bound to this circuit precedent given the U.S. Supreme Court’s recent decision in Dart Cherokee Basin Operating Co., LLC v. Owens, 135 S. Ct. 547 (2014), which recognized Congress’s strong preference that federal courts adjudicate certain interstate class actions.  A significant Ninth Circuit shift, Jordan opens the door for more lenient and less technical applications of removal requirements in CAFA cases.

In Jordan, plaintiff mortgagor commenced a putative class action against Nationstar in state court alleging violation of the Fair Debt Collection Practices Act (“FDCPA”).  The initial pleading specified no amount in controversy.  Despite the removable FDCPA claim, Nationstar did not file a removal notice within 30 days of receiving the initial pleading as 28 U.S.C. § 1446(b)(1) prescribes.  When plaintiff’s interrogatory answer later disclosed her $25 million damages estimate, Nationstar filed a notice of removal based on CAFA jurisdiction.  The plaintiff moved to remand the case, arguing removal was untimely.

In opposing remand, Nationstar claimed the interrogatory answer provided the first occasion to ascertain an amount in controversy exceeding $5 million, a CAFA element.  And although 28 U.S.C. § 1446(b)(3)’s plain language bestows a second 30-day removal window in such instance only if removability was not clear from the initial pleading, Nationstar urged the district court to recognize CAFA as a “second and separate ground for removal” that opened a second 30-day removal window “even if the initial complaint provided some other ground for removal.”  As analogous precedent, Nationstar cited a Ninth Circuit decision, Durham v. Lockheed Martin Corp., 445 F.3d 1247 (9th Cir. 2006), that deemed a defendant’s removal under the “federal officer” removal statute (28 U.S.C. § 1442) timely even though the initial pleading disclosed a separate basis for removal (which defendant chose not to pursue) and the 30-day removal window triggered by the initial pleading had closed.  Durham based its result on the particular importance of “federal officer” removal rights, citing instructions by Congress and the U.S. Supreme Court to broadly construe the “federal officer” removal statute.  Nationstar invited the district court to extend the logic of Durham to removals under CAFA.

The district court declined, adhering to the traditional strict-construction afforded removal statutes generally.  In remanding, it ruled that “the general principles of removal jurisdiction apply in CAFA cases” and “the relevant removal date is the date on which the case itself becomes removable.”  Nationstar appealed.

The Jordan panel reversed.  It agreed that Section 1446(b)(3) only grants a second 30-day removal window if “the case stated by the initial pleading is not removable.”  But, citing Durham, it identified “two plausible ways to construe” the term “removable.”  One way is “binary—either there is some basis [for removal] or there’s not.”  The other, less strict way, depends on whether “the particular basis on which removal is sought becomes apparent from the record.”  As the Jordan panel noted, it was the Supreme Court’s command to liberally construe the “federal officer” removal statute that led Durham to construe “removable” in a non-binary fashion.

The panel perceived a similar command in regard to CAFA in the Supreme Court’s December 2014 Dart Cherokee decision.  There, the Court, in addressing whether a notice of removal need only allege (rather than prove) CAFA’s amount-in-controversy element, remarked “that no antiremoval presumption attends cases involving CAFA,” and noted Congress’s “overall intent . . . to strongly favor the exercise of federal diversity jurisdiction over class actions with interstate ramifications.”  The Jordan panel, spurred by this language, selected a non-binary construction:  “[A] case becomes ‘removable’  . . . when the CAFA ground for removal is disclosed.”  Applying this rule, the case against Nationstar became “removable” only when Nationstar received the interrogatory answer, not before.  This opened Section 1446(b)(3)’s second 30-day removal window even though the initial complaint had revealed a separate removal basis.

Jordan represents a potentially significant shift.  At a minimum, it signals a willingness by the Ninth Circuit to interpret removal statutes in CAFA cases more liberally than the plain language might in the past have allowed.  In close removal cases, Jordan will assist defendants seeking CAFA-based removals.

For further information, please contact John Landry at (213) 617-5561.