Class Certification Provides a Second Bite at the Proverbial Apple for Removing Case to Federal Court

In Reyes v. Dollar Tree Stores, Inc. (Filed April 1, 2015, No. 15-55176) the United States Court of Appeals, Ninth Circuit, held the certification of a class triggers a new opportunity for a defendant to remove the matter to federal court pursuant to the Class Action Fairness Act (“CAFA”).

Class Plaintiff, Richard Reyes, filed this action in California State Court alleging defendant Dollar Tree Stores, Inc. (“Dollar Tree”) violated California Labor Code section 226.7 by denying Reyes, and similarly situated employees, rest breaks. The putative class was defined in the complaint to include “all current and former non-exempt employees of [Dollar Tree] who worked as assistant managers in California who worked one or more work periods in excess of three and one-half (3.5) hours without receiving a paid ten (10) minute break during which they were relieved of all duties, from and after July 13, 2008.” The complaint further alleged the amount in controversy was less than $5 million.

Dollar Tree removed the matter to the Central District Court of California, asserting jurisdiction under CAFA. Reyes’ motion to remand the matter to State Court was granted on the ground that defendant had to look “beyond Plaintiff’s allegations” to establish the $5 million amount in controversy requirement for jurisdiction under CAFA. The matter was litigated in the California Superior Court, and the class was ultimately certified. The certified class became larger than that described in the complaint because the Superior Court, sua sponte, expanded the scope of the class.

Upon class certification, Dollar Tree filed a second notice of removal, arguing that the broadened class established an amount in controversy over $5 million. Reyes again moved to remand the matter to California Superior Court and the motion was granted. The District Court reasoned that the Notice of Removal was untimely because it was based on the same class definition contained within the complaint, despite the fact that the California Superior Court had increased the scope when it certified the class.

The Ninth Circuit reversed, reasoning that the certification of the expanded class triggered a new opportunity for Dollar Tree to remove the matter to federal court pursuant to CAFA. The Ninth Circuit noted that successive removal petitions are permitted “when subsequent pleadings or events reveal a new and different ground for removal.” (Emphasis in original) Citing Kirkbride v. Cont’l Cas. Co. (9th Cir. 1991) 933 F.2d 729, 732. The Court concluded by noting “[t]he superior court’s class certification order thus altered the circumstances bearing on jurisdiction by expanding the amount in controversy.” Notably, Reyes conceded the amount in controversy exceeded $5 million after the California Superior Court expanded the scope of the class upon certification.

The case is important for defendant business entities facing class claims because it presents a “second bite at the apple” for attempting to remove a case to federal court. Before Reyes, a defendant who was unsuccessful in removing a class action to federal court was essentially stuck litigating in the state court. Taken to its logical conclusion, the holding could be applied in other circumstances to effectuate removal of class claims where it was previously denied.

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April 2, 2015