Kenny v. Wal-Mart Stores, Inc.

• Decision Date: 01 February 2018
• Docket Number: No. 17-56809,17-56809
• Parties: Kris KENNY, on behalf of himself and all others similarly situated, Plaintiff–Appellee, v. WAL–MART STORES, INC., a Delaware Corporation; Wal–Mart Associates, Inc., a Delaware Corporation, Defendants–Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

881 F.3d 786

Kris KENNY, on behalf of himself and all others similarly situated, Plaintiff–Appellee,

v.WAL–MART STORES, INC., a Delaware Corporation; Wal–Mart Associates, Inc., a Delaware Corporation, Defendants–Appellants.

No. 17-56809

United States Court of Appeals, Ninth Circuit.

Argued and Submitted January 9, 2018, Pasadena, California

Filed February 1, 2018

Mark D. Kemple (argued) and Ashley Farrell–Pickett, Greenberg Traurig LLP, Los Angeles, California, for Defendants–Appellants.

David M. deRubertis (argued) and Jeff D. Neiderman, The deRubertis Law Firm APC, Studio City, California; Ellen R. Serbin, Todd H. Harrison, and Brennan S. Kahn, Perona Langer Beck Serbin Mendoza & Harrison APC, Long Beach, California; for Plaintiff–Appellee.

Before: MILAN D. SMITH, JR. and MICHELLE T. FRIEDLAND, Circuit Judges, and JED S. RAKOFF,^* District Judge.

M. SMITH, Circuit Judge:

Defendants Wal–Mart Stores, Inc. and Wal–Mart Associates, Inc. (collectively, Wal–Mart) appeal from the district court's order remanding Plaintiff Kris Kenny's (Kenny) putative class action to California state court. In a four-sentence minute order, the district court remanded the case sua sponte , stating summarily that Wal–Mart waived its right to remove by filing a demurrer in state court prior to removal.

We disagree, and hold that the district court erred on two grounds. First, the district court exceeded its statutory authority in remanding sua sponte based on a non-jurisdictional defect. Second, Wal–Mart did not waive its right to remove by filing a demurrer in state court, when its right to remove pursuant to the Class Action Fairness Act (CAFA), 28 U.S.C. § 1332(d), was not ascertainable from Kenny's pleading. We therefore vacate the district court's remand order, and remand to that court for further proceedings.

FACTUAL AND PROCEDURAL BACKGROUND

On January 13, 2017, Plaintiff Kris Kenny filed a putative class action Complaint against Defendants Wal–Mart Stores, Inc., Wal–Mart Associates, Inc., and U.S. Healthworks Medical Group,¹ in California state court, challenging Wal–Mart's policy requiring employees who have suffered workplace-related injuries to submit to drug and/or urine testing. Kenny did not serve the Complaint on any of the Defendants.

On February 17, 2017, Kenny filed a First Amended Complaint (FAC), and served the FAC on Wal–Mart. Generally, a defendant in a California state court must respond to the complaint within thirty days after service, or risk default. See Cal. Civ. Proc. Code § 471.5. Wal–Mart obtained a fifteen-day extension to respond to the FAC, resulting in a deadline of April 4, 2017.

On April 4, 2017, Wal–Mart filed a demurrer and a motion to strike the FAC. Wal–Mart set the hearing on the demurrer for June 15, 2017. Kenny's deadline to oppose the demurrer was June 2, 2017, nine court days before the hearing. See id. § 1005(b).

On May 17, 2017, nearly a month before the hearing, Wal–Mart removed the case to federal court, asserting that the district court had jurisdiction over the case pursuant to CAFA. At the time of removal, Kenny had not yet opposed the demurrer, discovery had not begun, and the state court had issued no rulings.

On June 8, 2017, the district court, acting sua sponte , issued a four-sentence minute order remanding the action to state court. The district court concluded, without explanation, that Wal–Mart had waived its right to remove the case by filing a demurrer in response to Kenny's FAC in state court.

Wal–Mart timely petitioned this court for permission to appeal the district court's remand order. We granted the petition on December 4, 2017.

JURISDICTION AND STANDARD OF REVIEW

We have jurisdiction to review the district court's sua sponte remand order pursuant to 28 U.S.C. § 1453(c)(1). See Watkins v. Vital Pharm., Inc. , 720 F.3d 1179, 1180–81 (9th Cir. 2013) (per curiam). We review the district court's remand order de novo . Brinkley v. Monterey Fin. Servs., Inc. , 873 F.3d 1118, 1121 (9th Cir. 2017).

ANALYSIS

I. The District Court Erred in Remanding Sua Sponte Based on a Non–Jurisdictional Defect.

A district court lacks authority under 28 U.S.C. § 1447(c) to remand sua sponte based on a non-jurisdictional defect.² Corona–Contreras v. Gruel , 857 F.3d 1025, 1030 (9th Cir. 2017) ; see Smith v. Mylan Inc. , 761 F.3d 1042, 1044 (9th Cir. 2014). Whereas a "district court must remand ‘if at any time before final judgment it appears that the district court lacks subject matter jurisdiction,’ " it "may remand for defects other than lack of subject matter jurisdiction only upon a timely motion to remand." Smith , 761 F.3d at 1044 (alteration omitted) (quoting 28 U.S.C. § 1447(c) ). In essence, subject matter jurisdiction is the touchstone for a district court's authority to remand sua sponte .

Here, the district court erred by remanding sua sponte on a non-jurisdictional ground. Neither the district court nor Kenny questioned the court's subject matter jurisdiction under CAFA.³ Instead, the district court stated, without explanation, that Wal–Mart waived its right to remove by filing a demurrer to Kenny's FAC in state court. Plainly, waiver, a common-law doctrine, does not implicate the court's original jurisdiction over the action. See City of Albuquerque v. Soto Enters., Inc. , 864 F.3d 1089, 1093 (10th Cir. 2017) ; cf. Resolution Tr. Corp. v. Bayside Developers , 43 F.3d 1230, 1239 (9th Cir. 1994) ("[T]he jurisdiction exercised by the district court on removal is ‘original’ jurisdiction, without regard to the status of the proceedings in state court prior to removal.").⁴ Thus, the district court exceeded its statutory authority in remanding sua sponte on a non-jurisdictional ground, and its order warrants reversal for this reason alone.

II. The District Court Erred in Concluding that Wal–Mart Waived its Right to Remove the Action.

We have observed that a defendant "may waive the right to remove to federal court where, after it is apparent that the case is removable, the defendant takes actions in state court that manifest his or her intent to have the matter adjudicated there, and to abandon his or her right to a federal forum." Resolution Tr. , 43 F.3d at 1240. Such a waiver "must be clear and unequivocal," however. Id. (quoting Beighley v. FDIC , 868 F.2d 776, 782 (5th Cir. 1989) ). For example, when "a party takes necessary defensive action to avoid a judgment being entered automatically against him, such action does not manifest an intent to litigate in state court, and accordingly, does not waive the right to remove." Id. Generally speaking, "the right of removal is not lost by action in the state court short of proceeding to an adjudication on the merits." Id. (quoting Beighley , 868 F.2d at 782 ).

The district court erred in concluding that Wal–Mart waived its right to remove this case when the FAC did not reveal a basis for removal pursuant to CAFA. It is undisputed that the FAC is indeterminate as to the amount in controversy.⁵ Thus, Wal–Mart could not have waived its right to remove by taking actions in state court "after it [was] apparent that the case [was] removable," id. (emphasis added), when its right to remove was not apparent from the FAC.

A finding of waiver on the facts of this case would run contrary to our case law on removal. We have made clear that we will not "charge defendants with notice of removability until [they have] received a paper that gives them enough information to remove." Kuxhausen v. BMW Fin. Servs. NA LLC , 707 F.3d 1136, 1141 (9th Cir. 2013) (quoting Durham v. Lockheed Martin Corp. , 445 F.3d 1247, 1251 (9th Cir. 2006) ). "[A]s long as the complaint or ‘an amended pleading, motion, order or other paper’ does not reveal that the case is removable," a defendant, in effect, "may remove at any time." Rea v. Michaels Stores Inc. , 742 F.3d 1234, 1238 (9th Cir. 2014) (per curiam) (quoting 28 U.S.C. § 1446(b)(3) ).

We have also emphasized that "a defendant does not have a duty of inquiry if the initial pleading or other document is ‘indeterminate’ with respect to removability." Roth v. CHA Hollywood Med. Ctr., L.P. , 720 F.3d 1121, 1125 (9th Cir. 2013) (citing Harris v. Bankers Life & Cas. Co. , 425 F.3d 689, 693–94 (9th Cir. 2005) ). Accordingly, "even if a defendant could have discovered grounds for removability through investigation, it does not lose the right to remove because it did not conduct such an investigation and then file a notice of removal within thirty days of receiving the indeterminate document." Id.

These general removal principles apply equally in the context of removals premised upon CAFA. See, e.g. , Jordan v. Nationstar Mortg. LLC , 781 F.3d 1178, 1180 (9th Cir. 2015) (holding that "a defendant may remove a case from state court within thirty days of ascertaining that the action is removable under CAFA, even if an earlier pleading, document, motion, order, or other paper revealed an alternative basis for federal jurisdiction"). In line with these principles, we held in Roth that "a defendant who has not lost the right to remove because of a failure to timely file a notice of removal under [ 28 U.S.C.] § 1446(b)(1) or (b)(3) may remove to federal court when it discovers, based on its own investigation, that a case is removable" pursuant to CAFA. 720 F.3d at 1123. In short, "[a] CAFA case may be removed at any time, provided that neither of the two thirty-day periods under [ 28 U.S.C.] § 1446(b)(1) and (b)(3) has been triggered." Id. at 1126 (citing 28 U.S.C. § 1453(b) ).

Here, nothing on the face of the FAC put Wal–Mart on notice of the case's removability, and Kenny has not pointed to any other paper that would have done so. Under these circumstances, Wal–Mart could not have "clear[ly] and unequivocal[ly]" waived its right to remove by responding to the FAC. Resolution Tr. , 43 F.3d at 1240 (quoting Beighley , 868 F.2d at 782 ).⁶

Two additional points lend further support for our conclusion. First, Wal–Mart filed a demurrer on the last day...