Lucas et al v. Breg, Inc. et al, No. 3:2015cv00258 - Document 15 (S.D. Cal. 2015)
Court Description: ORDER denying Plaintiff's 7 Motion to Remand; granting Defendant's 12 Motion to Strike Document re 7 MOTION to Remand, MOTION for Attorney Fees and Costs Pursuant to 28 USC 1447. Court orders Marc Stein's Declaration (ECF 7-1) stricken from the record. Signed by Judge Cynthia Bashant on 4/22/2015. (jah)
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1 2 3 4 5 6 7 8 9 10 11 UNITED STATES DISTRICT COURT 12 SOUTHERN DISTRICT OF CALIFORNIA 13 14 15 STACY LUCAS, an individual, et al., on behalf of themselves and all other similarly situated consumers, Plaintiffs, 16 17 18 19 20 v. BREG, INC., a California corporation, et al., Defendants. Case No. 15-cv-258 BAS (KSC) ORDER: (1) DENYING PLAINTIFFS’ MOTION TO REMAND; AND (2) GRANTING DEFENDANTS’ MOTION TO STRIKE THE DECLARATION OF MARC STERN [ECFs 7, 12] INTRODUCTION 21 22 Under the Federal Class Action Fairness Act (“CAFA”), a district court may 23 exercise jurisdiction over a class action if there is minimal diversity of citizenship 24 between the parties, the proposed plaintiff class has at least 100 members, and the 25 amount in controversy exceeds $5,000,000. 28 U.S.C. §1332. The parties agree 26 that federal jurisdiction is proper in this case. However, the plaintiffs move to 27 remand to state court, arguing that the defendants’ notice of removal to federal 28 court was not timely. ECF 7. –1– 15-cv-258 BAS (KSC) 1 Although this Court shares the plaintiffs’ concern that the defendants may 2 well be forum shopping—choosing to remove after adverse rulings appear to be 3 forthcoming from the state court judge—this is the cost the plaintiffs have assumed 4 by filing an indeterminate pleading. Under Ninth Circuit law, the defendants’ 5 notice of removal was timely, and therefore the plaintiffs’ motion to remand and 6 for attorney’s fees is DENIED. 7 8 STATEMENT OF FACTS A. The Declaration of Marc Stern 9 The plaintiffs’ attorney, Marc Stern, filed a Declaration in support of the 10 motion to remand indicating that he has developed a “considerable body of 11 information” about the defendants from his work as litigation counsel and offered 12 his declaration “regarding Defendants and their relationships; the history of the 13 development of Breg’s PC500; the injuries associated with the product; and Breg’s 14 concealment of the considerable risk of injury associated with continuous use of 15 the PC500 as recommended by Breg.” Stern Decl. ¶ 2, ECF 7-1. The defendants 16 move to strike this Declaration, correctly recognizing that it violates the advocate- 17 witness rule. ECF 12. “The advocate-witness rule generally admits of only one 18 solution to avoid the improprieties inherent in advocate testimony. Attorneys must 19 elect in which capacity they intend to proceed, either as counsel or as a witness and 20 promptly withdraw from the conflicting role.” See United States v. Prantil, 764 21 F.2d 548, 553 (9th Cir. 1985). 22 Because the information detailed in Stern’s Declarations is both irrelevant to 23 the motion to remand and violates the advocate-witness rule, this Court GRANTS 24 Defendants’ Motion to Strike the Declaration of Marc Stern. ECF 12. However, 25 this Court will take judicial notice of the documents filed in San Diego Superior 26 Court in this case, in Engler v. Chao, Oasis, Breg, Inc., et al., and in Theriot v 27 Breg, Inc., et al., as reflected in ECF 7, Exhibits 8, 14–23, and 25–31. 28 –2– 15-cv-258 BAS (KSC) 1 B. The Complaints 2 On June 13, 2011, the plaintiffs filed a putative class action in San Diego 3 Superior Court on behalf of “all consumers [in California] and/or their insurers 4 who purchased and/or rented BREG Polar Care products pursuant to a physician’s 5 prescription” from 1992 to the present. Compl. ¶¶ 2, 59, ECF 1-3. Those who 6 suffered physical injury were excluded from the class. The complaint contains no 7 mention of the potential number of class members or the potential damage 8 requested per member. 9 On March 20, 2012, the plaintiffs filed their First Amended Complaint 10 (“FAC”) in state court, again on behalf of all consumers in California who 11 purchased and/or rented BREG Polar Care products, excluding those who were 12 physically injured. FAC ¶ 53, ECF 1-5. This time the plaintiffs specified that they 13 were requesting replacement of each unit, which were valued between $70–$350. 14 Id. at ¶ 19, ECF 1-5. Again, the complaint did not mention the potential number of 15 class members. 16 On October 17, 2014, the plaintiffs filed a Second Amended Complaint 17 (“SAC”) in state court expanding the class to include “thousands of consumers 18 throughout the United States and in California who specifically purchased and/or 19 rented for personal use and not for resale, pursuant to a physician’s prescription … 20 cold therapy treatment.” SAC ¶ 4, ECF 1-19. Again, those who suffered physical 21 injury were excluded, and the plaintiffs alleged that “BREG is currently aware of 22 more than 300 injuries.” Id. at ¶¶ 9, 67. The plaintiffs sought reimbursement of the 23 full amount of expenditures from the purchase and/or rental of the cold therapy 24 treatment. Id. at ¶ 120. 25 26 27 28 Finally, on December 16, 2014, the plaintiffs filed and served a Third Amended Complaint (“TAC”) in state court on behalf of: All consumers in the United States, who any at any [sic] time during the period 1992 through the present, purchased and/or rented a BREG Polar Care 500 for personal use, and not for resale, pursuant to –3– 15-cv-258 BAS (KSC) 4 a licensed physician’s prescription, and who, prior to purchasing and/or renting said product, were exposed to a statement and/or instruction from BREG, or a health care provider, that BREG’s Polar Care 500 was safe and effective for continuous use and were not told there was a material risk of bodily injury if said product was used continuously (for more than 20 minutes).” 5 TAC ¶ 10, ECF 1-24. The class specifically excluded any person who has suffered 6 bodily injury or has filed a non-class legal action against the defendants for similar 7 claims. Id. The TAC alleges that “[t]housands of consumers throughout the United 8 States and in California … purchased and/or rented for personal use and not for 9 resale, pursuant to a physician’s prescription what BREG [falsely] advertised and 10 promoted as safe and effective cold therapy treatment.” Id. at ¶ 4. The TAC also 11 alleges that “[a]s a result, thousands of consumers suffered serious injury. 12 Hundreds of personal injury actions have been filed against BREG….” Id. Without 13 specifying amounts, the Prayer for Relief seeks restitution for the purchase and/or 14 rental of BREG’s Polar Care-500, disgorgement of the defendants’ ill-gotten gains, 15 as well as actual and punitive damages. 1 2 3 16 C. The State Court Litigation 17 On April 26, 2012, the defendants filed a notice of related case, notifying the 18 state court that this case was related to another case filed against the defendants: 19 Engler v. Chao, Oasis, Breg, Inc., et al., S.D. Superior Court Case No. GI0870982. 20 ECF 7-23. On April 28, 2012, the Engler trial began before Judge Prager in the 21 San Diego Superior Court. During the course of the Engler trial, the defendants 22 admitted that millions of BREG Polar Care 500s had been sold and that sale of the 23 Polar Care 500s had generated close to $100 million in revenue. ECFs 7-16, 7-17, 24 7-18, 7-20. In July 2012, the jury reached a verdict of $5.196 million in 25 compensatory and $7 million punitives against Breg in the Engler case. ECF 7-22. 26 On September 25, 2012, all parties signed a stipulation and order that the 27 present case could be transferred to Judge Prager, the trial judge in the Engler case, 28 “for all purposes.” ECF 7-23. On February 26, 2013, Judge Prager denied all post–4– 15-cv-258 BAS (KSC) 1 trial motions in Engler. In May, 2013, Judge Prager denied all demurrers to the 2 FAC in this case. ECF 7-33. 3 Judge Prager set a briefing schedule for discovery and class certification in 4 this case and scheduled a class certification motion for May 5, 2015. ECF 7-27. On 5 December 16, 2014, Judge Prager ordered depositions to go forward over the 6 defendants’ objections and, again over the defendants’ objections, allowed the 7 plaintiffs to file a TAC. ECF 7-29. On February 2, 2015, the defendants received a 8 response to admissions from the plaintiffs confirming that they were seeking in 9 excess of $5 million in this case. On February 3, 2015, Judge Prager granted the 10 plaintiffs’ Motion to compel depositions and set a hearing on March 3, 2015 for 11 remaining discovery issues. ECF 7-32. On February 6, 2015, the defendants 12 removed this case to federal court. ECF 1. 13 ANALYSIS 14 The notice of removal in a civil action must be filed within 30 days of: 15 18 (1) ... [R]eceipt by the defendant … of a copy of the initial pleading setting forth [the basis for removability; or] ... (3) ... [R]eceipt by the defendant … of a copy of 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. 19 28 U.S.C. §1446(b). The Eleventh Circuit has held that the wording of § 1446(b) 20 suggests the second ground of removability “requires a greater level of certainty or 21 that facts supporting removability be stated unequivocally.” Pretka v. Kolter City 22 Plaza II, Inc., 608 F.3d 744, 760 (11th Cir. 2010) (comparing the first ground 23 requiring pleadings to “set forth” a claim to the second ground’s heightened 24 requirement that removability be “ascertainable”). 16 17 25 “[D]efendants need not make extrapolations or engage in guesswork; yet the 26 statute requires a defendant to apply a reasonable amount of intelligence in 27 ascertaining removability… Multiplying figures clearly stated in a complaint is an 28 aspect of that duty.” Kuxhausen v. BMW Financial Services NA LLC, 707 F.3d –5– 15-cv-258 BAS (KSC) 1 1136, 1140 (9th Cir. 2013) (quotations omitted). Defendants are not obligated to 2 look through their own files to ascertain the amount in controversy to determine 3 removability. Id. The grounds for removability must be within the four corners of 4 the paper served on a defendant. Lest the determination of removability degenerate 5 into a mini-trial as to whom knew what when, a defendant’s subjective knowledge 6 that a case is removable is irrelevant. Harris v. Bankers Life and Cas.Co., 425 F.3d 7 689, 697 (9th Cir. 2005). 8 Plaintiffs who fail to make the amount in controversy clear in the initial 9 pleadings “assume the costs [of leaving the window for removal open] associated 10 with their own indeterminate pleadings.” Kuxhausen, 707 F.3d at 1141. As a 11 footnote in the Kuxhausen case makes clear, “whether a defendant can establish 12 that federal jurisdiction exists and the question of when the 30-day time period 13 begins are not two sides of the same coin.” Id. at 1141, fn. 3. Just because a 14 defendant “could have ventured beyond the pleadings to demonstrate removal” 15 does not mean “it was therefore obligated to do so.” Id. (original emphasis). See 16 also Roth v. CHA Hollywood Medical Center, L.P., 720 F.3d 1121, 1125 (9th Cir. 17 2013) (Thirty day windows limit when a defendant must remove but does not 18 affect time when a defendant may remove. If defendants never had actual notice 19 triggering a 30-day window, they still may remove when they learn of 20 removability). 21 “Any document received prior to the receipt of the initial pleading cannot 22 trigger the second 30-day removal period.” Carvalho v. Equifax Information 23 Services, LLC, 629 F.3d 876, 885 (9th Cir. 2014). “We also reject [plaintiff’s] 24 suggestion that a pre-complaint document containing a jurisdictional clue can 25 operate in tandem with an indeterminate initial pleading to trigger some kind of 26 hybrid of the first and second removal periods.” Id. 27 This Court turns first to the requirement that the notice of removal be filed 28 within 30 days of receipt of the initial pleading if it sets out the basis of –6– 15-cv-258 BAS (KSC) 1 removability. The initial complaint and FAC in this case were limited to California 2 consumers and thus were not removable since they failed to establish diversity of 3 citizenship. The SAC expanded the class to include “thousands of consumers” 4 throughout the United States. This appeared to meet the diversity of citizenship 5 requirement, but it left open whether the amount in controversy exceeded $5 6 million. Excluded were individuals who had suffered physical injuries, and the 7 plaintiffs reference “more than 300 injuries.” Similarly, the TAC references 8 “thousands of consumers” who are part of the class but then references the 9 “thousands of consumers suffered serious injury” who are excluded from the class 10 definition. Referencing the FAC, which is the only Complaint that values the 11 replacement cost of each unit, and using a replacement cost of $70–$350, the four 12 corners of either the SAC or the TAC fall far short of the $5 million required for 13 removal. 14 Pointing to admissions made during the Engler case, the plaintiffs argue that 15 the defendants knew (1) that the class numbered in the millions and (2) that the 16 defendants had made well over $5 million in ill-gotten gains, which the plaintiffs 17 were requesting be disgorged as part of the Prayer for Relief. However, the Ninth 18 Circuit has made clear that to implicate the time limits of 1446(b), the grounds for 19 removability must be within the four corners of the paper served on the defendant. 20 Like the plaintiffs in Carvalho, these plaintiffs cannot use the admissions in the 21 Engler case as some sort of hybrid of the first and second removal periods. All four 22 of the amended complaints in this case are indeterminate with respect to the 23 amount in controversy. Therefore none triggered the first 30-day removal period. 24 Nor do the plaintiffs point to any “pleading, motion, order or other paper” 25 that put the defendants on notice that the amount in controversy was $5 million. 26 Instead, the plaintiffs argue again that the defendants were “well aware on or 27 before” the SAC had been filed that the plaintiffs would be seeking more than $5 28 million. The plaintiffs allege that the defendants’ discovery responses produced in –7– 15-cv-258 BAS (KSC) 1 March of 2014 show that millions of Polar Care 500s were sold and that the sale of 2 these Polar Care 500s generated over $80 million in revenue. However, none of 3 these numbers specifies how many sales should be excluded because they resulted 4 in injury to the user. The defendants were not required to extrapolate or engage in 5 guesswork to determine what the size of the class truly was or how much Plaintiffs 6 were seeking in this case.2 7 Since the only document received after the filing of the Complaint in this 8 case putting the defendants on notice that the amount in controversy exceeded $5 9 million was the plaintiffs’ response to interrogatories served on the defendants 10 February 2, 2015, the defendants’ notice of removal filed on February 6, 2015 was 11 timely. 12 Additionally, the plaintiffs argue that remand is proper because: (1) the 13 defendants failed to file with the removal petition “a copy of all process, pleadings 14 and orders” as required by 28 U.S.C. §1446(a); (2) the defendants stipulated to 15 state court Judge Prager for all purposes, and this precludes removal to federal 16 court; and (3) the defendants failed to notice the real party in interest as required by 17 Civil Local Rule 40.2. None of these is sufficient reason to remand. 18 Assuming, without deciding, that the defendants were required to attach 19 every pleading filed in the state court to their removal petition, the failure to do so 20 does not require remand. See Kuxhausen, 707 F.3d at 1142 (failure to attach 21 original complaint to its notice of removal is a “de minimis procedural defect” that 22 was curable even after expiration of the 30-day period). And the defendants’ 23 agreement to a transfer to Judge Prager in state court does not constitute a waiver 24 of the right to removal. At the time of the stipulation, there were no grounds for 25 removal to federal court and the stipulation did not clearly and unequivocally 26 27 28 2 Nor can the plaintiffs rely on earlier verdicts to establish that the amount in controversy in this case exceeds $5 million. Not only do these verdicts predate the filing of this complaint, they involve cases in which the plaintiffs were injured. These are clearly distinguishable and irrelevant in this case, in which the proposed class excludes injured individuals. –8– 15-cv-258 BAS (KSC) 1 waive the right to removal. See EIE Guam Corp. v. Long Term Credit Bank of 2 Japan, Ltd., 322 F.3d 635, 649 (9th Cir. 2003) (Although a party may waive its 3 right to remove by taking actions in state court manifesting its intent to have the 4 case adjudicated there and abandoning its right to a federal forum, the waiver must 5 be “clear and unequivocal” and cannot be made before the case was actually 6 removable). Finally, the defendants complied with their obligations under Civil 7 Local Rule 40.2 by identifying any parent corporation or any publicly held 8 company that owns 10% or more of their stock. Even if they did not, this has no 9 bearing on removal. Accordingly, because the defendant’s notice of removal was 10 timely, the Court DENIES the plaintiffs’ motion to remand. ECF 7. CONCLUSION 11 12 For the foregoing reasons, the Court GRANTS the defendants’ motion to 13 strike Marc Stern’s Declaration and DENIES the plaintiffs’ motion to remand. 14 ECFs 12, 7. The Court ORDERS Marc Stern’s Declaration STRICKEN from the 15 record. ECF 7-1. 16 17 IT IS SO ORDERED. Dated: April 22, April 21, 2015 2015 18 19 20 21 22 23 24 25 26 27 28 –9– 15-cv-258 BAS (KSC)
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