Ron Molina v. Lexmark International, Inc. et al, No. 2:2008cv04796 - Document 37 (C.D. Cal. 2008)
Court Description: ORDER GRANTING PLAINTIFF'S MOTION TO REMAND AND DENYING PLAINTIFF'S REQUEST FOR ATTORNEYS' FEES by Judge Margaret M. Morrow remanding case toLos Angeles County Superior Court, Case number BC339177 (bp)
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Ron Molina v. Lexmark International, Inc. et al Doc. 37 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 12 RON MOLINA, individually and on behalf of all others similarly situated, 13 14 15 16 17 18 19 20 Plaintiff vs. LEXMARK INTERNATIONAL, INC., a corporation, and Does One through Twenty-Five, Inclusive, Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) CASE NO. CV 08-04796 MMM (FMx) ORDER GRANTING PLAINTIFF’S MOTION TO REMAND AND DENYING PLAINTIFF’S REQUEST FOR ATTORNEYS’ FEES 21 22 23 Ron Molina filed this class action against his former employer, Lexmark International 24 (“Lexmark”), in Los Angeles Superior Court on August 31, 2005. He filed an amended 25 complaint alleging claims under California Labor Code §§ 203, 218.5, and 1194 and California 26 Business and Professions Code §§ 17200-17208 in June 2006. On July 22, 2008, two weeks 27 28 Dockets.Justia.com 1 before trial, Lexmark removed the case to federal court.1 Lexmark asserts that the court has 2 jurisdiction under the Class Action Fairness Act (“CAFA”). See 28 U.S.C. § 1332(d) (granting 3 district courts original jurisdiction over any civil action in which the amount in controversy 4 exceeds $5,000,000, and, inter alia, “any member of a class of plaintiffs is a citizen of a State 5 different from any defendant”). Lexmark contends that it first became aware “with any certainty” 6 that the amount in controversy exceeded $5,000,000 on July 7, 2008, when it received a summary 7 of damages prepared by Molina's expert witness.2 On August 21, 2008, Molina filed a motion 8 to remand, arguing that Lexmark knew the amount in controversy exceeded $5,000,000 long 9 before its July 22, 2008 removal. 10 I. FACTUAL AND PROCEDURAL BACKGROUND 11 12 A. Facts Underlying the Case 13 Molina alleges that Lexmark has failed to pay its current and former California employees 14 promised vacation and personal day pay.3 Lexmark allows its employees to take two to five weeks 15 of paid vacation a year, depending on length of employment, and four to five paid personal days.4 16 Molina asserts that Lexmark has willfully and deliberately maintained a “use it or lose it” policy 17 governing vacation and personal days in violation of California law. Molina alleges claims under 18 California Labor Code §§ 203, 218.5, and 1194, which seek unpaid vacation wages, unpaid 19 personal day wages, interest, penalties, injunctive and other equitable relief, attorneys’ fees, and 20 costs. He also pleads claims under California Business and Professions Code §§ 17200-17208, 21 which seek injunctive relief, restitution, disgorgement of profits generated by the alleged 22 23 24 25 1 Plaintiff’s Memorandum of Points & Authorities in Support of Motion for Remand (“Mot. Remand”) at 5. 2 Defendant’s Memorandum of Points & Authorities in Support of Opposition to Motion for Remand (“Opposition”) at 1. 26 3 27 4 28 Modified First Amended Complaint (“Am. Comp.”), ¶¶ 11-13. Id., ¶¶ 11-12. A “use it or lose it” policy is one in which unused vacation or personal days are neither paid at the end of the calendar year nor rolled over to the next year. (Id.) 2 1 2 violations, attorneys’ fees, and costs.5 B. Procedural History 1. 3 The Initial Complaint 4 Molina filed his initial complaint in Los Angeles Superior Court on August 31, 2005.6 The 5 complaint sought unpaid wages for accrued vacation pay only; it did not include allegations related 6 to pay for accrued personal days.7 The complaint sought certification of a class composed of all 7 former, current, and future Lexmark employees in California who were not paid the full amount 8 of vacation pay owed them during a period beginning four years prior to the filing of the 9 complaint.8 It did not quantify the amount of damages sought. 2. 10 11 The May 2, 2006 Mediation On May 2, 2006, the parties participated in a mediation conducted by Mark Rudy. 12 Attorneys Sheila Thomas, Kendra Tanacea, and Antonio Lawson were present on behalf of 13 Molina.9 Attorneys Frank Liberatore, Robert J. Patton, and Joanie McGuire, as well as Lexmark 14 “Human Resources Generalist,” Rebecca Cox, represented defendant.10 The parties have different 15 recollections of what transpired at the mediation. 16 Prior to the mediation, Lexmark gave Molina salary information for 111 employees that it 17 had employed from 2001 through early 2006.11 Molina’s experts “conduct[ed] analysis of potential 18 damages” using this data.12 Molina contends that during the mediation, his counsel gave Lexmark 19 20 5 21 6 22 7 23 24 25 26 Id. at 10-18. Complaint. Id. at 8-12. 8 Id., ¶ 15. 9 Declaration of Antonio Lawson (“Lawson Decl.”), ¶ 2. 10 Declaration of Frank Liberatore (“Liberatore Decl.”), ¶ 4. 27 11 28 12 Declaration of Sheila Y. Thomas (“Thomas Decl.”), ¶ 3. Id., ¶ 4. 3 1 attorney Frank Liberatore a copy of the damages analysis prepared by the consultants.13 Molina 2 asserts that the attorneys then returned to separate conference rooms, and mediator Mark Rudy 3 shuttled between them.14 Eventually, Liberatore came to see Molina’s attorneys, carrying the 4 damage analysis with him.15 Liberatore said that the analysis contained an error.16 (None of 5 Molina’s attorneys can recall the nature of the error;17 Lawson characterizes it as “minor,” 6 however.)18 Thomas contacted the expert and asked him to correct the error.19 The expert faxed 7 a corrected analysis, which “resulted in a minimal reduction in the overall damages calculation,” 8 to Rudy.20 Rudy took the fax to Liberatore.21 The expert faxed a copy of the new analysis to 9 Thomas two days after the mediation.22 10 Lexmark asserts that Molina’s lawyers never shared the damages analysis with its 11 representatives during the mediation.23 It states that its own calculation of potential damages prior 12 to the mediation estimated potential damages at approximately $1,200,000.24 13 14 15 13 16 14 17 15 18 16 19 20 21 22 Id., ¶ 5; Lawson Decl., ¶ 2. Id.. Id. Id. 17 Id. 18 Lawson Decl., ¶ 2. 19 Id., Supplemental Declaration of Sheila Y. Thomas (“Thomas Supp. Decl.”), ¶ 3. 23 20 24 21 25 22 26 23 27 28 Lawson Decl., ¶ 3. Id. Thomas Supp. Decl., ¶ 3. Liberatore Decl., Declaration of Rebecca Cox (“Cox Decl.”). Declaration of Robert J. Patton (“Patton Decl.”). 24 Cox Decl., ¶ 11. 4 1 The documents at the center of this factual dispute25 consist of a series of charts with 2 columns showing calculations of vacation pay,26 statutory waiting penalties,27and interest28 allegedly 3 owed to 62 former and 49 current Lexmark employees. 4 The analysis reflects a total of $1,292,092 in vacation pay, $429,144 in waiting penalties, 5 and $377,840 in interest owed to the 62 former employees, or a total of $2,099,076.29 It reflects 6 vacation pay of $2,367,195 and penalties of $924,350, or a total of $3,291,545, owed to the 49 7 current employees. On its face, therefore, the damages analysis reveals an amount in controversy, 8 “exclusive of interests and costs,” of $5,012,781.30 See 28 U.S.C. § 1332(d)(2) (the $5 million 9 amount in controversy minimum under CAFA is “exclusive of interests and costs”). 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 25 Thomas Decl., Ex. 1, 2, 3. 26 Vacation pay owed to former employees was calculated as follows: (Total Vacation Days Accrued If No Vacation Taken - Vacation Days Taken) x Value Of One Vacation Day. (Thomas Decl., Ex. 1, 3.) The calculation assumes that current employees had used none of their vacation days. (Id., Ex. 2.) Thus, “Vacation Days Taken” was always zero. 27 Waiting penalties for former employees were calculated by multiplying the value of one vacation day by 30. (Thomas Decl., Ex. 1, 2.) See CAL. LABOR CODE § 203 (“If an employer willfully fails to pay, without abatement or reduction, in accordance with Sections 201, 201.5, 202, and 205.5, any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefor is commenced; but the wages shall not continue for more than 30 days”). The calculation of waiting penalties for current employees is explained in the damages analysis as follows: “Penalty is $50 for 1st pay period, and $100 for subsequent pay periods.” (Id., Ex. 2.) The court is unable to determine the rationale behind this formula, as none of the applicable statutes provide for a waiting penalty of this type. 28 Interest was calculated at 10% per year beginning on the last day of employment for former employees. (Thomas Decl., Ex. 1, 3.) The analysis did not include interest for current employees. (Id., Ex. 2.) 29 26 27 28 Thomas Decl., Ex. 3. 30 Molina argues that the damages analysis shows that the amount in controversy as of the date of the mediation was $4.09 million. This figure excludes waiting penalties for current employees from the total amount. (Thomas Decl., ¶¶ 4-5.) 5 1 3. 2 3 The Amended Complaint, Class Certification and Removal On June 6, 2006, Molina sought leave to amend his complaint.31 The proposed amended 4 complaint added allegations regarding Lexmark’s failure to pay employees for accrued personal 5 days.32 It also sought to expand the definition of the proposed class in two significant ways: (1) 6 the proposed new class included employees who were not paid for personal days; and (2) it alleged 7 that the class period commenced in 1991 rather than 2001.33 The proposed complaint also added 8 a request for punitive damages.34 9 The Superior Court approved Molina’s request to file an amended complaint on June 29, 10 2006.35 Thereafter, Lexmark moved to strike references to current and future employees from the 11 complaint; the court struck references to future employees.36 Molina filed a modified first amended 12 complaint on October 2, 2006,37 and the state court certified a class on June 20, 2007.38 The class 13 that was certified differed from the class defined in the June 2006 proposed amended complaint 14 only in that it did not include future employees.39 15 The court set trial for May 20, 2008.40 At Lexmark’s request, this date was later continued 16 17 31 18 32 19 Thomas Decl., ¶ 7. Amended Complaint (attached to Plaintiff’s Motion for Leave to File Amended Complaint), ¶ 12. 20 33 21 34 22 35 23 24 25 26 Id., ¶ 16 Id., ¶ 54. Thomas Decl., ¶ 7. 36 Id. 37 Id. 38 Id., ¶ 8. 27 39 28 40 Am. Comp., ¶ 16. Remand at 5. 6 1 to August 8, 2008.41 On July 22, 2008, Lexmark removed the case to federal court,42 arguing that 2 there is federal jurisdiction under the Class Action Fairness Act. See 28 U.S.C. § 1332(d) 3 (granting the district courts original jurisdiction over any civil action in which the amount in 4 controversy exceeds $5,000,000, and, inter alia, “any member of a class of plaintiffs is a citizen 5 of a State different from any defendant”). The notice of removal asserts that Lexmark first became 6 aware “with any certainty” that the amount in controversy exceeded $5,000,000 on July 7, 2008, 7 when it received a Summary of Damages prepared by Molina’s expert witness.43 On August 21, 8 2008, Molina filed a motion to remand, arguing that Lexmark knew that the amount in controversy 9 exceeded $5,000,000 long before July 22, 2008. 10 II. DISCUSSION 11 12 A. Standard Governing Removal to Federal Court Under CAFA 13 Unless expressly excepted by some other federal statute, “any civil action brought in a State 14 court of which the district courts of the United States have original jurisdiction, may be removed 15 by the defendant or the defendants, to the district court of the United States for the district and 16 division embracing the place where such action is pending.” 28 U.S.C. § 1441(a). Under CAFA, 17 federal courts have subject matter jurisdiction to hear class actions in which the citizenship of the 18 defendant and at least one member of the plaintiff class is diverse, and the amount in controversy 19 exceeds $5,000,000. See 28 U.S.C. § 1332(d). “According to the Report of the Senate Committee 20 on the Judiciary on CAFA, the requirement under CAFA that the amount in controversy exceed 21 $5 million in the aggregate may be established ‘either from the viewpoint of the plaintiff or the 22 viewpoint of the defendant, and regardless of the type of relief sought (e.g., damages, injunctive 23 relief, or declaratory relief).’” Rippee v. Boston Market Corp., 408 F.Supp.2d 982, 984 (S.D. 24 Cal. 2005) (quoting S. Comm. on the Judiciary, Class Action Fairness Act of 2005, S.Rep. No. 25 26 41 Id. 27 42 28 43 Id. Notice of Removal at 5. 7 1 109-14, at 40 (Feb. 28, 2005), reprinted in 2005 U.S.C.C.A.N. 3, 2005 WL 627977). 2 The Ninth Circuit “strictly construe[s] the removal statute against removal jurisdiction.” 3 Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (citing Boggs v. Lewis, 863 F.2d 662, 663 4 (9th Cir. 1988), and Takeda v. Northwestern Nat'l Life Ins. Co., 765 F.2d 815, 818 (9th Cir. 5 1985)). “The ‘strong presumption’ against removal jurisdiction means that the defendant always 6 has the burden of establishing that removal is proper.” Id. (citing Nishimoto v. 7 Federman-Bachrach & Assocs., 903 F.2d 709, 712 n. 3 (9th Cir. 1990), and Emrich v. Touche 8 Ross & Co., 846 F.2d 1190, 1195 (9th Cir. 1988)); Befitel v. Global Horizons, Inc., 461 9 F.Supp.2d 1218, 1221 (D. Haw. 2006) (“In diversity cases, the burden of proving all jurisdictional 10 facts rests on the party seeking jurisdiction,” citing Kanter v. Warner-Lambert Co., 265 F.3d 853, 11 857-58 (9th Cir. 2001)). 12 If there is any doubt regarding the existence of federal jurisdiction, the court must resolve 13 those doubts in favor of remanding the action to state court. Gaus, 980 F.2d at 566 (“[f]ederal 14 jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance,” 15 citing Libhard v. Santa Monica Dairy Co., 592 F.2d 1062, 1064 (9th Cir. 1979)); Befitel, 461 16 F.Supp.2d at 1221 (“Diversity jurisdiction is to be strictly construed and any doubts are to be 17 resolved in favor of remand to the state court” (citations omitted)). This is true even where CAFA 18 provides the basis for removal. Abrego Abrego v. The Dow Chemical Co., 443 F.3d 676, 685 (9th 19 Cir. 2006) (“under CAFA the burden of establishing removal jurisdiction remains, as before, on 20 the proponent of federal jurisdiction”). 21 B. The Thirty Day Window for Removal 22 28 U.S.C. § 1446(b) governs the timing of removal. It provides that a defendant has thirty 23 days to file a notice of removal once it learns that an action is removable. See 28 U.S.C. §1446(b). 24 This thirty day period begins to run “‘from defendant’s receipt of the initial pleading only when 25 that pleading affirmatively reveals on its face’ the facts necessary for federal court jurisdiction.” 26 Harris v. Bankers Life & Cas. Co., 425 F.3d 689, 690-91 (9th Cir. 2005) (quoting Chapman v. 27 Powermatic, Inc., 969 F.2d 160, 163 (5th Cir.1992), and citing Lovern v. Gen. Motors Corp., 121 28 F.3d 160, 162 (4th Cir. 1997) (“[W]e will allow the court to rely on the face of the initial pleading 8 1 and on the documents exchanged in the case by the parties to determine when the defendant had 2 notice of the grounds for removal, requiring that those grounds be apparent within the four corners 3 of the initial pleading or subsequent paper”)). 4 If the amount in controversy is not clear on the face of the initial pleading, however, the 5 thirty-day period for removal does not “begin ticking until a defendant receives ‘a copy of an 6 amended pleading, motion, order or other paper’ from which it can determine that the case is 7 removable.” Durham v. Lockheed Martin Corp., 445 F.3d 1247, 1250 (9th Cir. 2006) (quoting 8 28 U.S.C. §1446(b)). By focusing on the objective facts contained in documents exchanged by the 9 parties, this bright-line rule aims to bring “bring certainty and predictability to the process and 10 avoids gamesmanship in pleading” on the part of the plaintiff. Harris, 425 F.3d at 697. 11 A document reflecting a settlement demand in excess of the jurisdictional minimum 12 constitutes “other paper” sufficient to provide notice that a case is removable and starts the thirty 13 day window under § 1446(b). Babasa v. Lenscrafters, Inc., 498 F.3d 972, 974-75 (9th Cir. 2007) 14 (citing Cohn v. Petsmart, Inc., 281 F.3d 837, 840 (9th Cir. 2002) (“[a] settlement letter is relevant 15 evidence of the amount in controversy if it appears to reflect a reasonable estimate of the plaintiff’s 16 claim”); Ambriz v. Luxury Imports of Sacramento Inc., No.C08-01004 JSW, 2008 WL 1994880, 17 *2 (N.D. Cal. May 5, 2008) (“Because Chase failed to remove this action within thirty days of 18 receiving the settlement demand letter, Chase’s removal was untimely”); Krajca v. Southland 19 Corp., 206 F. Supp. 2d 1079, 1081-82 (D. Nev. 2002) (“[T]he Ninth Circuit decision in Cohn v. 20 Petsmart, Inc. clarified the law with respect to the use of settlement letters as probative of the 21 amount in controversy”); Del Real v. Healthsouth Corp., 171 F.Supp.2d 1041, 1043 (D. Ariz. 22 2001) (“[A]s to whether a demand letter is admissible as evidence, many courts have ruled that 23 even if the initial pleading in a case does not support the amount in controversy requirement for 24 diversity jurisdiction, defendants may use a variety of documents, including a written settlement 25 demand, as ‘other paper,’ to determine if the case is removable”). See also Chase v. Shop 'N Save 26 Warehouse Foods, Inc., 110 F.3d 424, 428-30 (7th Cir. 1997) (“Chase has asserted the value of 27 her claim by making a settlement offer for over twice the jurisdictional amount, by refusing Shop 28 'N Save's request to admit that she would not seek more than $50,000 in damages, and by 9 1 specifically alleging a laundry list of serious and disabling injuries that will result in present and 2 future damages”); Burns v. Windsor Ins. Co., 31 F.3d 1092, 1097 (11th Cir. 1994) (“Plaintiff . . . 3 has offered to settle the case for $45,000. While this settlement offer, by itself, may not be 4 determinative, it counts for something. Defendant also offered no proof that plaintiff’s prayer is 5 grossly inconsistent with her alleged damages”); Wilson v. Belin, 20 F.3d 644, 651 n. 8 (5th Cir. 6 1994) (“Because the record contains a letter, which plaintiff’s counsel sent to defendants stating 7 that the amount in controversy exceeded $50,000, it is ‘apparent’ that removal was proper”). A 8 plaintiff’s damage estimate will not establish the amount in controversy, however, if it appears to 9 be only a “bold optimistic prediction.” Surber v. Reliance Nat'l Indem. Co., 110 F.Supp.2d 1227, 10 1232 (N.D. Cal. 2000). 11 If a defendant fails to comply with the procedural requirements of § 1446(b), the proper 12 procedural vehicle for challenging the removal is a motion to remand. See 28 U.S.C. § 1447(c); 13 Ultra Tool & Plastics, Inc. v. Schulman, No. 98-CV-0473E(SC), 1998 WL 864896, *1 14 (W.D.N.Y. Decl. 2, 1998). Once a motion to remand is filed, the party who removed the case has 15 the burden of establishing that federal jurisdiction is proper. See Gaus, 980 F.2d at 566-67); 16 Emrich, 846 F.2d at 1195 (citing Wilson v. Republic Iron & Steel Co., 257 U.S. 92, 97 (1921)). 17 See also Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 403-04 (9th Cir. 1996) (when 18 removing a case to federal court, defendants bear the burden of proving, by a preponderance of 19 the evidence, actual facts sufficient to support jurisdiction); Olsen v. Foundation Health Plan, No. 20 C 99-1804 THE, 1999 WL 390842, *2 (N.D. Cal. June 11, 1999) (if a plaintiff challenges the 21 removal, defendant “bears the burden of establishing [its] propriety. . . ,” citing Gaus, 980 F.2d 22 at 566). 23 The removal statute is strictly construed against removal, and all doubts respecting 24 jurisdiction are resolved in favor of remand. Gaus, 980 F.2d at 566; Libhart, 592 F.2d at 1064. 25 C. The Parties’ Arguments 26 The parties do not dispute that the amount in controversy in this case exceeds $5 million or 27 28 10 1 that the case meets CAFA’s diversity requirements.44 They dispute, however, when Lexmark first 2 received “an amended pleading, motion, order or other paper” from which it could ascertain that 3 the amount in controversy exceeded CAFA’s $5 million threshold. See 28 U.S.C. § 1446(b). 4 Lexmark contends that it was unable to ascertain the amount in controversy until its receipt of 5 Molina’s expert report regarding damages on July 7, 2008.45 Because it removed within thirty 6 days of its receipt of the report, Lexmark contends, its removal was timely. See id. 7 Molina counters that the removal was untimely for three reasons. He asserts that settlement 8 negotiations, which continued after the May 2, 2006 mediation, put Lexmark on notice of the 9 amount in controversy.46 As evidence of this, Molina cites two letters from mediator Mark Rudy 10 to Molina’s counsel, dated April 17 and 18, 2007.47 In the letters, Rudy states that he told 11 Lexmark’s counsel of Molina’s position that settling the case would require $8-10 million.48 12 Molina also asserts that Lexmark had the ability to calculate the amount in controversy 13 based on employee data in its possession. He argues that (1) Lexmark learned the “formula” used 14 to calculate the original $4.09 million damages number during the May 2, 2006 mediation, and 15 could have applied the same formula to its records to determine the amount in controversy under 16 the amended complaint; and (2) that the “formula” was “obvious, based on the nature of plaintiff’s 17 unpaid-vacation and wait-penalty claims,” such that Lexmark could have calculated the amount in 18 controversy even absent the alleged disclosure during mediation.49 19 20 21 22 23 24 25 26 44 Although parties may not confer subject matter jurisdiction on a federal court by consent, the court is satisfied that the amount in controversy requirement is met. See, e.g., Gosa v. Mayden, 413 U.S. 665, 707 (1973) (“One of the most basic principles of our jurisprudence is that subject-matter jurisdiction cannot be conferred upon a court by consent of the parties”) (Marshall, J., dissenting). CAFA’s diversity requirements are met as well. (Notice of Removal, ¶ 16.) 45 Notice of Removal at 5. 46 Reply in Support of Motion to Remand (“Reply”) at 1. 47 Thomas Supp. Decl., ¶ 5. 27 48 28 49 Id., Ex. B, C. Id. at 9. 11 1 Finally, Molina argues that Lexmark could have ascertained that the amount in controversy 2 exceeded $5,000,000 on June 6, 2006, when Molina sought leave to file an amended complaint.50 3 He asserts that, during the May 2, 2006 mediation, Lexmark learned that the amount originally in 4 controversy was $4.09 million,51 and that it could have used this knowledge, coupled with the 5 expanded class period alleged in the amended complaint, to ascertain that the amount in 6 controversy exceeded $5 million.52 Molina also argues that the additional claims for unpaid 7 personal days and punitive damages included in the amended complaint provided further evidence 8 that the amount in controversy had increased to more than $5,000,000.53 9 Lexmark denies receiving any notice of the amount in controversy on which it could act 10 before its receipt of the July 7, 2008 expert report.54 As noted, it disputes receiving a copy of the 11 damages analysis prepared by Molina’s expert during the mediation. Lexmark asserts, however, 12 that even if it had, the federal common law mediation privilege articulated in Folb v. Motion 13 Picture Industry Pension & Health Plans, 16 F.Supp.2d 1164 (C.D. Cal. 1998), prohibits use of 14 information exchanged during mediation for any purpose.55 See id. at 1180-81. Alternately, it 15 argues that state privilege law applies because jurisdiction under CAFA is based on diversity.56 16 Consequently, Lexmark asserts, Molina cannot rely on information purportedly exchanged during 17 the mediation to demonstrate that its removal of the action was untimely. 18 19 20 21 50 22 51 23 24 25 26 Remand at 1-4. Id. at 1-3. 52 Id. at 4. 53 Id. 54 Notice of Removal at 5; Opposition at 2. 27 55 28 56 Opposition at 9. Id. at 9-10. 12 1 1. 2 Whether Information Exchanged During Mediation Can Establish the 3 Amount in Controversy 4 a. 5 Whether State or Federal Privilege Law Applies Although Lexmark relies primarily on the federal common law mediation privilege 6 recognized in Folb, it also suggests that the court should apply California privilege law because the 7 case is one in which state law provides the rule of decision.57 It is clear that federal law governs 8 whether a case exceeds the amount in controversy necessary for removal under CAFA. See Horton 9 v. Liberty Mutual Ins. Co., 367 U.S. 348, 352 (1961) (“[D]etermination of the value of the matter 10 in controversy for purposes of federal jurisdiction is a federal question to be decided under federal 11 standards. . .”). Accordingly, federal privilege law controls. See FED. R. EVID. 501 (state law 12 privileges apply in civil actions in federal court only “with respect to an element of a claim or 13 defense as to which State law supplies the rule of decision”). 14 In Babasa v. Lenscrafters, the Ninth Circuit considered the applicability of state privilege 15 law in deciding whether the amount in controversy requirement for diversity jurisdiction had been 16 met and rejected the precise argument Lexmark advances here. Babasa, 498 F.3d at 974-75. The 17 Babasa court held that state privilege law did not apply in determining whether a settlement letter 18 sent “in preparation for [a] mediation” was privileged and thus was not an “other paper” that 19 triggered the commencement of the thirty day removal period. Rather, it held, federal law 20 controlled. Id. (“State law does not supply the rule of decision here. Federal law governs the 21 determination whether a case exceeds the amount in controversy necessary for a diversity action 22 to proceed in federal court,” citing Breed v. U.S. Dist. Court for the N. Dist. of Cal., 542 F.2d 23 1114, 1115 (9th Cir. 1976) (holding that, when a question of federal law is at issue, “[s]tate law 24 [as to privileges] may provide a useful referent, but it is not controlling”) and Horton, 367 U.S. 25 at 352). Under Babasa, California Evidence Code § 1119, which makes certain documents and 26 communications pertaining to mediation inadmissible in civil actions, is inapplicable here. The 27 28 57 Id. 13 1 court thus turns to Lexmark’s argument that a federal common law mediation privilege prevents 2 use of communications during mediation for purposes of removal or remand. 3 b. 4 5 Whether the Federal Mediation Privilege Adopted in Folb Applies i. Folb’s Adoption of a Mediation Privilege Lexmark relies on the district court’s decision in Folb as the basis for its argument that a 6 federal common law mediation privilege precluded it from removing based on the information 7 concerning damages it obtained during the May 2006 mediation. In Folb, a former employee of 8 the Motion Picture Industry Pension & Health Plans (“the Plans”) alleged that he had been 9 terminated in retaliation for whistle-blowing activities. Folb, 16 F.Supp.2d at 1166. The Plans 10 argued that Folb had been terminated because he sexually harassed a fellow employee, Vivian 11 Vasquez. Folb asserted that this reason was pretextual, and that he had been discharged in 12 retaliation for the objections he voiced to the Plans’ violation of fiduciary duties under ERISA. Id. 13 The Plans and Vasquez had previously participated in a mediation in an attempt to settle Vasquez’s 14 claims against the Plans arising out of Folb’s alleged harassment. Id. at 1167. Folb sought to 15 compel production of a “mediation brief” prepared by Vasquez’s counsel for the mediation, as well 16 as “related correspondence regarding settlement negotiations between the Plans and [ ] Vasquez.” 17 Id. Folb asserted the documents would reveal that the Plans had argued during mediation that he 18 had not sexually harassed Vasquez. Id. The court held that Folb was entitled to discovery 19 regarding settlement negotiations conducted after the close of formal mediation. Id. It concluded, 20 however, that a federal common law mediation privilege protected the mediation brief from 21 discovery. Id. 22 The court began its analysis by concluding that federal privilege law governed the 23 discoverability of the documents at issue.58 Id. at 1169-70. It next noted that under Rule 501 of 24 25 26 27 28 58 Folb’s complaint pled claims for violation of the Employee Retirement Income Security Act (“ERISA”) and state law claims as well. Because the issue of ERISA preemption had not yet been decided, the court assumed, without deciding, that both state and federal causes of action were at issue. Folb, 16 F.Supp.2d at 1168. This raised the question whether state or federal privilege applied. Id. at 1169. 14 1 the Federal Rules of Evidence, federal courts may “define new privileges based on interpretation 2 of ‘common law principles . . . in the light of reason and experience.’” Id. at 1170 (quoting Jaffee 3 v. Redmond, 518 U.S. 1 , 8 (1996)). The court noted, however, that caution should be exercised 4 in creating new privileges given the potential cost to the public and the courts in the form of lost 5 evidence. Id. at 1171. It observed that, before creating a privilege, a court must determine 6 whether it would constitute a “public good” by evaluating the factors outlined by the Supreme 7 Court in Jaffee v. Redmond: “(1) whether the asserted privilege is ‘rooted in the imperative need 8 for confidence and trust[;]’ (2) whether the privilege would serve public ends; (3) whether the 9 evidentiary detriment caused by exercise of the privilege is modest; and (4) whether denial of the 10 federal privilege would frustrate a parallel privilege adopted by the states.” Id. (quoting Jaffee, 11 518 U.S. at 9-13). After analyzing these factors, most particularly the first, the court concluded 12 that a federal common law mediation privilege precluded discovery of the Plans’ mediation brief 13 in the Vasquez suit. 14 15 ii. The Contours of the Folb Privilege The exact contours of the privilege recognized in Folb are unclear. The court stated that 16 the privilege it was adopting applied only to “communications between parties who agreed in 17 writing to participate in a confidential mediation with a neutral third party.”59 Id. at 1180. As to 18 19 20 21 22 23 24 25 26 27 28 59 Lexmark has adduced no evidence that the parties signed a formal written agreement governing the June 2006 mediation. While the statutes and rules governing mediation in state court proceedings may provide an adequate substitute for a written confidentiality agreement, it is possible that the limited privilege recognized in Folb may be inapplicable because no written confidentiality agreement was signed. In limiting the privilege it recognized in this manner, the Folb court distinguished between mediation, which is not addressed in the Federal Rules of Evidence, and settlement negotiations, which are governed by Rule 408 of the Federal Rules of Evidence. See FED. R. EVID. 408 (evidence of settlement offers and compromise negotiations is not admissible “to prove liability for, invalidity of, or amount of a claim that was disputed as to validity or amount, or to impeach through a prior inconsistent statement or contradiction”); Folb, 16 F.Supp.2d at 1180 (“Any interpretation of Rule 501 must be consistent with Rule 408. To protect settlement communications not related to mediation would invade Rule 408’s domain; only Congress is authorized to amend the scope of protection afforded by Rule 408. Consequently, any post-mediation communications are protected only by Rule 408’s limitations on admissibility”). 15 1 other details, the court observed that “the contours of such a federal privilege [will have] to be 2 fleshed out over time.” See id. at 1179. The court stressed repeatedly that its creation of a federal 3 mediation privilege was limited to the factual context before it, i.e., a situation in which a third 4 party who did not participate in a formal mediation sought discovery of mediation-related 5 communications. See, e.g., id. at 1180 (“On the facts presented here, the Court concludes that 6 communications to the mediator and communications between parties during the mediation are 7 protected. In addition, communications in preparation for and during the course of a mediation 8 with a neutral must be protected. Subsequent negotiations between the parties, however, are not 9 protected even if they include information initially disclosed in the mediation”). 10 Only a few decisions have applied the privilege recognized in Folb; most of these have 11 involved disputes regarding the discoverability of mediation-related material. The court has found 12 one case in this circuit upholding a claim of privilege under Folb, and two cases from other 13 circuits; all addressed the discoverability of mediation-related material, and cited Folb in endorsing 14 a mediation privilege.60 See Microsoft Corp. v. Suncrest Enterprise, No. C03-05424 JF, 2006 WL 15 929257, *2 (N.D. Cal. Jan. 6, 2006) (“this court concludes that most of the deposition questions 16 at issue seek information pertaining to the parties’ conversations with the mediator and are, 17 therefore, protected”); In re RDM Sports Group, Inc., 277 B.R. 415, 430-31 (Bankr. N.D. Ga. 18 2002) (“[T]he evidence is strong that parties engage in mediation with an expectation that the 19 information will remain protected from future use by other parties. . . . The mediation privilege 20 should operate to protect only those communications made to the mediator, between the parties 21 during the mediation, or in preparation for the mediation. Therefore, the mediation privilege does 22 23 24 25 26 27 28 Implicitly, therefore, the Folb court rejected Molina’s argument that Congress’s adoption of Rule 408 precludes the adoption of a federal common law mediation privilege. 60 In other cases where parties have asserted a mediation privilege under Folb, courts have found that the privilege did not apply because the communications at issue were not “formal mediation.” See E.E.O.C. v. Albion River Inn, Inc., No. C 06-05356 SI, 2007 WL 2560718, *2 (N.D. Cal., Sept. 4, 2007); California Service Employees Health & Welfare Trust Fund v. Advance, No. C06-3078 CW (BZ), 2007 WL 2669823, *1 (N.D. Cal. Sept. 7, 2007). 16 1 not apply to shelter from disclosure documents prepared prior to the mediation, merely because 2 those documents were presented to the mediator during the course of the mediation”); Sheldone 3 v. Pennsylvania Turnpike Comm’n, 104 F.Supp.2d 511, 512 (W.D. Pa. 2000) (granting a motion 4 “to preclude the discovery ‘through any method . . . , including Plaintiffs’ noticed deposition,’ of 5 ‘[a]ll mediation communications and mediation documents’”). 6 Here, Lexmark attempts to invoke a federal mediation privilege in an entirely different 7 context. Because the Folb court limited its recognition of the privilege to the factual scenario 8 before it, such a privilege does not apply in this case. Because the cases that have followed Folb 9 have involved the same context (i.e., third party attempts to discover the mediation positions of 10 their adversaries in other cases), moreover, it is likewise not clear that they support recognition of 11 a privilege here. This is particularly true when one considers that courts have declined to recognize 12 a federal mediation privilege outside the factual context at issue in Folb; that there is a fundamental 13 difference between confidential information and information subject to an evidentiary privilege; that 14 the Ninth Circuit and other courts have held that information that is otherwise privileged under 15 Rule 408 constitutes “other paper” that triggers the thirty day period for removal; and that parties 16 in Lexmark’s position frequently rely on information obtained during mediation to support removal 17 of a state action to federal court. 18 c. Whether a Federal Mediation Privilege Should Be Recognized in the 19 Context of Assessing the Timeliness of Removal 20 (1) 21 22 The State of the Law Concerning the Existence of a Federal Mediation Privilege The existence of a federal common law mediation privilege is not nearly as well established 23 as Lexmark suggests it is. No Circuit court has ever adopted or applied such a privilege; indeed, 24 both the Ninth and the Fourth Circuits have expressly declined to consider whether such a privilege 25 exists. See Babasa, 498 F.3d at 975 n. 1 (declining to consider whether a federal mediation 26 privilege exists); Dusek v. Mattel, Inc., 141 Fed.Appx. 586, 588 n. 2 (9th Circ. July 29, 2005) 27 (Unpub. Disp.) (same); In re Anonymous, 283 F.3d 627, 639 (4th. Cir.2002) (same). The Fifth 28 17 1 Circuit, moreover, has specifically refused to infer the existence of a mediation privilege from a 2 federal statute making mediation proceedings conducted under its aegis confidential. See In re 3 Grand Jury Subpoena Dated December 17, 1996 (“In re Grand Jury”), 148 F.3d 487, 493 (5th 4 Cir. 1998). 5 The Fifth Circuit’s analysis in In re Grand Jury Subpoena is instructive. The case 6 concerned a grand jury investigation of suspected criminal wrongdoing by the Texas Agricultural 7 Mediation Program (“TAM”). TAM was a state loan mediation program that received federal 8 funds under the Agricultural Credit Act of 1987.61 Id. at 489-90. The grand jury served a 9 subpoena on TAM’s custodian of records. Id. at 490. Parties to a mediation for which records 10 were sought moved to intervene and quash the subpoena “on the ground that documents relating 11 to mediation proceedings involving them [were] protected from disclosure by a mediation 12 privilege.” Id. The district court found that a federal mediation privilege protected the documents 13 at issue from disclosure, and the government appealed. Id. 14 To determine whether the documents were protected from disclosure by a mediation 15 privilege, the Fifth Circuit examined the requirement in the Agricultural Credit Act that a state 16 provide for the confidentiality of mediation sessions to qualify for funding under the Act. The 17 court noted that “[i]n imposing this requirement, Congress obviously sought to protect information 18 relating to mediation sessions to some extent. Confidentiality is critical to the mediation process 19 because it promotes the free flow of information that may result in the settlement of a dispute.” 20 Id. at 492 (citing Kenneth R. Feinberg, Mediation – A Preferred Method of Dispute Resolution, 21 16 PEPP. L. REV. S5, S28-29 (1989)). It concluded, however, that there was a distinction between 22 23 24 25 26 27 28 61 “The Agricultural Credit Act was passed in response to growing problems of farm debt in the United States. Among other things, the Act provides financial assistance to states for the operation and administration of agricultural loan mediation programs that assist in resolving disputes between farmers and their agricultural lenders. See 7 U.S.C. § 5102. To qualify for financial assistance, a state must be certified by the Secretary of Agriculture. See id., § 5101(a). The Secretary will certify a state if it has in effect an agricultural loan mediation program that, among other things, ‘provides that mediation sessions shall be confidential[.]’” In re Grand Jury Subpoena, 148 F.3d at 489 (quoting 7 U.S.C. § 5101(c)(3)(D)). 18 1 “confidential” and “privileged” communications. Id. (citing Nguyen Da Yen v. Kissinger, 528 2 F.2d 1194, 1205 (9th Cir. 1975) (concluding that INS files regarding Vietnamese children were 3 confidential but not privileged); State v. Thompson, 54 Wash.2d 100, 338 P.2d 319, 322 (1959) 4 (holding that the requirement of confidentiality in a statute did not create an evidentiary privilege); 5 and American Civil Liberties Union of Mississippi v. Finch, 638 F.2d 1336, 1342 (5th Cir. 1981) 6 (assuming arguendo that a confidentiality requirement in statute created an evidentiary privilege)). 7 As a result, although acknowledging that the mediation proceedings mandated by the Agricultural 8 Credit Act were intended to be confidential, the court declined to hold that they were privileged 9 and reversed the district court’s finding that a mediation privilege prevented disclosure of the 10 documents to the grand jury. Id. (“Because privileges are not lightly created, United States v. 11 Nixon, 418 U.S. 683, 710, 94 S.Ct. 3090, 41 L.Ed.2d 1039 (1974), we will not infer one where 12 Congress has not clearly manifested an intent to create one”). 13 Other courts have similarly concluded that although confidential, mediation is not 14 privileged. See F.D.I.C. v. White, 76 F.Supp.2d 736, 738 (N.D.Tex. 1999) (“It is obvious that 15 Congress sought to protect communications made during the course of mediation from unwarranted 16 disclosure. . . . However, “confidential” does not necessarily mean ‘privileged.’ . . . Privileges 17 are not lightly created and cannot be inferred absent a clear manifestation of Congressional intent. 18 . . . The Court does not read the [Alternative Dispute Resolution Act of 1998] or its sparse 19 legislative history as creating an evidentiary privilege that would preclude a litigant from 20 challenging the validity of a settlement agreement based on events that transpired at a mediation” 21 (citations omitted)); Datapoint Corp. v. Picturetel Corp., No. Civ.A. 3:93-CV-2381D, 1998 WL 22 25536, *2 (N.D. Tex. Jan. 14 1998) (“Additionally, the information sought by PictureTel is not 23 privileged. Southern District of Texas Local Rule 20(1), which is a component of the court’s 24 Alternative Dispute Resolution rule, does not render otherwise non-privileged settlement 25 communications privileged. Rather, it deems them to be confidential and protected from 26 disclosure. . .” (footnote omitted)). 27 28 (2) Confidentiality versus Privilege in the Mediation Context This distinction between evidentiary privilege and confidentiality helps clarify the issue in 19 1 the present case. Although “confidentiality” and “privilege” are often used interchangeably in 2 discussions of mediation, the terms refer to two distinct concepts. See Scott H. Hughes, The 3 Uniform Mediation Act: To The Spoiled Go The Privileges, 85 MARQ. L. REV. 9, 25-34 (2001) 4 (“The twin principles of the duty of confidentiality and privilege are not identical and, therefore, 5 generate confusion in the field of mediation” (footnote omitted)). “Confidentiality” refers to a duty 6 to keep information secret, while “privilege” refers to protection of information from compelled 7 disclosure. See id. Cf. Fred C. Zacharias, Harmonizing Privilege & Confidentiality, 41 S. 8 TEX.L.REV. 69, 72 (distinguishing between the duty of “confidentiality” set forth in professional 9 rules protecting client confidences and the attorney-client privilege). Communications are 10 confidential when the freedom of the parties to disclose them voluntarily is limited; they are 11 privileged when the ability of third parties to compel disclosure of them, or testimony regarding 12 them, is limited. See Hughes, supra, at 25-34. Distinguishing between these concepts in the 13 mediation context is sometimes difficult because the relationship between the parties to a mediation 14 is different than the type of fiduciary relationship that typically gives rise to an evidentiary privilege 15 or duty of confidentiality (e.g., attorney-client, psychotherapist-patient, clergy-penitent). 16 “Despite the conciliatory tone of mediation, the relationship[ ] between parties to a 17 dispute remain[s] adversarial until the dispute is resolved. To reach a productive 18 outcome, a mediator may seek to earn the confidence and trust of the participants, 19 and some parties may disclose sensitive information to the mediator, but the 20 vulnerability and dependence required for a fiduciary relationship is not an essential 21 quality of mediation. Parties do not need the mediator to resolve their dispute. 22 Mediation is, after all, a means of alternative dispute resolution. Mediation is a 23 confrontational process (although that phrase need not suggest a contentious or angry 24 process).”62 Eileen A. Scallen, Relational & Informational Privileges & The Case 25 26 27 28 62 That mediation, unlike other interpersonal relationships where the law recognizes confidentiality or privilege, involves a triangular relationship (between the parties to the dispute and the mediator), rather than a two-sided one, further complicates discussions of mediationrelated confidentiality and privilege. Because the mediator’s privilege or duty of confidentiality is not relevant to disposition of this case, the court does not address it here. 20 1 Of The Mysterious Mediation Privilege, 38 LOY. L.A. L. REV. 537, 590 (2004) 2 (footnote omitted). 3 In most relationships where the law recognizes a duty of confidentiality, “the duty of confidentiality 4 . . . is imposed upon the professional and not on the person being served. There is no reciprocal 5 duty on the client, penitent, or patient; each is free to disclose at will. . . . [A]lthough the 6 professional is bound by ethical codes or statutory authority to keep client confidences, a duty of 7 confidentiality does not bind third parties who may seek to compel involuntary testimony about the 8 matters covered by the duty of confidentiality.” Hughes, supra, at 33-34. The duty of 9 confidentiality that arises in the mediation context differs in that it operates as a restriction on both 10 parties. This is true because of the adversarial nature of the relationship: 11 “Because mediation involves communications with an adversary, the legal structures 12 that promote confidentiality must do more than function as a restraint on outside 13 parties who seek disclosure; they must also provide a substitute for trust between 14 those who are communicating. This is accomplished by limiting the adverse party’s 15 ability to disclose or make use of mediation communications. In this respect, 16 assurances of confidentiality reduce the chilling potential of disclosures, whether 17 initiated from inside or outside the group of mediation participants. Parties are then 18 free to explore possibilities for a resolution to their dispute without worrying about 19 the consequences in the courtroom if their exploration does not succeed.” Ellen E. 20 Deason, The Quest For Uniformity In Mediation Confidentiality: Foolish Consistency 21 Or Crucial Predictability?, 85 MARQ. L. REV. 79, 82 (2001). 22 23 24 (3) Whether the Duty of Confidentiality Prohibits Use of Mediation Information for Purposes of Removal As the preceding discussion makes clear, although Lexmark asserts reliance on a “mediation 25 privilege,” it in fact invokes the duty of confidentiality that prevents parties to a mediation from 26 disclosing mediation communications voluntarily. Folb, by contrast, addressed whether a privilege 27 shielded mediation discussions from discovery by third parties. See Folb, 16 F.Supp.2d at 1171. 28 Though protecting mediation discussions from compelled discovery and requiring parties to keep 21 1 mediation discussions confidential serve the same goal – “encouraging parties to attend mediation 2 and communicate openly and honestly,” see id. at 1172; Deason, supra, at 82 – they are 3 conceptually distinct. 4 Because of this distinction, Rule 408 of the Federal Rules of Evidence, which makes 5 “conduct or statements made in compromise negotiations regarding the claim” inadmissible to 6 prove liability,63 provides a better reference point for analyzing Lexmark’s argument than does 7 Folb. See FED. R. EVID. 408. The purpose of Rule 408 is “to encourage the compromise and 8 settlement of existing disputes.” See Josephs v. Pacific Bell, 443 F.3d 1050, 1064 (9th Cir. 2006). 9 Like mediation confidentiality, but unlike Folb’s mediation privilege (and traditional privileges such 10 as the attorney-client privilege), Rule 408 is primarily concerned with avoiding the chilling effect 11 that potential disclosure may have on a party to a communication, rather than the threat of 12 compelled discovery. 13 “The purpose of Fed.R.Evid. 408, to encourage settlements, is not undermined by use of 14 a demand letter in a notice of removal.” Archer v. Kelly, 271 F.Supp.2d 1320, 1323 (N.D. Okla. 15 16 17 18 19 20 21 22 23 24 25 26 27 28 63 Rule 408 states: (a) Prohibited uses.– Evidence of the following is not admissible on behalf of any party, when offered to prove liability for, invalidity of, or amount of a claim that was disputed as to validity or amount, or to impeach through a prior inconsistent statement or contradiction: (1) furnishing or offering or promising to furnish – or accepting or offering or promising to accept – a valuable consideration in compromising or attempting to compromise the claim; and (2) conduct or statements made in compromise negotiations regarding the claim, except when offered in a criminal case and the negotiations related to a claim by a public office or agency in the exercise of regulatory, investigative, or enforcement authority. (b) Permitted uses. – This rule does not require exclusion if the evidence is offered for purposes not prohibited by subdivision (a). Examples of permissible purposes include proving a witness’s bias or prejudice; negating a contention of undue delay; and proving an effort to obstruct a criminal investigation or prosecution. 22 1 2003) (citing FED. R. EVID. 408 Advisory Committee Notes (1974 Enactment)); see also id. (“The 2 Fed.R.Evid. 408 advisory committee’s notes (1972 Proposed Rules) indicate that the situations 3 mentioned in the rule are ‘illustrative’ and do[ ] not foreclose offering ‘compromise’ evidence for 4 other purposes. The Court finds that another acceptable purpose is to show that the amount in 5 controversy exceeds $75,000 and, together with complete diversity of the parties, . . . establish[es] 6 removal jurisdiction. As Kelly points out, the letter is not being offered as an admission of liability 7 or the amount of liability”); see also Vermande v. Hyundai Motor America, Inc., 352 F.Supp.2d 8 195, 202 (D. Conn. 2004) (“Here, the July 8 facsimile [containing a settlement offer] is not offered 9 for the purpose of establishing or fixing the amount of Defendants’ liability or even the amount of 10 Plaintiffs’ damages but rather merely to provide some evidence of the sums that are in dispute in 11 this action. While there is, admittedly, some risk that allowing courts to consider settlement offers 12 when assessing the amount in controversy may discourage parties from making settlement offers 13 during the first year of a case, on balance, the Court believes that the underlying rationale for Rule 14 408 cited in the Committee Notes – the limited relevance of such evidence and the public policy 15 of encouraging settlements – is not terribly offended by considering the July 8 facsimile (or for that 16 matter the Offer of Judgment) for the limited purpose of determining the amount in controversy 17 when the pleadings themselves are inconclusive on that subject” (footnote omitted)).64 18 Using this rationale, numerous courts, including the Ninth Circuit, have concluded that Rule 19 408 does not make settlement offers inadmissible in the removal context as evidence of the amount 20 in controversy. See Cohn v. Petsmart, Inc., 281 F.3d 837, 839 n. 3 (9th Cir. 2002) (“We reject 21 the argument that Fed.R.Evid. 408 prohibits the use of settlement offers in determining the amount 22 in controversy. Rule 408 disallows use of settlement letters to prove ‘liability for or invalidity of 23 the claim or its amount.’ We agree with the district court that Rule 408 is inapplicable because this 24 evidence was not offered to establish the amount of Petsmart’s liability, but merely to indicate 25 26 27 28 64 Because the one year limit on removal does not apply to cases removed under CAFA, 28 U.S.C. § 1453(b), the Vermande court’s concern about “discourag[ing] parties from making settlement offers during the first year of a case” is absent here. See Vermande, 352 F.Supp.2d at 202. 23 1 Cohn’s assessment of the value of the trademark”); Ray v. American Airlines, Inc., No. 08-5025, 2 2008 WL 3992644, *4 (W.D. Ark. Aug., 2008) (“We agree that Rule 408 does not prohibit the 3 use of a settlement letter to establish the amount in controversy”); Haydel v. State Farm Mut. Aut. 4 Ins. Co., No. CIVA 07-939-C, 2008 WL 2781472, *8 n. 8 (M.D. La. July 11 2008) (“Like other 5 courts, the undersigned also rejects the argument that Fed.R.Evid. 408 prohibits the use of 6 settlement offers in determining the amount in controversy”); Finnegan v. Wendy’s Intern., Inc., 7 No. 2:08-cv-185, 2008 WL 2078068, *3 (S.D. Ohio May 13, 2008) (“Courts have held that Rule 8 408 does not preclude the use of settlement offers to establish that the amount-in-controversy 9 requirement has been met”); Sulit v. Slep-Tone Entertainment, No. C06-00045 MJJ, 2007 WL 10 4169762, * 3 n. 1 (N.D.Cal. Nov. 20, 2007); (“The Court agrees with Defendants that Rule 408 11 does not prohibit use of settlement evidence that is not offered to prove liability or invalidity of the 12 claim or its amount”); Turner v. Baker, No. 05-3298-CV-S-SWH, 2005 WL 3132325, *3 (W.D. 13 Mo. Nov. 22, 2005) (“Other courts that have considered the issue have allowed the use of 14 information exchanged in settlement negotiations to determine if the amount in controversy 15 requirement has been satisfied”); LaPree v. Prudential Financial, 385 F.Supp.2d 839, 849 n. 9 16 (S.D. Iowa 2005) (“Prudential asserts that under Federal Rules of Evidence 408 and Iowa Rule of 17 Evidence 5.408, settlement proposals are inadmissible to prove liability or the amount of a claim, 18 and therefore the court is prohibited from using them to determine the amount in controversy. This 19 argument has been advanced before and has failed,” citing Cohn, 281 F.3d at 840 n. 3). 20 As these cases indicate, use of settlement offers as evidence of the amount in controversy 21 has not hindered Rule 408’s goal of encouraging open and honest discussion during negotiation. 22 This makes sense; concern that one’s adversary will use statements during negotiation as proof of 23 liability or wrongdoing, not concern that it will use them as proof of the amount in controversy, 24 is the primary obstacle to forthright negotiation discussions. 25 Given the courts’ experience applying Rule 408, Lexmark’s argument that the duty of 26 confidentiality that surrounds mediation discussions prohibits use of documents exchanged in that 27 setting for purposes of removal fails. Courts have found that using statements made during 28 settlement discussions to establish the amount in controversy does not undermine the policy goals 24 1 of Rule 408. That rule, like the duty of mediation confidentiality at issue here, seeks to encourage 2 honest assessment and acknowledgment of litigation strengths and weaknesses by limiting the 3 parties’ ability to make use of compromise discussions. Accordingly, although the parties to a 4 mediation generally have a duty to keep their discussions confidential, this duty does not prevent 5 use of mediation discussions for the limited purpose of establishing the amount in controversy.65 6 7 d. 8 9 Whether Folb’s Policy Concerns Support Prohibiting Use of Documents Exchanged During Mediation for Removal The court has determined that Folb’s focus on the discoverability of mediation-related 10 material limits its relevance here. Nonetheless, consideration of the concerns underlying Folb’s 11 adoption of a federal mediation privilege supports the conclusion the court reaches today. The Folb 12 court evaluated four factors in assessing whether creating a federal mediation privilege would be 13 a “public good”: “(1) whether the asserted privilege [was] ‘rooted in the imperative need for 14 confidence and trust[;]’ (2) whether the privilege would serve public ends; (3) whether the 15 evidentiary detriment caused by exercise of the privilege [was] modest; and (4) whether denial of 16 the federal privilege would frustrate a parallel privilege adopted by the states.” Folb, 16 F.Supp.2d 17 at 1171 (quoting Jaffee, 518 U.S. at 9-13). In applying these factors to the case before it, the court 18 19 20 21 22 23 24 25 26 27 28 65 Although Lexmark asserts that relying on the damages analysis provided to it during mediation would have been “improper,” defendants regularly rely on information regarding the amount in controversy learned during mediation to remove. See Storball v. Atlantic Recording Corp., 989 F.Supp. 845, 846-47 (E.D. Mich.1997) (finding removal proper where the defendant removed a case less than thirty days after “plaintiff submitted a mediation summary claiming damages in the amount of $82,535.48, plus interest”); see also Entrekin v. Fisher Scientific Inc., 146 F.Supp.2d 594, 617 (D.N.J. 2001) (rejecting plaintiff’s argument that defendant knew the amount in controversy more than thirty days prior to removal, the court noted that “discussions at the August 31, 2000 mediation session certainly cannot justify the remand of this action because the removal occurred a mere one day after this mediation”); Faasen v. State Farm Fire and Cas. Co., 886 F.Supp. 625, 628 (W.D. Mich. 1995) (considering defendant’s statement that “[t]hrough the mediation process and statements made by plaintiff’s counsel in late May, 1994, it became evident that [plaintiff] sought damages different from, and in excess of, the limits of State Farm Fire & Casualty Company policy no. 22-B2-4623-1” in determining whether the amount in controversy requirement was met and whether remand was appropriate). 25 1 is mindful that, in enacting Rule 501, Congress intended “to ‘provide the courts with the flexibility 2 to develop rules of privilege on a case-by-case basis,’ 120 Cong.Rec. 40891 (1974) (statement of 3 Rep. Hungate), and to leave the door open to change.” Trammel v. U.S., 445 U.S. 40, 47 (1980). 4 5 (1) The Need for Confidence and Trust The Folb court focused primarily on the need for confidence and trust in the mediation 6 process. The court noted that allowing third parties to discover “confidential communications with 7 the mediator”would penalize “the side [that had been the] most forthcoming in the mediation 8 process. . . .” Id. at 1172. This threat of compelled disclosure, the court observed, “create[d] an 9 incentive for participants to withhold sensitive information in mediation or refuse to participate at 10 all.” Id. 11 Prohibiting the use of documents created or prepared for mediation to establish the amount 12 in controversy for purposes of removal or remand, by contrast, will not further Folb’s goal of 13 “encouraging parties to attend mediation and communicate openly and honestly.” Id. As the facts 14 of this case demonstrate, such a prohibition would give defendants a significant tactical advantage. 15 Lexmark argues that paper evidencing the amount in controversy exchanged during mediation 16 should not start the thirty day removal clock under § 1446(b). If this were the case, a plaintiff who 17 valued his case above of the jurisdictional amount for removal might well be hesitant to share this 18 information with a defendant during mediation, as doing so would give the defendant an immense 19 tactical advantage. If the plaintiff revealed in paper exchanged during mediation that he valued his 20 case at an amount over the jurisdictional minimum, the defendant would have objective written 21 evidence of the amount in controversy without being required to act on the knowledge to remove. 22 A defendant in this position could wait to see if the state court ruled in its favor before deciding 23 whether to remove, confident that, at some point before trial, it could elicit an “amended pleading, 24 motion, order or other paper” (in the form of interrogatories, document production requests, and 25 deposition answers) that would once again indicate the case was removable. 26 For these reasons, if paper exchanged during mediation does not start the clock for removal, 27 the effectiveness of mediation will be severely limited. Plaintiffs will avoid sharing their valuation 28 of the case during mediation because the information will give defendants the ability to “test the 26 1 waters” before deciding to remove. In addition to discouraging honesty during mediation, such 2 a result would be contrary to § 1446(b)’s goal of eliminating unfair forum shopping. See Brown 3 v. Demco, 792 F.2d 478, 482 (5th Cir. 1986) (“The thirty-day time limit imposed by § 1446(b) 4 plays an integral role in preventing defendants from gaining unfair advantage by forum-shopping 5 after testing the waters of state court”). Adopting the rule Lexmark proposes would penalize 6 plaintffs for being forthcoming during mediation – exactly the outcome Folb sought to avoid. See 7 Folb, 16 F.Supp.2d at 1172. 8 9 (2) Public Ends Folb next noted that a mediation privilege “would serve public ends by encouraging prompt, 10 consensual resolution of disputes, minimizing the social and individual costs of litigation, and 11 markedly reducing the size of state and federal court dockets.” Id. at 1176. As noted, prohibiting 12 use of documents exchanged during mediation for purposes of establishing the amount in 13 controversy and removing would not encourage prompt and effective mediation; rather, it would 14 force plaintiffs to remain tightlipped or risk giving their opponents a tactical advantage. Folb’s 15 further focus on the institutional costs to courts is instructive as well. Lexmark’s proposed 16 approach would burden state courts with making substantive decisions in cases that are not removed 17 to federal court until the eve of trial so that defendants can “test the waters” before deciding 18 whether they wish to remove. 19 20 (3) Evidentiary Benefit In Folb, the court concluded that there was “little evidentiary benefit to be gained by 21 refusing to recognize a . . . privilege” shielding mediation communications from discovery. It 22 stated: 23 “First, evidence disclosed in mediation may be obtained directly from the parties to 24 the mediation by using normal discovery channels. 25 admission in mediation proceedings may, at least theoretically, be elicited in 26 response to a request for admission or to questions in a deposition or in written 27 interrogatories. In addition, to the extent a party takes advantage of the opportunity 28 to use the cloak of confidentiality to take inconsistent positions in related litigation, 27 For example, a person’s 1 evidence of that inconsistent position only comes into being as a result of the party’s 2 willingness to attend mediation. Absent a privilege protecting the confidentiality of 3 mediation, the inconsistent position would presumably never come to light.” Id. at 4 1178. 5 This analysis is inapposite in the present context, where the question is when a defendant had notice 6 of the amount in controversy. As this case makes evident, although a defendant who first learns 7 that the amount in controversy exceeds the jurisdictional limit in mediation has the ability to elicit 8 that same information through formal discovery, it has no incentive to do so until it decides that 9 it is strategically advantageous to remove to federal court. This permits defendant to control the 10 timing of removal and essentially vitiates the thirty day period set forth in § 1446(b). Harris stands 11 for the proposition that there must be an “objective baseline” to which courts can look in 12 determining when a defendant first knew that a case was removable. See Harris, 425 F.3d at 13 690-91. If courts cannot consider evidence of papers exchanged in mediation in analyzing the 14 timeliness of removal, Harris’ objective standard will be undercut. Under Harris, “[o]nce 15 defendant is on notice of removability, the thirty-day period begins to run”; this rule is no less 16 appropriately applied if notice occurs during mediation. See Harris, 425 F.3d at 697 (“The 17 jurisdictional and procedural interests served by a bright-line approach are obvious. First and 18 foremost, objective analysis of the pleadings brings certainty and predictability to the process and 19 avoids gamesmanship in pleading”). Courts must be able to consider all the papers exchanged 20 between the parties, including those exchanged during mediation, when deciding whether removal 21 is timely. As the court has emphasized, anything less would lead to exactly the gamesmanship 22 which Harris’s objective approach sought to eliminate. 23 24 (4) Frustration of Parallel State Privilege The fourth factor cited in Jaffee and Folb is “whether denial of the federal privilege would 25 frustrate a parallel privilege adopted by the states.” Folb, 16 F.Supp.2d at 1171 (citing Jaffee, 518 26 U.S. at 9-13). Analyzing this factor, the court in Folb noted that, as of 1998, “every state in the 27 Union, with the exception of Delaware, [had] adopted a mediation privilege of one type or 28 another.” See id. at 1179 (citing Pamela A. Kentra, Hear No Evil, See No Evil, Speak No Evil: 28 1 The Intolerable Conflict for Attorney-Mediators between the Duty to Maintain Mediation 2 Confidentiality and the Duty to Report Fellow Attorney Misconduct, 1997 B.Y.U.L. REV. 715, 3 Appendix A (collecting statutes)). It observed, however, that the scope of the mediation privilege 4 was not consistent across the states. See id. Nonetheless, the court found that recognizing a 5 federal mediation privilege was appropriate. See id. (“The fact that the states have not settled on 6 the scope of protection to provide should not prevent the federal courts from determining that in 7 light of reason and experience we should adopt a federal mediation privilege”). 8 The inconsistency in the scope of the mediation privilege recognized by the states remains 9 unaltered since Folb was decided. See Ellen E. Deason, The Need For Trust As A Justification For 10 Confidentiality In Mediation: A Cross-Disciplinary Approach, 54 U. KAN. L. REV. 1387, 1389 n. 11 14 (2006) (citing Ellen E. Deason, Predictable Mediation Confidentiality in the U.S. Federal 12 System, 17 OHIO ST. J. ON DISP. RESOL. 239, 255-80 (2002) (“In sum, state mediation privilege 13 statutes vary greatly in both their structure and their substantive exceptions that permit 14 disclosures”)). Thus, while the fact that most states have adopted a mediation privilege might 15 conceivably weigh in favor of the rule Lexmark urges, the lack of uniformity in the privileges 16 recognized limits the weight to which this factor is entitled. 17 18 19 (5) The Reduced Expectation of Mediation Confidentiality in the Class Action Context The court’s decision regarding the use of documents exchanged during mediation to 20 establish the amount in controversy is also influenced by the reduced expectation of confidentiality 21 in class action mediation proceedings. One group of researchers analyzed all state and federal 22 court decisions pertaining to mediation available through Westlaw’s “allstates” and “allfeds” 23 databases for the years 1999 through 2003. They concluded that there was little expectation of 24 confidentiality in class action mediation proceedings: 25 “The level of vigilance for maintaining the confidentiality of mediation discussions 26 varies depending on the context of the litigation. If the mediation settlement affects 27 the rights of third parties, such as settlement in class action cases, the expectation 28 of confidentiality appears to disappear or be substantially diminished. Indeed, not 29 1 a single one of the thirty-four class action opinions in the database presented a 2 confidentiality dispute. Mediators offered testimony in twelve and parties offered 3 mediation evidence in twenty-two of these cases. In short, the bargaining process 4 in class actions is closely scrutinized and frequently placed on the public record – 5 whether the settlement is reached through unfacilitated negotiation or with the 6 assistance of a mediator.” James R. Cohen & Peter N. Thompson, Disputing Irony: 7 A Systematic Look at Litigation About Mediation, 17 HARV. NEGOT. L. REV. 43, 68- 8 69 (2006). 9 Whatever the contours of the federal mediation privilege recognized in Folb, therefore, or 10 the general desirability of maintaining mediation confidentiality, neither privilege nor duties of 11 confidentiality prevent reliance on documents exchanged during mediation to establish the amount 12 in controversy. At least in the context of class action litigation, where the expectation of 13 confidentiality regarding mediation is diminished because the rights of third parties are involved 14 and the court must scrutinize settlements to ensure that class members’ rights are protected, neither 15 the mediation privilege created in Folb nor the general duty of mediation confidentiality entitled 16 Lexmark to refrain from removing based on information learned from documents exchanged during 17 mediation. 18 19 2. Whether Lexmark’s Removal Was Timely Molina argues that Lexmark had notice that the amount in controversy exceeded $5 million 20 more than thirty days prior to the removal (1) because the amount in controversy was 21 communicated in settlement negotiations after the initial mediation; (2) because Lexmark could 22 calculate the amount in controversy based on information in its own records; and (3) because 23 Molina’s counsel shared plaintiffs’ damages analysis with Lexmark during the May 2, 2006 24 mediation, and this, coupled with Molina’s subsequent amendment of the complaint, put Lexmark 25 on notice that more than $5 million was claimed in the case. 26 27 a. Rudy’s April 2008 Settlement Communications In an April 17, 2008 letter to Molina’s counsel, mediator Rudy stated that he told Lexmark 28 attorney “Frank Liberatore that it will probably take $8 million to $10 million to resolve this 30 1 dispute short of a trial.”66 In a second letter the following day, Rudy states that he “informed 2 Frank Liberatore that the matter, in your view, would have to settle closer to $10 million than to 3 $5 million.”67 It appears these letters reference oral statements Rudy made to Liberatore.68 4 Although the Ninth Circuit has held that a settlement letter provides sufficient notice of the 5 amount in controversy to trigger the thirty-day window for removal under § 1446(b), see, e.g., 6 Babasa, 498 F.3d at 974-75, it has not directly addressed whether oral settlement communications 7 likewise start the removal clock. In Harris, however, the Ninth Circuit stated that courts should 8 “rely on the face of the initial pleading and on the documents exchanged in the case by the parties 9 to determine when the defendant had notice of the grounds for removal, requiring that those 10 grounds be apparent within the four corners of the initial pleading or subsequent paper.” Harris, 11 425 F.3d at 695 (quoting Lovern, 121 F.3d at 162). Harris’ focus on the information contained 12 in documents exchanged in the case appears to preclude consideration of oral settlement offers for 13 purposes of assessing the timeliness of removal under § 1446(b). Such an inquiry might easily 14 devolve into the type of “collateral litigation” over defendant’s subjective knowledge that the 15 Harris court sought to avoid. See id. at 697; see also Thomas v. Ritter, No. 3:98CV530-H, 1999 16 WL 1940047, *2 (W.D.N.C. Feb. 11, 1999) (“Allowing oral communications of settlement offers 17 to establish the amount in controversy would present enormous proof problems, and potentially 18 require an evidentiary hearing on every notice of removal and motion for remand. Accordingly, 19 the statute is worded specifically to require written notice, in a pleading or otherwise, that the 20 amount in controversy exceeds the jurisdictional threshold”); id. at *2 n. 2 (collecting cases in 21 22 23 24 25 26 27 28 66 Thomas Supp. Decl., Ex. B. 67 Thomas Supp.Decl., Ex. C. 68 Although the court has concluded that no federal mediation privilege applies under the circumstances of the present case, it is unclear whether, even if such a privilege were recognized, it would apply to Rudy’s letters. Specifically, the record does not reflect whether Rudy’s letters were sent in order to continue formal mediation proceedings, or whether they were communications outside the formal mediation process. See Folb, 16 F.Supp.2d at 1180 (“Subsequent negotiations between the parties, however, are not protected even if they include information initially disclosed in the mediation”). 31 1 which oral notice of diversity jurisdiction triggered removal and noting that in all such cases, “the 2 oral notices were given in court proceedings and/or in the presence of the presiding judge, thereby 3 removing any proof problems regarding who said what at what time”); Smith v. Bally’s Holiday, 4 843 F.Supp. 1451, 1454 (N.D. Ga. 1994) (“the court finds that oral communication between 5 counsel, not reduced to writing (or not capable of immediate reduction to writing), and not of a 6 nature any more specific than that damages would be sought ‘in the six-figure range,’ does not 7 satisfy the language of § 1446(b)”); but see Chase, 110 F.3d at 428-30 (discussing a “settlement 8 offer” made at a “settlement conference” as evidence of amount in controversy without specifying 9 whether the offer was oral or written); Burns, 31 F.3d at 1097 (discussing a “settlement offer” as 10 evidence of the amount in controversy without specifying whether the offer was oral or written). 11 Given the reference in § 1446(b) to “an amended pleading, motion, order or other paper,” and the 12 holding in Harris, the court concludes that Rudy’s April 2008 communications with Liberatore, 13 which appear to have been oral, do not constitute “other paper” triggering Lexmark’s obligation 14 to remove. 15 16 17 b. Lexmark’s Ability to Calculate the Amount in Controversy Based on its Own Records Molina next asserts that Lexmark knew from its own employee records that the amount at 18 issue in the amended complaint exceeded $5 million. Molina contends that the “formula” rquired 19 to calculate the amount in controversy from Lexmark’s employee records was available to the 20 company either because it was disclosed during the May 2, 2006 mediation or because it was 21 “obvious.” The court assumes without deciding that Lexmark knew the “formula,” and that 22 applying the formula to data in its possession would have revealed an amount in controversy 23 greater than $5 million. The question is the “duty to investigate” jurisdictional facts that Harris 24 proscribes encompasses “investigating” data in defendant’s possession. 25 Rico-Chinn v. Prudential Ins. Co. of America, Case No. C-05-01975 MMC, 2005 WL 26 1632289 (N.D. Cal, July 12, 2005), addressed an analogous question. Although decided before 27 the Ninth Circuit’s decision in Harris, Rico-Chinn employed the type of objective analysis endorsed 28 in Harris, and relied on the same authorities the Ninth Circuit found persuasive. See Rico-Chinn, 32 1 2005 WL 1632289 at *2 (“Of the five courts of appeals to have addressed the issue, . . . all have 2 held that ‘the thirty day time period . . . starts to run from defendant’s receipt of the initial pleading 3 only when that pleading affirmatively reveals on its face that the plaintiff is seeking damages in 4 excess of the minimum jurisdictional amount of the federal court,’” quoting Chapman, 969 F.2d 5 at 163 and citing In re 228 F.3d 896, 897 (8th Cir. 2000); Huffman v. Saul Holdings Ltd., 194 6 F.3d 1072, 1077 (10th Cir. 1999); Lovern, 121 F.3d at 162; and Foster v. Mutual Insurance Co., 7 986 F.2d 48, 54 (3d Cir. 1993)). 8 Rico-Chinn had filed a complaint in state court seeking disability benefits owed under an 9 insurance contract. Id. at *1. The complaint did not allege a specific amount in controversy. Id. 10 The insurance company removed the case to federal court after Rico-Chinn stated in response to 11 an interrogatory that she sought $87,673.81 in damages. Id. Rico-Chinn argued that the removal 12 was untimely because the insurer could have ascertained the amount in controversy at the point her 13 complaint was filed. Id. at *2. Specifically, she argued that the complaint alleged she was 58, and 14 sought payment of monthly disability benefits until she reached the age of 65. Id. Since the 15 insurer’s records disclosed the amount of her past monthly payments, Rico-Chinn asserted that it 16 could easily have calculated the amount in controversy using the information in its records. Id. 17 The court rejected this argument, and held the removal was timely. Id. at *3. It noted that a 18 defendant’s own records cannot logically constitute “other paper” under § 1446(b), which provides 19 that the removal period “commences only with the defendant’s ‘receipt’ of an ‘other paper.’” 20 “Plaintiff’s theory that defendant ‘received’ its own records, i.e., documents created and 21 maintained by defendant,” the court stated, was “inconsistent with the plain language of the 22 statute.” Id. Even if Lexmark could have ascertained that the amount in controversy exceeded $5 23 million by reviewing its own records, therefore, this would not have triggered the thirty day period 24 for removal under § 1446(b). 25 26 c. The Damages Analysis Provided to Lexmark During Mediation Finally, the court considers Molina’s argument that the damages analysis provided to 27 Lexmark during mediation, coupled with the amended complaint, put Lexmark on notice that the 28 claims in the amended pleading exceeded the jurisdictional minimum under CAFA. Molina asserts 33 1 that the analysis provided to Lexmark during the 2006 mediation calculated total damages of $4.09 2 million.69 As noted, the documents actually reflected total unpaid wages and statutory penalties, 3 excluding interest, of $5,012,781.70 Molina’s figure of $4.09 million excludes penalties for current 4 workers. This appears to be a correct interpretation of California Labor Code § 203.71 The court 5 presumes, therefore, that both parties understood penalties could not be collected for current 6 employees, and that the damages analysis effectively showed a potential recovery for plaintiffs of 7 $4.09 million. If this damages analysis was received by defendant during the mediation, it is clear 8 that, the following month, when Molina amended his complaint to include allegations regarding 9 Lexmark’s failure to pay employees for accrued personal days,72 to expand the class period for an 10 additional ten years, and to add a request for punitive damages, Lexmark had sufficient information 11 to determine that the amount in controversy exceeded $5 million, and that the action was 12 removable. As the court has concluded that no mediation privilege or duty of confidentiality 13 precludes reliance on the document, the question becomes whether the damages analysis constitutes 14 “other paper” for purposes of § 1446(b) and whether it was received by Lexmark. (1) 15 During the Mediation Was “Other Paper” 16 17 Whether the Damages Analysis Allegedly Exchanged In analyzing whether the damages analysis constitutes “other paper” for removal purposes, 18 19 69 20 70 21 22 23 24 25 26 27 28 Thomas Decl., ¶ 5. Id., Ex. 1, 3. The court’s figure is the sum of the “Cumulative Lost Vac[ation] Dollars,” and “Cumulative Waiting Penalty” columns on the “Summary of Damages for Former Employees” and the “Cumulative Lost Vac[ation] Dollars” and “Cumulative Penalty” columns from the “Summary of Damages for Current Employees.” 71 California Labor Code § 203, which provides for statutory penalties, provides: “If an employer willfully fails to pay . . . in accordance with Sections 201, 201.5, 202, and 205.5, any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefor is commenced; but the wages shall not continue for more than 30 days.” CAL. LABOR CODE § 203. 72 Amended Complaint, attached to Plaintiff’s Motion for Leave to File Amended Complaint, ¶ 12. 34 1 the court once again finds Harris instructive. Harris was a disability benefits suit brought by an 2 insured against his insurer and its agent. Harris, 425 F.3d at 691. Harris lived in Montana and 3 alleged that the agent, Brown, was also a citizen of that state; this prevented removal of the action 4 to federal court. The state court set trial for February 2004. In late October 2003, the insurer filed 5 a motion to continue the trial because, among other things, Harris had not yet served or dismissed 6 Brown. Id. When Harris’ counsel opposed a continuance in an October 21, 2003 letter, the carrier 7 concluded that he had abandoned his claims against Brown. Id. It contacted Harris to ascertain 8 whether he intended to attempt service on Brown; when it received no response, the insurer 9 removed the action on November 3, 2003. Id. at 691-92. Asserting that citizenship of the parties 10 was completely diverse because Brown was no longer a party, the insurer alleged that the thirty-day 11 period for removal began to run on October 21, when Harris’ attorney wrote the letter opposing 12 a continuance. Id. at 692. Harris filed a motion to remand, arguing that the insurer’s removal was 13 untimely. Id. The district court concluded otherwise. Id. 14 The appellate court held that “notice of removability under § 1446(b) is determined through 15 examination of the four corners of the applicable pleadings, not through subjective knowledge or 16 a duty to make a further inquiry.” Id. at 694. When “details [regarding grounds for removal] are 17 obscured or omitted [from the initial pleadings], or indeed misstated,” the court observed, “that 18 circumstance makes the case ‘stated by the initial pleading’ not removable, and the defendant will 19 have 30 days from the revelation of grounds for removal in an amended pleading, motion, order, 20 or other paper to file its notice of removal.” Id. (quoting Lovern,121 F.3d at 162 (emphasis 21 original)). 22 Applying this rule, the court concluded that the insurer’s removal had been timely. 23 Specifically, it concluded that, because Harris’ complaint did not allege facts reflecting complete 24 diversity of citizenship between all plaintiffs and all defendants, the thirty-day period did not begin 25 to run until Bankers’ receipt of the October 21, 2003 letter from Harris’ attorney indicating that 26 Harris did not intend to pursue claims against the non-diverse agent. Id. at 695-96. 27 In assessing the timeliness of removal, Harris focused on the objective information available 28 to the removing party, i.e., the information contained within the four corners of initial and 35 1 subsequent pleadings, and other paper received during the litigation. See id. at 695 (stating that 2 courts need not “inquire into the subjective knowledge of the defendant, an inquiry that could 3 degenerate into a mini-trial regarding who knew what and when. Rather, [they] will . . . rely on 4 the face of the initial pleading and on the documents exchanged in the case by the parties to 5 determine when the defendant had notice of the grounds for removal, requiring that those grounds 6 be apparent within the four corners of the initial pleading or subsequent paper,” quoting 7 Lovern,121 F.3d at 162). 8 This bright-line rule aims to bring “bring certainty and predictability to the process and 9 avoids gamesmanship in pleading” on the part of the plaintiff. Harris, 425 F.3d at 697 & n. 8 10 (citing In re Willis, 228 F.3d at 897 (“The rule prevents a plaintiff from disguising the amount of 11 damages until after the thirty-day time limit has run to avoid removal to federal court”)); id. at 697 12 n. 9 (stating that such a rule “avoids the spectre of inevitable collateral litigation over whether the 13 pleadings contained a sufficient ‘clue,’ whether defendant had subjective knowledge, or whether 14 defendant conducted sufficient inquiry,” citing Soto v. Apple Towing, 111 F.Supp.2d 222, 226 15 (E.D.N.Y. 2000) (“[T]here is no requirement in 28 U.S.C. § 1446(b) that a defendant exercise a 16 duty to investigate, and this Court will not read into the statute such a condition. To do so would 17 invite wasteful litigation as parties spar over the issues of diligence and ascertainability”)); see also 18 Chapman, 969 F.2d at 163 (“[Imposing a duty to investigate when a defendant receives an 19 indeterminate complaint as to removability] would needlessly inject uncertainty into a court’s 20 inquiry as to whether a defendant has timely removed a case, and as a result would require courts 21 to expend needlessly their resources trying to determine what the defendant knew at the time it 22 receive the initial pleading and what the defendant would have known had it exercised due 23 diligence”)). 24 Utilizing an objective analysis defeats gamesmanship by defendant as well, since “[o]nce 25 defendant is on notice of removability, the thirty-day period begins to run.” Harris, 425 F.3d at 26 697. This goal is supported by considering documents shared during mediation as “other paper” 27 that can trigger the thirty day removal period. As noted earlier, if such documents did not start 28 the running of the removal clock, defendants could obtain objective written notice of removability 36 1 without a concomitant obligation to act on it in thirty days. Accordingly, the court holds that the 2 damages analysis at issue here, if received by Lexmark during mediation, was an “other paper” 3 that triggered the commencement of the thirty day period under § 1446(b).73 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 73 At the hearing, counsel for Lexmark argued that even if the company had received the damages analysis during the mediation, it would not have been required to remove after the filing of the amended complaint because the analysis did not reflect a reasonable estimate of Molina’s claims. Counsel cited statements in Cohn that “[a] settlement letter is relevant evidence of the amount in controversy if it appears to reflect a reasonable estimate of the plaintiff’s claim,” and that “Cohn could have argued that the demand was inflated and not an honest assessment of damages, but he made no attempt to disavow his letter or offer contrary evidence.” See Cohn, 281 F.3d at 840. Counsel asserted that unlike Cohn, Lexmark “disavowed” Molina’s estimate and contended it was “unreasonable.” Lexmark stands in a different position than Cohn. Cohn was the plaintiff, not the removing defendant. The court merely observed that the settlement letter Cohn sent to the defendant was sufficient to establish the amount in controversy because Cohn did not attempt to disclaim his damages demand or assert that it was inflated and did not reflect the true value of the case. See id. at 839-40. It does not follow from the court’s analysis in Cohn that a plaintiff’s settlement offer should be deemed “unreasonable” because a defendant “disavows” it. A defendant may disagree with plaintiff regarding his valuation of a lawsuit, but that does not mean that the amount claimed by plaintiff is not “in controversy.” Molina has not “disavowed” the damages analysis prepared for the mediation in 2006 or suggested in any way that it does not reflect a “reasonable estimate” of damages recoverable by the class. Counsel for Lexmark also argued that the estimate set forth in the damage analysis was unreasonable because (1) it was assumed that no Lexmark employee had taken vacation days; and (2) the analysis included vacation pay owed to current employees, who are not entitled to accrued vacation pay until termination under California Labor Code § 227.3. As respects Lexmark’s first argument, Molina contends that Lexmark workers are entitled to be paid for all vacation days they accrued during their employment because Lexmark admittedly failed to maintain records regarding the use of vacation days. The validity of this position has not yet been adjudicated, and it is not so unreasonable on its face as to warrant discounting Molina’s damages estimate. As respects Lexmark’s second argument, under California law, an employee’s right to vacation pay vests as it is earned through labor. Suastez v. Plastic Dress-Up Co., 31 Cal.3d 774, 784 (1982) (“Case law from this state and others, as well as principles of equity and justice, compel the conclusion that a proportionate right to a paid vacation ‘vests’ as the labor is rendered. Once vested, the right is protected from forfeiture by [California Labor Code] section 227.3”); see also Boothby v. Atlas Mechanical, Inc., 6 Cal.App.4th 1595, 1597 (1992) (“Paid vacation provided by an employment agreement vests as the employee labors”). The vested nature of the right is not affected by the California Court of Appeal’s statement in Church v. Jamison, 143 Cal.App.4th 1568 (2006), that “[u]nder Labor Code section 227.3, an employee has the right to be paid for unused vacation only after the ‘employee is terminated without having taken off his vested vacation time.’ Thus, termination of employment is the event that converts the employer's obligation to allow an employee to take vacation from work into the monetary obligation to pay 37 1 The fact that Lexmark had to combine the information contained in the damages analysis 2 with the new allegations in the amended complaint to determine that more than $5 million was at 3 issue does not alter this analysis. Although a defendant need not investigate facts outside the 4 pleadings and litigation papers to determine removability, this does not mean that it can avoid 5 making simple calculations using objective facts contained within those pleadings and papers to 6 ascertain the amount in controversy. See Meridian Sec. Ins. Co. v. Sadowski, 441 F.3d 536, 7 541-42 (7th Cir. 2006) (citing “calculation from the complaint’s allegations”as one manner in 8 which a defendant can establish that the amount in controversy satisfies the jurisdictional 9 minimum); Town of Ogden Dunes v. Siwinski, No. 2:08-CV-78, 2008 WL 1804104, *3 (N.D. Ind. 10 Apr. 17, 2008) (“The Siwinskis have failed to demonstrate that the case was not removable after 11 receipt of the Complaint. They admit, through their Notice of Removal, that the Complaint sought 12 ‘a fine in an amount up to $2,500 per day that the violation alleged hereunder exists.’ The amount 13 of days subject to penalty under the ordinance is revealed by the Complaint’s allegation that the 14 Siwinskis were in violation from as early as June 18, 2007 up through and including the time of 15 the filing of the Complaint. This totals seventy-five (75) days of potential violations, and at $2,500 16 a day, the Complaint immediately put the Siwinskis on notice that there was at least $182,500 in 17 controversy” (citations omitted)); Locklear Elec. v. My Overhead Corp., No. 07-788-GPM, 2007 18 WL 4225732, *4 (S.D. Ill. Nov. 26, 2007) (“Any willful violation of TCPA is punishable in a 19 20 21 22 23 24 25 26 27 28 that employee for unused vested vacation time.” Id. at 1576. Earlier in this litigation, the Superior Court rejected the very argument Lexmark now advances as a basis for finding Molina’s damages estimate to be “unreasonable.” In ruling on Lexmark’s motion for summary judgment, the Superior Court held that while current employees might not be able to sue for damages under § 227.3 until termination, they could obtain a declaratory judgment regarding their entitlement to vacation pay. (Compendium of Declarations and Exhibits in Support of Defendant’s Notice of Removal (“Removal Compendium”), Ex. JJJJ at 2-3.) “[T]he requirement under CAFA that the amount in controversy exceed $5 million in the aggregate may be established ‘either from the viewpoint of the plaintiff or the viewpoint of the defendant, and regardless of the type of relief sought (e.g., damages, injunctive relief, or declaratory relief).’” Rippee, 408 F.Supp.2d at 984 (quoting S. Comm. on the Judiciary, Class Action Fairness Act of 2005, S.Rep. No. 109-14, at 40 (Feb. 28, 2005), reprinted in 2005 U.S.C.C.A.N. 3, 2005 WL 627977). For all of these reasons, Molina’s damages analysis was a reasonable estimate, and Lexmark’s argument to the contrary fails. 38 1 private civil action under the statute through damages in an amount equivalent to the actual loss 2 caused by the violation or $1,500, whichever is greater. In light of the allegations of the 3 complaint, proof that Defendants transmitted a mere 3,334 unsolicited advertisements via fax over 4 a period of five years would satisfy the $5 million jurisdictional threshold under CAFA. 5 Accordingly, the Court believes that the allegations of Locklear’s second amended complaint 6 joining iBid as a party Defendant were sufficient to put iBid on notice that the amount in 7 controversy in this case exceeds $5 million, so that iBid’s attempted removal of this case more than 8 thirty days after receipt of the second amended complaint is untimely” (citations omitted)); Doss 9 v. Albertson’s LLC, 492 F.Supp.2d 690, 694 (W.D. Tex. 2007) (“A simple computation would 10 show that this claim was for at least $317,408 in damages. Even setting aside Plaintiff’s claims 11 for compensatory damages and benefits, Plaintiff’s discovery response made clear to Defendants 12 that Plaintiff sought more than $75,000. In so holding, the Court is not inquiring into what 13 Defendants ‘may or may not subjectively know,’ and it is not requiring Defendants to engage in 14 due diligence to determine the extent of Plaintiff’s allegations. Instead, the Court relies on an 15 objective reading of Plaintiff’s allegations, aided by ‘a modicum of effort and a couple of simple 16 mental calculations’” (citations omitted)). 17 (2) 18 19 Whether Lexmark Received the Damages Analysis During Mediation Because the court has concluded that the damages analysis is “other paper” that could 20 trigger defendant’s obligation to remove, it must now address the parties’ dispute as to whether 21 Lexmark received the document during mediation. Molina has proffered the declarations of his 22 attorneys, Sheila Y. Thomas and Antonio Lawson, and the damages analysis itself, as evidence that 23 it was provided to Lexmark during mediation. Both Thomas and Lawson attended the mediation, 24 and state that Lexmark counsel Frank Liberatore received the damages analysis at that time.74 They 25 assert that Liberatore made a correction to the calculations reflected in the analysis, that Thomas 26 called Molina’s expert regarding the correction, that the expert faxed a corrected analysis, and that 27 28 74 Thomas Decl., ¶¶ 3-5; Thomas Supp. Decl., ¶¶ 2-4; Lawson Decl., ¶¶ 2-4. 39 1 Liberatore received a copy of this new document as well.75 Lexmark counters with the 2 declarations of its counsel, Liberatore and Robert Patton, and its “Human Resources Generalist” 3 Rebecca Cox. All three were present at the mediation and state that Molina’s counsel never shared 4 the documents in question with Liberatore.76 The court finds the detailed account of events of the 5 mediation found in the declarations of Molina’s lawyers more credible than the general denials 6 contained in the substantially identical declarations submitted by Lexmark’s representatives.77 7 First, the mediation between Molina and Lexmark would have been singularly ineffective had the 8 parties not at some point shared their valuations of the case. Second, the date of May 4, 2006 on 9 the revised damages analysis sent to Thomas and attached to her declaration provides 10 contemporaneous support for her description of events and for the fact that Liberatore received a 11 copy of the document during the mediation and made a correction to it.78 Lexmark does not offer an alternate account of the events that took place at the mediation 12 13 to support its claim that it did not receive the damages analysis.79 Instead, it argues that the history 14 of the litigation post-mediation is inconsistent with Molina’s claim that his counsel shared the 15 damages analysis during the mediation. Lexmark first contends that Molina “never provided [it] 16 with a calculation or estimate of damages of any kind (e.g., the amount of pay owed to class 17 members based on accrued and unused vacation and personal choice days, or any other damages)” 18 19 75 20 76 21 77 22 23 24 25 26 27 28 Id. Liberatore Decl., ¶¶ 5-9; Cox Decl., ¶¶ 5-10; Patton Decl., ¶¶ 3-8. See Thomas Decl., ¶¶ 3-5 and Ex. 3.; Thomas Supp. Decl., ¶¶ 2-4; Lawson Decl., ¶¶ 2- 4. 78 The mediation took place on May 2, 2006. Thomas declares that she asked the expert consultant to email her a copy of the corrected analysis two days after the mediation concluded because she did not have a copy of it. (Thomas Supp. Decl., ¶ 3). 79 Lexmark’s contention at the hearing that it had no opportunity to respond to plaintiff’s claims regarding the mediation because they were raised in reply is meritless. Plaintiff first asserted that Lexmark received the damages analysis during mediation and that Liberatore made corrections to it in its initial memorandum of points and authorities and the declaration of Sheila Thomas supporting that memorandum. (See Mot. Remand at 1, 3; Thomas Decl., ¶¶ 3-5.) 40 1 despite “multiple discovery requests asking [Molina] to state the amount of damages.”80 It also 2 asserts that Molina’s February 13, 2008 motion for bifurcation of liability and damages at trial, 3 which the Superior Court granted on April 2, 2008, is evidence that Molina did not share a 4 damages analysis during the mediation.81 Molina argued to the state court that bifurcation would 5 allow determination of issues bearing on the amount of damages (such as “(1) the time periods 6 during which class members are entitled to recover vacation wages; (2) whether liquidated or other 7 enhanced damages need to be calculated for all or some of the class period, and, if so, for which 8 class members, under what law, and at what rate; and (3) entitlements to prejudgment interest”) 9 before a bifurcated second phase trial, thus “ensuring that discovery and proof related to damages 10 are properly targeted.82 Finally, Lexmark cites the fact that the report prepared by Molina’s 11 damages expert, economist Amy Aukstiknalis, did not rely on or refer to the 2006 damages 12 analysis.83 13 Lexmark’s arguments are unavailing given the time line in the case and Molina’s consistent 14 position that class members are entitled to recover all accrued vacation and personal days because 15 of Lexmark’s failure to keep records of its employees’ use of such days. The damages analysis that 16 Molina claims to have shared with Lexmark during the May 2, 2006 mediation was prepared by 17 Molina’s “expert consultant,” Richard Drogin, from “salary information for 111 employees 18 employed by Lexmark from 2001 through early 2006”; Lexmark provided this information to 19 Molina prior to the mediation.84 Drogin’s damages calculations do not reflect that Molina had 20 access to any information regarding the number of unused accrued vacation days to which each 21 employee was entitled; rather, they are based on an assumption that no employee used any of his 22 23 80 24 81 25 82 26 Liberatore Decl., ¶ 14. Opp. at 5; Liberatore Decl., ¶ 20. Plaintiff’s Motion for Bifurcation of Liability and Damages Issues at Trial at 4 (Removal Compendium, Ex. SSS, at 3178). 27 83 28 84 Opp. at 5-6; Liberatore Decl., ¶¶ 21-26. Thomas Decl., ¶¶ 3-4; Lawson Decl., ¶¶ 2-3. 41 1 or her vacation days.85 Contrary to Lexmark’s assertion that Molina’s subsequent interrogatory 2 answers demonstrate that he had made no attempt to calculate damages, the responses are consistent 3 with the analysis Drogin prepared. Lexmark served its first set of special interrogatories on August 4 10, 2007; Molina responded on September 14, 2007.86 Lexmark served its second set of special 5 interrogatories on March 21, 2008; Molina responded on May 1, 2008.87 In response to an 6 interrogatory asking that Molina state all facts on which he based his contention that class members 7 had accrued, unused vacation time, Molina stated, in part: “Lexmark failed to track or record 8 vacation and personal choice days taken and those days that remained at year end and has no 9 documents reflecting accrued and used vacation days for California employees.”88 In another 10 response, Molina contended that, because of this failure, “[a]ll class members are entitled to all 11 vacation and personal choice days accrued subject to any records reflecting any days taken during 12 their employment.”89 The balance of the interrogatory responses consistently reflect this position.90 13 As can be seen, the assumption on which Drogin’s damages analysis was based is also reflected 14 in Molina’s responses to Lexmark’s interrogatories, i.e., that class members are entitled to recover 15 for 100% of the vacation and personal days to which they were entitled under Lexmark’s policies 16 because the company failed to keep adequate records as to how much vacation and/or personal time 17 employees used. As a result, the court is not persuaded by Lexmark’s argument that Molina’s 18 discovery responses are inconsistent with his contention that his lawyers shared the damages 19 analysis with Lexmark during the mediation. 20 Similarly, Molina’s motion to bifurcate liability and damages to assure efficient discovery 21 22 23 24 25 26 85 Thomas Decl., Ex. 1-3. 86 Liberatore Decl., ¶¶ 16-17. 87 Id., ¶¶ 18-19. 88 Liberatore Decl., Ex. 2 at 5. 27 89 28 90 Id. at 42-43. See, e.g., id. at 8, 14, 20, 36, 42-46. 42 1 and trial proceedings is not inconsistent with Molina’s claim that he provided the damages analysis 2 to Lexmark during mediation. As noted, Molina has consistently asserted that Lexmark’s failure 3 to keep records makes it liable for all vacation and personal day pay to which its employees were 4 entitled during the relevant period. Nothing in the damages analysis Molina contends he shared 5 during mediation suggests that he was in possession of information that would have made 6 bifurcation and further damages discovery unnecessary. 7 Finally, the court finds Lexmark’s arguments regarding Molina’s expert witnesses 8 unconvincing. In an answer to Lexmark’s second set of interrogatories, Molina stated that he 9 intended to call Richard Drogin, the expert consultant who prepared the 2006 damages analysis, 10 to testify at trial regarding damages.91 Molina apparently changed his mind, however, and on May 11 15, 2008, sought leave to designate Aukstikalnis as his damages expert.92 Lexmark cites Molina’s 12 statement in the application in which he sought leave to designate Austikalnis that “[t]here are no 13 written reports or memoranda. There are no summaries of data. There have been no analyses 14 based on information other than that which [Lexmark] has provided and has had full opportunity 15 to review and analyze on its own.”93 It suggests that these statements constitute an admission that 16 no prior damages analysis was made. Reading the statements in context, it is clear that they refer 17 to reports, memoranda, summaries, and analyses prepared by Austiknalis, not Drogin, the 18 consultant who prepared the initial damages assessment used during the 2006 mediation. As a 19 result, they are not inconsistent with Molina’s claims regarding what took place at the mediation. 20 It is, of course, not surprising that a new expert entering the case would make her own calculations 21 rather than rely on those prepared by a prior expert based on a different class period. 22 In sum, having reviewed all of the evidence in the record, the court finds that Molina’s 23 counsel shared the damages analysis with Liberatore during the May 2, 2006 mediation. As a 24 result, Lexmark received objective written notice of the amount in controversy more than thirty 25 26 91 Liberatore Decl., Ex. 4 at 5. 27 92 28 93 Id., Ex. 5. Id. at 2; Opp. at 5. 43 1 days before it removed the case to federal court on July 22, 2008. Consequently, its removal was 2 untimely and Molina’s motion to remand must be granted. 3 D. Molina’s Request for Attorneys’ Fees 4 Molina seeks an award of $10,925 in attorneys’ fees under 28 U.S.C. § 1447(c), 5 representing the expenses he incurred filing the instant motion to remand.94 Section 1447(c) 6 provides in part: “An order remanding the case may require payment of just costs and any actual 7 expenses, including attorney fees, incurred as a result of the removal.” 28 U.S.C. § 1447(c). Attorneys’ fees may be awarded under § 1447(c) even absent a finding that the 8 9 removal was frivolous, vexatious, or in bad faith. See Moore v. Permanente Medical Group, Inc., 10 981 F.2d 443, 446-48 (9th Cir. 1992). In fact, the Ninth Circuit has made clear that an award of 11 attorneys’ fees is permissible even if defendant’s removal was “fairly supportable,” but wrong as 12 a matter of law. See Balcorta v. Twentieth Century-Fox Film Corp., 208 F.3d 1102, 1106 n. 6 (9th 13 Cir. 2000). 14 The decision to grant fees under § 1447(c) therefore rests in the sound discretion of the trial 15 court. See Toumajian v. Frailey, 135 F.3d 648, 657 (9th Cir. 1998) (“upon remand for lack of 16 subject matter jurisdiction court may require payment of just costs and any actual expenses, 17 including attorney’s fees incurred as a result of the removal”); Gotro v. R&B Realty Group, 69 18 F.3d 1485, 1487-88 (9th Cir. 1995) (recognizing that the district court has broad discretion to 19 award attorneys’ fees incurred as a result of removal under § 1447(c)); Moore, 981 F.2d at 447 20 (“Given the wide discretion provided the district court by § 1447(c), we will review an award of 21 attorney’s fees under this statute for abuse of discretion”). 22 In determining whether to award fees and costs, the court must assess the merits of 23 defendant’s removal petition. See Moore, 981 F.2d at 447; see also Balcorta, 208 F.3d at 1106, 24 n. 6 (“our case law . . . permit[s] an award of fees when a defendant’s removal, while ‘fairly 25 supportable,’ was wrong as a matter of law”); Gray v. New York Life Ins. Co., 906 F. Supp. 628, 26 634 (N.D. Ala. 1995) (“the decision as to whether to award fees under § 1447(c) turns primarily, 27 28 94 Declaration of Thomas Freeman (“Freeman Decl.”), ¶ 4. 44 1 if not solely, on the merit of the removal”). 2 Here, the court has found that the removal of Molina’s action from state court was untimely 3 as a matter of law. Under § 1447(c), therefore, the court has the discretion to award fees. The 4 court notes, however, that the Ninth Circuit has previously declined to address the application of 5 a federal mediation privilege in the removal context. See Babasa, 498 F.3d at 975 n. 1 (declining 6 to decide whether federal mediation privilege applied to a settlement letter prepared for mediation 7 in deciding whether it put defendant on notice of the action’s removability); see also Dusek, 141 8 Fed. Appx. at 588 n. 2 (“[W]e need not address whether the Ninth Circuit should recognize a 9 federal mediation privilege . . .”). Even if such a privilege exists, moreover, its scope and 10 application are unclear. See Folb, 16 F.Supp.2d at 1179 (“[T]he contours of [ ] a federal privilege 11 need to be fleshed out over time”). Because Lexmark’s notice of removal was based on an 12 arguable interpretation of law, the court declines to exercise its discretion to award plaintiff fees 13 and costs. 14 III. CONCLUSION 15 16 For the foregoing reasons, the court grants plaintiff’s motion, and remands the action 17 forthwith to Los Angeles Superior Court. 18 19 20 DATED: September 30, 2008 MARGARET M. MORROW UNITED STATES DISTRICT JUDGE 21 22 23 24 25 26 27 28 45
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