:: Federal Court Removal Deadline Triggered By Deposition Exhibit

Tyson takes issue with the Magistrate Judge’s conclusion that removal was untimely. The Magistrate Judge found that Tyson was on notice of the removability of the action on December 30, 2008. Rao’s deposition was taken on that date and, during the deposition, an offer letter (to Rao from his current employer Foster Farms) was introduced as a deposition exhibit by Tyson.

Rao v. Tyson Foods, 2009 U.S. Dist. LEXIS 49466 (E.D. Cal. June 12, 2009)

The jousting in this dispute over a non-competition clause involves several noteworthy issues.  Though this is a diversity case, the question of timely removal offers some insights.  In addition, the case reflects competing efforts at controlling venue, with the employer, Tyson, suing in Arkansas, and the employee seeking declaratory relief in before a California court.

The plaintiff, Shivram Rao (”Rao”), filed a civil action against his former employer, Defendant Tyson Foods, Inc. seeking declaratory relief invalidating a non-competition clause.  The action was initially filed in state court, but was removed by Tyson on the basis of diversity jurisdiction. Rao filed a motion to remand.

The removal came up in this way.   On December 30, 2008, Tyson took Rao’s deposition.  Tyson introduced an offer letter from Rao’s new employer, Foster Farms, as an exhibit.

The parties at the deposition also stipulated that the amount of compensation in the offer letter was the amount that Rao was receiving at the time of the deposition. The offer letter shows that Rao’s salary with Foster Farms easily exceeeds the jurisdictional minimum for this Court.

Since the notice of removal was filed on February 12, 2009, if the letter constitutes an “other paper” under 28 U.S.C. § 1446(b), then Tyson’s removal was untimely.

[Background note:  28 U.S.C.A. § 1446(b) states that notice of removal may be filed within 30 days after receipt by the defendant of a copy of an amended pleading, motion, order, or other paper from which it may first be ascertained that the case is or has become removable.]

The district court agreed with the magistrate judge that the deposition exhibit was notice that the case was removable.

. . .  the Ninth Circuit has held that a settlement letter, Cohn v. Petsmart, Inc., 281 F.3d 837, 840 (9th Cir. 2002), as well as a letter sent between attorneys in preparation for mediation, Babasa v. Lenscrafters, Inc., 498 F.3d 972, 975 (9th Cir. 2007), were sufficient to put the respective defendants on notice that the amount in controversy exceeded that required for federal diversity jurisdiction. In this case, the offer letter was made an exhibit to Rao’s deposition and the parties stipulated that the amounts stated therein represent Rao’s current compensation. The offer letter expressly identifies Rao’s salary and the dollar value of other benefits and thus, is sufficiently similar to the settlement letter of Cohn and the letter in preparation of mediation in Babasa to put Tyson on notice of the value of the declaratory relief to Rao. This objection is overruled.

Note: For some discussion of the ERISA parallel to the timeliness issue, see the discussion in :: Challenge To Factual Basis Set Forth In Removal Notice Rejected

Under the complete preemption doctrine, the basis for removal will often not be apparent from the face of the complaint. Cf. Peters v. Lincoln Elec. Co., 285 F.3d 456 (6th Cir. 2002) (plaintiff’s responses to deposition questioning may constitute an “other paper”.

Conflicting Authorities – The district court noted that the authorities are split on the issue, stating:

Tyson is correct that some courts hold that a deposition is not an “other paper” or that courts have indicated that the issue is unclear. E.g., Kiedaisch v. Nike, Inc., 2004 U.S. Dist. LEXIS 2828, *5 n.1 (D. N.H. 2004); Smith v. Equitable Life Assur. Co., 148 F.Supp.2d 1247, 1253 (N.D. Ala. 2001); O’Brien v. Powerforce, Inc., 939 F.Supp. 774, 781 (D. Haw. 1996); Fillmore v. Bank of Am., N.T. & S.A., 1991 U.S. Dist. LEXIS 6640, *9 n.4 (N.D. Cal. 1991).

But the court found that the Ninth Circuit’s position was clear based upon Karambelas v. Hughes Aircraft, 992 F.2d 971 (9th Cir. 1993), a decision which rejected the argument that deposition testimony triggered the 30-day clock on the facts presented:

However, in Karambelas v. Hughes Aircraft, 992 F.2d 971 (9th Cir. 1993), the Ninth Circuit addressed whether the plaintiff’s deposition testimony could form the basis for removal. Karambelas held that the particular deposition testimony was too speculative to show that the plaintiff was alleging an ERISA claim and thus, removal was improper. See id. at 974-75.

And from the Karambelas opinion:

We are also aware of the authorities which permit removal based upon facts developed at a deposition.  [*7] See, e.g., Felton, 940 F.2d at 507; 3 Zawacki v. Penpac, Inc., 745 F. Supp. 1044, 1047 (M.D. Pa. 1990); Riggs v. Continental Baking Co., 678 F. Supp. 236, 238 (N.D. Cal. 1988); Brooks v. Solomon Co., 542 F. Supp. 1229, 1230-31 (N.D. Ala. 1982).

The Ninth Circuit distinguished these authorities, the district court observed, stating:

The Ninth Circuit distinguished those cases because the testimony was clear and non-speculative, unlike Karambelas’s deposition. See id. at 974-75. Riggs, Zawacki, and Brooks are all lower court cases that expressly held that a deposition can constitute an “other paper” under § 1446(b). Zawacki, 745 F.Supp. at 1047; Riggs, 678 F.Supp. at 238; Brooks, 542 F.Supp. at 1230-31. Felton did not expressly discuss § 1446(b) because the plaintiffs in that case had failed to preserve any error associated with removal. See Felton, 940 F.2d at 907. Nevertheless, the Karambelas court characterized Felton as a case that permits removal based upon facts developed at a deposition. Thus, the Ninth Circuit acknowledged cases that expressly hold that depositions are “other papers” under § 1446(b), characterized one of its own prior cases as an authority that permits removal  based on facts from a deposition, examined Karambelas’s deposition testimony, and ultimately distinguished the quality of Karambelas’s deposition testimony from those in Felton, Zawaki, Riggs, and Brooks; the Ninth Circuit did not indicate that depositions were not “other papers.” In light of Karambelas, the law does not seem unclear in the Ninth Circuit — depositions, if sufficiently definite/non-speculative, may form the basis for removal and thus, is an “other paper” under 28 U.S.C. § 1446(b). That lower courts from other jurisdictions have concluded that depositions are not “other papers” does not make the law in the Ninth Circuit “unclear.”

Comment – This area of the law is quite tricky.  For example, Tyson offered the letter as an exhibit.  Other than the stipulation at the deposition, I am not sure why the 30-day clock did not begin to run even earlier, i.e., when Tyson first obtained the letter (presumably in discovery).

Attorneys’ Fees – A mistake here may result in an award of attorneys’ fees against the loser as this case illustrates.

In light of Karambelas, Tyson does not have a reasonable basis for contending that the amended complaint, and not the offer letter received at and made an exhibit to the deposition, triggered the 30 day removal deadline of § 1446(b).

Opinion – I posted the opinion on erisaboard.com this morning for those interested in reading the case.