Sheppard v. Compass, Inc.

Background

Lisa and Todd Sheppard filed the action in Sonoma County Superior Court. The complaint alleged, among other claims, breach of contract, fraud, and violations of the California Labor Code. Compass removed the action to federal court under the Class Action Fairness Act, a federal law that can provide federal jurisdiction over certain class actions. Compass asserted that the claims, when combined, exceeded $5 million in damages, that more than 100 potential class members existed, and that the parties had the required minimal diversity.

The Sheppards did not dispute those jurisdictional elements. Instead, they moved to remand, meaning they asked the federal court to return the case to state court. They argued that Compass’s removal was untimely because its counsel had received the complaint and notified the Sheppards of representation on May 14, 2021. They also argued that Compass waived its right to remove by pursuing proposed class-wide mediations and then canceling them.

Timeliness of Removal

The court explained that federal law generally gives a defendant 30 days after formal service of the summons and complaint, or receipt of the complaint through a legally sufficient alternative, to remove a case. Mere receipt of a complaint without formal service does not begin that period.

The parties agreed that Compass was formally served on May 3, 2022. The court therefore concluded that Compass had until June 2, 2022, to remove the action. Because Compass filed its notice of removal within 30 days of May 3, removal was timely. The court also determined that the Sheppards’ emailed notice and acknowledgment forms did not satisfy California’s requirements for service by mail because the email did not include a summons.

Waiver of Removal

The court stated that a defendant may waive removal by taking state-court actions, after the case is removable, that clearly show an intent to have the case decided in state court and to give up a federal forum. The waiver must be clear and unequivocal.

The court found no such waiver here. Compass had informed the Sheppards of its intent to remove after service. The court also found it unclear whether Compass had ever appeared in the state-court action; although the Sheppards filed two status reports, neither was signed by Compass’s counsel.

Attorney’s Fees and Disposition

The Sheppards requested $3,750 in attorney’s fees incurred in preparing and filing the remand motion. Under the federal removal statute, fees may be awarded when the removing party lacked an objectively reasonable basis for removal. The court found that Compass’s removal was objectively reasonable because Supreme Court, Ninth Circuit, and California district court authority supported its position.

The court denied the Sheppards’ Motion to Remand and denied their request for attorney’s fees. It vacated the November 15, 2022, hearing on the remand motion.