By Michael Hoenig - New York Law Journal -
January 10, 2011
Starbucks is known to
many of its aficionados for its grand selection of coffees but it was a
cup of tea, literally, that got it into hot water with Rachel Moltner, a
76-year-old New York resident. Little did Starbucks or Ms. Moltner know
on Feb. 19, 2008, what the spillover effects would be—that the events
involving them would result in a significant ruling by the U.S. Court of
Appeals for the Second Circuit nearly three years later that would
clarify the timing of removal of state court lawsuits to federal court.
The Nov. 2 ruling is called
Moltner v. Starbucks Coffee Co.1 It is a short,
per curiam opinion, barely occupying four Federal Reporter pages, but it
packs a wallop and, for litigators, can jolt the reader into wakefulness
perhaps faster than an early a.m. Starbucks brew. For those who prefer to be
in state court and shun the federal forum, Moltner is an important
alert. For those who want out of the state venue and find more comfort in
federal proceedings, the new ruling is must reading. As for Ms. Moltner's
saga, so far as we know, the case is still brewing and the ending has yet to
Here is what happened.
Nearly three years ago, Rachel Moltner purchased a "Venti"-sized cup of tea
at the Starbucks shop at 80th Street and York Avenue. Her tea was served
double-cupped and with a lid. At a table she tried to remove the lid to add
sugar but had difficulty. While trying to pry the lid off, the tea spilled
onto her left leg and foot. The burns were severe enough to require a skin
graft and a hospital stay where she was further beleaguered by secondary
injuries including bed sores and a fractured sacrum and herniated discs
caused by a fall out of bed.
Her attorneys filed an
action in New York State Supreme Court on July 31, 2008. Consistent with
state practice (see CPLR §3017(c)), the complaint described her injuries but
did not specify an amount of damages being sought. Defendant Starbucks
served its answer on Aug. 26 and also served a Request for Supplemental
Demand for Relief. Under CPLR §3017(c), such a supplemental demand is to set
forth, within 15 days of the Request, the total damages to which the pleader
deems himself entitled. Ms. Moltner responded to Starbucks' Request by
letter dated Oct. 21, stating she sought damages not to exceed $3 million.
On Oct. 29, defendants filed a notice of removal to the U.S. District Court
for the Southern District of New York.
On Nov. 12, 2008, plaintiff
moved in federal court to remand the case back to the state court. The
district court denied the motion. The U.S. Court of Appeals for the Second
Circuit affirmed in its per curiam opinion issued on Nov. 2, 2010. Under 28
U.S.C. §1446(b), the notice of removal is to be filed within 30 days of the
defendant's receipt "of a copy of the initial pleading setting forth the
claim for relief upon which such action is based."
If the initial pleading
does not set forth a removable case, then the notice of removal may be filed
within 30 days after defendant's receipt of a copy of "an amended pleading,
motion, order or other paper from which it may first be ascertained that the
case is one which is or has become removable." An outside limit of one year
after commencement of the action stops the removal clock.
Here, Starbucks' notice of
removal was filed after 30 days from its receipt of Ms. Moltner's complaint.
So, argued the plaintiff, the removal was untimely. Starbucks argued, "no,"
since the removal clock actually did not begin to run until it received the
first paper from which it could ascertain that the case was removable. This
was Ms. Moltner's Oct. 21, 2008, letter stating that she sought damages not
to exceed $3 million. Was Starbucks correct and the removal timely? The
court held "yes."
The appellate panel
referred to its holding in the
Whitaker decision issued in 2001 as lending "strong support" to
Starbucks' position.2 In Whitaker, the state court summons
with notice did not provide the address of one of the defendants although it
specified the states of incorporation of the other two defendants. The
complaint was served some six weeks later and gave sufficient information to
determine the citizenship of all defendants.
The defendant served its
notice of removal 27 days after service of the complaint. Plaintiff
unsuccessfully moved to remand contending the removal was untimely. The
Second Circuit in Whitaker held that the 30-day period did not begin
to run until defendant had received the first document from which all of the
facts giving rise to removability were evident. This was the complaint.
The court in Whitaker
observed that the initial pleading creates removability when, from the face
of such pleading, the defendant is able to "intelligently ascertain"
removability by being provided with "the necessary facts to support the
removal petition." In diversity of citizenship cases, "the facts required to
support the removal petition include the amount in controversy and the
address of each party." While this standard requires a defendant to apply "a
reasonable amount of intelligence in ascertaining removability, it does not
require a defendant to look beyond the initial pleading for facts giving
rise to removability."3
Ms. Moltner argued that
Starbucks, by applying "a reasonable amount of intelligence" to its reading
of the complaint, should have deduced from the complaint's description of
her injuries that the amount in controversy would exceed the $75,000
jurisdictional amount. Plaintiff cited a number of district court cases from
other circuits holding that the removal clock runs from service of the
complaint, even when the latter does not specify the amount of damages
sought, when the defendant can reasonably discern from the complaint that
the damages sought will meet the amount-in-controversy requirement.4
The Second Circuit rejected
this approach. "To the extent that our holding in Whitaker does not
foreclose this argument, we now reject it."5 The court stated
that it joins the U.S. Court of Appeals for the Eighth Circuit as well as
all of the district courts in the Second Circuit in holding that "the
removal clock does not start to run until the plaintiff serves the defendant
with a paper that explicitly specifies the amount of monetary damages
Plaintiff asserted that
this approach would "invite gamesmanship." Thus, a defendant may delay
serving a request for specification of the damages sought "for up to a year
while it tests the waters in state court," and then remove to federal court
only if and when the defendant determines that the state court is not a
favorable forum. The appellate panel answered by noting that this argument
"finds no support in the facts of Moltner's own case." Starbucks served its
request for specification of the damages sought on the same date it served
its answer. Rather, it was Ms. Moltner who delayed matters by filing her
response to this request beyond the 15-day window specified in CPLR
§3017(c). Eight days later, Starbucks filed its timely notice of removal.
The court also saw "no evidence of gamesmanship in the district court cases
that have addressed similar situations."
The Second Circuit panel
found that a "bright line rule is preferable" because requiring a defendant
to read the complaint and "guess the amount of damages" that the plaintiff
seeks "will create uncertainty and risks increasing the time and money spent
on litigation." Under plaintiff's approach, if a defendant were to wait with
removal until the damages have been specified, the parties "will dispute,
upon removal, whether the defendant should have known from the complaint
that the jurisdictional threshold was met." Accordingly, Ms. Moltner's
motion to remand was properly denied.
The Moltner decision
now supplies a "bright line" rule for operation of the removal clock, at
least in the Second Circuit. That clock starts ticking when the defendant is
served with a paper that explicitly specifies the amount of damages sought
as well as information from which one can intelligently ascertain requisite
diversity of citizenship. In New York state courts the initial pleading may
be unclear due to the practice of not stating the amount of damages sought.
If the complaint does not do it, then the first paper served on defendant
that does it is the trigger. For those whose cup of tea is litigating in
federal court, please take notice.
Michael Hoenig is a
member of Herzfeld & Rubin.
1. 624 F.3d 34 (2d Cir.
2. Moltner, 624 F.3d
at 36-37 (citing Whitaker v.
American Telecasting Inc., 261 F.3d 196 (2d Cir. 2001)).
3. Moltner, 624 F.3d
at 37 (quoting from Whitaker, 261 F.3d at 205-06).
4. Moltner, 624 F.3d
at 37 (citing and quoting e.g.
Granowsky v. Pfizer Inc., 631 F.Supp.2d 554, 563 (D. N.J.
McCraw v. Lyons, 863 F.Supp. 430, 434 (W.D. Ky. 1994)).
5. Moltner, 624 F.3d
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