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CAFA Law Blog

Information, cases and insights regarding the Class Action Fairness Act of 2005

Claims Under California’s Private Attorneys General Act Not Subject To Removal Under CAFA, Says District Court

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Bailey v. Redfin Corp., 2015 WL 276849 (C.D. Cal. Jan. 21, 2015).

Relying on the Ninth Circuit’s ruling in Baumann v. Chase Inv. Servs. Corp., 747 F.3d 1117, 1122 (9th Cir. 2014), a district court in the Central District of California held that claims under California’s Private Attorneys General Act (“PAGA”) cannot be a basis for removal under CAFA.

Plaintiffs, employed as real estate field agents by defendant, brought an action under PAGA, and alleging various violations of California labor laws. The defendant removed the action, alleging that diversity jurisdiction existed under CAFA, because there was diversity of citizenship among the parties and the amount-in-controversy was alleged to exceed $5 million.

The plaintiffs moved to remand, arguing that their claims did not trigger CAFA jurisdiction.  While numerous labor violations were alleged, plaintiffs only alleged a single PAGA claim.  Their complaint contained neither class allegations, nor did it assert any claims on behalf of a class.  Instead, plaintiffs sought civil penalties on behalf of themselves and other aggrieved employees in their alleged PAGA claim.

In Baumann, the Ninth Circuit held that PAGA actions were not sufficiently similar to Rule 23 class actions to trigger CAFA jurisdiction. Unlike Rule 23, PAGA has no notice requirements for unnamed aggrieved employees, nor may such employees opt out of a PAGA action.  In a PAGA action, a court does not inquire into the named plaintiffs and plaintiffs’ counsel’s ability to fairly and adequately represent unnamed employees, which are critical requirements in federal class actions under Rule 23(a)(4) and (g). Moreover, there are no requirements of numerosity, commonality, or typicality under a PAGA claim.

Furthermore, the court remarked that the finality of PAGA judgments distinctly differs from that of class action judgments.  In a class action, the class members who receive notice and decline to opt out are bound by a judgment, whereas PAGA expressly provides that employees retain all rights to pursue or recover other remedies available under state or federal law, either separately or concurrently with an action taken under this part. Additionally, the nature of PAGA penalties is also distinct from damages sought in Rule 23 class actions. In class actions, damages are typically restitution for wrongs done to class members, while PAGA actions seek to “vindicate the public interest in enforcement of California’s labor law.” Baumann, 747 F.3d 1117 at 1123.

Therefore, the court concluded that Rule 23 and PAGA were more dissimilar than alike, and that plaintiffs’ PAGA claims were not subject to removal under CAFA.

 

New Jersey’s exercise of its quasi-sovereign powers by way of filing parens patriae action is beyond the dominion of CAFA

Posted in Case Summaries

West Virginia ex rel McGraw v Bristol Myers Squibb Co., 2014 WL 793569 (D.N.J. Feb. 26, 2014).

In this action, the District Court in New Jersey held that  For those unfamiliar with those types of actions, the District Court was kind enough to provide a footnote explaining parens patriae, literally “parent of the country,” is a doctrine that provides a state with standing to sue as a guardian of its citizens when the state can “articulate an interest apart from the interests of particular private parties.”

Here, the State of West Virginia, by its Attorney General alleged that the defendants Bristol-Meyers Squibb Company, Sanofi-Aventis U.S., LLC, Sanofi U.S. Services Inc., and Sanofi-Synthelabo, Inc., engaged in unfair and deceptive marketing practices relating to the efficacy of Plavix, an anti-clotting prescription drug.

Initially, the Attorney General filed this suit in the West Virginia state court; however, upon removal by the defendants to the federal court, the case was transferred to the District of New Jersey by the Multi-District Litigation Panel as a part of the In re Plavix MDL. The Attorney General moved to remand the case.

At the very outset, the defendants conceded that parens patriae suits brought by state attorneys general are generally not removable as class actions under CAFA. In fact, during pendency of the motion to remand in this case, the Supreme Court addressed this issue in Mississippi ex. rel. Hood. v. A.U. Optronics Corp., 134 S.Ct. 736 (2014), essentially holding that when a state brings suit on behalf of its citizens it is the only named plaintiff; thus, the suit is not removable under CAFA. (Editor’s Note: see the CAFA Law Blog analysis of A.U. Optronics posted on October 8, 2014).

The Attorney General argued that the District Court lacked diversity jurisdiction because the State of West Virginia was real party in interest. The Attorney General reasoned that the West Virginia Consumer Credit Protection Act (“CCPA”), the state’s consumer fraud statute, expressly authorizes the Attorney General to bring suit on behalf of citizens of West Virginia to vindicate its quasi-sovereign interest. Here, in addition to seeking disgorgement of insurance payments on behalf of Public Employees Insurance Agency (“PEIA”), the State also claimed that it had substantial pecuniary stake in the outcome of this litigation as it sought civil penalties against the defendants up to $5,000 for each willful violation of the CCPA, which occurred during the four year period prior to suit being filed. The Attorney General also sought for an injunction to enjoin the defendants from engaging in unfair or deceptive acts or practices in the future relating to the marketing of Plavix.

The District Court noted that the parties’ dispute centered on whether the State of West Virginia is the real party in interest. The District Court noted that Fed. R. Civ. P. 17 makes it clear that diversity jurisdiction is based on the citizenship of the real party in interest. Thus, the District Court opined that the initial step is to examine if West Virginia, the only plaintiff named in the action, is also the real party in interest. The District Court also noted that a state may sue on behalf of its citizens as parens patriae when the interests if a group of citizens are at stake, so long as the state is also pursuing a quasi-sovereign interest. And, a quasi-sovereign interest generally arises from either (1) the State itself having suffered injury, such as direct damage to its economy, or (2) the general public having suffered an injury so that no one individual has legal standing to sue.

The District Court found that the State was in fact the real party in interest in this enforcement action.  The District Court remarked that the defendants’ argument that the complaint “overwhelmingly” sought to vindicate the specific interests of PEIA, not the State in general was unpersuasive.  The District Court explained that the fact that the State, on behalf of PEIA, also sought recovery of prescription drug costs expended by PEIA did not undermine the State’s broader interest in its case.  The District Court observed that the State asserted causes of action, inter alia, for violations of the CCPA, and in that connection, the State sought civil penalties, as well as a statewide injunction to enjoin the defendants from engaging in unfair or deceptive practices in violation of West Virginia law in the future.  As to the civil penalties, the State was seeking up to $5,000 for each willful violation of the CCPA by the defendants.  The District Court found that the penalties were sought by the State were distinct from any particular interests of private parties because monies received under W. Va. Code § 46A–7–111(2) inure to the State alone.

Additionally, the District Court observed that the Attorney General of West Virginia was expressly charged with enforcing certain provisions of the CCPA.  And, the District Court observed that as many authorities suggested, the Attorney General advanced a quasi-sovereign interest when the State sought for relief under the CCPA for the protection and promotion of consumer welfare in the process.  Taken the pleadings as a whole, the District Court remarked that it was satisfied that it had concrete interests and a substantial stake in the litigation.  In other words, the benefits of the remedies that the State sought were relevant to the State as a whole.  Significantly, the District Court remarked that the fact that the State was seeking the remedy of injunctive relief alone supported the position that the State was the only real party in interest.

The defendants then relied on White v. Wyeth, 227 W.Va. 131 (W.Va.2010) and West Virginia ex rel. McGraw v. Bear, Stearns & Co., 217 W.Va. 573 (W.Va.2005), which precluded the State from bringing CCPA claims because the state consumer fraud statute should not apply to the marketing of prescription drugs.  The West Virginia Supreme Court held in White that the CCPA does not apply to private causes of action involving prescription drugs because doctors, rather than consumers, select which drugs to prescribe to an individual, and consumers are thereby protected by the doctor’s medical judgment–which is known as the learned intermediary doctrine.  The District Court remarked that it did not find White helpful under the circumstances of this case because White’s decision was limited to private causes of action.  Similarly, the District Court found that Bear, Stearns & Co. was not relevant to the instant case.

Finally, the State maintained that remand was appropriate because the state law claims asserted here did not explicitly arise under federal law, nor did they raise a federal issue that is actually disputed and substantial.  A substantial federal issue was a serious federal interest in claiming the advantages thought to be inherent in a federal forum, one that justified the resort to the experience, solicitude, and hope of uniformity that a federal forum offers.  The District Court found that the defendant failed to show that the federal issues in this case were substantial.

The District Court explained that the disputed factual issue in this case centered on whether the defendants acted in an unfair and deceptive manner in their marketing and labeling of Plavix.  Other than the fact that the Attorney General’s claims may implicate the FDCA – that is, the FDCA may be consulted or analyzed in establishing certain elements of the state law claims – that in and of itself is not substantial to support federal question jurisdiction.  The District Court concluded that the lack of a federal cause of action under the FDCA weighed heavily in favor of the conclusion that the federal issues in this case are not substantial.

Accordingly, the District Court remanded the action to the state court. — JR

CAFA Law Blog Editors Publish Article Arguing that Supreme Court’s Dart Cherokee Decision Creates Presumption in Favor of CAFA Removal

Posted in Legal Publications and Articles

CAFA Law Blog editors – Anthony Rollo, Michael Ferachi, and Gabe Crowson – recently published an article in March 27, 2015 edition of Bloomberg BNA’s Class Action Litigation Report, titled Supreme Court Rejection of Presumption Against Removal of CAFA Cases in Dart Cherokee Opens Door to Presumption in Favor of CAFA Removal.  A copy of the article can be found here: PDFArtic

In their article, the authors argue that the Supreme Court’s decision in Dart Cherokee Basin Operating co., LLC v. Owens, 2014 BL 350806, 135 S. Ct. 547 (Dec. 15, 2014) opens the door to a presumption in favor of CAFA removal.  As explained in the article, the Dart Cherokee Court cited CAFA’s legislative history for the proposition “that no antiremoval presumption attends cases invoking CAFA, which Congress enacted to facilitate adjudication of certain class actions in federal court.”  According to the legislative history cited by the Court, CAFA should be read broadly with a “strong preference” that interstate class actions should be heard in federal court.  While the Dart Cherokee Court did not expressly adopt a presumption in favor of CAFA removal, the opinion certainly opens the door to defense arguments that there should be a presumption in favor of CAFA removal.

District Court In South Carolina Applies Local Controversy Exception

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Estate of Hanna, et al. v. Agape Senior, LLC, et al.,  2015 WL 247906 (D.S.C. Jan. 20, 2015).

A district court in South Carolina applied CAFA’s local controversy exception in remanding a case to state court, holding that the plaintiff class sought “significant relief” from local defendants, whose actions formed a “significant basis” for the proposed class’s claims.

This case arose out of the purported medical care provided to members of the class by an unlicensed physician. The complaint named nine Agape entities (“Agape”), Agape’s owner and CEO Scott Middleton, and recruiting agency Jackson Coker (collectively, the “Defendants”). The plaintiff class sought remand on the basis of CAFA’s local controversy exception, 28 U.S.C. § 1332(d)(4).

The local controversy exception applies to removed cases where: (1) more than two-thirds of the members of the proposed plaintiff class are citizens of the state where the suit was filed originally; (2) at least one defendant (a) is a defendant from whom members of the plaintiff class are seeking “significant relief,” (b) is a defendant whose conduct “forms a significant basis” for the proposed plaintiff class’s claims, and (c) is a citizen of the state in which the action originally was filed; (3) the principal injuries stemming from the conduct alleged in the complaint occurred in the state where the action was filed originally; and (4) in the three years before the filing of the class action complaint, no other similar class action was filed against any of the defendants on behalf of the same or other class. 28 U.S.C. § 1332(d)(4). The Court noted that the purpose of the local controversy exception is to permit class actions with a truly local focus to remain in state court. See S. Rep. No. 109–14, at 38 (2005).

Here, the Court’s analysis focused on the second factor: whether “significant relief” was sought from Agape, and whether Agape’s conduct formed a “significant basis” for the claims made.

The Court referred to the Eleventh Circuit, which has held that “a class seeks ‘significant relief’ against a defendant when the relief sought against the defendant is a significant portion of the entire relief sought.” Evans v. Walter Indus., 449 F.3d 1159, 1167 (11th Cir. 2006) (citation omitted). Such analysis requires not only an “assessment of how many members of the class were harmed by the defendant’s actions, but also a comparison of the relief sought between all defendants and each defendant’s ability to pay a potential judgment.” Id. (citation omitted).

Although the original complaint was unclear as to which defendant it sought actual and punitive damages from, the Court noted that it exclusively sought disgorgement of improper collections and a declaratory judgment against Agape only. Moreover, of the nine causes of action alleged, only one was asserted against Jackson Coker, the diverse defendant. Conversely, the complaint alleged numerous causes of action against Agape. Only one of those causes of action sought vicarious liability; the remainder held Agape primarily and independently liable. Finally, the complaint alleged that all members of the plaintiff class were harmed by actions of Agape.

Next, the Court noted that the “significant basis” component of the local controversy exception requires that there be “at least one local defendant whose alleged conduct forms a significant basis for all the claims asserted in the action.” Kaufman v. Allstate New Jersey Ins. Co., 561 F.3d 144, 155 (3d Cir. 2009). In relating the local defendant’s alleged conduct to all the claims asserted in the action, the significant basis provision effectively calls for comparing the local defendant’s alleged conduct to the alleged conduct of all the defendants. Id. at 156.

The Court referred to nine factors formulated in Kaufman to ascertain a “significant basis,”  and it analyzed four of those nine factors. (Editors’ Note: See the CAFA Law Blog analysis of Kaufman posted on October 14, 2009). The Court noted that: (1) the claims alleged against Agape were important to the action, relative to the other claims, as they were related to direct contact Agape made with the plaintiffs; (2) all of the claims alleged, save for one, relied on the alleged conduct of Agape; (3) only one out of nine causes of action had been asserted against a non-local defendant; and (4) the local defendants in this case were related to one another: all constituted the entities of Agape, and its owner and CEO, Scott Middleton. As such, all of the local defendants were related to one another, and comprised the vast majority of all defendants in this case.

Accordingly, the Court concluded that the “significant relief” and “significant basis” prongs were satisfied. Pursuant to CAFA’s local controversy exception, the Court remanded the action to state court.

Class Action Remanded For Untimely Removal Where Amount In Controversy Could Have Been Timely Ascertained From State Court Pleadings

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Levanoff, et al. v. SoCal Wings LLC, et al., 2015 WL 248338 (C.D. Cal. Jan. 16, 2015).

In Levanoff, a district court in California remanded the case to state court and held that a  notice of removal was untimely filed where the removing defendant could have ascertained the amount in controversy from the pleadings in a timely manner.

The plaintiffs brought an employment class action in state court on September 28, 2011. On October 22, 2012, the plaintiffs filed a statement of damages (the “Statement of Damages”), estimating that the proposed class sustained damages of at least $8,160,000.  In October 2013, plaintiffs filed their second amended complaint, including an additional defendant, Dragas Homes Inc. (“Dragas Homes”).

In May 2014, the plaintiffs filed a motion seeking class certification, which the state court granted. On November 24, 2014, three years after the case was initiated and almost one year after Dragas Homes was named as a defendant, Dragas Homes removed the action to the district court.  The plaintiffs moved to remand arguing that the removal was untimely.

The District Court noted that CAFA provides for federal jurisdiction over class actions in which the amount in controversy exceeds $5 million, there is minimal diversity between the parties, and the number of proposed class members is at least 100. 28 U.S.C. §§ 1332(d)(2), (d)(5)(B). Under 28 U.S.C. § 1446(b), a defendant may remove a state court action to the federal court within thirty days if the case stated by the initial pleading is “removable on its face.” Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 885 (9th Cir. 2010).  Where the basis for removal is not apparent from the face of the complaint, a 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 one which is or has become removable.” 28 U.S.C. §1446(b)(3). The District Court noted that untimely removal was a procedural defect that may defeat removal if properly raised by the party seeking remand. Smith v. Mylan Inc., 761 F.3d 1042, 1045 (9th Cir. 2014).

Dragas Homes cited to Roth v. CHA Hollywood Medical Center, L.P., 720 F.3d 1121 (9th Cir. 2013), and argued that, prior to October 2014, it could not determine that the amount-in-controversy exceeded $5 million until it conducted its own investigation into the damages the plaintiffs were seeking.  Roth, 720 F.3d at 1125 (concluding that although a defendant does not have a duty to investigate, if it does conduct its own investigation and discover that the case is removable the defendant is entitled to remove the case within 30 days of discovering the information).

Here, however, the District Court remarked that the facts and circumstances strongly suggested that Dragas Homes could have reasonably and intelligently ascertained the amount in controversy well before October 2014. While it is true that “defendants need not make extrapolation or engage in guesswork” to determine the amount in controversy, the Ninth Circuit has found that the removal statute “requires a defendant to apply a reasonable amount of intelligence in ascertaining removability.” Kuxhausen v. BMW Fin. Serv. NA LLC, 707 F.3d 1136, 1140 (9th Cir. 2013) (internal citation and quotation marks omitted).

The District Court observed that, after being served with the second amended complaint in December 2013, Dragas Homes actively litigated the case, filed a voluminous opposition to the plaintiffs’ motion for class certification, and had access to the state court docket. The Statement of Damages, although filed with the state court prior to the second amended complaint, clearly outlined that the proposed class suffered at least $8,160,000 in damages as of October 22, 2012.  In fact, for the purposes of showing that the amount-in-controversy was met under CAFA, Dragas Homes submitted this exact statement in its opposition to the plaintiffs’ motion to remand.

The District Court held that Dragas Homes “should not be able to ignore pleadings or other documents from which removability may be ascertained and seek removal only when it becomes strategically advantageous for it to do so.” Roth, 720 F.3d at 1125; see also 28 U.S.C. § 1446(c)(3)(A) (stating that information relating to the amount in controversy in the record of the state proceeding may be used to ascertain whether a case is removable). Accordingly, the District Court found that the removal was untimely because Dragas Homes could have intelligently ascertained the amount in controversy within the requisite time period, and thus remanded the case to the state court.

 

O’Shaughnessy v. Cypress Media, LLC, 2014 WL 1791065 (W.D. Mo. May 6, 2014).

Posted in Case Summaries

O’Shaughnessy v. Cypress Media, LLC, 2014 WL 1791065 (W.D. Mo. May 6, 2014).

A district court in Missouri denied the plaintiffs’ motion to remand based on CAFA’s local controversy exception finding that when the lone defendant in the action is not the citizen of a state where the class action was originally filed, the requirements of the exception cannot be satisfied.

The three named plaintiffs in this case originally filed this putative class action lawsuit on April 16, 2013 in the Circuit Court of Jackson County, Missouri against the McClatchy Company, the sole shareholder of Cypress Media, Inc.  The McClatchy Company removed the lawsuit to the federal court, asserting jurisdiction under CAFA and traditional diversity jurisdiction.  After the Court denied the plaintiffs’ motion for remand, the plaintiffs voluntarily dismissed their lawsuit, without prejudice.  The plaintiffs then filed the present lawsuit in the Circuit Court of Jackson County, Missouri against Cypress Media, L.L.C. (“Cypress”). 

This putative class-action lawsuit alleged that the defendant, a publisher of three newspapers in three different states, unlawfully double billed some of its subscribers in the period between when their original subscription ended and a renewed subscription began.  The defendant removed the action to the federal court under CAFA, and the plaintiffs moved to remand.

The plaintiffs contended that: (i) traditional diversity jurisdiction does not exist because the parties are not citizens of different states and that the amount in controversy of any one the named plaintiff did not exceed $75,000; and (ii) CAFA jurisdiction did not exist because the parties are not minimally diverse, and the total amount in dispute did not exceed $5 million.  And, even if CAFA jurisdiction existed, the plaintiffs argued, the Court should decline to hear the dispute under CAFA’s “local-controversy” exception.

Turning first to the question of diversity jurisdiction, the District Court found that the defendant failed to meet its burden of demonstrating that the amount in dispute between any named plaintiff and defendant exceeds $75,000.  The District Court explained that the maximum that could be in dispute in this case was approximately $20,000, well short of the jurisdictional threshold.  The plaintiffs suggested, which the defendant did not dispute, that compensatory damages were approximately $9.24 per plaintiff for wrongful subscription charges.  With respect to punitive damages, the Court noted that any award that exceeds a single-digit ratio between punitive and compensatory damages presumptively violates a defendant’s due process rights, unless the act being punished is particularly egregious and has resulted in only a small amount of economic damages.

While the compensatory damages here were small, the District Court observed that the defendant’s alleged actions were not so egregious that the Court would consider awarding punitive damages at a ratio exceeding one 100 to 1, such that $924 would be the upper-limit for any punitive damage award.  Thus, the District Court remarked that the outer-limits of an individual named plaintiff’s total damages in this case were $20,933.24, an amount that did not meet the jurisdictional threshold.  Accordingly, the District Court ruled that it lacked jurisdiction to hear this case pursuant to its diversity jurisdiction.

On the other hand, the District Court found that the defendant had established CAFA jurisdiction.  Regarding the amount-in-controversy, the District Court observed that there were approximately 763,313 potential class members who had subscribed to one of the three Cypress-owned newspapers.  The District Court remarked that assuming compensatory damages of $9.24 per class member, the compensatory damages in dispute alone exceed $7 million, not including punitive damages or attorneys’ fees.  Therefore, the jurisdictional threshold was satisfied.

The District Court also found that minimal diversity was satisfied.  The Court explained that for purposes of determining diversity jurisdiction under CAFA, a limited liability company such as Cypress is considered to be a citizen of the state under whose laws it is organized and of the state in which it has its principal place of business.  

The District Court observed that while the parties agreed Cypress was organized under Delaware law, they hotly disputed as to where its principal place of business was.  Because Congress chose to treat LLC’s like corporations for purposes of determining citizenship under CAFA, the Court remarked that it would use the “nerve center” approach to determine the principle place of business.  Under the “nerve center” approach, the corporation’s principal place of business is that single place, where the corporation’s high-level officers direct, control, and coordinate the company’s operations.  Here, the Court noted that Cypress’ officers oversaw the publishing of its three newspapers from its offices in Sacramento, California.  The Court also found that the preponderance of the evidence indicated that Cypress’ nerve center is in Sacramento, California.  Consequently, Cypress is a citizen of Delaware and California.  Since the proposed class consists of individuals from Missouri, Kansas, Texas, and Illinois, the District Court found that there was at least one class member who was not a citizen of Delaware or California, and so there was minimal diversity here.

The plaintiffs also attempted to invoke the local-controversy exception.  The Court, however, found that the plaintiffs could not establish the exception because two of its four requirements were not met.  First, more than two-thirds of the proposed class members were not citizens of the state in which the action was originally filed (Missouri).  Only 201,122, or 26%, of the proposed class were Missouri citizens; the remainder were citizens of Kansas, Texas, Illinois, or other states.  Second, there was no defendant from whom significant relief was sought and whose conduct formed a significant basis for the class members’ claims who was a citizen Missouri, where the class action was originally filed.  Because Cypress was the only defendant in this case and it was not a Missouri citizen, the requirements of the local-controversy exception were not satisfied. 

Accordingly, the District Court denied the plaintiffs’ motion to remand and retained jurisdiction.

Federal Jurisdiction Under CAFA is Measured at the Time of Removal

Posted in Case Summaries

Growitch v. Charter Communications, Inc., 2014 WL 1718737 (8th Cir. May 2, 2014).

The Eighth Circuit held that a federal jurisdiction under CAFA is measured at the time of removal–the court does not lose its jurisdiction over the action merely because the district court found that complaint failed to state a sufficient claim for damages and dismissed the claim.

The plaintiffs in this action were customers of the defendant Charter Communications (“Charter”), broadband communications company that provides cable, Internet, and telephone services.  The plaintiffs subscribed to Charter’s “Plus” Internet service under Charter’s Internet Residential Customer Agreement (the “Agreement”) in 2011.  Charter provided the plaintiffs with DOCSIS 2.0 modems at the time their Internet services were installed. 

The plaintiffs were promised increased download speeds of up to 30 Mbps; however, they never achieved those speeds because they did not have the DOCSIS 2.0 modems.  Accordingly, the plaintiffs brought putative class action in Missouri state court, claiming that Charter violated the Missouri Merchandising Practices Act (“MMPA”) and breached its contract with the class members.  Charter removed the action under CAFA, and then filed a motion to dismiss.

The district court dismissed the complaint with prejudice on three independent grounds, concluding (1) that the plaintiffs had not pleaded facts sufficient to demonstrate pecuniary loss, (2) that the plaintiffs’ January 2012 bills gave them notice that their modems needed to be upgraded to obtain the increased download speed, and (3) that the plaintiffs’ claims were foreclosed by a speed disclaimer in the Agreement.  On appeal, the plaintiffs challenge each of the grounds the district court relied on in granting Charter’s motion to dismiss and, in the alternative, argue that the district court did not have jurisdiction.

 The plaintiffs argue that removal under CAFA was improper because Charter failed to prove by a preponderance of the evidence that the amount-in-controversy exceeded $5 million.  The plaintiffs contended that the district court should have remanded the case to state court because it did not have subject matter jurisdiction.  

Contrary to their argument, the Eighth Circuit noted that the plaintiffs alleged a nationwide class consisting of at least 50,000 members, who overpaid for Internet services each month from September 14, 2007, to the date of final judgment.  The plaintiffs sought to recover up to $50,000 in damages per class member.  Based on these allegations, a jury might conclude that the class suffered damages of more than $5 million dollars, even if the individual class members’ monthly overpayment was minimal.  Accordingly, the Eighth Circuit concluded that Charter met its burden of showing that the amount-in-controversy exceeded CAFA’s $5 million jurisdictional threshold.

Challenging the grant of motion to dismiss, the plaintiffs argued that even if the district court had jurisdiction, it erred in dismissing their complaint for failure to plead facts sufficient to demonstrate pecuniary loss.  Missouri law requires the plaintiffs to prove that they suffered pecuniary loss in order to prevail on their MMPA claim, and breach of contract claim.  The plaintiffs contended that they adequately pleaded damages by alleging that they suffered a monetary loss of the difference in the cost and value of the services they paid for and the useable service they received.

The Eighth Circuit, however, noted that the complaint did not allege facts to support the plaintiffs’ allegation of damages because it did not allege that the plaintiffs paid extra for the 30 Mbps download speed.

The plaintiffs then contended that if based on the pleading, there were no damages, then there cannot be an amount-in-controversy of more than $5 million.  The plaintiffs, thus, maintained their claim that removal under CAFA was improper.  The Eighth Circuit ruled that the district court’s jurisdiction is measured at the time of removal.  At that time, the Eighth Circuit remarked, the district court could fairly assume that the plaintiffs had stated a claim and that a fact finder might legally conclude that the class damages were greater than $5 million.  The Eighth Circuit remarked that the plaintiffs themselves did not challenge removal until after their claims were dismissed.

Accordingly, the Eighth Circuit found no error in the district court’s holding and affirmed the dismissal of the action.

South Florida Wellness, Inc. v. Allstate Ins. Co., 2014 WL 576111 (11th Cir. Feb. 14, 2014)

Posted in Case Summaries

South Florida Wellness, Inc. v. Allstate Ins. Co., 2014 WL 576111 (11th Cir. Feb. 14, 2014).

In this action, where a health care provider merely sought a declaration that the insurance policy did not clearly state that the defendant would limit the statutory fee, the U.S. Eleventh Circuit Court of Appeals held that such a declaration would only open doors to insureds to seek damages from the insurance company far exceeding the amount-in-controversy threshold.  Accordingly, the Eleventh Circuit directed the District Court to retain federal jurisdiction over the action.

The plaintiff, a healthcare provider brought a putative class action contending that the defendant, an insurer, did not indicate unambiguously in its insurance policy that it chose to limit payments to the statutory fee schedule against the Florida Supreme Court’s directive in Geico Gen. Ins. Co. v. Virtual Imaging Servs., Inc., 2013 WL 3332385 (Fla. July 3, 2013).  In January 2012, Florencio Sanchez was injured in an automobile accident and received medical treatment from the plaintiff.  Sanchez was insured by the defendant under a policy that provided her with personal injury protection (“PIP”) coverage.

The general rule for PIP coverage in Florida is that an insurance policy must cover 80% of all reasonable costs for medically necessary treatment resulting from an automobile accident.  Florida law also provides that an insurer may opt out of it.  When the plaintiff sought payment of 80% of the total amount billed, the defendant it opted out of the general payment rule, and paid only 80% of certain amounts set out in the statutory fee schedule contained in Fla. Stat. § 627.736(5)(a).

The complaint did not seek for monetary damages but, instead, sought a declaration that the form language used in policies did not clearly and unambiguously indicate that payments would be limited to the levels provided in § 627.736(5)(a).  The defendant removed the case to the federal court asserting jurisdiction under CAFA.  The plaintiff moved to remand contending that the defendant did not establish the amount-in-controversy exceeded $5 million as the complaint sought no damages.  The District Court agreed and remanded the case.  The defendant appealed.

The Eleventh Circuit noted that, for amount-in-controversy purposes, the value of injunctive or declaratory relief was the value of the object of the litigation measured from the plaintiff’s perspective.  In support of its position that the value of the declaratory relief was too speculative, the plaintiff pointed to the multiple events that must occur before any putative class member could recover additional money from the plaintiff in the event that the declaratory judgment went in favor of the class.  The plaintiff pointed that, under Florida law, a party seeking to file a suit to recover PIP benefits must first submit a pre-suit demand letter to the insurer for payment benefits.  If the insurer rejects that demand, the party may file a suit for additional payment if it could be determined that the treatment in question was related to an accident, medically necessary, and billed at a reasonable rate.  The plaintiff argued that with all of those contingencies standing between any class member and recovery, valuing a declaratory judgment was far too speculative.

The Eleventh Circuit found that the plaintiff’s speculative argument itself was too speculative.  The Eleventh Circuit explained that estimating the amount-in-controversy was a simple affair considering the large number of medical bills at issue and the significant amount of money at stake.  The Eleventh Circuit observed that, given the large bills, it was unlikely that most insureds and medical providers, who may be collectively owed $68,176,817.69, would leave the vast majority of that money on the table if a federal court declared that they were entitled to it.

The plaintiff relied on Leonard v. Enter. Rent a Car, 279 F.3d 967 (11th Cir.2002), where the plaintiffs sought injunction to stop the defendant from selling automobile insurance when it rented cars to customers.  The Eleventh Circuit in Leonard held that the injunctive relief had no value because the plaintiffs had always been free to refuse purchase the insurance offered by the defendants, and hence, the relief could not be monetized.

The Eleventh Circuit, here, found that Leonard, could be distinguished because it concerned future transactions that were merely possible, as opposed to here, where the defendant was able to identify a specific number of bills that would be affected by the declaratory relief sought.  Accordingly, the Eleventh Circuit reversed the District Court’s order remanding the case to state court.