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CAFA Law Blog

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

Missouri Court Applies CAFA’s Two-Thirds Citizenship Exception in Granting Remand

Posted in Case Summaries

Hood v. Gilster-Mary Lee Corp., 2015 WL 328409 (W.D. Mo. Jan. 26, 2015)

A district court in Missouri granted a motion to remand finding that plaintiffs successfully established an exception to removal under CAFA. The Court relied on 28 U.S.C. § 1332(d)(4),which provides, in part, that a court shall decline to exercise jurisdiction over a class action in which: (i) over two-thirds of class members are citizens of the State in which the action was originally filed; (ii) at least one defendant from whom significant relief is sought, and whose conduct forms a significant basis for the claims asserted, is a citizen of the State in which the action was originally filed; (iii) principal injuries from the alleged conduct were incurred in the State in which the action was originally filed; and (iv) no other class actions asserting the same allegations against the defendants were filed in the preceding 3-year period.

The parties disputed whether last known address information can be used to determine citizenship. Defendants cited an appellate decision from the Eleventh Circuit, in which the court deemed the class too broad, extending over an 85-year period, and plaintiffs’ attorney’s affidavit too insufficient as evidence, to satisfy the two-thirds requirement. See Evans v. Walter Industries, Inc., 449 F.3d 1159, 1164 (11th Cir. 2006). Defendants also cited In re Sprint Nextel Corp., 593 F.3d 669, 673-674 (7th Cir. 2010) (declining to rely on cellphone information in the absence of proof of citizenship) and Preston v. Tenet Healthsystem Memorial Medical Center, Inc., 485 F.3d 793, 798 (5th Cir. 2007) (declining to rely on billing addresses in medical records following mass relocations due to Hurricane Katrina).

Here, the court found the cited decisions inapposite. The potential class was not overly broad in time or location, did not involve a catastrophic circumstance like Hurricane Katrina, and was supported by both information provided by Defendant and Plaintiffs. In this case, Plaintiffs provided last-known addresses, and also confirmed by affidavit that a percentage of the class was still residing in Missouri. The Court relied on the “well-established maxim that residence is prima facie proof of citizenship,” (see Elsea v. Jackson County, Mo, 2010 WL 4386538 *4 (W.D. Mo. 2010)), and prior decisions holding that last known addresses create a rebuttable presumption that those individuals are Missouri citizens. See, e.g., Randall v. Evamor, Inc., 2010 WL 1727977, at *2 (E.D. Mo. Apr. 29, 2010).

After considering the evidence presented, the Court found that that it was more likely than not that more than two-thirds of the plaintiffs were citizens of Missouri. As the other conditions for remand under 28 U.S.C. § 1332(d)(4) were unchallenged, the Court remanded the case to state court.

Amount In Controversy Is Determined By Four Corners Of The Pleadings And There Is No Duty To Make Further Inquiry.

Posted in Uncategorized

Adams v. Toys ‘R’ Us, 2015 WL 395214 (N.D. Cal. Jan. 29, 2015).

A district court in California denied remand finding that the allegations in the complaint were sufficient to assume an amount-in-controversy in excess of the jurisdictional minimum under CAFA.

Plaintiff filed this class action on behalf of herself and at least 2000 purported class members. In her complaint, plaintiff alleged that the amount-in-controversy of her individual claim was less than $30,000, in addition to an unspecified amount of attorneys’ fees.

The defendant removed the action to the federal court under CAFA alleging that the class contained more than 100 people, there was minimal diversity, and that the amount-in-controversy exceeded $5 million.  In support, the defendant noted that plaintiff’s individual claim of less than $30,000, aggregated over 2000 class members, amounted to a claim of approximately $59,999,980.

Plaintiff argued that she had not alleged a specific amount-in-controversy because the defendant alone had access to the information necessary to make such calculation. As defendant had not presented such calculation in its notice of removal, defendant had not met its burden of establishing the amount in controversy.

In response, the defendant maintained that it had no duty to investigate facts outside of the four corners of the pleadings. The court sided with the defendant, noting that the plaintiff alleged that the amount-in-controversy for her individual claim was less than $30,000, but greater than the unlimited jurisdictional amount of $25,000 under California Code of Civil Procedure section 88.  Since plaintiff at no point alleged that the damages she sustained were atypical to the class, it was reasonable to aggregate and assume that the plaintiff had placed over $59,000,000 in controversy.

The court referred to the decision in Harris v. Bankers Life and Casualty Co., 425 F.3d 689 (9th Cir. 2005), in which the Ninth Circuit clarified that removability under 28 U.S.C. section 1446(b) is determined by an examination of the four corners of the applicable pleadings, not through subjective knowledge or a duty to make further inquiry.   

Under this authority, the district court concluded that the defendant was under no duty to investigate the facts or make calculations as suggested by the plaintiff. Accordingly, the plaintiff’s motion to remand was denied.

Parties Ordered to Show Cause Why Suit Should Not Be Remanded, Despite Stipulation that the Action Satisfied CAFA Requirements

Posted in Case Summaries

Carroll v. Lowes Home Centers, Inc., 2014 WL 1928669 (S.D. Fla. May 6, 2014).

A district court in Florida found that it lacked subject matter jurisdiction over the action after the plaintiff amended his complaint to remove those claims preempted by ERISA, and particularly after the court denied the motion for class certification.  The district court explained that the defendant had removed the case based on preemption, but not on diversity.  Although the parties stipulated that the action satisfied CAFA requirements, the district court ordered the parties to show cause as to why the case must not be remanded.

The plaintiff, an installer for the defendant, filed a putative class action in state court alleging that he was classified by the defendant as an independent contractor, when in fact he was an employee under Florida law.  The plaintiff alleged a violation of the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”) and fraud.  The defendant removed the action to federal court.

The plaintiff filed a motion for class certification seeking to certify a class of all persons who installed products for the defendant or performed installation services in the State of Florida and who were misclassified by Lowe’s as independent contractors.

Here, the plaintiff had filed the suit in the state court alleging two state law causes of action, i.e., violation of the FDUTPA and fraud.  However, when the defendant removed the action to federal court, it asserted federal question jurisdiction, arguing that the plaintiff’s state law claims were completely preempted under ERISA because the plaintiff sought to be classified as an “employee” for ERISA purposes.  The defendant had not asserted diversity jurisdiction.  Therefore, the District Court ordered supplemental briefing on jurisdiction, and both parties agreed that the District Court had jurisdiction pursuant to the CAFA.

The parties agreed that there was a basis for diversity jurisdiction under CAFA because (1) the putative class included at least 100 members; (2) the matter in controversy exceeded $5 million; and (3) the plaintiff was a citizen of a different state (Florida) than the defendant who was a citizen of North Carolina.

Regarding the motion for class certification, the District Court found that common issues of law and fact did not predominate over questions affecting individual class members.  Whereas the plaintiff relied on the standard form contracts that the defendant had signed with the installers to establish commonality and predominance, the District Court found that on their face, the contracts stated that the installers were independent contractors.  The agreements also vested the right to control the method and manner of the work in the installer, not the defendant, and, in this regard, supported independent contractor status.  Based on this, the District Court concluded that the individual issues predominated over common issues.

The District Court noted that federal courts had limited jurisdiction and were obligated to inquire into subject matter jurisdiction sua sponte whenever it may be lacking.  Here, the defendant removed this action from state court pursuant to federal question jurisdiction, arguing that the plaintiff’s claim for insurance and retirement benefits was preempted under ERISA.  However, the plaintiff had removed his claim for ERISA benefits and, therefore, federal question jurisdiction was lacking.

The District Court remarked that it had diversity jurisdiction under CAFA to consider the plaintiff’s motion for class certification because the filings alleged a putative class of over 100 members, damages in excess of $5,000,000 on behalf of the class, and minimal diversity.  It remarked that in this order, it had denied certification of the class and also concluded that the plaintiff could not pursue a claim for actual damages under FDUTPA because he was not a consumer.  In addition, the plaintiff had voluntarily removed his fraud claim.  Thus, the District Court remarked that the only claim remaining was the plaintiff’s individual claim for declaratory and injunctive relief under FDUTPA, a state law cause of action.

Because subject matter jurisdiction was lacking, the District Court ordered the parties to show cause why this action should not be remanded to state court for lack of federal subject matter jurisdiction.

Plaintiffs Must Establish Initial Domicile for Continued Domicile to Be Presumed for Purposes of CAFA’s Local Controversy Exception

Posted in Case Summaries

Serrano v. Bay Bread, LLC, 2014 WL 1813300 (N.D. Cal. May 6, 2014).

A district court in California found that the presumption of continuing domicile applies only after it has been established; because the plaintiffs failed to establish the initial domicile of the class members, continued domicile cannot be presumed for the purposes of local controversy exception.

The plaintiffs brought a putative class action in the superior court for the county of San Mateo alleging that the defendants violated California Labor Code when they failed to provide meal and rest periods, failed to pay all earned wages during regular pay period, and also upon termination.  The defendant Aerotek, Inc. removed this case to the the District Court pursuant to CAFA, and the plaintiffs moved to remand.

 The plaintiffs sought remand under CAFA’s local controversy exception, under which a federal court must decline jurisdiction if:

  1. more than two-thirds of putative class members are citizens of the State in which the action was originally filed;
  2. at least one defendant from whom significant relief is sought is a citizen of the State in which the action was originally filed;
  3. and during the three-year period preceding the filing, no other class action has been filed asserting the same or similar factual allegations against any of the defendants.

In an attempt to satisfy the local controversy exception, the plaintiffs asserted that the defendant, Bay Bread L.L.C., was a citizen of California because its principal place of business was in San Francisco, California.  Based upon information and belief, the plaintiffs claimed that more than two-thirds of the putative class members were California citizens because the class consists of persons who were employed at Bay Bread or Full Bloom bakeries, which were located in South San Francisco and Newark, California, respectively.

The defendant Aerotek did not dispute, and the District Court concluded that the plaintiffs had established that Bay Bread LLC was a defendant from whom significant relief was sought, and that Bay Bread LLC was a California citizen for CAFA purposes because its principal place of business is in California.  Next, Aerotek cited two cases, Ascencio v. Oceaneering International Inc., 37–2011–6055, originally filed in the Superior Court of California, San Diego County, and Graehl v. Wellpoint Inc., B C526710, originally filed in the Superior Court of California, Ventura County.  Aerotek contended that these two cases were wage and hour suits filed against it, which were analogous to the present action.

The District Court remarked that although both suits alleged wage and hour violations against Aerotek, the suits involved different violations for different employer policies and practices than those alleged in the instant lawsuit.  Here, the plaintiffs were employed at bakeries and allegedly made to work without meal or rest breaks.  The Ascencio plaintiffs were employed at an engineering firm and alleged they were denied rest and meal breaks, overtime, and itemized wage statements.  In Graehl, the plaintiffs were call center employees for a health insurance company who alleged they were made to work off the clock, and that they were denied overtime, itemized wage statements, and pay for waiting time.  Accordingly, the District Court concluded that Ascencio and Graehl were factually distinguishable from the instant case.

The District Court remarked that allegations alone, when challenged by the defendant, are insufficient to support remand; there must be some facts in evidence from which the district court may make findings regarding class members’ citizenship for purposes of CAFA’s local controversy exception.  The District Court opined that the plaintiffs here failed to put forth any evidence, and instead rely solely on the fact that the plaintiff class was employed in California.  The plaintiffs argued that the presumption of continuing domicile supports their position that if the class consists of persons employed in California within the last four years, then more than two-thirds of the class members likely remained California citizens.

The District Court remarked that the presumption of continuing domicile, however, provides that once established, a person’s state of domicile continues unless rebutted.  Here, the District Court found that the plaintiffs did not establish the initial domicile of the class members, preventing the Court from presuming continued domicile.  Because the plaintiffs failed to put forth any evidence to support their contention that greater than two-thirds of class members were California citizens, the District Court concluded that the plaintiffs failed to meet their burden under the local controversy exception.

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

Coordination Can Be Limited To Pre-Trial Purposes To Avoid CAFA’s Mass Action Jurisdiction

Posted in Uncategorized

Aiona v. Bayer-Healthcare Pharm., Inc., 2015 WL 293496 (N.D. Cal. Jan. 20, 2015)

Where a petition for coordination unequivocally stated that coordination was sought only for pre-trial purposes and not for a joint trial, a district court in California found that the actions did not qualify as a mass action under CAFA.

Plaintiffs filed a Joint Petition for Coordination (the “Joint Petition”) under California Code of Civil Procedure § 404.1, seeking to coordinate 7 similar actions brought against the same defendant.  The plaintiffs made clear in their Joint Petition that they did not seek a joint trial, but rather were limiting their request for coordination to pre-trial purposes only.

Defendant sought removal under CAFA, contending that the Joint Petition was sufficient to invoke the “mass action” provision of CAFA, defined as any civil action in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact.

Here, the only question posed was whether the Joint Petition represented a proposal to try the various actions jointly, or whether, as plaintiffs maintained, it was merely a request for coordination for pre-trial purposes. Although § 404.1 refers to coordination of civil actions being appropriate if  “one judge hearing all of the actions for all purposes” would promote the ends of justice, courts have recognized the possibility of coordination for pre-trial purposes only.  See e.g. Gutowski v. McKesson Corp., 2013 WL 675540 (Feb. 25, 2013). A petition for coordination when subject to removability must be carefully assessed to determine whether, in language or substance, the petition proposes a joint trial. Corber v. Xanodyne Pharmaceuticals, Inc., 771 F.3d 1218 (9th Cir.2014) (en banc). In Corber, although the petition did not expressly request a joint trial, the court held that where it sought coordination for “all purposes,” and where it listed the danger of inconsistent judgments and conflicting determinations of liability as reasons for coordination, the petition, in substance, was requesting joint trial. Corber, 771 F.3d at 1223-24.

In the present case, even though the language of the Joint Petition was nearly identical to the petition in Corber, the court held that the explicit references limiting coordination “for pre-trial purposes only” was sufficient to conclude that the petitioners did not propose joint trials, only consolidation of pre-trial proceedings. Accordingly, the Court concluded that the included actions did not qualify as a removable mass action under CAFA, and remanded them to state court.

California Court Applies Dart Cherokee To Retain Jurisdiction Despite Evidentiary Objections

Posted in Uncategorized

Roa v. TS Staffing Servs., Inc., 2015 WL 300413 (C.D. Cal. 2015)

A district court in California applied the ruling in Dart Cherokee Basin Operating Co. v. Owens, 135 S.Ct. 547 (2014), and retained jurisdiction over a plaintiff’s evidentiary objections to a notice of removal, finding that when a plaintiff does not challenge the underlying allegations in a notice of removal, they are presumed to be true for the purposes of federal jurisdiction under CAFA.

Plaintiff sought to remand a case on the basis of several evidentiary objections raised to a declaration filed in support of a notice of removal. The Court noted that in Dart Cherokee the Supreme Court held that when a defendant seeks federal-court adjudication, the defendant’s allegations should be accepted when not contested by the plaintiff or questioned by the court. The Supreme Court explained that when a plaintiff contests an allegation in the notice of removal, both sides submit proof and the court decides, by a preponderance of the evidence, whether the amount-in-controversy requirement has been satisfied.  But, there is no anti-removal presumption in cases invoking jurisdiction under CAFA.

Here, the defendants had specifically alleged that each element of CAFA was satisfied.  The court noted that, under Dart Cherokee, it must accept these allegations as true unless contested by the plaintiff or questioned by the court.  Since the plaintiff did not contest the allegations, and instead chose to contest the defendant’s evidence in support of the allegations, Dart Cherokee’s “no antiremoval presumption” applied, and the court had no reason to sua sponte question the defendants’ allegations. As defendant was not required to submit evidence in support of its allegations, plaintiff’s attack on the evidence was fallacious.

Accordingly, the court denied the plaintiff’s motion to remand, and retained jurisdiction over the action.

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

Posted in Uncategorized

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.