A District Court in Louisiana granted the plaintiffs’ motions to remand holding that the mere potential for recovery in excess of the jurisdictional minimum was not sufficient to establish the amount in controversy, and that the defendants must show that it was more likely than not that the plaintiffs would recover more than the jurisdictional minimum.
The Fourth Circuit vacated an order of remand, holding that an unnamed defendant is not a party to the litigation, and thus, it was improper for the District Court to aggregate the unnamed defendant in a group for the purposes of the “at least 1 defendant” exception.
Atwell v Boston Scientific Corp., 2013 WL 6050762 (8th Cir. Nov. 18, 2013).
In this appeal, the Eighth Circuit ruled that when three cases each with less than 100 members were joined together before a common judge for the purposes trial, it becomes a mass action for the purposes of CAFA. Hence, a federal court can retain jurisdiction to hear an appeal of remand of a CAFA action.
Groups of plaintiffs filed several product liability actions in the Missouri’s Twenty-Second (City of St. Louis) Judicial Circuit against four manufacturers of transvaginal mesh medical devices. Each group comprised less than 100 plaintiffs. However, the three groups filed motions proposing that the state court assign each group to a single judge for purposes of discovery and trial. The defendants removed the three cases to the federal court, but two district judges granted the plaintiffs’ motions to remand on the ground that no case included more than 100 plaintiffs, and that plaintiffs never proposed that the actions be tried jointly in the state court.
The defendants appealed arguing that the three groups of plaintiffs had proposed to try their cases jointly within the meaning 28 U.S.C. § 1332(d)(11)(B)(i), transforming their cases into a single mass action subject to federal jurisdiction. In this opinion, we learn how the Eighth Circuit applies the theory of mass action to the three actions and retains jurisdiction.
At the outset, the Eighth Circuit analyzed whether three cases together be termed as a mass action subject to federal jurisdiction under CAFA. The Eighth Circuit noted that although the plaintiffs conceded that their respective individual claims involved common questions of law or fact, the plaintiffs could still bring separate state cases with fewer than 100 plaintiffs each against a common defendant to avoid federal jurisdiction under CAFA, unless their claims are proposed to be tried jointly.
Therefore, the issue here, as the Eighth Circuit noted, was whether three groups of plaintiffs proposing that their claims be “tried jointly” where § 1332(d)(11)(B)(i) applied and the case becomes removable, or it was merely a case where the plaintiffs asked that their respective claims be consolidated or coordinated solely for pretrial proceedings, where § 1332(d)(11)(B)(ii)(IV) applied, and made the case non removable.
Here, the Eighth Circuit observed that each plaintiff group (the “Atwell Group,” the “Taylor Group,” and the “Evans Group”) moved for special assignment to a single judge. First, Atwell Group sought to be assigned for purposes of discover and trial, then the Taylor and the Evans Group moved to have their cases assigned to a single judge for both pretrial and trial matters. But, none of the groups stated that they sought consolidation with other cases, their aim being to avoid conflicting pretrial rulings, and for providing consistency in the supervision of pretrial matters, etc.
The Eighth Circuit found that the dicta In re Abbott Laboratories, Inc., 698 F.3d 568 (7th Cir. 2012) applied to this case. In that case, several hundred plaintiffs filed 10 personal injury actions in three state courts and moved the Supreme Court of Illinois to exercise its discretion under a Court rule allowing for consolidated pretrial, trial, or post-trial proceedings. The Seventh Circuit reversed the District Court’s order remanding the case finding that the plaintiffs had requested consolidation of their cases through trial, and not solely for pretrial proceedings.
By contrast, in Romo v. Teva Pharmaceuticals USA, Inc., 731 F.3d 918 (9th Cir. 2013), attorneys for many plaintiffs in 40 product liability actions filed in California state courts asked California judicial council to invoke a state rule of procedure allowing coordination of common actions for all purposes. In affirming the district court’s remand order, the panel majority distinguished Abbott Labs because it involved consolidation rather than coordination, and because plaintiffs in Abbott Labs requested consolidation through trial, thereby removing any question of their intent.
Here, the Eighth Circuit noted that the counsel of Evans and Taylor plaintiffs, while disavowing a desire to consolidate cases for trial, nonetheless urged the state court to assign the claims of more than 100 plaintiffs to a single judge who could handle those cases for consistency of rulings, judicial economy, and administration of justice. The Eighth Circuit noted that the counsel for Atwell plaintiffs was more explicit, explaining that the motion was intended to have it assigned to the judge that’s going to try the case because of the complexity that’s going to occur all the way through. The Eighth Circuit accordingly, concluded that the counsel’s statement revealed the purpose of their motions – a joint assignment in which the inevitable result would be that their cases were tried jointly.
The Eighth Circuit held it had jurisdiction, granted the Defendants’ petition to appeal the remand orders, vacated the District Court’s orders remanding the cases to the state court and instructed the District Court to proceed consistent with its opinion. – JR
In this action, a District Court in New York held that affirmative defenses asserted on the merits could not be used to cut down the amount in controversy even where the complaint itself discloses the existence of a valid defense.
In Sheppard v. Manhattan Club Timeshare Association, Inc., 2012 WL 1890388 (S.D.N.Y. May 23, 2012), the plaintiffs alleged that they were unlawfully induced into the purchase of ownership interests in The Manhattan Club. The plaintiffs also alleged that they were misled about the unit reservation process and reservation availability because The Manhattan Club unlawfully rented rooms to members of the general public. The District Court dismissed the action for failure to state a claim.
Soon thereafter, the plaintiff commenced the instant putative class action in the New York Supreme Court, New York County. The plaintiff’s claims were based on the same facts and theory as in Sheppard and asserted against the same defendants. Other than the identity of the class representative, the definition of the purported class in each case was identical in all material respects.
The defendants removed the action to the District Court, and the plaintiff moved for remand. The plaintiff argued that the defendant failed to establish the amount in controversy and that the action came under the home-state and/or discretionary exceptions. The defendants in turn moved to dismiss.
The Complaint did not make any specific damages demand, and the aggregate value of the claims were unclear from the face of the Complaint. So, the defendants submitted the sworn affidavit of The Manhattan Club’s Vice President, along with five exhibits, to establish the amount in controversy. The complaint alleged a class that included all persons who purchased timeshare interests in The Manhattan Club from its inception in 1997 through the present. According to computer records maintained by The Manhattan Club, during the relevant time period, The Manhattan Club sold to members of the putative class a total of 14,696 timeshare interests for a total sales amount of $332,224,553.41.
The District Court observed that if during a portion of the class period members of the putative class paid over $330 million to purchase their timeshare interests, and if, as the Complaint alleged, those interests had been rendered virtually worthless by the defendants’ alleged conduct, then the amount in controversy comfortably exceeded the $5 million threshold. Also, the District Court noted that the amount in controversy would still exceed $5 million even if an ultra-conservative diminution figure of 5% were applied. In that instance, the amount in controversy would still exceed $16.6 million.
Further, the Complaint alleged that neither the plaintiff nor putative class members would have agreed to pay real estate taxes and Timeshare Charges if they had known of the defendants’ deceptive business practices. These taxes and fees were charged to timeshare-interest holders annually, but in 2012 alone, the combined amount of real estate taxes and Timeshare Charges owed by members of the putative class exceeded $31 million. This further demonstrated that the defendants satisfied the amount in controversy requirement.
The plaintiff argued that it must be presumed that if class certification was granted, the amount in controversy would be reduced by affirmative defenses, including the statute of limitations and release, and by other factors such as difficulties in proving damages, class members opting out of the class, and hypothetical settlements for less than $5 million. The District Court, however, remarked that affirmative defenses asserted on the merits could not be used to cut down the amount in controversy even where the complaint itself discloses the existence of a valid defense.
Accordingly, the District Court opined that the defendants proved by a preponderance of evidence that CAFA’s amount-in-controversy requirement was satisfied.
The District Court then observed that under 28 U.S.C. § 1332(d)(4)(B), the home-state exception applied only when two-thirds or more of the members of all proposed plaintiff classes in the aggregate are citizens of the State in which the action was originally filed, and under 28 U.S.C. § 1332(d)(3) the discretionary exception applied only when greater than one-third but less than two-thirds of the members of all proposed plaintiff classes in the aggregate are citizens of the State in which the action was originally filed.
Here, the plaintiff offered no evidence to support the proposition that greater than one-third of the members of the proposed class were citizens of New York. The District Court stated that the plaintiff’s contention that most timeshare interest holders were citizens of the State of New York who did not otherwise reside in the City of New York was pure speculation. According to residency records maintained by the defendants in the ordinary course of business, as of September 10, 2013, there were a total of 18,480 timeshare owners in The Manhattan Club, of which 3,826 resided in New York, a mere 20.7% of the total.
Accordingly, the District Court opined that because the plaintiff failed to demonstrate that greater than one-third of the putative class members were citizens of New York, the plaintiff failed to establish that either CAFA exception applied.
The District Court further noted that res judicata barred this action because every claim asserted here was previously raised and decided in Sheppard. Accordingly, the District Court dismissed the action.
In this case, the plaintiff made a purchase at Penn Station, Inc., a shop located in Rocky River,Ohiousing his credit card. The defendant Heartland Payment Systems, Inc. processed credit card purchases for Penn Station, Inc. The plaintiff alleged that as a result of the defendants’ negligence and/or breach of contract, the plaintiff’s credit card information ended up in the hands of a third party, causing the plaintiff and the proposed class injury. The plaintiff sought compensatory damages, punitive damages, and two years of credit monitoring services for each class member.
The defendant removed the action to the District Court arguing that CAFA governed the action. CAFA, 28 U.S.C. 1332(d), confers federal jurisdiction over class actions in which the matter in controversy exceeds $5 million, there is minimal diversity of citizenship, and the proposed class includes at least 100 members. The parties agreed that the potential class included at least 100 members and that minimal diversity was present. However, the plaintiff moved for remand arguing that the defendants could not meet their burden to show that the amount in controversy exceeded $5 million.
The plaintiff claimed that the defendants’ argument that the amount in controversy exceeded $5 million was speculative because the defendants assumed that every customer who used a credit or debit card during the class period was a class member. The plaintiff also argued that the defendants failed to offer evidence that all of their stores were affected by the alleged breach and failed to offer evidence that the breach was continuous for the entire time of the alleged class period.
The defendants relied on the declaration of Lois Ault, Senior Compliance Analyst with Heartland, who stated that during the proposed class period Heartland processed 1.4 million unique credit and debit card transactions made at Penn Station locations. The defendants also presented the declaration of Craig N. Dunaway, President of Penn Station, Inc., who stated that he reviewed the cost of credit monitoring services, and they ranged from $6.99 to $24.00 per month. Based on his calculations, the cost per individual class member for a two year period of monitoring, as requested by the plaintiff, would result in $168 to $576 cost per class member.
The District Court explained that a defendant can meet its evidentiary burden to show the jurisdictional amount in controversy in numerous ways. For example, a defendant can utilize contentions, interrogatories or admission in state court, calculations derived from the complaint’s allegations, references to the plaintiff’s informal estimates or settlement demands, or by introducing evidence, in the form of affidavits from the defendant’s employees or experts, about how much it would cost to satisfy the plaintiff’s demands.
Here, the plaintiff described the putative class as customers of Penn Station stores from February 1, 2012, through June 1, 2012, who completed a credit card or debit card transaction with the defendants. Based on this description, the defendants produced unrefuted evidence that the class size, based on unique credit and debit card purchases, was over 1 million persons. Further, based on the relief sought by the plaintiff of credit monitoring services for a two year period, the defendants again produced evidence that the costs of such services ranged from $168 to $576 per class member.
The District Court therefore found that the defendants met their burden to show the amount in controversy exceeded $5 million, and accordingly, denied the plaintiff’s motion to remand.
In this action, a District Court in Missouri held that it had authority to stay its own remand order. The plaintiffs brought an action under the Missouri Merchandising Practices Act. The plaintiffs alleged that the defendants placed expiration dates on their medications, causing consumers to discard products and replace them after the expiration dates had passed, with knowledge that the products remained safe and effective beyond those dates.
The defendants removed the action from the Circuit Court for St. Louis County to the District Court pursuant to CAFA. The District Court, however, held that the defendants did not meet their burden of establishing an amount in controversy that was at least $5 million, and remanded the action to the state court. The defendants then moved to stay the remand orders, arguing that equity favored issuance of a stay. The defendants also argued that the stay would prevent the parties from having to expend resources to litigate the cases simultaneously in state court and on appeal, and that it would avoid any potentially inconsistent rulings from the state court. The District Court agreed and granted the motion.
Under 28 U.S.C. § 1447(d), an order remanding a case to state court is generally not reviewable on appeal, and § 1447(c) states that when a remand order is issued by a district court, the district court is ordinarily divested of jurisdiction, allowing the state court to proceed with the case. However, the District Court explained that pursuant to §1453(c) federal courts of appeals may exercise their discretion to accept an appeal from a remand order under CAFA notwithstanding §1447(d).
The District Court reasoned that to hold that a district court lacks the limited jurisdiction to stay its remand order in a CAFA case would render the statutory right to appeal a CAFA remand order worthless. While deciding a motion to stay pending appellate review, courts must consider:
- the likelihood that a party seeking the stay will prevail on the merits of the appeal;
- the likelihood that the moving party will be irreparably harmed absent a stay;
- the prospect that others will be harmed if the court grants the stay; and
- the public interest in granting the stay.
The District Court determined that the defendants adequately demonstrated a sufficient likelihood of success on the merits to support their motions to stay because of the lack of authority on the issues. The District Court also found that the burden of having to simultaneously litigate cases in state court and on appeal, as well as the potential for inconsistent outcomes if the state court ruled on any motions while the case was pending before the Eight Circuit, demonstrated irreparable harm and favored granting the stay.
Similarly, the District Court noted that the plaintiffs’ interests would be served by granting a stay because neither party would incur additional expenses from simultaneous litigation, and plaintiffs would not be harmed by a lengthy delay because of the expedited appellate review process set forth in § 1453(a). Finally, the District Court explained that granting the stay would benefit the public’s interest by saving judicial resources and promoting judicial economy.
For these reasons, the District Court opined that a stay of the remand order was appropriate. However, the District Court explained that the parties could not seek any further relief from it until the Eighth Circuit ruled on the merits of the appeal because it lacked subject matter jurisdiction.
In this matter, the plaintiff brought an action in the Los Angeles County Superior Court alleging that the defendant breached contracts with its California customers by charging unauthorized fuel surcharges and excessive fees.
The defendants removed the action to the District Court for the Central District of California asserting diversity jurisdiction under CAFA, 28 U.S.C. § 1332(d). The District Court, however, remanded the action to state court on its own motion for lack of jurisdiction. On appeal, the Ninth Circuit vacated the order.
As a result, the action came back to the District Court, and plaintiff again moved for remand. Plaintiff argued that remand was appropriate because the defendant failed to establish that the amount in controversy exceeded $5,000,000, an issue the Ninth Circuit declined to address on appeal.
Plaintiff had not specified an amount in controversy; so, the defendant was required to establish by a preponderance of the evidence that the amount in controversy exceeded $5,000,000. In its Notice of Removal, the defendant argued that the total amount it charged the putative class members during the four years preceding the filing of the action was $5,281,406. The defendant calculated this figure by adding together the amounts it charged for fuel surcharges and fees, which were $3,527,781 and $1,753,625, respectively.
The plaintiff, on the other hand, argued that its putative class only included persons and entities residing in California who actually paid fuel surcharges and late-payment fees, and that the defendant only collected $3,239,822 in fuel surcharges and $317,215 in fees, totaling $3,557,037.
The District Court noted that the plaintiff is the master of the complaint, and because the plaintiff only proposed a class of persons and entities residing in California who paid the fuel surcharges and late-payment fees, the amount defendant charged but did not necessarily receive had little effect on the amount in controversy computation. Also, the defendant admitted that it only collected $3,557,037 in questioned fees.
The defendant also assumed that every class member would continue to pay the questioned charges throughout the litigation. The District Court calculated the amount defendant collected each month from the fuel surcharges and fees and multiplied those amounts by 5.7, the median number of months a case took to go from filing to disposition. Yet, the amount in controversy ($3,962,587) was still below the jurisdictional threshold.
The defendant’s remaining arguments were flawed as well. For example, the defendant valued the plaintiff’s claim for injunctive relief, namely prohibiting it from continuing its allegedly unfair, illegal, and fraudulent businesses practices in the future. The defendant’s manager assumed that if the defendant was prohibited from assessing a fuel surcharge to its customers, the defendant would need to increase its service price, which would result in the defendant losing some of its current customers. The manager estimated lost sales of $1,780,000 within one year of a potential injunction. The District Court, however, declined to base its jurisdiction on the defendant’s speculation and conjecture, and noted that the defendant failed to produce any concrete evidence in support of its assertions.
Additionally, the defendant argued that it could include the value of the plaintiff’s requested recessionary relief, and contended that there was a reasonable likelihood that the total gross revenues generated by the defendant on contracts with putative class members who paid a fuel surcharge and/or a late payment fee exceeded $5 million. Because the defendant, again, asserted a conclusion, without adducing any evidence to support its proposition, such as the value of its contracts, the District Court refused to take note.
Unfortunately for the defendant, it failed to identify any applicable statute that either required or permitted an attorneys’-fees award. This was perhaps the defendant’s biggest mistake as such fees may be included in the amount in controversy.
Thus, because the defendant failed to prove by a preponderance of the evidence that the amount in controversy exceeded $5,000,000 as mandated by 28 U.S.C. § 1332(d)(2), the District Court granted the plaintiff’s motion for remand.
Lemy v. Direct General Finance Co., 2014 WL 903371 (11th Cir. March 10, 2014).
The Eleventh Circuit upheld the District Court’s denial of motion to remand, finding that when the percentage of recovery from a foreign defendant far exceeds the percentage of recovery from the local defendant, then significant relief is not being sought from the local defendant.
The plaintiffs, Gardith Lemy and Marilyn Hill, brought a class action in state court, alleging that a group of defendants acted in concert to sell plaintiffs a worthless insurance product in violation of the Florida Insurance Code, specifically surplus lines insurance, which covers things such as ambulance services and hospital stay bills. The Florida Insurance Code regulates surplus lines insurance and provides that surplus lines insurance may be sold to supplement general line insurance under certain conditions.
The defendants removed the action to the federal court under CAFA, but the plaintiffs moved to remand the case under the local controversy exception, which withdraws federal jurisdiction where the class seeks significant relief from a local defendant. The District Court found that the plaintiffs did not establish the applicability of this exception to federal jurisdiction and denied the motion to remand.
On the merits, the District Court dismissed the plaintiffs’ complaint, with prejudice, holding that the Florida Insurance Code sections implicated did not provide for private enforcement. Moreover, the District Court found that, even if the Florida Insurance Code did provide for private enforcement, the defendants’ conduct did not materially violate those sections. The plaintiffs appealed.
At the outset, the Eleventh Circuit noted that a local defendant is significant when, inter alia, the plaintiffs seek significant relief from him. First, inasmuch as the relief that the plaintiffs sought was the restitution of the insurance premiums paid by the Florida class, the District Court compared the shares of the premiums retained by a local defendant to those retained by the foreign defendant. The District Court determined that, as a matter of fact, the local defendant retained only 4.5% of the total premiums paid by the class, while the foreign defendant retained 80%. In finding this fact, the District Court interpreted the evidence, credited certain testimony, and drew reasonable inferences, which it was entitled to do.
The Eleventh Circuit noted that in Evans v. Walter Industries, Inc., 449 F.3d 1159 (11th Cir. 2006), it was explained that the plaintiffs must show that the relief they sought from a local defendant is significant portion of the entire relief sought by the class. The Eleventh Circuit observed that this conclusion could be reached through comparing the relief sought from the local defendant to that sought from the foreign defendants. In this case, the District Court concluded that 4.5% of the total relief sought against one of the local defendants was not significant as compared to the 80% sought against one of the foreign defendants. The Eleventh Circuit found that this conclusion was not erroneous. (Editors’ Note: See CAFA Law Blog analysis of Evans posted on May 25, 2006.)
According to the Eleventh Circuit, the fact that the plaintiffs sought declaratory relief from the local defendants did not change this result. The complaint did not distinguish between the declaratory relief sought against the local as opposed to the foreign defendants. Therefore, this claim did not militate against the conclusion that the leonine share of the relief sought was that from the foreign defendants. Accordingly, the Eleventh Circuit upheld the denial of motion to remand.
The Eleventh Circuit similarly found that the District Court correctly held that the plaintiffs could not assert the claims that they had advanced in their complaint. The Eleventh Circuit explained that their claims relied on code sections that did not provide for a private right of enforcement. Furthermore, violations of these code sections do not render the sections void, thus, permitting the resurrection of common law claims.
Vogle v. Archstone Communities, LLC, 2014 WL 463532 (C.D. Cal. Feb. 5, 2014)
A District Court in California refused to exercise federal jurisdiction by aggregating the claims against two defendants. The District Court found that, under CAFA, aggregation of claims against the defendants is permitted only when the defendants were one legal entity, and there was no pleading in the complaint to show that the two defendants in question were a single unit.
Seeking to represent a class of former tenants, who leased apartments from the defendants, Archstone Builders Inc., Archstone Property Management (California), Inc., Archstone–Smith Four, Inc., and Archstone–Smith Two, Inc., the plaintiffs brought an action asserting violations of California Civil Code § 1950.5, unjust enrichment, and violation of California Business and Professions Code §§ 17200 et seq. The plaintiffs alleged that the defendants systematically charged tenants for cleaning, painting, and carpet cleaning at the conclusion of every tenancy, regardless of the apartment’s actual condition. The defendants removed the case to the federal court, pursuant to CAFA.
In support of the removal, the defendants included a declaration of Chris Jenkins, who oversaw the processing of Archstone Defendants’s financial information and electronic data. Jenkins alleged that over the time in question, approximately 69,000 tenants resided in their apartments, paid security deposits of approximately $34 million, and were charged approximately $21 million for apartment cleaning, painting and/or carpet replacement. The plaintiffs filed a motion to remand.
The defendant Archstone Long Beach, L.P. (“LB Defendant”) alleged that this case could be removed because it satisfied the CAFA requirements, including that the amount-in-controversy exceeded $5 million. Because the plaintiffs did not allege an amount-in-controversy, LB Defendant bore the burden of proving by a preponderance of the evidence that the amount-in-controversy had been met.
LB Defendant calculated the amount-in-controversy by aggregating potential damages to all tenants who lived in any of the 70 multi-unit apartment complexes managed by defendant Archstone Communities, LLC (“Archstone Defendant”) not just the ones managed by LB Defendant. The District Court, however, noted that, in order to be potentially liable for damages to all former tenants of Archstone Apartments, LB Defendant would have to be jointly liable with Archstone Defendant or both the defendants would need to be one legal entity. The District Court remarked that it was not persuaded that the facts alleged in complaint were consistent with either joint liability or the existence of one entity. Therefore, the District Court concluded that LB Defendant did not properly calculate its potential liability and did not satisfy the CAFA amount-in-controversy requirement.
The District Court explained that, while CAFA permits aggregation of claims of separate plaintiffs, claims against multiple defendants could be aggregated only when the defendants were liable jointly. The District Court found that, based on the facts in the complaint, there was no factual basis on which to conclude that LB Defendant could be liable for damages owed to any tenants outside the class of tenants who lived in LB Apartment. Therefore, the District Court was not persuaded that potential damages against all Defendants should be aggregated when determining the amount-in-controversy.
Finding that both Archstone Defendant and LB Defendant were not one entity, the District Court ruled that the removal was improper and remanded the case to the state court.
In this case, a Kentucky district court held that defendants in a putative class action arising out of a train derailment satisfied their burden of establishing CAFA’s minimal-diversity and amount-in-controversy requirements. The court also found that, because two thirds of the proposed class members, in the aggregate, were not citizens of Kentucky, plaintiffs failed to satisfy their burden of establishing that CAFA’s home-state and local-controversy exceptions defeated removal. Continue Reading