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CAFA Law Blog

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

Defendant’s Speculations Will Not Suffice for CAFA Jurisdiction

Posted in Case Summaries, Jurisdictional Amount

Woods v. CVS Pharmacy, Inc., 2014 WL 360185 (C.D. Cal. Jan. 30, 2014).

A District Court in California remanded an action for failure to establish the amount in controversy holding that a defendant seeking removal of a putative class action must demonstrate, by a preponderance of evidence, that the aggregate amount in controversy exceeded the jurisdictional minimum.

Plaintiffs are pharmacists who worked as “floater” pharmacist in Region 60 of defendants’ California retail stores.  A “floater” pharmacist is one who travels to different locations.  The plaintiffs filed this action in Los Angeles County Superior Court alleging numerous violations of the California Labor Code, conversion under the California Civil Code, and unfair business practices under the California Business and Professional code.

The defendants removed the action under CAFA asserting, among other things, that the amount-in-controversy exceeded $5 million.

The defendants maintained that there were at least 1,087 putative class members because there were at least 1,087 pharmacist who were floater pharmacists or pharmacists who had at least one shift where they were paid at more than one store any calendar year in the class period.

The court found the defendants calculation to be speculative because it included pharmacists who transferred from one home store to another during the time period.  It also included pharmacists who had a home store and only covered once at another store.  Because defendants failed to meet their burden as to the number of putative class members, defendants’ other calculations of the amount in controversy also failed to establish that the amount exceeded $5 million.

For example, the defendants estimated that the amount in controversy for the plaintiffs’ waiting time penalties claim was $3,889,798.  The District Court explained that this number was partly based on the defendants’ speculative estimate of 1,087 putative class members, so the defendants failed to prove this amount by a preponderance of evidence.

The court also stated that the defendants neither explained nor provided any evidence in support of using the maximum penalty of 30 days as a basis for their calculations of the amount in controversy.  Similarly, the defendants also failed to provide evidence to support their assumptions regarding the 47,457 instances where pharmacists potentially worked a shift at more than one store or a store other than their home store used to calculate the plaintiffs’ unpaid overtime claim.

Plaintiffs’ representation that their class definition covered all individuals who worked as pharmacists at multiple CVS locations did not establish that the definition of “floater” incorporated those pharmacists who had a home store and only worked at another store once.

Accordingly, the District Court held that the defendants failed to demonstrate by a preponderance of evidence that the aggregate amount in controversy exceeded the jurisdictional minimum, and the case was remanded to state court.

Plaintiff’s Facially Deficient Claims Cannot Be Considered for Purposes of the CAFA Amount in Controversy Determination

Posted in Case Summaries, Uncategorized

McDaniel v. Fifth Third Bank, 2014 WL 805508 (M.D. Fla. Feb. 28, 2014).

In an action arising out of fraud and misrepresentation, the district court refused to retain subject matter jurisdiction under CAFA finding that it could not consider a facially deficient claim for the purpose of ascertaining the amount-in-controversy.

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100 Is The Magic Number For Both Remand As Well As Removal

Posted in Case Summaries

California ex rel. Sherwin v. Office Depot, Inc., 2014 WL 320156 (C.D. Cal. Jan. 29, 2014).

Relying on the Supreme Court’s recent decision in Mississippi ex rel. Hood v. AU Optronics Corp, which prohibited the court from exercising subject matter jurisdiction when there did not exist at least 100 named plaintiffs, the Central District Court of California sua sponte remanded the case to the state court.

A qui tam Plaintiff, David Sherwin, filed an action against the defendant, Office Depot, Inc., to recover damages and civil penalties pursuant to the California False Claims Act (“CFCA”).  For those who are not aware of qui tam suits – these suits are brought for the government as well as the plaintiffs against a person or company who is believed to have violated the law in the performance of a contract with the government.

Sherwin was representing the State of California and all political subdivisions within the state that purchased goods and services from the defendant pursuant to a contract with the U.S. Communities Government Purchasing Alliance.  Nineteen political subdivisions intervened in the action to assume control over their claims, and eighteen filed separate complaints-in-intervention asserting CFCA and common law causes of action.

The defendant removed the action to federal court under CAFA.  As you may know, an action under CAFA arises when the monetary claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law and fact.

At the outset, the District Court noted that it has an independent duty to ascertain its own subject-matter jurisdiction, so it ordered the parties to show cause for its subject matter jurisdiction.  In response to the court’s order to show cause, the parties contended that the action met the 100 plaintiffs requirement because there were over 100 real parties in interest in the lawsuit.  The parties cited Nevada v. Bank of Am. Corp., 672F. 3d 661, 669 (9th Cir. 2012), where the court held that the characterization of a case as a mass action turned on whether the plaintiff or the 100-plus entities or persons on whose behalf it sought restitution are the real parties in interest, which affects CAFA’s numerosity requirement.

The District Court also ordered the parties to show whether and how the Supreme Court’s grant of certiorari in Mississippi ex rel. Hood v. AU Optronics, Corp., 701 F.3d 796 (5th Cir. 2012) affected the court’s subject matter jurisdiction.  The parties contended that it did not affect the court’s subject matter jurisdiction because, unlike Mississippi ex rel. Hood, this was not a parens patriae action, and the parties asserted no sovereign interest separate from the claims for relief on behalf of the individual government purchasers.

Moreover, the circuit split that the Supreme Court resolved in Mississippi ex rel. Hood regarding which test applies in determining who the real parties in interest were, was not relevant here because under either test, the real parties in this action were the government entities on whose behalf the plaintiff sued.

The District Court, however, noted that the Mississippi ex rel. Hood recent decision prohibited the court from exercising subject matter jurisdiction, over this action if there do not exist at least 100 named plaintiffs.  Here, the complaint named as plaintiffs only the State of California and relator Sherwin, and there were only 19 intervenors.  The lawsuit failed to satisfy the 100 named plaintiffs requirement, therefore the case did not qualify as a CAFA mass action granting the court subject matter jurisdiction.

The defendant also asserted that removal was proper because the action was completely diverse as defined by 28 U.S.C. § 1332(a) because relator was fraudulently joined.  The District Court rejected the defendant’s fraudulent joinder argument.  The court found that a ruling on whether the plaintiff was fraudulently joined, could only be determined after making factual findings and determining the legal issues on the merits pursuant to a summary judgment motion.

Accordingly, the District Court opined that it lacked subject matter jurisdiction and sua sponte remanded the action.

Plaintiffs Must Meet Their Burden to Rebut Defendants’ Showing Re: Amount-in-Controversy

Posted in Case Summaries, Uncategorized

Clements v. DirecTV, LLC, 2014 WL 794287 (W.D. Ark. Feb. 27, 2014).

In this action, the District Court denied a motion for remand and retained jurisdiction, finding that the defendant had satisfied its burden to establish that the amount-in-controversy exceeded the $5 million threshold required by CAFA.

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A Plaintiff’s Motion to Amend is Not Operative for Removal Purposes

Posted in Case Summaries

Chapin v. Whitecap Investment Corp., 2014 WL 656971 (D.V.I. Feb. 20, 2014).

The plaintiffs in this matter are St. John property owners.  The plaintiffs brought this action against defendants, Whitecap Investment Corp. and Paradise Lumber, in the Superior Court of the Virgin Islands alleging breach of contract, breach of warranty, negligence, strict product liability, and deceptive trade practices.

Paradise Lumber filed third party cross claims seeking indemnity and contribution from Great Southern Wood Preserving, Inc., Putnam Lumber and Export Company, and Putnam Family Properties.  The Putnam entities also filed cross claims against Paradise Lumber and Great Southern.

After the cross claims were instituted, the plaintiffs amended their complaint to add additional plaintiffs (“First Amended Complaint”).  Several months later, the plaintiffs filed a motion to amend their First Amended Complaint.  In the proposed amended complaint, there were a number of additional plaintiffs not included in the First Amended Complaint, and the complaint included class allegations under Fed. R. Civ. P. 23.

Third-party defendant Great Southern filed a notice of removal with the district court pursuant to 28 U.S.C. § 1332.  The plaintiffs then withdrew the motion and filed a motion to remand.

The District Court explained that the party seeking removal has the burden of showing that removal is proper.  This action did not assert a question of federal law, so the matter could be removed only on the basis of diversity jurisdiction.  The District Court denoted that a federal court has diversity jurisdiction over civil actions only when complete diversity exists and the amount-in-controversy exceeds $75,000.  However, when the lawsuit is a class action, the complete diversity rule is relaxed, so long as any plaintiff is diverse from any defendant and the amount-in-controversy exceeds $5 million.

The issue in this case was whether the service of plaintiffs’ motion to amend was sufficient to allow removal when the motion had not been disposed of and the then-operative complaint did not contain a statutory basis for removal.

In short, the answer is no.  The District Court reasoned that the basis for removal does not exist until leave to amend is granted by the local court because allowing removal prior to the Superior Court’s ruling on a motion for leave to amend would ignore the Superior Court’s right to deny such a motion.  Accordingly, the District Court held that a proposed amended complaint did not become operative for removal purposes until the Superior Court grants leave to amend.

Here, the plaintiffs’ motion for leave to amend had not been granted, and it could not be granted anymore because it had been withdrawn.  Therefore, the operative complaint at the time the third-party defendants filed their notice of removal was their First Amended Complaint.  Because the First Amended Complaint did not contain any class action allegations, the minimal diversity rule was not triggered, and the complaint provided no other grounds for federal jurisdiction.

Thus, the District Court granted the plaintiffs’ motion to remand.

Federal Jurisdiction Retained in Declaratory Judgment Action Where Value of Relief Was Measured in Medical Bills

Posted in Case Summaries

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

The Eleventh Circuit held that, 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, 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.

In January 2012, Florencio Sanchez was injured in an automobile accident and received medical treatment from the plaintiff, a healthcare provider. Sanchez was insured by the defendant under a policy that provided her with personal injury protection (“PIP”) coverage.  The plaintiff brought a putative class action, contending that the insurer-defendant did not unambiguously indicate 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).

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 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 plaintiff, in the complaint, did not seek monetary damages. Instead, the plaintiff 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 Fla. Stat. § 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.

At the outset, 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 stated 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, then the party may file a suit for additional payment if the following could be determined: that the treatment in question was (1) related to an accident; (2) medically necessary; and (3) 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 the money.

The plaintiff relied on Leonard v. Enter. Rent a Car, 279 F.3d 967 (11th Cir.2002), where the plaintiffs sought to enjoin 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. Hence, the relief could not be monetized.

In the instant matter, the Eleventh Circuit found that Leonard was distinguishable, because it concerned future transactions that merely were possible, as opposed to the present case, 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.

Plaintiff Cannot Maintain CAFA Jurisdiction Where Amount Stated In Controversy Isn’t Really in Controversy

Posted in Uncategorized

Reilly v. Amy’s Kitchen, Inc., 2014 WL 905419 (S.D. Fla. March 7, 2014).

A District Court in Florida dismissed the plaintiff’s complaint finding that the general rule for CAFA jurisdiction that the amount-in-controversy is determined at the time a complaint is filed does not apply to cases where the plaintiff doesn’t have standing to pursue those claims in the first instance.

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Expedited Discovery Denied for Local Controversy Exception

Posted in Case Summaries

Catron v. Colt Energy, Inc., 2013 WL 6016231 (D. Kan. Nov. 13, 2013).

In an action alleging violation of Kansas law prohibiting restraint of trade, the District Court denied the plaintiff’s motion to remand (without prejudice) finding that he failed to establish that he and his class would qualify for a local controversy exception and denied his request for expedited discovery finding that the information he sought was not readily available.

The plaintiff filed this action in the District Court of Wilson County Kansas claiming that the defendants Colt Energy, Inc.; Layne Energy Resources, Inc.; Layne Energy Operating, LLC; and PostRock Midcontinent Production, LLC, successor by merger to Quest Cherokee, LLC, violated law prohibiting restraint of trade in leasing minerals in Southeast Kansas.  Specifically, the plaintiff claimed that the defendants allocated markets instead of competing.  The defendants removed the action under CAFA.

The plaintiff filed a motion to remand based on the local controversy exception arguing that it was more likely than not that more than two-thirds of the putative class members were Kansas citizens.  However, in order to properly support his motion to remand, plaintiff asked the District Court for expedited jurisdictional discovery.

The plaintiff specifically requested the defendants to produce two categories of documents: (1) the names and addresses of all royalty owners with leases for gas wells; and (2) all written agreements between the defendants touching upon leases in Southeast Kansas, including the Area of Mutual Interest agreement.  The defendants responded that the plaintiff’s request was unnecessary because according to them, those requests would not result in information that would help the Court to decide Plaintiff’s motion to remand.  The defendants also claimed that the information would take some time for them to compile and object to providing personal information of putative class members before certification of any class.

In analyzing the plaintiff’s request, the District Court noted that it was undisputed that it had jurisdiction over the case under CAFA, but the only question here was whether the court is required to decline to exercise that jurisdiction pursuant to the local controversy exception.  Under the circumstances, the District Court remarked that it did not appear that the information that the plaintiff sought might be readily available.  Additionally, the District Court did not find that the plaintiff’s initial evidence of the applicability of the local controversy exception to be as strong as the plaintiff contended. 

Accordingly, the District Court denied the plaintiff’s motion to remand, without prejudice, for refiling if information is obtained in discovery indicating that the local controversy applied.

It appears that the plaintiff attempted to use the remand related expedited discovery request to push their response to the defendants’ motion to dismiss.  The Court determined that it had jurisdiction pursuant to CAFA and did not allow discovery in advance of the plaintiff’s response to the motion to dismiss.  – JR

Jurisdiction to Address Jurisdiction – Supreme Court Questions Its Jurisdiction to Hear Case About CAFA Jurisdiction

Posted in Case Summaries

Much like avid followers of this blog, the U.S. Supreme Court, of late, has started to take an interest in CAFA litigation, having issued decisions in CAFA cases in the past two terms. Mississippi ex rel. Hood v. AU Optronics Corp., 134 S. Ct. 736 (2014); Standard Fire Ins. Co. v. Knowles, 133 S. Ct. 1345 (2013).  For the third year in a row, the Court has another CAFA case on its docket, Dart Cherokee Basin Operating Co., LLC v. Owens, which was argued on October 6, 2014.

Dart Cherokee concerns whether a defendant removing a case to federal court under CAFA need simply plead the $5 million amount in controversy or instead submit evidence of the jurisdictional amount in its removal notice.  The defendants argued that the CAFA removal rules set forth a pleading requirement akin to Rule 8’s notice pleading requirement for original complaints.  Defendants claimed that only when the amount in controversy is challenged by the plaintiff or by the district court does the defendant need to submit evidence to prove that the amount at issue exceeds $5 million.  Along these lines, the briefs submitted by the parties at the certiorari stage and at the merits stage focused on this issue.    

An amicus brief filed by Public Citizen, Inc., however, added a very interesting wrinkle.  Public Citizen argued that the Supreme Court did not have jurisdiction to review the merits issue, because the Court’s jurisdiction is generally limited to cases “in the courts of appeal.”  According to Public Citizen, this case was never in the court of appeal, because the Tenth Circuit had declined to exercise its discretion to accept the Defendants’ petition to appeal the district court’s remand ruling.  In denying the petition to appeal, the Tenth Circuit panel did not give any reasons for its denial.  Likewise, a divided en banc panel declined to grant an en banc petition, again without any reasons.   Public Citizen thus contended that the only thing that the Supreme Court could review was whether the Tenth Circuit abused its discretion in denying the petition to appeal.  Because the Tenth Circuit did not give any reasons for its denial, Public Citizen claimed that the Court should dismiss the case as improvidently granted.

In light of Public Citizen’s amicus brief, the October 6th oral argument before the Court largely concerned whether the Court has the power to review the remand ruling at issue, even though several members of the Court appeared to agree with the defendants’ position on the merits.  Justice Kagan went so far as to comment that she thought most of the court agreed with the defendants’ merits arguments, but was unsure how the Court could reach that issue.  For now, CAFA followers will have to wait and see whether the Court does reach the merits of the issue or instead dismisses the appeal as improvidently granted.