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

A Removed Case Doesn’t Always Stay Removed – Jurisdictional Ping-Pong under the CAFA and 28 U.S.C. § 1447(c)

Posted in Case Summaries

Polo v. Innoventions Int’l, LLC, 833 F.3d 1193 (9th Cir. Aug. 18, 2016).

The Ninth Circuit remanded this case removed under the CAFA back to state court by holding in part the maxim “a putative class action, once properly removed, stays removed” directly contradicts the statutory language of 28 U.S.C. § 1447(c), which requires: “If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.” The Ninth Circuit further held that actions removed under CAFA can be remanded on mostly the same terms as any other case removed to federal court.

Background Facts:

The plaintiff in Polo filed a putative class action lawsuit in a California state court alleging that the defendant marketed a product called DiabeStevia through grossly misleading and exaggerated claims of its effectiveness, in particular that it could be used to treat diabetes, in violation of California’s Consumers Legal Remedies Act (“CLRA”). The Plaintiff alleged she stopped taking her prescribed diabetes medication and began using DiabeStevia based on the Defendant’s claims, but that DiabeStevia failed to perform as advertised and caused her to suffer a “life threatening illness.”

Procedural History:

The defendant removed the action to federal court pursuant to CAFA. After limited discovery the defendant moved for summary judgment, arguing that the plaintiff lacked Article III standing.  The district court found it undisputed that the Plaintiff did not have diabetes, that she had stopped taking her diabetes medication at least five months before she began using DiabeStevia, and that the Defendant had refunded Plaintiff her entire purchase price, including tax and shipping. The district court thus held Plaintiff “cannot have been injured in the manner in which she alleges,” and due to the purchase price refund lacked Article III standing for all of her claims, granting summary judgment for the defendant and dismissing the case.

Parties Arguments on Appeal: 

Plaintiff appealed only the dismissal of her class-action claim for violations of CLRA. Plaintiff’s appeal did not dispute her lack of Article III standing, but rather argued that upon making the lack of standing determination the district court was required to remand the case to state court pursuant to 28 U.S.C. § 1447(c).

Defendant argued that § 1447(c) did not apply in the context of this case due to general maxims in past Ninth Circuit decisions, that failure of a claim on its merits does not divest a court of jurisdiction, and that plaintiff’s lack of injury was established as part of the summary judgment process, therefore plaintiff’s lack of standing was established at final judgment, not “before final judgment” as required by § 1447(c). Defendant also argued that even if § 1447(c) did apply remand to the California state court would have been “futile” due to Plaintiff’s lack of standing.

The Ninth Circuit Holds 28 U.S.C. § 1447(c) is Applicable to This Action: 

The Ninth Circuit’s opinion noted that the maxim relied on by defendant, “a putative class action, once properly removed, stays removed,” only applied to “post-filing developments,” such as a failure of Rule 23 class certification that might defeat CAFA eligibility, in order to thwart “jurisdictional ping-pong” in which a case bounces back and forth between federal and state court. The court held that when federal jurisdiction is absent from the beginning of a case, like in this situation, the case is not “properly removed” and need not “stay removed.”

Defendant’s second argument, that the failure of a claim on the merits does not generally divest a court of jurisdiction, was held to be irrelevant because the plaintiff’s CLRA claim was rendered “moot” when the defendant refunded her purchase price for DiabeStevia, and the district court therefore rendered no judgment on the merits of that claim.

Defendant’s third argument that plaintiff’s lack of jurisdiction was established at final judgment through summary judgment, rather than “before final judgment,” was held to be misleading. 28 U.S.C. § 1447(c) requires a case be remanded “[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction.” The district court record reflects that the district court determined it lacked subject matter jurisdiction on May 1, 2014, but entered its final judgment almost two weeks later on May 12, 2014. The 12-day difference between determining lack of jurisdiction and entering judgment brings this case within § 1447(c).

Lack of Article III Standing Does Not Deprive State Courts of Jurisdiction:

Finally, the Ninth Circuit noted that the Supreme Court declined to adopt a futility exception to the remand rule. Because federal courts have limited jurisdiction the ultimate responsibility to ensure jurisdiction lies with district courts, and the district courts must generally remand a case to state court rather than dismiss it. Remand is the proper remedy because lack of Article III standing means federal courts have no jurisdiction over the matter, but state courts are not bound by the constraints of Article III.

In order to dismiss a case rather than remand it the district court must have “absolute certainty” that a state court would “simply dismiss the action on remand.” Plaintiff lacked Article III standing due to allegations (a) she purchased a product from the defendant, and (b) “the purchase would not have been made but for the misrepresentation,” as well as defendant’s proof that it refunded plaintiff’s “entire purchase price.” But under California law “[O]nce a person has been the victim of a proscribed practice under the CLRA and makes a demand on behalf of a class, remedying the plaintiff’s individual complaint does not disqualify her as class representative.” Because of this the district court could not say with “absolute certainty” that remand would be futile because plaintiff may have standing in the California state court.

Accordingly, the Ninth Circuit reversed the district court’s judgment and remanded the case.