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

Federal Court orders Limited Discovery to Ascertain the Citizenship of the Putative Class

Posted in Case Summaries

McMullen_v_Synchrony_Bank, 82 F.Supp.3d 133 (D. D. C. 2015).

In this matter, the United States District Court for the District of Columbia (the “District Court”) ordered limited discovery to ascertain the citizenship of the putative class before deciding on a motion to remand.  In this action, the District Court found the evidence before it was insufficient to consider the exceptions to the Class Action Fairness Act (“CAFA”), and ordered limited discovery.

The plaintiff, a customer, brought an action in the state court alleging numerous defendants fraudulently took out lines of credit against customers and billed against those lines of credit without the customers’ knowledge or authorization in violation of the District of Columbia Consumer Protection Procedures Act, and for fraud, conspiracy to commit fraud, conversion, and breach of contract.  The defendants removed the action to the District Court, and plaintiff moved to remand to the Superior Court of the District of Columbia (the “Superior Court”).

At the outset, the District Court noted it was undisputed the plaintiff had alleged a class action and the parties were minimally diverse.  The plaintiff contended CAFA’s local controversy exception warranted remand to the Superior Court.  For the local controversy exception to apply there must be (i) greater than 2/3rds of the class members as citizens from the District of Columbia; (ii) at least one defendant from whom the significant relief was sought was from the District of Columbia; and (iii) the injuries occurred in the District of Columbia.

Here, the parties agreed that the principal injuries occurred in District of Columbia, and that no other class action was filed on the same allegations.  As to the citizenship of the defendants, the plaintiff asserted that three of the defendants–One World Fitness, Bullen Wellness, and Washington Chiropractic–were citizens of District of Columbia because they were limited liability companies formed under the laws of District of Columbia.

Defendant JP Morgan Chase & Co. (“Chase”) did not dispute the plaintiff’s factual allegations about the companies’ formation or their primary place of businesses;rather, Chase contended those companies carried the citizenship of their members for diversity purposes, and plaintiff failed to produce any evidence identifying the companies’ members or their members’ citizenship.  The Court disagreed and found CAFA specifically provides that an unincorporated association shall be deemed to be a citizen of the State where it has its principal place of business.  Accordingly, the Court ruled that those businesses were citizens of District of Columbia under CAFA.

Chase did not dispute the local defendants formed a significant basis for the claims asserted by the proposed plaintiff class, as local defendants were allegedly responsible for setting in motion the actions that subsequently harmed plaintiff.  Accordingly, the Court concluded the plaintiff established that there was at least one local defendant from whom significant relief was sought who was a citizen of the District of Columbia.

Finally, as to the citizenship of the proposed class members, the Court found plaintiff had not clearly limited the class to District of Columbia citizens and she had failed to provide any evidence concerning the citizenship of the putative class members.  As a result, plaintiff requested expedited discovery on the issue of class citizenship.

The District Court, accordingly, denied the motion to remand, and ordered expedited limited discovery regarding the citizenship of the putative plaintiff class.

Yaron Shaham