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

Post-Removal Amendments Clarifying Citizenship of Class Members is Permissible

Posted in Case Summaries

In_re_Anthem_Inc_Data_Breach_Litigation, 129 F.Supp.3d 887 (N.D. Cal. 2015).

The United States District Court, Northern District of California (the “District Court”) concluded post removal amendments clarifying the citizenship of class members was relevant to consider if a complaint met the minimal diversity requirement under the Class Action Fairness Act (“CAFA”) enabling the Federal Court to exercise jurisdiction over the action.

The plaintiffs, brought an action in the Circuit Court of St. Louis City, 22nd Judicial District, in the State of Missouri (the “State Court”) against HMO Missouri, Inc. and Healthy Alliance Life Insurance Company (collectively, the “Defendants”), arising out of a cyberattack on the computer system of Defendants’ parent company, Anthem, Inc. (“Anthem”) where plaintiffs and other class members’ information was exposed to hackers.  The plaintiffs brought the action on behalf of a statewide class of similarly situated individual insureds comprising of Missouri residents whose personal information was compromised as a result of the data breach announced in February 2015.  Defendants removed the action to the United States District Court for the Eastern District of Missouri.  On June 8, 2015, the Judicial Panel on Multidistrict Litigation (“JPML”) issued a transfer order pursuant to 28 U.S.C. § 1407 selecting the District Court.  The plaintiffs moved to remand, and also amended the complaint where they clarified the class members were all “citizens” of Saint Louis County, Missouri, not just “residents.”

Defendants argued that there were two independent bases for the subject matter jurisdiction before the Federal Court: (i) diversity jurisdiction under CAFA; and (ii) federal question jurisdiction under HIPAA.

At the outset, the District Court noted the diversity jurisdiction statute, 28 U.S.C. § 1332, speaks of citizenship, and not of residency.  The Court observed that a natural person’s state citizenship is determined by his state of domicile, and not his state of residence.  A person’s domicile, in turn is his permanent home, where he resides with the intention to remain or to which he intends to return, and a person residing in a given state is not necessarily domiciled there, and thus, is not necessarily a citizen of that state.

In the instant case, plaintiffs’ original petition stated they were adult residents of Saint Louis County, Missouri.  The original petition’s class definition also spoke of residency, rather than citizenship, i.e., “Missouri residents whose personal information was compromised as a result of the data breach announced in February 2015 and are (1) current and former members of a health insurance plan administered by Defendants; and/or (2) current and former Anthem employees.”

The District Court observed that ordinarily, post-removal amendments to the pleadings cannot affect whether a case is removable because the propriety of removal is determined solely on the basis of the pleadings filed in the state court.  That said, the District Court observed that in Benko v. Quality Loan Serv. Corp., 789 F.3d 1111 (9th Cir. 2015), the Ninth Circuit held plaintiffs should be permitted to amend a complaint after removal to clarify issues pertaining to federal jurisdiction under CAFA.

Here, the plaintiffs amended their state court petition to clarify they were not only residents of Missouri, but citizens as well.  The plaintiffs also amended the complaint to explain the nature of the action–namely that the plaintiffs were pursuing their four state law claims on behalf of themselves and a class of similarly situated citizens of Missouri.  When the plaintiffs filed their petition in the state court, there was no reason under state law for them to distinguish between residency and citizenship for pleading purposes.  That distinction only became relevant when the defendants sought removal to federal court under CAFA.  The Court remarked that as the Ninth Circuit recognized in Benko, state court complaints may not address CAFA-specific issues.  Consequently, the District Court considered plaintiffs’ clarifications in their amended complaint.  As a result, the District Court found CAFA’s minimal diversity requirement was not met in this action between citizens of Missouri.

Accordingly, the Court concluded that it would consider the plaintiffs’ clarifications in the amended complaint.  Thus, the District Court found CAFA’s minimal diversity requirement was not met in this action, and both the parties were citizens of Missouri.

The District Court similarly found Defendants did not meet their burden to show federal jurisdiction existed under the Health Insurance Portability and Accountability Act (“HIPAA”), and it remanded the action to the State Court.

Yaron Shaham