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CAFA Law Blog

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

Standard Fire Versus Lowdermilk – The Debate Continues!

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Trahan v. U.S. Bank, N.A., 2014 WL 116606 (N.D. Cal. Jan. 13, 2014).

A District Court while denying a motion to remand opined that the preponderance of the evidence standard applied, and held that the legal certainty standard is not applicable in actions involving absent class members.

The plaintiff brought an action on behalf of Business Banking Officers, including trainees for the Business Banking position, alleging that the defendant failed to reclassify such employees as non-exempt employees even after Duran v. U.S. National Bank Association, Alameda Co. Sup.Ct. Case No.2001–035537, held that such employees had been misclassified as exempt.  The plaintiff alleged that because of this misclassification, the putative class was not paid overtime, and rest and meal breaks.

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Jail Term Not a Bar For Jail Inmate’s Ability to Communicate

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Underwood v. Menfre, 2014 WL 67644 (M.D. Fla. Jan. 8, 2014).

Aggrieved by her inability to write letters to her husband with sensitive, personal information, and send him inter alia photographs, drawings, and newspaper clippings, the plaintiff, whose husband was an inmate at the Flagler County Jail, Florida, brought an action challenging two policies of the Jail’s Sheriff regarding incoming and outgoing mails.  While one policy required all incoming mail to Jail inmates, except legal or privileged mail, to be in postcard form, another policy prohibited Jail inmates from sending outgoing letters that exceeded two sheets of paper and all outgoing mail that contained obscene language.  The plaintiff alleged that these policies violated her First Amendment free speech rights to communicate in a complete and meaningful way with her inmate husband.

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Merchandise Certificates are Not Coupons And Therefore CAFA Did Not Apply to Louis Vuitton Settlement

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Morey v. Louis Vuitton N. America, Inc., 2014 WL 109194 (S.D. Cal. Jan. 9, 2014).

A District Court granted final approval to a settlement reached between the parties holding that the settlement was fair and reasonable, and that because the settlement did not involve coupons, CAFA did not apply.

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Suit on behalf of All Taxpayers in a State is Deemed a Class Action Under CAFA

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Brown v. Mortgage Elec. Reg. Systems, Inc., 2013 WL 6851088 (8th Cir. Dec. 31, 2013)

The Eighth Circuit affirmed the order of a District Court denying a Plaintiff’s motion to remand holding that, because Arkansas cases involving the misuse of public funds proceed on a class theory that includes all Arkansas taxpayers, and the type of illegal-exaction suit pled by the Plaintiff under Arkansas law did not alter the class membership, the District Court had properly exercised CAFA jurisdiction.

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Are You Ready for Some Football?

Posted in Case Summaries, Jurisdictional Amount

Greco v. Jones, 2014 WL 177410 (N.D. Tex. Jan. 16, 2014).

In this case, the plaintiffs, 237 ticket holders to Super Bowl XLV, brought an action alleging that they were denied, relocated, delayed seating, and/or, redirected to seats with obstructed views.  The plaintiffs asserted claims for breach of contract, fraudulent inducement and concealment, negligent misrepresentation, violations of the Texas Deceptive Trade Practices Act (“DTPA”), and negligence.

The defendants removed the action from state court to federal court as a mass action under CAFA.  The plaintiffs then moved to remand arguing that the defendants failed to establish that each plaintiff sought damages in excess of $75,000.  The plaintiffs also argued that remand was appropriate because the matter fell within the “event or occurrence” exception to the mass action provision.

28 U.S.C. § 1332(d)(11)(B)(i) defines a mass action as any civil action in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact.  Further, CAFA provides that jurisdiction shall exist only over those plaintiffs whose claims in a mass action exceed $75,000.  Thus, to be removable as a mass action under CAFA, a civil action must, satisfy CAFA’s minimal diversity requirement; have an amount in controversy exceeding $5,000,000; and involve claims of monetary relief of at least 100 persons that involve common questions of law or fact.

Here, the plaintiffs argued that the defendants had to establish that each of the 237 plaintiffs sought damages in excess of $75,000.  Defendants, on the other hand, maintained that they only had to make a threshold showing that at least one plaintiff brought claims in an amount exceeding $75,000.  The District Court observed Hamilton v. Burlington N. Santa Fe Ry. Co., 2008 WL 8148619 (W.D. Tex. Aug. 8, 2008) and sided with defendants.  In Hamilton, the court dismissed the plaintiffs’ argument that their claims were not subject to mass action removal because the defendants had failed to show that each plaintiffs’ claims exceeded $75,000.

Hamilton had relied on Lowery v. Alabama Power Company, 483 F.3d 1184 (11th Cir. 2007), which held that requiring a showing that each plaintiff holds claims exceeding $75,000 would fail to give effect to every word and clause in CAFA and render the $5,000,000 aggregate amount in controversy threshold mere surplusage.  Accordingly, finding the language of § 1332(d)(11)(B)(i) to refer to individual plaintiffs and their claims, not to the civil action as a whole, Lowery opined that the $75,000 provision, when read in the broader context of the statute, did not bar district courts from asserting jurisdiction over the entire case if each individual plaintiff’s claims do not exceed $75,000.

Thus, keeping in mind the above precedents, the District Court stated that although the defendants must show that the plaintiffs’ claims exceed $5,000,000 in the aggregate to establish jurisdiction, they do not also bear the burden of establishing that each plaintiff seeks recovery in excess of $75,000.

Although the plaintiffs in their Original Petition had alleged that no individual plaintiff sought recovery in excess of $74,000, the District Court remarked that this statement did not constitute a binding judicial admission or stipulation that actually served to limit recovery to that amount, and it did not irrevocably demonstrate that all plaintiffs waived the right to recovery in excess of that amount.  The District Court also observed that jurisdiction would be lacking unless the defendants demonstrated that the plaintiffs’ disclaimer of recovery exceeding the jurisdictional minimum was inconsistent with the facts with respect to at least one plaintiff.

The plaintiffs repeatedly alleged that the defendants had caused them substantial damages including but not limited to the cost of their tickets, travel-related expenses, loss of vacation time, and other expenses in a total amount exceeding $5,000,000 to be determined according to proof at trial.  Consequently, the District Court noted that it was apparent from the face of the Original Petition that, on average, each plaintiff sought compensatory damages of least $21,097.00.  Assessing treble damages and conservative attorney’s fees on this amount showed that at least one Plaintiff brought claims greater than $75,000.

The plaintiffs also argued that the “event or occurrence” exception barred jurisdiction over this action.  According to § 1332(d)(11)(B)(ii)(I), the “event or occurrence” exception excludes from the definition of mass actions any civil action in which all of the claims in the action arise from an event or occurrence in the State in which the action was filed, and that allegedly resulted in injuries in that State or in States contiguous to that State.

The plaintiffs’ claims undeniably shared similar facts, but the District Court found that they did not arise from a single event or occurrence.  Rather, the plaintiff’s claims were based on numerous separate ticket purchases and/ or acquisitions and different problems that occurred.

Accordingly, the District Court opined that the defendants had shown, by a preponderance of the evidence, that the $75,000 individual amount in controversy was met as to at least one plaintiff, and the “event or occurrence” exception did not apply.

Potential for Recovery in Excess of Jurisdictional Minimum is Not Sufficient to Establish Amount in Countroversy, Which

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Perritt v. Westlake Vinlys Co., LP, 2013 WL 6451774 (M.D. La. Dec. 9, 2013).

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.

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An Unnamed Defendant Is Not A Party For Purposes of the “At Least 1 Defendant” Requirement for the Local Issue Controversy Exception

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Quicken Loans v. Alig, 2013 WL 6671618 (4th Cir. Dec. 19, 2013).

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.

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Eighth Circuit Math 101: One + One + One = One Mass Action under CAFA

Posted in Case Summaries

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

Affirmative Defenses Have No Role in Determining the Amount in Controversy

Posted in Case Summaries, Jurisdictional Amount

Smith v. Manhattan Club Timeshare Association, Inc., 2013 WL 1955882 (S.D.N.Y. May 10, 2013).

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.