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CAFA Law Blog

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

A Plaintiff’s Dual Role as Class Counsel and Lead Plaintiff Did Not Divest a Federal Court of Its Jurisdiction

Posted in Case Summaries

Hoffman v. DSE Healthcare Solutions, LLC, 2014 WL 1155472 (D.N.J. March 21, 2014).

A district court in New Jersey retained federal jurisdiction under CAFA, finding that under the Standard Fire principle, a plaintiff’s dual role as the class counsel and the lead plaintiff did not divest a federal court of its jurisdiction.

The plaintiff filed a consumer fraud class action against the defendant DSE Healthcare Solutions, LLC in the Superior Court of New Jersey, alleging that the defendant made false claims of product efficacy about Lipo–Flavonoid Plus, a dietary supplement.  The plaintiff was a New Jersey citizen and sought treble damages, interest, fees, costs, attorneys’ fees and civil penalties for the defendant’s alleged violation of the New Jersey Consumer Fraud Act (“NJCFA”).  The complaint expressly limited the overall amount-in-controversy to less than $5 million.  The defendant removed the lawsuit under CAFA.  The plaintiffs filed a motion to remand.

The plaintiff argued that his dual role as both the class counsel and the class representative prohibited class certification in federal court, resulting in the inability of the class to recover the minimum CAFA jurisdictional requirement.  To support his argument, the plaintiff cited precedent where such dual status was held to create a conflict of interest.

The defendant responded that the plaintiff could not unilaterally divest the District Court of the CAFA jurisdiction by asserting this dual role.  The defendant pointed to the unanimous Supreme Court decision in Standard Fire Ins. Co. v. Knowles, 133 S.Ct. 1345 (2013).  In Standard Fire, the Supreme Court interpreted CAFA to hold that a named plaintiff cannot unilaterally circumvent CAFA by his own non-binding actions.  Specifically, the Supreme Court rejected a plaintiff’s attempt to evade the scope of CAFA jurisdiction by stipulating that the class he sought to represent would not seek damages that exceed the $5 million jurisdictional threshold.  (Editors’ Note: see CAFA law blog analysis of Standard Fire posted on April 12, 2013).

 The District Court agreed with the defendant that, just as a class representative could not bind a class with a stipulation to limit the class’ damages in order to avoid federal jurisdiction in Standard Fire, a class representative cannot bind the class by unilaterally deciding to select himself as counsel.

Next, the District Court remarked that the primary issue was whether the defendant could show “to a legal certainty” that the individual claims of all proposed class members aggregate to more than $5 million.  The plaintiff proposed a class that comprised all U.S. purchasers of Lipo–Flavonoid Plus for the four year period.  The defendant submitted a certification from William D. Everett, Jr., the Vice President of Finance of DSE, that in the four-year period covered by the complaint DSE’s total nationwide sales of Lipo–Flavonoid Plus were over $9 million.  The District Court remarked that this evidence, coupled with the plaintiff’s demand for treble damages, was sufficient to prove “to a legal certainty” that the claims of the proposed class exceed $5 million in the aggregate.

Accordingly, the District Court denied the plaintiff’s motion to remand.

District Court Affirms Magistrate Court’s Lack of Sua Sponte if Outside Scope of Its Referral

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Lowell v. Summer Bay Mgmt., L.C., 2014 WL 1092187 (E.D. Tenn. March 17, 2014).

In an action, a Tennessee District Court adopted the magistrate judge’s recommendation, where he refused to dismiss a case sua sponte on the issue of subject matter jurisdiction.  The magistrate judge was of the view that when a case is referred to a magistrate by district court, he is bound to the extent of referral, which in this case was class certification; as a result, dismissing the case sua sponte would mean that he would be exceeding his jurisdiction.

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District Court Allows Discovery to Proceed in Part for Plaintiff to Establish CAFA Jurisdiction

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Kanowitz v. Broadridge Fin. Solutions, Inc., 2014 WL 1338370 (E.D.N.Y. March 31, 2014).

A district court in New York granted in part and denied in part a defendant’s motion to stay discovery while a motion to dismiss for lack of jurisdiction under CAFA was pending.  The District Court found that although the putative class satisfied the local controversy and the home state exceptions under CAFA, defendant should produce unredacted information on the putative class members’ to allow Plaintiffs an opportunity to verify Plaintiffs’ state citizenship, which had been withheld at the initial stage of the litigation.

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Defendants’ Citation to State Actions Alleging Similar Claims Insufficient Evidence to Establish CAFA’s Amount in Controversy

Posted in Case Summaries

Hochstrassen v. Broadspire Servs., Inc., 2013 WL 5536465 (N.D.W. Va. Oct. 8, 2013).

In this case, the district court held that defendants failed to establish CAFA’s amount-in-controversy requirement by citing state-court cases in which plaintiffs alleged similar invasion of privacy claims.  According to the district court, the damages awarded in those state cases were not illustrative of what class members could potentially recover in this case.

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PAGA Penalties Divided Among Employees and State of California May Not Be Aggregated To Satisfy CAFA’S Amount-In-Controversy Requirement

Posted in Case Summaries

Main v. Dolgen California, LLC, 13-01637, 2013 WL 5799019 (E.D. Cal. Oct. 28, 2013).

In this case, a California district court remanded a putative class action after finding that plaintiffs’ individual recoveries under the California Labor Code’s Private Attorneys General Act (“PAGA”) could not be aggregated with civil penalties under the Act that inure to the benefit of the State of California.

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Red Light Means Stop! District Court Finds CAFA’s Amount in Controversy Is Sufficiently Demonstrated in Removal of Traffic Violation Fine Case

Posted in Case Summaries

Hung v. American Traffic Solutions, Inc., 2014 WL 1689303 (E.D. Mo. April 29, 2014).

In an action brought on behalf of citizens of Missouri who had paid traffic violation fees, a district court in Missouri found that the allegations in the complaint were sufficient to satisfy the jurisdictional threshold considering that there were thousands of violations, and each violator paid a fine of $100.

The plaintiffs brought a putative class action in the Circuit Court for the City of St. Louis, Missouri.  The complaint stated that the defendant American Traffic Solutions, Inc. contracted with the City of St. Louis (the “City”) to aid enforcement of City Ordinance 66868 (“Ordinance”).  The Ordinance authorizes installation and use of traffic cameras to detect certain red light traffic violations.  The plaintiffs claimed that by contracting with the City to help enforce the Ordinance, the defendant violated Article I, Section 10 of the Missouri Constitution and the Missouri Merchandising Practices Act.  The plaintiffs alleged that the red light Ordinance impermissibly placed the burden on the accused to rebut a presumption of guilt, which is ultimately based on the registered owner of the vehicle, rather than the driver.  The defendant removed the action under CAFA, and the plaintiffs moved to remand.

The only dispute between the parties was whether the defendant satisfied CAFA’s amount-in-controversy requirement.  The defendant contended that the amount-in-controversy exceeded $5 million, based on the face of the petition and on the declaration of the defendant’s Senior Account Manager Damon Cross.  The defendant argued that in assessing the amount-in-controversy, the Court should consider the value of punitive damages, attorney fees, and injunctive relief sought by the plaintiffs.  The plaintiffs in turn claimed that the defendant merely speculated as to the amount-in-controversy, and had failed to offer any evidence of its suggestion that punitive damages and attorney fees would drive the amount-in-controversy over $5 million.

The District Court found that the defendant had demonstrated amount-in-controversy requirement by a preponderance of the evidence.  The District Court remarked that a plain reading of the petition alone showed that the amount-in-controversy exceeded $5 million.  Specifically, the District Court stated that the plaintiffs asserted that a $100 fine was typically assessed against those accused of red light violations.  The plaintiffs also asserted that the class and sub–class collectively contained thousands of members who paid fines for violating the Ordinance.  Further, the plaintiffs contended that the defendant issued several thousand red light camera violations per month.  The District Court remarked that assuming that the defendant issued 2,000 violations per month, and only half of those violations resulted in payment of the $100 fine, the amount-in-controversy would still be $6 million dollars for the most recent five years of the Ordinance’s enforcement.

The plaintiffs argued that the defendant’s hypothetical was speculative and insufficient to warrant jurisdiction.  The District Court disagreed.  Citing Hartis v. Chicago Title Insurance Company, 694 F.3d 935, 944–46 (8th Cir.2012), the Court explained that the Eighth Circuit had engaged in a similar analysis to conclude the removing party met CAFA’s amount-in-controversy requirement.  In Hartis, the plaintiff class of consumers sought to recover against the defendant title insurance company for allegedly overcharging for recording fees in many transactions.  In assessing the amount-in-controversy, the Eighth Circuit first noted the average amount allegedly overcharged was $12.  The plaintiff class alleged the defendant engaged in transactions in 17 states.  In fact, the plaintiffs had claimed that in Missouri alone, the defendant engaged in 71,000 transactions. Using the Missouri data, the Eighth Circuit estimated that the defendant engaged in a total of 1,207,000 relevant transactions.  Given the plaintiff class alleged “many” of the total transactions involved overcharged fees, the Eighth Circuit found that, even construing the term “many” as “one-half,” the amount-in-controversy would exceed $7.2 million.

In light of Hartis, the Hung Court concluded that the defendant’s hypothetical was compelling.  In addition, the Court noted that in his declaration, Cross stated, from January 1, 2009 through December 31, 2013, the City issued over 280,000 violation notices, which were paid in full or in part, based on automated traffic control systems.  The District Court remarked that given the standard fee of $100 per violation, the amount-in-controversy would be as much as $28 million, half of which would be $14 million.  Considering the five year period that the plaintiffs claimed, the amount-in-controversy would be as high as $35 million.

Finding that the defendants had adequately established the amount-in-controversy threshold under CAFA, the District Court denied the plaintiffs’ motion to remand.

A Class Action By Any Other Name is Still a Class Action

Posted in Case Summaries

Williams v. Employees Mut. Cas. Co., 2014 WL 1375470 (E.D. Mo. April 8, 2014).

In a garnishment action to collect insurance proceeds brought by a lone plaintiff, the District Court found that it satisfied the requirements of CAFA removal because an action to collect insurance proceeds brought by the class representative was in substance a class action.

The plaintiff Barbara Williams filed this action in the Circuit Court for Lincoln County, Missouri.  The action was filed on behalf of a previously certified class to recover a $82,037,000 judgment obtained in a separate state court action styled Williams v. The Collier Organization (hereinafter referred to as the “Original Lawsuit”). Continue Reading

District Court Concludes that Plaintiff Failed to Plead Sufficient Facts to Establish Jurisdiction Under CAFA

Posted in Case Summaries

Hirmez v. GNC Holdings, Inc., 2014 U.S. Dist. LEXIS 72096 (S.D. Cal. May 27, 2014)

A California district court dismissed a class action complaint for lack of subject matter jurisdiction. The court determined that the complaint contained insufficient factual allegations to establish not only the plaintiff’s citizenship, but also that the amount in controversy exceeded CAFA’s jurisdictional minimum.

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District Court Reconsiders Remand Order in Light of Rodriguez v. AT&T Mobility Servs. LLC

Posted in Case Summaries

Deaver v. BBVA Compass Consulting And Benefits, Inc., 2014 U.S. Dist. Lexis 72074 (N.D. Cal. May 27, 2014)

The U.S. District Court for the Northern District of California (the “Northern District”) reconsidered its remand order in light of the Ninth Circuit’s ruling in Rodriguez v. AT&T Mobility Servs. LLC, 728 F.3d 975 (2013). In originally remanding the case, the court relied on the “legal certainty” test promulgated by Lowdermilk v. United States Bank National Association, 479 F.3d 994 (9th Cir. 2007). Because the Rodriguez court overruled Lowdermilk and held that a defendant removing an action under CAFA need only establish the amount in controversy by a preponderance of the evidence, the court re-evaluated whether the removing defendants satisfied the amount in controversy requirement under CAFA.

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Plaintiffs’ Real Estate Transactions Cannot Be Considered for Purposes of Joinder Under Rule 20(a)

Posted in Case Summaries

Padron v. Onewest Bank, 2014 WL 1364901 (C.D. Cal. April 7, 2014).

In this action, the District Court declined to exercise jurisdiction under CAFA because the plaintiffs could not show that all of their claims were a result of the same transaction, occurrence, or series of transactions or occurrences.

One hundred and twenty-one plaintiffs joined together in this action against the defendants, OneWest Bank, FSB, and various mortgage servicers, trustees, and an appraiser, in Los Angeles County Superior Court.  Plaintiffs filed various claims alleging that the defendants were no longer acting as conventional money lenders, but instead morphed in to an enterprise engaged in systematic fraud upon its borrowers.  The defendants removed the action to federal court invoking mass action jurisdiction under CAFA.

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