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CAFA Law Blog

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

Better Late Than Never: Defendant Allowed To Raise CAFA’s Home State Exception Three Years After Filing Complaint

Posted in Case Summaries

Gold v. New York Life Ins. Co., 730 F.3d 137 (2nd Cir. 2013).

In this appeal, the Second Circuit held (1) that CAFA’s home state exception is not jurisdictional and must be raised within a reasonable time, and (2) that the district court’s discovery schedule, which required the defendant to complete individual discovery before commencing class discovery, excused the defendant’s three-year delay in filing a motion to dismiss under the home state exception.

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CAFA’s General Public Exception Does Not Apply To Action Brought By Mississippi’s Attorney General

Posted in Case Summaries

Hood v. Bristol-Myers Squibb Co., No. 12-00179, 2013 WL 3280267 (N.D. Miss. June 27, 2013).

In this case, the District Court for the Northern District of Mississippi found that an action brought by Mississippi’s Attorney General on behalf of the State of Mississippi, as well as individual, Mississippi consumers, did not fall within the scope of CAFA’s “general public” exception. See 28 U.S.C. § 1332(d)(11)(B)(ii)(III).

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Seventh Circuit Refuses to Exalt Form Over Substance in Decision Reversing District Court’s Remand Order

Posted in Case Summaries

Addison Automatics, Inc. v. Hartford Cas. Ins. Co., 731 F.3d 740 (7th Cir. 2013).

In this appeal, the Seventh Circuit found that the substance, not form, of a plaintiff’s complaint determined whether the district court had subject matter jurisdiction under CAFA.  Also, the Seventh Circuit held that a class representative’s fiduciary duties extend to separate litigation affecting the class.

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The Elder Scrolls IV: Oblivion – The Game Is On In Colorado

Posted in Case Summaries

Edwards v. Zenimax Media Inc., No. 12-00411, 2013 WL 5420933 (D. Colo. Sept. 27, 2013).

In this case, the United States District Court for the District of Colorado held that once a case is properly removed under CAFA, the subsequent striking of class allegations does not divest a federal court of subject matter jurisdiction.

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Fifth Circuit Grants Petition to Determine The Meaning Of “Significant Relief” Under CAFA

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Opelousas General Trust Authority v. Multiplan, Inc., 2013 WL 3245169 (5th Cir. June 28, 2013).

Because it had yet to fully explore the meaning of “significant relief” in the context of CAFA’s local controversy exception, the Fifth Circuit granted the defendants’ petition for leave to appeal a remand order to consider the question.

Defendant American Lifecare, Inc. (“ALC”) is a Louisiana corporation that contracted with various healthcare providers.  The contracts authorized ALC to negotiate with entities like employer health-benefit plans, offering those plans discounted rates with healthcare providers.  ALC was acquired by defendant Private Healthcare Systems, Inc. (“PHCS”), and subsequently defendant Multiplan, Inc. (“MPI”) acquired PHCS, including ALC.

The plaintiffs, a class of Louisiana healthcare providers with preferred provider agreements, brought an action in Louisiana state court alleging violations by the defendants of notice provisions of the Louisiana PPO Act, and alleging that their medical bills had been improperly discounted without prior notice since May 2002.

The defendants removed the action to the District Court based on diversity, alleging improper joinder of ALC, and CAFA.  The plaintiffs moved to remand arguing that there was no improper joinder and the local controversy exception to CAFA applied.

The defendants contended that the local controversy exception applied only if the plaintiffs sought significant relief from ALC, and argued that whether the relief sought was significant depended on ALC’s ability to pay any judgment entered against it.

Although the District Court noted that ALC was the entity against whom most of the violations were claimed, it did not consider ALC’s ability to pay any judgment.  The District Court opined that the local controversy exception applied and remanded the case to Louisiana state court.

The defendants petitioned for leave to appeal the remand order, and the Fifth Circuit granted the motion.

The only contested piece of the local controversy exception was whether ALC is a defendant from whom significant relief is sought by members of the plaintiff class.  The Fifth Circuit noted that if the plaintiffs did not seek significant relief from ALC, then the exception did not apply, and the District Court erred when it remanded the case.

The Fifth Circuit remarked that the meaning of “significant relief” in this context had not yet been determined.  The defendants argued that leave to appeal should be granted so that the Fifth Circuit could determine whether a defendant which was not a going concern and which would not satisfy any judgment against it could be a defendant from whom significant relief was sought.

The Fifth Circuit granted the petition to consider the question.

California District Court Avoids Addressing Controlling Standard for Determining Amount in Controversy

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Ornelas v. Children’s Place Retail Stores, Inc., 2013 WL 2468388 (C.D.Cal. June 5, 2013).

A District Court in California avoided addressing the effect of a recent Ninth Circuit decision on the controlling standard for determining the amount in controversy in a removed case where Plaintiff has pled less than the jurisdictional amount.

The plaintiff, a non-exempt sales associate, brought a putative class action in the Los Angeles County Superior Court alleging failure to provide proper overtime compensation, proper minimum wages for off-the-clock work, required meal periods and required rest periods or proper compensation in lieu thereof, complete and accurate wage statements, and timely payments of wages, both during employment and upon termination.

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Supplemental Evidence from Removing Defendant May Be Considered To Defeat CAFA Removal

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Steele v. W.W. Grainger, Inc., 2013 WL 2481476 (S.D. Cal. June 10, 2013).

Removing defendants can undermine the basis for removal jurisdiction with their own subsequent submissions.  A District Court in Southern California held that a court may consider supplemental evidence proffered by the removing defendant, which was not originally included in the removal notice to determine the amount in controversy.

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Defendant Cannot Be Asked To Confess Liability Under The Guise Of Calculating The Amount In Controversy

Posted in Case Summaries

Raskas v. Johnson & Johnson, 2013 WL 3198177 (8th Cir. June 26, 2013)

While reversing an order of remand, the Eighth Circuit held that when determining the amount in controversy, the question is not whether the damages are greater than the requisite amount, but whether a fact finder might legally conclude that they are.  Further, the court held that defendants do not need to provide a formula or methodology for calculating the potential damages more accurately because that would require a defendant to confess liability for the entire jurisdictional amount.

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The Seventh Circuit Resolves District Court Split Over Triggering the 30-day Removal Period

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Walker v. Trailer Transit, Inc., 2013 WL 4488915 (7th Cir. Aug. 23, 2013).

The Seventh Circuit resolves a district court split in the Seventh Circuit holding that the 30-day removal clock under 28 U.S.C. § 1446(b)(3) is triggered only when the defendant receives a pleading or other paper that affirmatively and unambiguously reveals that the predicates for removal are present including the amount of monetary damages sought.

The plaintiff, an owner and operator of a long-haul truck, brought a class action in Indiana state court asserting that the defendant, broker of trucking services, violated its lease agreement.  Under the lease agreement, the defendant was obligated to pay the plaintiff 71% of the gross revenues derived from use of the truck, less all items intended to reimburse the defendant for special services.  The plaintiff alleged that the defendant charged add-on fees to customers which exceeded the cost of providing special services.  Because those fees were allegedly not intended to reimburse the defendant, the plaintiff contended that the truckers were entitled to a portion of these fees under the lease agreement.

In its motion for summary judgment, the defendant argued that the plaintiff’s theory of damages tied to a percentage of profits was untenable.  Although the complaint alleged that truckers were entitled to 71% of the profits from the fee, the defendant contended that the language of the lease agreement could not support an interpretation entitling the class to that measure of damage.  In response to the defendant’s summary judgment motion, the plaintiff argued that a jury could award damages based on either the defendant’s profits or based on the entire fees.

Thereafter, the defendant’s counsel sought clarification on whether the class was seeking 71% of the entire fees or of the profits from the fees.  The plaintiff’s attorney responded by merely copying and pasting the same argument from its earlier response to the summary judgment motion.  Only when the defendant formally requested clarification of the theory of damages through requests for admission, the did the plaintiff admit that the class was seeking 71% of the entire fees.

Within 30 days of receiving the plaintiff’s response to the requests for admission, the defendant removed the action to District Court under CAFA.  The notice of removal included an affidavit from an executive which stated that the possible damages could exceed $5 million if the class sought 71% of the entire amount of the disputed fees, but not if the class sought 71% of the profits from those fees.

Although the plaintiff conceded that the amount-in-controversy requirement was satisfied, he moved for remand arguing that removal was untimely because the 30-day removal period started when he filed his summary-judgment response, or at the latest, when his attorney responded to the defendant’s e-mail, both of which occurred more than 30 days before removal.

The District Court denied remand, holding that neither the summary-judgment response nor the plaintiff’s counsel’s e-mail clearly disclosed that the damages potentially exceeded $5 million.  The Seventh Circuit granted the plaintiff’s petition to appeal and affirmed the District Court’s ruling.

Under 28 U.S.C. § 1446(b)(1) the notice of removal shall be filed within 30 days after defendant receives a copy of the initial pleading setting forth the claim for relief or within 30 days of service of the summons if such initial pleading has then been filed in court and is not required to be served on the defendant.   Further, § 1446(b)(3) provides that if the case stated by the initial pleading is not removable, a notice of removal may be filed within 30 days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable.

The Seventh Circuit stated that the 30-day removal clock is triggered only when the defendant receives a pleading or other paper that affirmatively and unambiguously reveals that the predicates for removal are present.  Further, regarding the amount in controversy in particular, the Seventh Circuit opined that the pleading or other paper must specifically disclose the amount of monetary damages sought.

Although the plaintiff asserted that the 30-day removal clock should begin to run the first moment it becomes possible for the defendant to remove the case, the Seventh Circuit remarked that the plaintiff’s proposed rule merged the timeliness question with the factual inquiry into whether the case is substantively appropriate for removal.

Further, the Seventh Circuit noted that whether the jurisdictional prerequisites are in fact met is a separate determination and involving consideration of materials outside the state-court pleadings, whereas the timeliness inquiry is limited to the examining contents of the clock-triggering pleading or other litigation paper.  The Seventh Circuit opined that evaluating the timeliness of removal should not involve a fact-intensive inquiry about what the defendant subjectively knew or should have discovered through independent investigation.

The Seventh Circuit stated that here, neither the plaintiff’s summary-judgment response nor the follow-up e-mail was sufficient to start the removal clock.  Although the summary-judgment response intimated the defendant for the first time that the class was seeking 71% of the entire disputed fees rather than just 71% of the defendant’s profits from those fees, the Seventh Circuit observed that it was ambiguous, and did not affirmatively reveal that the damages could be greater than $5 million.  Further, the District Court remarked that the follow-up e-mail from the plaintiff’s counsel also did not resolve the ambiguity; instead it only reiterated what was in the summary-judgment response.

The Seventh Circuit held that the removal clock was first triggered when the plaintiff responded to the defendant’s requests for admission seeking formal clarification of the theory of damages, wherein the plaintiff confirmed that the class was indeed seeking damages based on a percentage of the total disputed fees.

The Seventh Circuit, however, stated that even this document did not affirmatively specify a damages figure under the class’s new theory, and thus the removal clock never actually started to run.  Although the defendant filed its notice of removal within 30 days of receiving that response, the Seventh Circuit noted that the removal was not based on the plaintiff’s response to the requests for admission alone; it was based on the plaintiff’s admission and an estimate from the defendant’s executive which collectively showed that the jurisdictional limits were met.

Accordingly, the Seventh Circuit opined that removal was not untimely, and that the District Court had properly denied the motion to remand.

The Seventh Circuit adopts the same standard applied in 2nd, 4th, 5th, 8th, 9th, 10th Circuits and itemizes those Circuits’ decisions on pages 9-10.   There is a good string cite from the Seventh Circuit there if this issue ever becomes your own.   — JR