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CAFA Law Blog

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

More than Declarations are Required for Evidence of CAFA Jurisdiction

Posted in Case Summaries

Emmons v Quest Diagnostics Clinical Labs Inc, 2014 WL 584393 (E.D. Cal. Feb. 12, 2014).

In this action, the federal court refused to accept the defendants’ attempt to establish amount-in-controversy exceeded $5 million through a declaration by one of its employees, finding that the declarations were not enough evidentiary support to retain jurisdiction under CAFA.

Two phlebotomists, on behalf of themselves and others similarly situated, brought this action in the Stanislaus County Superior Court against the defendants seeking overtime wages, unpaid minimum wages, unpaid meal period and rest period premiums. Phlebotomists are those who are trained and certified to draw blood for diagnostic testing. The plaintiffs defined three classes of similarly situated persons: (1) non-Floater Phlebotomists in California; (2) Floater Phlebotomists in California; and (3) non-Floater and Floater Phlebotomists in California who worked for defendants within one year prior to filing of the complaint, until certification.

The defendants removed the action to the federal court under CAFA. Supporting removal, the defendants attached the declaration of Megan Bassler, the Senior Human Resources Generalist, who stated that there were at least 2,000 employees who worked in California as non-Floater Phlebotomists during the 4-year period, and 785 were former employees; at least 180 employees were Floater Phlebotomists, among them 30 were former employees. The defendants indicated that the entire alleged class consisted of at least 2,180 individuals. The plaintiffs sought remand on the grounds that the defendants failed to meet their burden of establishing that the amount-in-controversy exceeded $5 million.

As in many cases, here too, the complaint did not specify an amount of damages, therefore, the defendants again landed with the burden of establishing the amount-in-controversy by preponderance of evidence. The district court noted that in Lowdermilk v. U.S. Bank Nat’l Ass’n, 479 F.3d 994 (9th Cir. 2007), the Ninth Circuit adopted “legal certainty” standard as the standard of proof in CAFA cases where a state court complaint affirmatively alleges that the amount-in-controversy was less than CAFA’s jurisdictional minimum. (Editor’s Note:  See the CAFA Law Blog analysis of Lowdermilk posted on July 30, 2007). The defendants argued that in Rodriguez v. AT & T Mobility Services, LLC, 728 F.3d 975 (9th Cir. 2013), the Ninth Circuit found that the Supreme Court overruled Lowdermilk in Standard Fire Insurance Company v. Knowles, 133 S.Ct. 1345 (2013) instructing the district courts to look to the potential claims of the absent class members, rather than plaintiff’s complaint. (Editors’ Note: see CAFA law blog analysis of Standard Fire posted on April 12, 2013). The Rodriguez court observed that Lowdermilk reasoned that the initial jurisdictional determination derives from the complaint, while the Standard Fire mandates that courts determine their jurisdiction by aggregating all potential class members’ individual claims.

Under this heightened burden, the district court found that the defendants did not show that the amount-in-controversy exceeded $5 million. The district court explained that here, the defendants contended that the amount-in-controversy exceeded $8,625,000 based on three of the nine allegations of violations of the California Labor Code. The district court noted that in their sixth cause of Action, the plaintiffs alleged that the defendants intentionally and willfully failed to provide the employees with accurate wage statements in accordance with California Labor Code § 226(a). The defendants calculated the value of this claims as $5,565,000 with support from Megan Basler’s declaration. Basler declared that the defendants issued at least 2,100 paychecks in the one-year preceding the complaint, and the defendants assumed that every wage-statement issued over 26 periods was incorrect. Based on that assumption, the defendants argued that the plaintiffs were entitled to recover $50 for the initial incorrect wage statement, $100 for every additional erroneous wage statement, and therefore, each employee would be entitled to receive $2,650 in statutory compensation at minimum. According to the defendants 2,100 paychecks X $2,650 equaled over $5.56 million.

The district court noted that in Garibay v. Archstone Communities LLC, the plaintiff alleged violations of § 226, and the defendant calculations assumed that every single member would be entitled to recover maximum penalties for every single period without providing supporting evidence for that assertion. The Garibay court observed that the only support for the defendants’ calculation of the amount-in-controversy was a declaration by their superior. Accordingly, the Garibay court rejected this evidence as a support for amount-in-controversy. Similarly, the district court in this case relied on other cases where the defendants attempted to establish amount-in-controversy by declarations as opposed to producing solid evidence. The district court concluded that similar to those cases, the defendants here merely speculated without much evidence that the violations of § 226 would result in them paying maximum penalties. The district court ruled that it cannot rely on the defendants’ assertions that the amount-in-controversy was in excess of $5.65 million only in violations of § 226 for the purpose of calculation amount-in-controversy.

Likewise, the district court found that the defendants’ reliance of Basler’s declarations to establish that the violation of § 203 – waiting time penalties – also attracted maximum penalties. The district court refused to accept the defendants’ argument the plaintiffs’ allegations of PAGA violations also helped cross the $5 million threshold.

Accordingly, the district court granted plaintiffs’ request to remand the case to the state court. –JR

Home State Exception Unsuccessful in California

Posted in Case Summaries

Swearingen v Yucatan Foods LP, 2014 WL 553537 (N.D. Cal. Feb. 7, 2014).

In an action brought by the consumers of nationwide class, the district court denied the defendant’s challenge of the federal jurisdiction based on home state exception finding that the choice of law analysis was inappropriate at the pleadings stage, and refused to dismiss the complaint.

These consumers purchased food products from the defendant Yucatan Foods, a food seller, and brought a putative class action contending that the defendant misbranded its guacamole products by using the term “evaporated cane juice” in violation of California’s Sherman Food, Drug and Cosmetics Law and Unfair Competition Law (“UCL”). The defendant moved to dismiss the complaint contending among other things that the plaintiffs cannot plead federal jurisdiction based on class action status.

The defendant argued that plaintiffs failed to plead a claim invoking federal jurisdiction. The plaintiffs had asserted federal jurisdiction pursuant to CAFA, which vests the district courts with jurisdiction over class actions in which the amount-in-controversy exceeds $5 million so long as there is minimal diversity between the parties. The defendant nevertheless, argued that the home state exception should apply, under which the court shall decline jurisdiction when both the primary defendants and 2/3rds of the proposed plaintiff class members are citizens of the forum state.

The district court remarked that ordinarily, the party seeking to invoke federal diversity jurisdiction must bear the burden of establishing that the court may properly exercise such jurisdiction. However, the home state provision i.e., U.S.C. § 1332(d)(4), is an exception to jurisdiction under CAFA and therefore, not part of the prima facie case establishing minimal diversity jurisdiction.

The district court found that on its face, the plaintiffs’ complaint met the jurisdictional requirements of § 1332(d)(2). First, the defendant was a Delaware Corporation with is headquarters in Los Angeles, California. Second, the plaintiffs asserted claims on behalf of over 100 members of a proposed class of consumers throughout the United States, including class members from states other than Delaware or California. The amount-in-controversy was in excess of $5 million in the aggregate. These assertions were unchallenged by the defendant, therefore, were sufficient to establish a prima facie case of minimal diversity jurisdiction under CAFA.

With this established, the district court remarked that the burden was on the defendant to show the home state exception. The defendant pointed to a California appellate decision in Norwest Mortgage, Inc. v. Superior Court, 72 Cal. App. 214 (1999) reversing the trial court’s certification on a nationwide UCL consumer class on the ground that the UCL was not intended to regulate conduct unconnected to California. The Court, however, noted that in Nat’l Notary Ass’n v. U.S. Notart, No. D038278, 2002 WL 1265555 (Cal. Ct. App. June 7, 2002) which distinguished Norwest on the grounds that the class in Nat’l Notary sought injunctive, not monetary, relief to enforce compliance by the resident defendant for conduct directed from its California headquarters. Irrespective of the holdings in the two cases, the district court remarked that whatever the merits of the defendant’s argument in this case as to the ultimate propriety of a nationwide class, resolution of the question would require detailed choice-of-law analysis not appropriate at the pleadings stage. Accordingly, the district court rejected the defendant’s challenge of the federal jurisdiction based on the CAFA’s home state exception.

Similarly, the district court denied the defendant’s other arguments based on preemption, standing, and for failure to state a claim, and rejected the motion to dismiss. –JR

Amendment after Removal does not divest CAFA Jurisdiction

Posted in Case Summaries

Rivas v Terminix Intl Co., 2013 WL 6443381 (N.D. Cal. Dec. 9, 2013).

In this action, a California federal court reaffirmed the oft-repeated finding that when a class action is properly removed, a subsequent amendment of the complaint to delete class allegations did not divest the district court of its original jurisdiction, and refused to remand the case.

The plaintiff filed this action in the state court asserting six causes action, and each one was brought on behalf of a class, including the Sixth Cause of Action by which the plaintiff alleged a claim under the Private Attorneys General Act. The defendants removed the complaint to the federal court under CAFA. Thereafter, the plaintiff filed a first amended complaint, pleading only one cause of action, the PAGA claim, which was no longer brought on behalf of the class. The plaintiff then moved to remand the case to the state court.

At the very outset, the district court noted that once a putative class action is properly removed, it stays removed. This effectively meant that post filing developments did not defeat the jurisdiction if the jurisdiction was properly invoked as of the time of filing. Here, the district court found that the removal of the initial complaint was proper under CAFA, in light of the defendants’ showing that the parties were minimally diverse, and that the amount-in-controversy exceeded $5 million. Consequently, the district court ruled that the plaintiffs’ subsequent amendment did not divest it of the original jurisdiction.

Accordingly, the district court denied the motion to remand. –JR

Getting Free Stuff in Settlement is Not a Coupon Settlement

Posted in Case Summaries

Seebrook v The Childrens Place Retail Stores Inc, 2013 WL 6326487 (N.D. Cal. Dec. 4, 2013).

In this action, a California federal court found that when class members are receiving vouchers, which entitles them to get free stuff from defendants under a Settlement Agreement, it does not attract the provisions of § 1712, and therefore, are not coupon settlements.

The plaintiffs in this action were purchasers from the defendant’s stores. They sued the defendant alleging that the defendant requested and recorded personal identification information in conjunction with a credit card transaction in violation of the Song-Beverly Credit Card Act of 1971. After the district court approved the settlement, the plaintiffs filed a motion for attorneys’ fees, expenses, and incentive award payments.

The issue before the district court was whether the settlement agreement was a coupon settlement under CAFA. The district court noted that the terms of the settlement provided that class members receive the choice of $10 gift certificate with no minimum purchase required or a 35% off voucher at the defendant’s retail store.

The district court observed that In re HP Inkjet Printer Litigation, 716 F.3d 1173 (9th Cir. 2013), the Ninth Circuit addressed the calculation of attorneys’ fees in the context of coupon settlement under CAFA, and held that if a settlement gives coupon and equitable relief and the district court sets attorneys’ fees based on the value of the entire settlement, and not solely on the basis of injunctive relief, then the district court must use the value of the coupons redeemed when determining the value of the coupons part of the settlement.

The district court observed that CAFA does not define what constitutes a coupon or even for that matter a voucher. However, the distinction between a coupon and a voucher was that a coupon is a discount on merchandise or services offered by the defendant and a voucher provides for free merchandise or services. In this case, the district court found that the 35% discount was indisputably a coupon, however, at issue was whether the $10 merchandise certificate provided in the alternative by the settlement was a coupon.

The district court observed that other courts have found that CAFA does not apply to settlements that offer vouchers for free products. Such cases distinguish vouchers from discounts on products where class members are forced to purchase the products and pay the difference between the full and coupon-discounted price. For example, in Foos v. Ann, Inc., 2013 WL 5352969 (S.D. Cal. 2013), a very similar case to the one at hand, the court found that a $15 certificate and a discount at the defendant’s store did not constitute a coupon settlement because the class members had the opportunity to receive free merchandise, as opposed to merely discounted merchandise.

Accordingly, the district court ruled that, the $10 certificate was not a coupon settlement, and did not trigger the provisions of 28 U.S.C. § 1712.

In the same vein, the district court granted the attorneys’ request for $335,000 in class counsel’s fees, costs and expenses of litigation, finding those reasonable. –JR

A Controversy No Matter How Local, Must Be Established With Evidence

Posted in Case Summaries

Mandragon v Capital One Auto Finance, 2013 WL 6183001 (9th Cir. Nov. 27, 2013).

In this action, the Ninth Circuit refused the plaintiff’s request that the class definition was sufficient to establish a local controversy exception, and that a requirement of evidence showing that the two-thirds of the class members were in fact California citizens, thereby vacating the district court’s order remanding the case.

The plaintiff filed a putative class action against the defendants Capital One Auto Finance and Ron Baker Chevrolet in the San Diego County Superior Court, alleging violations of various provisions of California state law related to automobile finance contract disclosures. Captial One removed the case to the United States District Court for the Southern District of California under CAFA. The plaintiffs filed a motion to remand under the local controversy exception. The plaintiff did not produce any evidence to establish the local controversy exception, but relied on the class definitions that more than two-thirds of the class members were citizens of California.

The plaintiff argued that the class definitions, limiting putative class members to those consumers who purchased and registered cars in California, were sufficient to establish that this action fell within CAFA’s local controversy exception. The district court agreed and remanded. Capital One appealed to the Ninth Circuit. On appeal, the district court’s remand order based on what the Ninth Circuit termed as “guesswork” was reviewed.

At the very outset, the Ninth Circuit observed that in many cases before this, it has held that the burden of proof for establishing the applicability of an exception to CAFA jurisdiction rests on the party seeking remand, which in this case, as in most cases, is the plaintiff. This meant that the plaintiff here must thus establish that greater than two-thirds of the prospective class members were citizens of California as of the date the case became removable. The plaintiff argued that more than two-thirds of the members of the class defined to be limited to persons who purchased vehicles in California for personal use to be registered in the State of California, would necessarily be California citizens, but he did not present any evidence, even after Capital One challenged it.

The Ninth Circuit noted that where the facts are in dispute, the statute requires the district court to make factual findings before granting a motion to remand a matter to state court. The Ninth Circuit remarked that it joined the other three circuits that had considered the issue, in holding that the plaintiff must have some facts in evidence from which the district court may make findings regarding class members’ citizenship for the purposes of CAFA’s local controversy exception.

In re Sprint Nextel Corp., 593 F.3d 669 (7th Cir. 2010), the Seventh Circuit noted that freewheeling discretion amounts to no more than guesswork, and a jurisdictional finding of fact should be based on more than guesswork. (Editors’ Note:  See the CAFA Law Blog analysis of In Re Sprint Nextel posted on March 28, 2010). Similarly, in Preston v. Tenet Healthsystem Mem’l Med. Ctr., Inc., 485 F.3d 793 (5th Cir. 2007); and in Evans v. Walter Indus., Inc., 449 F.3d 1159 (11th Cir. 2006), the Fifth Circuit and the Eleventh Circuit, have concurred with the Seventh Circuit that a jurisdictional finding of fact should be based on more than guesswork. (Editors’ Note: See the CAFA Law Blog analysis of Evans posted on May 25, 2006.)

Applying the rulings here, the Ninth Circuit remarked that merely because a purchaser may have a residential address in California, it does not mean that the person is a citizen of California. The Ninth Circuit remarked that if the plaintiff decides to expend the effort, he would be able to gather and submit evidence to support his contention that more than two-thirds of prospective class members were California citizens.

The Ninth Circuit, however, remarked that the burden of proof placed on a plaintiff should not be exceptionally difficult to bear, and that even under CAFA, the jurisdictional allegations in the complaint can be taken as a sufficient basis, on their own, to resolve questions of jurisdiction where no party challenges the allegations. Nevertheless, as the allegations were disputed in this case, the Ninth Circuit vacated the district court’s remand order and remanded the case to the district court with instructions to allow plaintiff an opportunity to renew his motion to remand and to gather evidence to prove that more than two-thirds of the putative class members were California citizens. –JR

Local Defendants Must be Significant Defendants

Posted in Uncategorized

Lefevre v Connextions Inc., 2013 WL 6241732 (N.D. Tex. Dec. 3, 2013).

In this action, the United States District Court for the Northern District of Texas found that the plaintiffs failed to distinguish between a local defendant, and the other defendants in order to establish by a preponderance of evidence that the local defendant was the one from whom significant relief was being sought. Therefore, the district court refused to remand the case under the local controversy exception.

The plaintiffs filed a suit in Texas state court alleging that the defendants offered them jobs with a promise that they would earn between $17 and $25 per hour, as a combination of hourly wages, sales commissions, and performance bonuses, but in reality they were paid nowhere near that amount. The plaintiffs asserted that they only received hourly wages and were never paid commissions on the sales of two specific drug plans. The defendants removed the case under CAFA, and the plaintiffs moved to remand under CAFA’s local controversy exception.

The plaintiffs asserted that there were two local defendants – Ayaya Staffing Professionals Ltd., and Patrick Kerl. The plaintiffs, however, did not contend that Kerl was a significant defendant within the meaning of CAFA. The district court noted that 28 U.S.C. § 1332(d)(4)(A)(i)(II)(aa) requires that Ayaya be one from whom significant relief was sought by the members of the plaintiff class. Second, subsection (bb) requires that Ayaya be one who alleged conduct formed a significant basis for the claims asserted by the proposed plaintiff class. The plaintiffs maintained that Ayaya was a significant defendant because it satisfied the requirements of subsections (aa) and (bb).

The district court noted that the plaintiffs sought damages equally from Ayaya and the other defendants. The district court also noted that Ayaya was a local defendant, and therefore, subsection (aa) was satisfied. As to the subsection (bb) the district court noted that in Opelousas General Hospital Authority v. Multiplan, Inc., 2013 WL 3245169 (5th Cir. June 28, 2013), the Fifth Circuit held that the plaintiff failed to satisfy subsection (bb) because the complaint contained no information about the conduct of the local defendant relative to the conduct of the other defendants as it related to the claims of the putative class or even the lead plaintiff. (Editor’s Note: See the CAFA Law Blog analysis of Multiplan here).

Unlike Opelousas General Hospital Authority, the plaintiffs’ complaint included allegations to distinguish the conduct of Ayaya from that of the other defendants. For example, the complaint alleged that Ayaya recruited plaintiffs and the class to work for defendant Connextions, Inc., suggesting that Ayaya was a recruiting organization whereas Connextions was the actual employer. The district court noted that these distinctions, however, were insufficient to prove by a preponderance of the evidence that Ayava was a significant defendant under subsection (bb). In fact, the district court remarked that the distinguishing conduct – that Ayava recruited plaintiffs to work for Connextions – cuts against the finding that Ayava was a significant defendant. The allegations suggest instead that Ayava was merely a recruiting agency that did not itself hire or purport to hire any of the plaintiffs.

In addition, the district court noted that the vast majority of the allegations in the amended petition did not distinguish between the conduct of Ayava and the conduct of the other defendants.

Consequently, the district court found that that the plaintiffs failed to carry their burden under subsection (bb) because they did not prove by a preponderance of the evidence that Ayava was a local defendant “whose alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class.” Because plaintiffs did not meet their burden of proof as to all the essential elements of the local controversy exception, the court denied their motion to remand. –JR

CAFA Coupon Settlements Must Be Approved

Posted in Case Summaries

Fouks v Red Wing Hotel, 2013 WL 6169209 (D. Minn. Nov. 21, 2013).

The district court in Minnesota finally approved a coupon settlement in terms stipulated in CAFA, but reduced the award for the class representatives, and deferred the award of attorneys’ fees after the redemption period of voucher was complete.

The plaintiff filed this putative class action for the defendant’s willful failure to properly redact its customers’ debit and credit card numbers from its receipts in violation of the Fair and Accurate Credit Transaction Act’s (“FACTA”) truncation requirement. The parties reached a tentative settlement, which was preliminarily approved by the district court. The plaintiffs then filed a motion for final approval of the class action settlement.

The parties sought final approval of their proposed settlement in which the defendant – St. James Hotel – would provide to the 161 class members who timely submitted claims a voucher for either 40% off a stay at the hotel or 30% off a meal at the hotel’s restaurant. Under the terms of the settlement, the defendant would also make direct cash payments of $4,000 to both the class representatives and a cy pres donation of $20,000 to the Red Wing Environmental Learning Center within 10 days of the court’s final approval.

Because the proposed settlement would provide the class members with vouchers that would require them to a purchase more of the defendant’s goods and services, in order to receive a discount, the district court observed that the provision of CAFA regarding coupon settlements at 28 U.S.C. § 1712 was applicable here. The statute specifies that, where a proposed settlement includes the award of coupons to class members, the court may approve the setlement only upon making a written finding that the settlement was fair, reasonable, and adequate for class members.

After having considered all the relevant factors, the district court in particular noted the difficulty FACTA plaintiffs who sought only statutory damages may encounter in providing the defendant’s willful non-compliance where the case does not settle and proceeds to trial. In addition, the court took notice that no class members had objected to the proposed settlement. Accordingly, the district court remarked that those factors cut in favor of final approval of the settlement, but it was uneasy about the difference in kind and amount between $4,000 cash payments the plaintiffs sought for themselves and the far less valuable coupons that they deemed adequate for the other class members. The district court found that here, the case was not strongly contested, as settlement negotiations began in the earliest stages of the litigation; demanded very little of the plaintiffs individually; did not implicate the public interest, and presented no novel, complex, or controversial issues. Accordingly, the district court reduced the award for class representative and paid $1,000 to one plaintiff and $500 to the other, and modified the settlement.

Similarly, the district court found that the class counsel’s award of attorneys’ fees of $65,000 was unreasonable, firstly because the hours expended were unreasonable for a case of this nature, and secondly, the hourly rate the counsel requested was exorbitant. The district court denied class counsel’s motion without prejudice, and gave them the liberty to refile once the voucher redemption period was concluded.

Accordingly, the district court modified, and finally approved the settlement. –JR

CAFA Does Not Fill the Lacunae Created by Lack of Article III Standing

Posted in Case Summaries

Wallace v Conagra Foods Inc., 2014 WL 1356860 (8th Cir. April 4, 2014).

On an appeal challenging the district court’s order dismissing an action for lack of subject matter jurisdiction due to lack of Article III standing, the Eighth Circuit made the following findings:

  1. CAFA does not abrogate the Article III standing’s injury in fact requirement and replace it with injury in law;
  2. On a case removed from a state court, if a federal court finds that it lacks subject matter jurisdiction, it must remand the case to the state court, and not dismiss it.

This opinion explains that the consumers brought an action in the state court against the defendant, who manufactures Hebrew National meat products (notably hot dogs) using beef slaughtered by AER Services, Inc. (“AER”). The slaughtering of the beef took place in the facilities of another entity, American Foods Group, LLC (“AFG”), which then sold the meat classified as kosher to the defendant and sold any remaining meat to third parties. AER employed the religious slaughterers who perform the “shechitah” (i.e., the ritual slashing of the cow’s throat) along with the other individuals responsible for marking particular meat as kosher. One such individual is supposed to inspect the freshly slaughtered carcass while another examines the lungs for signs of injury. If a lung cannot hold air because, for example, there is a small perforation, the meat should be deemed non-kosher. A third party kosher certification entity named Triangle K, Inc., nominally monitored whether AER, AFG, and the defendant complied with the kosher rules. Triangle K was a for-profit New York company owned and run by Ayreh Ralbag, an orthodox rabbi.

The plaintiffs contended that the defendant promoted these kosher requirements as a reason to purchase Hebrew National products, which cost more than similar non-kosher competitors. As American consumers sought purer foods prepared in accordance with strict safety standards, the kosher food industry expanded by catering to non-religious consumers. Like the consumers bringing this case, an increasing number of Americans chose to pay more for Hebrew National’s supposedly kosher products based on the defendant’s representations that the kosher label was a guarantee of quality and superior taste. The plaintiffs contended that manufacturing quotas–not kosher rules–were the deciding factor as to whether any batch of meat harvested at the AFG slaughterhouses was ultimately designated as kosher or non-kosher. The plaintiffs brought this action alleging that the defendant’s misrepresented that Kosher was the “New Organic”, which led them to pay an unjustified premium for the defendant’s ostensibly kosher beef.

This case began as a state class action filed in Minnesota state court. The defendant removed to federal court in the District of Minnesota, then moved for dismissal pursuant to Federal Rules 12(b)(1) and (6). Although the defendant itself first invoked federal jurisdiction, the defendant submitted that the federal district court lacked subject matter jurisdiction because (1) the consumers’ claims were “barred” by the First Amendment, and (2) the consumers lacked Article III standing. After the District Court granted the defendant’s motion, the consumers appealed.

At the very outset, the Eighth Circuit noted that the plaintiffs did not have an Article III standing because they failed to demonstrate an injury in fact. In other words, the plaintiffs failed to show that any of the particular packages of Hebrew National beef they personally purchased contained non-kosher beef.

The plaintiffs then argued that Congress extended federal jurisdiction to the causes of action as alleged by the plaintiffs meant the they need only show a bare statutory violation–injury in law rather than an injury in fact–to satisfy Article III. The Eighth Circuit remarked that to interpret CAFA as a congressional attempt to extend federal jurisdiction to cases involving no injury in fact would force it to presume–without any basis in the statutory text, and in contradiction to long-settled constitutional precedent–that Congress intended to stretch, if not breach, the constitutional limits on federal jurisdiction. The Eighth Circuit remarked that one cannot assume the people’s elected representatives would so casually disregard the Constitution they have sworn to uphold. To the contrary, recognizing that Congress is predominantly a lawyer’s body, it can be assumed that the elected representatives know the law.

The Eighth Circuit remarked that Congress clearly incorporated Article III’s traditional limits into CAFA. In drafting the Act, Congress was not required to restate existing standing law, nor to specify that Article III limited CAFA’s reach, because Congress legislates against the background of standing. The Eighth Circuit remarked that the Congress passed CAFA to restore the intent of the framers of the United States Constitution by providing for Federal court consideration of interstate cases of national importance under diversity jurisdiction. The Eighth Circuit concluded that this stated purpose was wholly inconsistent with the notion Congress wished to reject Article III’s historic injury in fact requirement.

Accordingly, The Eighth Circuit concluded that CAFA does not purport to extend federal jurisdiction to state claims–if any exist–permitting recovery for bare statutory violations without any evidence the plaintiffs personally suffered a real, non-speculative injury in fact.

The Eighth Circuit nevertheless, disagreed with the District Court’s finding of dismissing the case. The Eighth Circuit explained that when case originally filed in federal court does not belong there because the plaintiffs lack Article III standing, generally the appropriate remedy is to dismiss without prejudice. If, on the other hand, the case did not originate in federal court but was removed there by the defendants, the federal court must remand the case to the state court from whence it came. Further, the Eighth Circuit remarked that if at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case should be remanded.

Because this case began in the First Judicial District Court, Dakota County, Minnesota, the Eighth Circuit concluded that is where this case must return. Accordingly, the Eighth Circuit vacated the District Court’s judgment, reversed the district court’s dismissal with prejudice, and remand to the District Court with instructions to return this case to the Minnesota state court for lack of federal jurisdiction. –JR

Private Attorney Suits not Removable under CAFA

Posted in Case Summaries

National Consumers League v Flowers Bakeries LLC, 2014 WL 1372642 (D.D.C. April 8, 2014).

In an action brought by an organization on behalf of several consumers, the federal court remanded the action finding that a lawsuit brought as a private attorney does not meet the class action definition of CAFA.

The National Consumers League filed suit on behalf of the “general public” in D.C. Superior Court against Flowers Bakeries, LLC, alleging violations of the D.C. Consumer Protection Procedures Act (“DCCPPA”). The defendant removed the action to the federal court on the basis of diversity jurisdiction and under CAFA. The plaintiff moved to remand.

At the very outset, the defendant argued that the motion to remand should be denied on the grounds that it was not timely filed. Under the federal removal statute, a motion to remand on the basis of any defect other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal. However, the plaintiff filed its motion to remand 34 days after the case was removed, which according to defendant, did not raise a defect in the Court’s subject matter jurisdiction, but rather procedural defects in defendant’s Notice of Removal, and therefore should be denied.

However, the plaintiff’s motion to remand argued that based on the facts contained in the Notice of Removal, the defendant failed to establish that the amount-in-controversy exceeded the statutory minimum as a matter of law. The district court rejected the defendant’s timeliness argument because the plaintiff’s motion did not allege procedural defects in the Notice of Removal, but instead it presents a bona fide challenge to this Court’s subject matter jurisdiction.

The district court next noted that a complete diversity of citizenship existed as the plaintiff was a citizen of Washington, D.C., and the defendant a citizen of Georgia. The only contention was over the amount-in-controversy. The plaintiff argued that the defendant did establish that the amount-in-controversy exceeded $75,000.

The defendant identified three independent bases in support of its argument that it cleared the jurisdictional threshold. First, the defendant argued that because more than 300,000 loaves of the subject products were sold to consumers in D.C. and each violation carried with it a minimum statutory penalty of $1,500 per product under the DCCPPA, the total potential damages would easily eclipse $75,000. Second, the defendant argued that because there was at least one retailer who bought over fifty loaves, the amount-in-controversy requirement was met. Third, the defendant relied on the plaintiff’s settlement demand for an amount in excess of $75,000 to satisfy the amount-in-controversy requirement.

The court remarked that it was not persuaded by these arguments; as this type of case was often referred to as a private attorney general suit brought to enforce the rights of the general public. While the D.C. Circuit has yet to address the question of how to calculate the amount-in-controversy for purposes of determining diversity in such suits, this court was guided by the principal that the removal statute should be construed narrowly in favor of remand and that separate and distinct claims should not be aggregated. On these bases, the court concluded that the jurisdictional amount in controversy had not been satisfied.

As to jurisdiction under CAFA, the District Court remarked that this was not the first time that a court within this jurisdiction considered whether a DCCPPA private attorney general action was a “class action” under CAFA. For example, in Breakman v. AOL LLC, 545 F. Supp. 2d 96 (D.D.C. 2008), the court had concluded that because the plaintiff had not attempted to comply with Rule 23 of the D.C. Superior Court Rules of Civil Procedure, and he had not sought class certification, removal was not justified under CAFA’s class action provision. (Editor’s Note: See the CAFA Law Blog discussion of Breakman here). Similarly, in Zuckman v. Monster Beverage Corp., 958 F. Supp. 2d 293 (D.D.C. 2013), the court relied on similar factors when and concluded that because plaintiff brought his case as a representative action under the private attorney general provision of the DCCPPA, he did not refer to his claim as a class action, and did not seek to comply with any of the D.C. Superior Court’s class action rules; and accordingly, his case did not qualify as a class action under the CAFA. (Editor’s Note: See the CAFA Law Blog discussion of Zuckman here).

The defendant attempted to distinguish Breakman and Zuckman based on the fact that those cases were brought by individuals, whereas the present case was brought by a non-profit, public interest organization. The difference, defendant argues, was that under D.C. Code § 28–3905(k)(1)(D), a public interest organization is only permitted to bring a DCCPPA action on behalf of the interests of a consumer or a class of consumers. Because the plaintiff brought this suit on behalf of the General Public, the defendant contended that it must necessarily be bringing the suit on behalf of a class of consumers under CAFA.

The district court disagreed with this analysis for two reasons. First, the plaintiff’s complaint expressly relied on all four private attorney general standing provisions, not just subsection (D).  Second, even if the Court were to construe that the plaintiff’s complaint as one brought solely pursuant to subsection (D), it would not follow that the statute’s use of the term “class” would automatically permit removal under CAFA’s class action provision.

The district court explained that CAFA defines a “class action” as any civil action filed under rule 23 of the Federal Rules of Civil Procedure or similar State statute or rule of judicial procedure authorizing an action to be brought by 1 or more representative persons as a class action. The issue, therefore, would be whether an action under D.C. Code 28–3905(k)(1)(D) constitutes a suit ‘filed under’ a state statute or rule of judicial procedure ‘similar’ to Rule 23 that authorizes a class action. The District Court observed that absent the hallmarks of Rule 23 class actions; namely, adequacy of representation, numerosity, commonality, typicality, or the requirement of class certification, courts have held that private attorney general statutes lack the equivalency to Rule 23 that CAFA demands.

The district court concluded that the same was true of D.C. Code § 28–3905(k)(1)(D). Accordingly, the district court remarked that it saw no reason to depart from the well-reasoned conclusions in Breakman and Zuckman that removal is not permitted under CAFA’s class action provision for actions brought by a private attorney general under D.C. Code § 28–3905(k)(1) where plaintiff has not brought a “class action” under D.C. Superior Court Rule 23. Accordingly, the district court granted the motion for remand. –JR

Law of the Case Doctrine Controls Remand Decisions Too

Posted in Case Summaries

Stafford v Dollar Tree Stores Inc., 2014 WL 1330675 (E.D. Cal. March 27, 2014).

The Eastern District (the transferee court) applied the law-of-the-case doctrine and refused to revisit motion to remand that was denied by the Central District (the transferor) finding that removal was appropriate under CAFA.

The plaintiff brought this wage and hour class action in the state court alleging inter alia failure to provide meal and rest periods; failure to pay minimum, regular and overtime wages. The defendant removed the action under CAFA, and the plaintiffs moved to remand. The defendant removed the case based on the allegations contained in the First Amended Complaint to the U.S. District Court for the Central District of California. After the case was removed to federal court, plaintiff filed a Second Amended Complaint in which he omitted the class action allegations and asserted only PAGA claims.

The District Court in the Central District of California denied plaintiff’s initial motion to remand. The plaintiff renewed his motion to remand after the Ninth Circuit passed Urbino v. Orkin Services of California, Inc., 726 F.3d 1118 (9th Cir. 2013). The Urbino court held that damages from PAGA claims could not be aggregated with damages from individual claims to satisfy the amount-in-controversy for ordinary diversity subject matter jurisdiction. The Ninth Circuit’s decision was issued after the Central District court denied plaintiff’s initial motion to remand. The case was transferred to Eastern District.

The plaintiff argued that the defendant’s aggregation of damages for PAGA claims was improper under the Ninth Circuit’s intervening decision in Urbino. The plaintiff also argued that the defendant’s asserted basis of removal relied on class action claims in a prior complaint that have been superseded by an amended complaint omitting all class allegations. The defendant opposed the plaintiff’s renewed motion to remand arguing the law-of-the-case doctrine prevents this court from reconsidering the decision denying the plaintiff’s initial motion to remand, made by the transferor Central District court.

The law-of-the-case doctrine states that when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case. Here, the plaintiff argued that the district court should revisit the decision of its sister court in light of the Ninth Circuit’s decision in Urbino. In Urbino, the Ninth Circuit concluded that when an employee asserts individual claims and claims under PAGA, the aggrieved employee’s individual interest is different from the state’s collective interest in enforcing its labor laws through PAGA. Therefore, the court held that the PAGA claims cannot be aggregated together with an individual’s claims to meet the amount in controversy requirement for ordinary diversity jurisdiction.

The district court observed that in its order, the Central District court held it had diversity jurisdiction because the amount-in-controversy exceeded $75,000 after aggregating PAGA claims. Thus, this portion of the court’s decision may have been different under Urbino; plaintiff argues this court should revisit that decision under the exception to the law-of-the-case doctrine for an intervening change in controlling authority.

The district court observed that Christianson v. Colt Indus. Operating Corp., 486 U.S. 800 (1988), and Hanna Boys Ctr. v. Miller, 853 F.2d 682 (9th Cir.1988) were two persuasive authorities on the issue of whether the law-of-the case doctrine applies to an alternative basis for upholding subject matter jurisdiction. In Christianson, the Supreme Court stated that the law-of-the-case promotes the finality and efficiency of the judicial process by protecting against the agitation of settled issues. The Supreme Court noted that the doctrine must be applied rigorously to transfer decisions that implicate the transferee’s jurisdiction. Similarly, in Hanna Boys Ctr., the Ninth Circuit held that the law-of-the-case doctrine applies not only to the explicit holding of a sister court, but also to issues decided by necessary implication in a coordinate court’s previous disposition.

Based on Christianson, and Hanna Boys Ctr., the district court concluded that the law-of-the-case applies to alternative holdings, even if the other holding has been vacated on appeal, and found that the alternative holding of the transferor court is binding as the law of the case on this court, as the transferee court.

The plaintiff next argued the transferor court’s prior ruling, denying plaintiff’s initial motion to remand and upholding jurisdiction under CAFA was erroneous or worked a manifest injustice. The First Amended Complaint met the first three requirement was met.  But the plaintiff argued that the court lacked CAFA jurisdiction because his complaint omitted class allegations.

The district court ruled that the transferor court’s decision upholding CAFA jurisdiction was not clearly erroneous because plaintiff’s First Amended Complaint, not his Second Amended Complaint, is the controlling complaint. Here, the defendant timely removed the action to federal court based on the allegations contained in the First Amended Complaint. It was not until seven days later, that plaintiff filed his Second Amended Complaint, which asserted only PAGA claims and omits all class allegations. Therefore, the transferor court’s decision upholding CAFA jurisdiction based on allegations in the First Amended Complaint was not clear error.

Next, the plaintiff contended that amount-in-controversy did not exceed $5 million. The district court remarked that the plaintiff made several claims which took the amount-in-controversy past the jurisdictional threshold. For example, the district court noted that plaintiff’s amount-in-controversy challenge on failure to provide meal periods were unavailing. The district court pointed to its decision in Stevenson v. Dollar Tree Stores, 2011 WL 4928753 (E.D.Cal. Oct.17, 2011), where it held it was reasonable to estimate that fifty percent of meal periods were missed because the plaintiff alleged that members of the class were ‘routinely’ denied meal periods as part of a policy and practice. Here, the plaintiff’s complaint contained similar language, therefore, the transferor court could have reasonably credited defendant’s estimate that, for this claim alone, the amount in controversy is $5,314,825.69.

Similarly, the district court concluded that when the other claims of the plaintiff were aggregated along with the attorney fees and the failure to provide meal and rest breaks, the transferor court made no error in retaining jurisdiction.

Accordingly, the district court denied the plaintiff’s motion to remand as barred by the law-of-the-case doctrine. –JR