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CAFA Law Blog

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

Expedited Discovery Denied for Local Controversy Exception

Posted in Case Summaries

Catron v. Colt Energy, Inc., 2013 WL 6016231 (D. Kan. Nov. 13, 2013).

In an action alleging violation of Kansas law prohibiting restraint of trade, the District Court denied the plaintiff’s motion to remand (without prejudice) finding that he failed to establish that he and his class would qualify for a local controversy exception and denied his request for expedited discovery finding that the information he sought was not readily available.

The plaintiff filed this action in the District Court of Wilson County Kansas claiming that the defendants Colt Energy, Inc.; Layne Energy Resources, Inc.; Layne Energy Operating, LLC; and PostRock Midcontinent Production, LLC, successor by merger to Quest Cherokee, LLC, violated law prohibiting restraint of trade in leasing minerals in Southeast Kansas.  Specifically, the plaintiff claimed that the defendants allocated markets instead of competing.  The defendants removed the action under CAFA.

The plaintiff filed a motion to remand based on the local controversy exception arguing that it was more likely than not that more than two-thirds of the putative class members were Kansas citizens.  However, in order to properly support his motion to remand, plaintiff asked the District Court for expedited jurisdictional discovery.

The plaintiff specifically requested the defendants to produce two categories of documents: (1) the names and addresses of all royalty owners with leases for gas wells; and (2) all written agreements between the defendants touching upon leases in Southeast Kansas, including the Area of Mutual Interest agreement.  The defendants responded that the plaintiff’s request was unnecessary because according to them, those requests would not result in information that would help the Court to decide Plaintiff’s motion to remand.  The defendants also claimed that the information would take some time for them to compile and object to providing personal information of putative class members before certification of any class.

In analyzing the plaintiff’s request, the District Court noted that it was undisputed that it had jurisdiction over the case under CAFA, but the only question here was whether the court is required to decline to exercise that jurisdiction pursuant to the local controversy exception.  Under the circumstances, the District Court remarked that it did not appear that the information that the plaintiff sought might be readily available.  Additionally, the District Court did not find that the plaintiff’s initial evidence of the applicability of the local controversy exception to be as strong as the plaintiff contended. 

Accordingly, the District Court denied the plaintiff’s motion to remand, without prejudice, for refiling if information is obtained in discovery indicating that the local controversy applied.

It appears that the plaintiff attempted to use the remand related expedited discovery request to push their response to the defendants’ motion to dismiss.  The Court determined that it had jurisdiction pursuant to CAFA and did not allow discovery in advance of the plaintiff’s response to the motion to dismiss.  – JR

Jurisdiction to Address Jurisdiction – Supreme Court Questions Its Jurisdiction to Hear Case About CAFA Jurisdiction

Posted in Case Summaries

Much like avid followers of this blog, the U.S. Supreme Court, of late, has started to take an interest in CAFA litigation, having issued decisions in CAFA cases in the past two terms. Mississippi ex rel. Hood v. AU Optronics Corp., 134 S. Ct. 736 (2014); Standard Fire Ins. Co. v. Knowles, 133 S. Ct. 1345 (2013).  For the third year in a row, the Court has another CAFA case on its docket, Dart Cherokee Basin Operating Co., LLC v. Owens, which was argued on October 6, 2014.

Dart Cherokee concerns whether a defendant removing a case to federal court under CAFA need simply plead the $5 million amount in controversy or instead submit evidence of the jurisdictional amount in its removal notice.  The defendants argued that the CAFA removal rules set forth a pleading requirement akin to Rule 8’s notice pleading requirement for original complaints.  Defendants claimed that only when the amount in controversy is challenged by the plaintiff or by the district court does the defendant need to submit evidence to prove that the amount at issue exceeds $5 million.  Along these lines, the briefs submitted by the parties at the certiorari stage and at the merits stage focused on this issue.    

An amicus brief filed by Public Citizen, Inc., however, added a very interesting wrinkle.  Public Citizen argued that the Supreme Court did not have jurisdiction to review the merits issue, because the Court’s jurisdiction is generally limited to cases “in the courts of appeal.”  According to Public Citizen, this case was never in the court of appeal, because the Tenth Circuit had declined to exercise its discretion to accept the Defendants’ petition to appeal the district court’s remand ruling.  In denying the petition to appeal, the Tenth Circuit panel did not give any reasons for its denial.  Likewise, a divided en banc panel declined to grant an en banc petition, again without any reasons.   Public Citizen thus contended that the only thing that the Supreme Court could review was whether the Tenth Circuit abused its discretion in denying the petition to appeal.  Because the Tenth Circuit did not give any reasons for its denial, Public Citizen claimed that the Court should dismiss the case as improvidently granted.

In light of Public Citizen’s amicus brief, the October 6th oral argument before the Court largely concerned whether the Court has the power to review the remand ruling at issue, even though several members of the Court appeared to agree with the defendants’ position on the merits.  Justice Kagan went so far as to comment that she thought most of the court agreed with the defendants’ merits arguments, but was unsure how the Court could reach that issue.  For now, CAFA followers will have to wait and see whether the Court does reach the merits of the issue or instead dismisses the appeal as improvidently granted.

Standard Fire Versus Lowdermilk – The Debate Continues!

Posted in Uncategorized

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

Posted in Uncategorized

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

Posted in Uncategorized

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

Posted in Uncategorized

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.