Header graphic for print

CAFA Law Blog

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

Join the CAFA Law Blog at ACI’s Residential Mortgage Regulation and Litigation Forum taking place in Dallas on October 22-24

Posted in Events

Join us at ACI’s 25th National Forum on Residential Mortgage Regulatory Enforcement and Litigation, October 22-24 in Dallas, Texas. McGlinchey Stafford is proud to be a supporting sponsor of the conference, and the CAFA Law Blog will serve as this year’s conference media partner.

Continue Reading

Sworn Declaration Itself Serves As Factual Evidence Supporting The Amount-In-Controversy

Posted in Case Summaries

Pattison v. Omnitrition International, Inc. No. 2:17-cv-01454 (W. D. Wa. Jan. 5, 2018).

In this action, while granting the defendants’ motion for reconsideration of the order remanding the matter to state court, a District Court in Washington found that the defendants’ declarant was not required to attach underlying documentation to support her statements, as her sworn declaration itself served as factual evidence supporting the amount-in-controversy.

The plaintiff brought a putative class action in the Superior Court of King County, Washington, alleging that the defendants engaged in an illegal and deceptive practice of manufacturing, promoting, marketing, selling, and distributing over-the-counter, homeopathic, weight-loss products containing or purporting to contain Human Chorionic Gonadotropin (HCG). The plaintiff’s claims were generally based on the labelling, marketing, and sales of the “Omni Drops” product sold by the defendants Roger M. Daley and Barbara Daley’s (collectively, “the Daleys”) company, the defendant Omnitrition International, Inc.

The plaintiff alleged that the FDA had labelled the HCG-based products “an economic fraud” because there was no scientific evidence that they were effective for weight loss. As a consequence, the plaintiff alleged that the defendants reaped substantial profits, and caused the plaintiff to spend money on products that she otherwise would not have purchased.

After the Daleys removed the action to the federal court, the District Court remanded the action to the state court. The Daleys moved for reconsideration of the remand order, which the District Court granted.

The Daleys contended that the District Court had jurisdiction over this action pursuant to CAFA, and the various relief sought by the plaintiff independently met the amount-in-controversy requirement.

The plaintiff argued that the Daleys had provided no evidence whatsoever in establishing the amount-in-controversy. The District Court, however, found that the Daleys offered the sworn declaration of Cindy Jordan, the Vice President of Operations for Omnitrition, who had personal knowledge of the company’s sales.  Ms. Jordan testified that during the class period, Omnitrition’s sales of Omni Drops to customers in Washington exceeded $5,000,000, over $5,000,000 of Omnitrition’s revenue was attributable to its sales of Omni Drops, and removing Omni Drops from the market would cause Omnitrition to lose more than $5,000,000 in expected revenue in the following year.  The District Court thus concluded that Ms. Jordan’s statements, based upon her personal knowledge and Omnitrition’s business records, constituted sufficient factual evidence to establish the required amount-in-controversy by a preponderance of the evidence.

The plaintiff further argued that Ms. Jordan’s statements were “unsupported and speculative,” as in her first declaration, Ms. Jordan stated that Omnitrition’s sales in Washington exceeded $1,000,000 but in her second declaration, she stated that the relevant sales exceeded $5,000,000. The District Court, however, found that Ms. Jordan’s second declaration did not contradict her first as sales exceeding $5,000,000 also exceeded $1,000,000.  The District Court further found that while Ms. Jordan could have attached underlying documentation to support her statements, she was not required to, as her sworn declaration itself served as factual evidence supporting the amount-in-controversy.

The plaintiff also argued that pursuant to 28 U.S.C. § 1332(d)(11)(B)(i) governing mass actions, the Daleys must present evidence that at least one plaintiff’s damages exceeded $75,000. The District Court, however, found that the plaintiff confused a mass action with a class action.  The District Court noted that a class action is any civil action filed under Fed. R. Civ. P. 23 or similar State statute or rule of judicial procedure, whereas a mass action is 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.  The District Court opined that while the plaintiff was correct that at least one plaintiff must seek damages in excess of $75,000 to trigger federal jurisdiction over a mass action, that requirement did not apply to class actions.  The District Court thus ruled that because the plaintiff brought a traditional class action suit and sought certification under Rule 23, the Daleys did not have to show that at least one plaintiff’s damages exceeded $75,000.

The District Court therefore concluded that the Daleys had established the requisite amount-in-controversy, and accordingly granted their motion for reconsideration.

-Melissa M. Grand

A “Resident” Is Not The Same As A “Citizen” For Purposes Of CAFA’s Local Controversy Exception

Posted in Case Summaries

White Knight Diner, LLC v. Arbitration Forums, Inc. No. 4:17-cv-02406 (E.D. Mo. Jan. 12, 2018).

In this action, while denying the plaintiffs’ motion to remand, a District Court in Missouri found that the plaintiffs could meet their burden under the CAFA’s Local Controversy Exception by presenting evidence of citizenship or by defining the class to include only citizens of the relevant state, however, merely alleging residency was not enough.

The plaintiffs brought a putative class action in the Circuit Court of St. Louis County, Missouri, on behalf of various Missouri insureds, for damages incurred as a result of the alleged misconduct of their respective insurance companies, and the insurance companies for unnamed third-party tortfeasors, in connection with an arbitration services company. The plaintiffs named as the defendants Arbitration Forums, Inc., State Farm Mutual Automobile Insurance Company and State Farm Fire and Casualty Company (collectively “State Farm”), Owners Insurance Company, Safeco Insurance Company, Zurich Insurance Company, Acuity Insurance Company, and AAA Insurance Company.

State Farm removed the action to the federal court pursuant to CAFA. The plaintiffs moved to remand, which the District Court denied.

The plaintiffs argued that the District Court must remand the case pursuant to the local controversy exception to CAFA jurisdiction.

The defendants did not dispute that the plaintiffs satisfied the third and fourth requirement under the local controversy exception that the principal injuries occurred in Missouri, and that no other class action with similar facts had been filed within the three years prior to the present action commencing respectively. The defendants, however, disputed that the plaintiffs satisfied the first and the second requirement under the local controversy exception.

The District Court noted that for the first requirement, the plaintiffs must establish by a preponderance of the evidence that more than two-thirds of the plaintiffs’ class members were citizens of Missouri as of the date of the operative complaint. The plaintiffs in their motion to remand, stated that at the very least, well over ninety percent of the putative plaintiff class members would have been residents of the State of Missouri at the time this action was filed.  The District Court, however, found that the plaintiffs’ proposed class definition contained no such Missouri-based limitation, and instead, the class consisted broadly of all persons who suffered a property damage loss caused by a third party; were insured by one of the defendant insurance companies; and whose insurer made a subrogation claim against the third-party or his insurer following payment to the insured for property loss.  The District Court further found that the only connection to Missouri was the location of the alleged subrogation claims between the defendants and the insurers of the alleged tortfeasors.

Additionally, the District Court found that the Eighth Circuit in Hargett v. RevClaims, LLC, 854 F.3d 962 (8th Cir. 2017) held that a “resident” is not the same as a “citizen” for purposes of CAFA’s local controversy exception.  (Editor’s Note: See the CAFA Law Blog analysis of Hargett posted on June 2, 2017).  In Hargett, the Eighth Circuit remanded the case to the district court because the record did not contain sufficient evidence to determine the citizenship of the class members, and whether they triggered the local controversy exception.  The Eighth Circuit instructed that plaintiffs like Hargett could meet their burden by presenting evidence of citizenship or by defining the class to include only citizens of the relevant state, however, merely alleging residency was not enough.  The District Court therefore ruled that the plaintiffs had not met their burden of establishing predominantly local citizenship, which precluded a finding that the local controversy exception applied.

Next, for the second requirement, the District Court noted that at least one defendant “from whom significant relief is sought by members of the plaintiff class” and “whose alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class” is a citizen of the state in which the class action was originally filed.

In support of their contention that AAA, the only local defendant, was a “significant defendant,” the plaintiffs submitted a number of exhibits with their motion to remand, offering matters outside the pleadings. The District Court, however, noted that in determining if a defendant is “significant” under the local controversy exception, the majority of circuits found that the district court should consider only the allegations in the plaintiff’s complaint or petition for damages.  The District Court thus confined itself to the plaintiffs’ pleadings and the allegations contained therein in considering whether AAA was a “significant defendant.”

The plaintiffs’ petition alleged that all defendants engaged in the same negligent or fraudulent conduct and sought the same relief from all defendants. The defendants argued that nothing in the petition distinguished AAA’s conduct from the conduct of the other out-of-state defendants.

The District Court explained that the plaintiffs could have satisfied their burden, for example, by including in their petition the number of Missouri residents AAA insured compared to the other insurance company defendants, and an estimate of the alleged subrogation payments received by AAA in comparison to those made by the non-Missouri defendants. The District Court, however, found that the only AAA specific allegation in the petition was that AAA was “a Missouri insurance company duly authorized and existing in accordance with Missouri Statute and, as such, writes, sells, and processes casualty and liability insurance claims in the State of Missouri.”  The District Court thus opined that it had no means of determining whether AAA’s activity formed a significant basis for the claims asserted.  The District Court therefore ruled that the plaintiffs had not demonstrated that AAA, a local defendant, was a significant defendant, which also precluded a finding that the local controversy exception applied.

The District Court concluded that the plaintiffs had failed to meet their burden of proving that CAFA’s local controversy exception applied in this case, and accordingly, denied their motion to remand.

-Melissa M. Grand

Local-Controversy Test Does Not Require A Showing That The Local Defendant’s Conduct Forms A More Significant Basis For The Claims Asserted Than The Conduct Of The Other Defendants

Posted in Case Summaries

Walsh v. Defenders, Inc, 2018 WL 555690 (D.N.J. Jan. 25, 2018).

On a motion for reconsideration, a District Court in New Jersey reversed an earlier ruling denying a motion to remand based on the “local controversy” exception to CAFA. The Court held that, in order to defeat diversity, the local-controversy test does not require a showing of predominance, i.e., that the local defendant’s conduct forms a more significant basis for the claims asserted than the conduct of the other defendants, but merely a showing that the local defendant’s actions formed a significant basis for the claims asserted.

Based in part on new evidence obtained during class discovery, the Court agreed that plaintiff could now establish that the local defendant’s conduct formed a significant basis of the claims asserted by the putative class. Specifically, the Court noted that 35.3% of the entire class entered into the allegedly unlawful contracts with the local defendant and thus had claims arising directly from the local defendant’s conduct. Although this evidence also showed that 64.7% of the class had claims arising from the foreign defendant’s conduct, the Court acknowledged that plaintiff need not demonstrate that the claims against the local defendant predominated over the other defendants; rather, to invoke the exception, the plaintiff must show that the local defendant’s conduct was a significant – defined as ‘important, notable’ – basis for the claims asserted.

Accordingly, the District Court granted the plaintiff’s motion for reconsideration and remanded the action to the state court.

Sua Sponte Remand By District Court Only Appropriate When Based On A Defect In Subject Matter Jurisdiction

Posted in Case Summaries

Kenny v Wal-Mart Stores, Inc., et al., 2018 WL 650998 (9th Cir. Feb. 1, 2018).

In this action, the United States Court of Appeals for the Ninth Circuit (the “Ninth Circuit”) found that a district court lacks authority to sua sponte remand an action unless there is a defect in subject matter jurisdiction. Additionally, the defendants’ demurrer did not constitute a waiver of their right to removal.

Plaintiff Kris Kenny (“Plaintiff”) brought a putative class action in the Superior Court of California (the “State Court”) challenging Wal-Mart Stores, Inc. and Wal-Mart Associates, Inc.’s (“Defendants”) policy that required employees who had suffered workplace-related injuries to submit to drug and/or urine testing. Continue Reading

Post Filing Change In Citizenship Does Not Satisfy Minimum Diversity Requirement Under CAFA

Posted in Case Summaries

Sanchez v. Ameriflight, LLC, 2018 WL 654170 (9th Cir. Feb. 1, 2018).

Here, the Ninth Circuit found that where parties were not diverse at the onset of the action, a post-filing change in citizenship cannot cure the original defect in diversity jurisdiction.

David Sanchez (“Plaintiff”), a California resident and former Ameriflight, LLC (“Ameriflight”) cargo pilot, brought a putative class action in the Superior Court of the State of California alleging that Ameriflight improperly paid wages in violation of the California Labor Code and the California Business and Professions Code. Ameriflight is an interstate air cargo carrier with operations in more than 10 states, organized under Nevada law, with its headquarters in Texas. However, at the time Plaintiff filed suit, Ameriflight was headquartered in California. Continue Reading

Statistical Assumptions, if Based in Reason, May be Used to Prove That CAFA’s Amount-In-Controversy Requirement Has Been Satisfied

Posted in Case Summaries

Allred v. Kellogg_Company, et al., 2018 WL 332904 (S.D. Cal. Jan. 9, 2018).

A California district court denied the plaintiff’s motion to remand, holding that the statistical assumptions used in the defendant’s amount-in-controversy calculation were permissible under the circumstances. Continue Reading

A Challenge to Defendants’ Calculation of the Amount-in-Controversy Requires More than Mere Criticism of Evidence

Posted in Case Summaries

Carter, et al., v. Westlex Corporation, et al., 2016 WL 1397648 (5th Cir. April 8, 2016).

The Fifth Circuit affirmed the District Court’s order retaining jurisdiction over an action where the defendants established by a preponderance of the evidence that the amount-in-controversy exceeded CAFA’s $5 million jurisdictional threshold.

Continue Reading

30-Day Time Period for Removing Case Pursuant to 1446 Only Begins to Run when Amount-In-Controversy Is Apparent

Posted in Case Summaries

Graiser v. Visionworks of America, Inc., 2016 WL 1359048 (6th Cir. April 6, 2016).

The Sixth Circuit held that the 30-day removal period under CAFA does not begin if the plaintiff does not serve the defendant with an amended complaint, motion, other paper etc. from which a defendant can figure out that the amount-in-controversy exceeds CAFA’s jurisdictional threshold. The Sixth Circuit further held that if a defendant can determine from the documents served by the plaintiff that the amount-in-controversy could exceed $5 million, the defendant is not obligated to do so, unless the document is apparent.

Continue Reading

Unsupported Allegations That Diverse Class Members Exist Are Insufficient To Establish CAFA Jurisdiction

Posted in Case Summaries, Jurisdictional Amount

Calmes v. Boca West Country Club, 2017 WL 4621112 (S.D. Fl. Oct. 16, 2017).

A district court in Florida dismissed the plaintiff’s complaint for lack of subject-matter jurisdiction under the Class Action Fairness Act (CAFA) finding that the plaintiff did not satisfy his burden to establish that there were diverse class members or that the amount in controversy exceeded $5,000,000.

Continue Reading