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CAFA Law Blog

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

District Court of New Jersey Declines CAFA Jurisdiction In A Matter That Is “Uniquely Local” Pursuant To CAFA’s “Interests of Justice” Exception

Posted in Case Summaries

Roberts v. Tribeca Automotive, Inc., 2019 WL 522127 (D.N.J. February 11, 2019)

In this action, the District Court of New Jersey adopted a magistrate’s recommendation which granted the plaintiff’s motion to remand the case back to state court.  The plaintiff brought a class action in a state court of New Jersey seeking to recover wages for a class of employees of defendant (which was an interstate trucking company) who were allegedly misclassified as independent contractors.  The defendant removed the action asserting that the District Court had jurisdiction pursuant to the Class Action Fairness Act (“CAFA”).  The plaintiff thereafter filed a motion to remand.  The magistrate judge recommended remand, concluding that the defendant had failed to prove that the plaintiff could recover the requisite amount in controversy for CAFA jurisdiction (five million dollars).  In addition, the magistrate judge recommended remand pursuant to CAFA’s discretionary home state exception.  The defendant thereafter filed objections to the magistrate judge’s recommendations.

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Unintended Consequences: Careful How You Amend

Posted in Case Summaries

Scott v. Cricket Communications, LLC, 15-03330-GLR (D. Md. March 30, 2018)

Reiterating that a court will not protect a party from the adverse consequences of its own voluntary acts, a District Court in Maryland denied a second motion to remand where an amended complaint cured defects it had previously identified.

Plaintiff brought a putative class action in state court on behalf of himself and a class of Maryland citizens alleging that Defendant sold him and the class phones it knew were obsolete at the time of the sale. Defendant removed the case, but an initial motion to remand was granted on the basis that it had not proven the necessary amount in controversy. Cricket had sought to establish the amount by submitting evidence as to phones sold to Maryland customers, but because it had not actually established the citizenship of those customers, the District Court held that it had not met its burden. On appeal, the Fourth Circuit remanded the matter for the District Court to make a finding of fact as to the citizenship of the Maryland class, and thus as to the amount in controversy. Continue Reading

A Private Entity May Be Treated As a State Actor Under Section 1332(d)(5) When Intertwined With State Actors Such That the Actions of One Can Be Imputed On Others

Posted in Uncategorized

Kendrick v. Xerox State and Local Solutions, Inc., et al., 18-cv-00213 (N.D. Cal. 2018).

In granting plaintiffs’ motion to remand, a district court in California found that an action may be deemed a state action under section 1332(d)(5) if there is such a close nexus between the State and the challenged action that private behavior may be fairly treated as actions of the State.

Plaintiffs brought a putative class action asserting state law claims against defendants Bay Area Toll Authority (“BATA”), Golden Gate Bridge Highway and Transportation District (“GGB”), and Conduent State and Local Solutions, Inc. f/k/a Xerox State & Local Solutions (“Conduent”). At issue was the collection of toll on the Golden Gate Bridge and other Bay Area bridges, and the alleged disclosure of consumers’ personally identifiable information.

Conduent removed the action to federal court pursuant to CAFA, contending an amount in controversy in excess of $5 million. Plaintiffs moved for remand. Among other theories, plaintiffs argued that removal was precluded under 28 U.S.C. § 1332(d)(5) because the primary defendants were state actors. While there was no dispute that BATA and GGB were government agencies, plaintiffs argued that Conduent – a private corporation – acted under color of state law when it participated in assessing, collecting, and adjudicating tolls and penalties, thereby meeting the state action requirement. In support of this argument, plaintiffs alleged that Conduent physically operated within the facilities of the other defendants, wielded the authority of the other defendants to report toll violations and to administer toll proceedings, and was compensated based on each notice of violation it sent. The complaint further alleged that Conduent was a “processing agency” within the meaning of California Vehicle Code 40250 and had accordingly been delegated a public function by BATA and GGB. In essence, plaintiffs alleged that Conduent, BATA, and GGB were inextricably intertwined such that the actions of one entity could be imputed to the others.

The District Court found that as the assessment of tolls on state-owned bridges arguably exercised the coercive power of the state, plaintiffs had alleged state action on the face of the complaint. Apart from merely asserting that Conduent was a private corporation and that government contractors were not necessarily state actors, the Court found that the defendants failed to address the issue of state action with the requisite depth. Accordingly, the District Court found section 1332(d)(5)’s jurisdictional requirements lacking, and granted plaintiffs’ motion to remand.

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

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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.

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Burden Of Proof Of A Party Invoking The Local Controversy Exception Is By A “Preponderance” – Or More Than 50% – Of The Evidence

Posted in Case Summaries

McAllister v. The St. Louis Rams, LLCNo. 4:16-cv-00172 (E.D. Mo. Feb. 12, 2018).

In this action, while remanding a case to state court, a district court in Missouri found that the plaintiffs’ burden of proof, as the party invoking the local controversy exception, is by a “preponderance” or more than 50% of the evidence.

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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.

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Generic Demand For Damages Does Not Justify Local Controversy Exception to CAFA

Posted in Case Summaries

Robertson v. Sun Life Financial, 2:17-cv-02148-SSV-JVM (E.D. La. Jan. 22, 2018)

In this action, a Louisiana District Court denied a motion to remand, finding that the Plaintiff’s generic demand for damages from a “local” defendant was insufficient to justify remanding the case pursuant to CAFA’s Local Controversy exception. Continue Reading

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.

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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