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

A Plaintiff’s Dual Role as Class Counsel and Lead Plaintiff Did Not Divest a Federal Court of Its Jurisdiction

Posted in Case Summaries

Hoffman v. DSE Healthcare Solutions, LLC, 2014 WL 1155472 (D.N.J. March 21, 2014).

A district court in New Jersey retained federal jurisdiction under CAFA, finding that under the Standard Fire principle, a plaintiff’s dual role as the class counsel and the lead plaintiff did not divest a federal court of its jurisdiction.

The plaintiff filed a consumer fraud class action against the defendant DSE Healthcare Solutions, LLC in the Superior Court of New Jersey, alleging that the defendant made false claims of product efficacy about Lipo–Flavonoid Plus, a dietary supplement.  The plaintiff was a New Jersey citizen and sought treble damages, interest, fees, costs, attorneys’ fees and civil penalties for the defendant’s alleged violation of the New Jersey Consumer Fraud Act (“NJCFA”).  The complaint expressly limited the overall amount-in-controversy to less than $5 million.  The defendant removed the lawsuit under CAFA.  The plaintiffs filed a motion to remand.

The plaintiff argued that his dual role as both the class counsel and the class representative prohibited class certification in federal court, resulting in the inability of the class to recover the minimum CAFA jurisdictional requirement.  To support his argument, the plaintiff cited precedent where such dual status was held to create a conflict of interest.

The defendant responded that the plaintiff could not unilaterally divest the District Court of the CAFA jurisdiction by asserting this dual role.  The defendant pointed to the unanimous Supreme Court decision in Standard Fire Ins. Co. v. Knowles, 133 S.Ct. 1345 (2013).  In Standard Fire, the Supreme Court interpreted CAFA to hold that a named plaintiff cannot unilaterally circumvent CAFA by his own non-binding actions.  Specifically, the Supreme Court rejected a plaintiff’s attempt to evade the scope of CAFA jurisdiction by stipulating that the class he sought to represent would not seek damages that exceed the $5 million jurisdictional threshold.  (Editors’ Note: see CAFA law blog analysis of Standard Fire posted on April 12, 2013).

 The District Court agreed with the defendant that, just as a class representative could not bind a class with a stipulation to limit the class’ damages in order to avoid federal jurisdiction in Standard Fire, a class representative cannot bind the class by unilaterally deciding to select himself as counsel.

Next, the District Court remarked that the primary issue was whether the defendant could show “to a legal certainty” that the individual claims of all proposed class members aggregate to more than $5 million.  The plaintiff proposed a class that comprised all U.S. purchasers of Lipo–Flavonoid Plus for the four year period.  The defendant submitted a certification from William D. Everett, Jr., the Vice President of Finance of DSE, that in the four-year period covered by the complaint DSE’s total nationwide sales of Lipo–Flavonoid Plus were over $9 million.  The District Court remarked that this evidence, coupled with the plaintiff’s demand for treble damages, was sufficient to prove “to a legal certainty” that the claims of the proposed class exceed $5 million in the aggregate.

Accordingly, the District Court denied the plaintiff’s motion to remand.