Morgan v. American International Group, Inc., No. C-05-2798 MMC; 20056 WL 2172001 (N.D. Cal. Sept. 8, 2005).
While the remand order in this case may come as no surprise, this decision by California U. S. District Judge Maxine M. Chesney does offer some useful insights for defense counsel. The plaintiffs, Adolphus Morgan and William Hall, sued a host of lenders in state court in 2004, making a wide variety of predatory lending claims, including flipping and packing and unfair and misleading tactics allegations. The defendants removed the action later that year on federal question and diversity grounds, but the case was remanded. The plaintiffs then filed a “Consolidated Amended Complaint” on June 17, 2005, almost four months after the February 18, 2005 adoption of the Class Action Fairness Act of 2005, naming one new defendant and two new plaintiffs, and on July 8th, the defendants again removed, claiming federal jurisdiction under CAFA. Judge Chesney, in deciding the plaintiffs’ motion to remand, considered whether the addition of the new defendant “related back” to the original complaint, or instead, began a new action, and ultimately sided with the plaintiffs.
The opinion flatly states: “For purposes of removal, state law determines when a party ‘commences’ an action,” and that state law also governs “whether an amendment of a pleading relates back to the date of the original pleading.” Under California law, Judge Chesney said, adding a new defendant typically does not relate back and instead, creates a new action; however, unfortunately for the lender defendants in this case, the Court decided that the amended complaint instead “corrects a `misnomer,'” and thus, relates back to the original complaint, and so the amended complaint did not ” ‘substantively change’ the nature of the action.”
Judge Chesney tracked Knudsen v. Liberty Mutual Insurance Co., 411 F.3d 805, 806 (7th Cir. 2005), when identifying what amendments would trigger CAFA — “The Seventh Circuit aptly summarized the distinction between an amendment that ‘counts’ under CAFA and one that doesn’t when it observed: ‘[A] new development in a pending suit no more commenced a new suit [under CAFA] then does its removal.’ ”