Stein v. American Express Travel Related Servs., No. 11–1384 (GK), 2011 WL 4430855 (D.D.C. Sept. 23, 2011).

In this case, a District Court in District of Columbia, relying on Breakman v. AOL, L.L.C., 545 F.Supp.2d 96 (D.D.C.2008), held that CAFA does not establish an alternative basis for federal jurisdiction because the representative action under the D.C. Consumer Protection Procedures Act is authorized by D.C. statute and is a separate and distinct procedural vehicle from a class action.

The plaintiffs filed a complaint in the state court as private attorney generals alleging violations by various American Express corporate defendants of the D.C. Consumer Protection Procedures Act, D.C. Code 28–3901 (the “DCCPA”). 

The defendants removed the lawsuit to the federal district court, and the plaintiffs challenged that removal and moved for a remand back to the Superior Court of the District of Columbia. 

The District Court granted the plaintiffs’ motion to remand.

At the outset, the Court noted that under the federal system, “federal courts are courts of limited jurisdiction;” indeed, the law presumes that “a cause lies outside of the court’s limited jurisdiction.” Because of the limited jurisdiction of federal courts, any doubts as to whether such federal jurisdiction exists in any given case must be resolved in favor of remand. Further, the presence or absence of federal question jurisdiction is governed by the well pleaded complaint rule, which provides that federal jurisdiction exists only when a federal question is presented on the face of the plaintiff’s properly pleaded complaint.

First, the defendants argued that a “federal question” had stemmed from the complaint’s references to the Fourth Amendment; thus, the Court had federal question jurisdiction under 28 U.S.C. § 1331. 

The Court noted that each and every one of the plaintiffs’ seven counts against the defendants alleged various violations of only one state statute—the DCCPA, and no federal statute was relied on anywhere in the complaint. 

The Court observed that the plaintiffs had not pled any violation of the Fourth Amendment; nor did they seek any relief under the Fourth Amendment. Rather, they alleged deceptive trade practices by American Express, namely, outsourcing the handling of card members’ private data to foreign countries, which, in practice, affected the constitutional rights of those members, without giving them any notice or disclosure of the ramifications of that practice. The central issue in the plaintiffs’ complaint was whether the actions they alleged constituted a violation of the DCCPA—not whether they constituted a violation of the Fourth Amendment. The Court pointed that federal question jurisdiction does not exist simply because principles of federal law may be considered when determining if and whether defendants violated the DCCPA. Consequently, the Court concluded that it did not have jurisdiction under § 1331. 

Second, the defendants argued that the Court had federal jurisdiction under CAFA because the plaintiffs were essentially pursuing a “class action.” 

The Court noted that under CAFA, a defendant may remove a class action to federal district court so long as the complaint satisfies the statute’s special requirements, and that the action to be removed is a “class action” as defined in 28 U.S.C. § 1332(d)(1)(B) and § 1453(a). CAFA also provides that a “mass action” that meets certain requirements is determined to be a removable class action, but “the term ‘mass action’ shall not include any civil action in which … all of the claims in the action are asserted on behalf of the general public,” 28 U.S.C. § 1332(11)(B)(ii)(III). 

The Court relied on a leading case Breakman v. AOL, L.L.C., 545 F.Supp.2d 96, 101 (D.D.C.2008), on this subject, which held that CAFA does not establish an alternative basis for federal jurisdiction because “this representative action is authorized by District of Columbia statute and is a separate and distinct procedural vehicle from a class action.” (Editors’ Note: See the CAFA Law Blog analysis of Breakman posted on September 10, 2008.) 

The defendants, however, argued that Breakman was wrongly decided and should not be followed, that Breakman was distinguishable, and that Judge Bates, who wrote Breakman, appeared to confuse CAFA’s terms “mass action” and “class action.”

Disagreeing with the defendants, the Court observed that Breakman has been widely followed by the courts in that district. Second, the Court stated that while the facts in Breakman might have been slightly different from the facts in this case, the plaintiff in Breakman brought his complaint under the DCCPA, just as the plaintiffs in this case, and brought his complaint as a representative private attorney general, just as plaintiffs have done in this case. Thus, the Court concluded that in all relevant aspects, the analysis in Breakman was fully applicable to a proper analysis in this case. Finally, the Court was not persuaded that Judge Bates ‘appeared to have confused’ CAFA’s two different terms. 

Accordingly, the Court remanded the action to state court.