Westerfeld v. Independent Processing, LLC, No. 4:09CV1674 RWS, 2010 WL 2540725 (E.D. Mo. June 17, 2010).
A District Court in Missouri remanded the action to state court holding that under CAFA’s local controversy exception, only one plaintiff class–rather than an aggregate of all the classes in a lawsuit–must meet the conditions set out to compel remand.
The plaintiff, a Missouri citizen who entered into an agreement with one of the defendants to finance the purchase of a home in Missouri, filed a class action in state court against the defendants, Independent Processing, LLC—a Missouri Corporation which processes paperwork associated with home loans and Provident Funding Associates, LP—a California corporation which is a home loan provider.
The complaint asserted state law claims of unauthorized practice of law and violation of Missouri’s Merchandising Practices Act against each defendant in two separate plaintiff classes based on the broker processing fees and the administration fees improperly charged in association with the purchase and financing of real property. Two separate class actions were filed because the potential class members in each class were not identical. Independent had customers that did not obtain a loan from Provident and Provident provided loans to borrowers who did not use Independent to process the paperwork. Some transactions overlapped with common customers but each defendant had customers that did not enter transactions with the other defendant. Based on the overlapping of some of the transactions a single lawsuit was filed with two distinct plaintiff classes.
Provident removed the case to the federal court under CAFA, whereas, the plaintiff moved to remand under the local controversy exception to CAFA, 28 U.S.C. §1332(d)(4)(A)(i).
The Court remarked that although CAFA provides the federal courts jurisdiction over state law class actions under certain circumstances, CAFA does not confer a right to defendants to be in federal court. The stated purpose of CAFA relates to the benefits of the plaintiffs and society-at-large, and not the defendants. The Court maintained that a case removed under CAFA must be remanded if all of the requirements under §1332(d)(4) are met.
The Court first found that the condition of §1332(d)(4)(A)(i)(I) was met because two-thirds of the members of all the proposed classes were citizens of Missouri because the vast majority of the home loans at issue were transacted by Missouri citizens to purchase primary residences.
Second, Provident argued that the requirements of §1332(d)(4)(A)(i)(III) were not met because the “related conduct” language in this section included mortgages it made outside Missouri.
The Court disagreed because the plaintiff had limited the classes to the conduct of defendants involving Missouri mortgages only.
Finally, the Court found that conditions of §1332(d)(4)(A)(i)(II) were satisfied because the plaintiff filed the claims against Independent as an individual class. Independent was a citizen of Missouri, its conduct formed a significant basis for the class action claims, and significant relief was sought against Independent by the plaintiff class. Further, a plain reading of §1332(d)(4)(A)(i)(II) required that only one plaintiff class–rather than an aggregate of all the classes in a lawsuit–must meet the conditions set out to compel remand.
Provident, however, argued that the case should be viewed not as two separate class actions but as one controversy in which Independent was a minor player and the true conduct challenged and relief sought was against Provident, who was not a citizen of Missouri.
The Court remarked that Provident’s position was not supported by the plain language of the statute, wherein §1332(d)(4)(A)(i)(I) states that “all proposed plaintiff classes in the aggregate” should be considered, §1332(d)(4)(A)(i)(II) is limited to the singular “plaintiff class.” The Court maintained that such a distinction must be recognized, and even if this distinction was not as clear as it is, any doubt into its meaning must be resolved in favor of remand.