Jones v. Sears Roebuck and Co., Slip Copy, 2008 WL 4844717 (4th Cir.(W.Va.) Nov 10, 2008) (Not selected for publication in the Federal Reporter)

When you think of Sears, perhaps you think of a store that…carries a softer side. Or perhaps Ty Pennington screaming into his giant megaphone “REMOVE THAT CASE UNDER CAFA!!” (or something like that) comes to mind. Well in this case, Sears asserted anything but a softer side, arguing that CAFA jurisdiction must exist under an amended complaint asserting new causes of action, and not the original complaint – filed before Congress enacted CAFA. Apparently, Sears used Ty Pennington’s megaphone, because the Fourth Circuit heard its argument loud and clear.

In 2003, the plaintiffs filed a state class action lawsuit against Sears Roebuck and Co. alleging three counts relating to Sears credit cards: Unconscionability, statutory damages for violations of the West Virginia Consumer Credit Protection Act, and equitable relief under the West Virginia Consumer Credit Protection Act. Sears filed a Motion to Dismiss, alleging that there existed no case or controversy, which the court granted. Jones v. Sears, Roebuck & Co., No. 03-C-1011-B, Slip Op. at 6 (W. Va. Cir. Ct. Dec. 15, 2005) (the “2003 Case”).

Subsequently in 2006, the plaintiffs filed an “amended class action complaint” against Sears, adding Sears Holding Corp. and Citibank as defendants (the “2006 Case”). This time, the complaint contained the original three counts articulated in the 2003 Case, but also asserted: (1) violations of the Federal Trade Commission consent decree, and (2) all the above claims on behalf of a subclass limited to West Virginia residents with Sears credit cards. Because the 2006 Case asserted damages of $350 Million and diversity jurisdiction existed, Sears removed the case to federal court under CAFA.

On their appeal to the Fourth Circuit, the plaintiffs argued that the District Court never had jurisdiction under CAFA, and therefore lacked jurisdiction to grant a motion to dismiss. The plaintiffs asserted that the 2006 Case “related back” to the 2003 Case, which was filed before CAFA was enacted. (CAFA was enacted February 18, 2005. See Pub. L. No. 109-2, § 9, 119 Stat. 14 (2005)).

The Fourth Circuit looked to state law to determine whether an amended complaint commences a new action. The standard used in West Virginia (and many other states) is that an amended complaint relates back when it “ar[ises] out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading.” W. Va. R. Civ. P. 15(c)(2). 

The Fourth Circuit determined that the two new counts contained in the 2006 Case presented new claims premised on conduct and occurrences readily distinct from the allegations contained within the 2003 Case, and the 2006 Case did not relate back. As such, the Fourth Circuit held jurisdiction under CAFA was proper, and thus affirmed the lower court’s dismissal.