Hubbard v. Electronic Arts, Inc., No. 2:09-CV-233 and 2:09-CV-234, 2011 WL 2792048 (E.D. Tenn. July 18, 2011).
Just like in FIFA Soccer, the plaintiff drew a red card on his attempt to avoid federal court. A District Court in Tennessee held that a plaintiff is not the so-called master of his complaint if he specifically drafts it to avoid CAFA by “splintering” identical lawsuits by time. Thus, drafting a complaint this way divests him of the benefit of choosing his forum by disclaiming damages over the jurisdictional threshold
The plaintiff brought two separate class actions — Hubbard I and Hubbard II, against Electronic Arts, Inc. (“EA”), alleging, inter alia, violations of the Tennessee Trade Practices Act.
Hubbard I is an antitrust case, which alleged that through unlawful and anti-competitive agreements with the co-conspirators, National Football League, the NFL Players Union, Arena Football League and the National Collegiate Athletic Association (“NCAA”), EA had a Need for Speed and driven its competition out of the market for interactive football software and had prevented additional competitors from entering the market, and, as a direct result of these anticompetitive agreements, the price of interactive football software had soared.
Six days later, the plaintiff brought Hubbard II,, where a current student-athlete at East Tennessee State University, sued EA, individually and on behalf of current student-athletes in Tennessee who competed for NCAA member colleges or universities on those schools’ (1) ‘Division I’ men’s basketball teams; and (2) ‘Football Bowl Subdivision’ men’s football teams, whose names, likenesses, images or identities have been utilized, licensed, or sold in interactive videogames and related software products by EA.
After five days of filing Hubbard II, the plaintiff’s counsel filed a related case, Nuckles, et al. v. National Collegiate Athletic Association, on behalf of former students-athletes, which is similar to Hubbard II.
In Hubbard I and II, the plaintiff carefully worded the complaints in an attempt to avoid alleging any federal cause of action and to avoid the amount in controversy requirements of diversity jurisdiction. The plaintiff limited the individual claims to less than $74,999 and aggregate class-wide claims to less than $4,999,999, and specifically disclaimed compensatory damages, punitive damages, disgorgement, declaratory, injunctive, equitable or other relief greater than the amount specified.
Like a fullback in Madden NFL, EA removed the Hubbard I, Hubbard II, and Nuckles actions under CAFA. Like a solider in Medal of Honor, the plaintiff moved to remand the actions back to state court, which the District Court denied.
In Hubbard I, although the plaintiff limited the amount in controversy below jurisdictional threshold, with the consent of the plaintiff, EA supplemented the record regarding the number of videogames sold in Tennessee. That record showed that during the class period, EA had sold at least 681,497 copies of Madden NFL and 258,177 copies of NCAA Football to Tennessee retailers for a total of at least 939,674 copies. The complaint alleged that EA charged $29.95 for its flagship product Madden NFL, and after the exclusive agreements entered into by the defendant and alleged co-conspirators and after the effective withdrawal of its only competitor, EA increased the price of the product to $49.99. In addition, the complaint stated that EA currently sold interactive football software for up to $59.95. Thus, the overcharge was between $20 to $30. Further, these numbers did not include prior editions of Madden NFL or NCAA Football, and they did not include sales figures for games sold in 2005, 2006, 2007 and 2008. Additionally, they did not include those sold from one of EA’s major partners. Considering all of these factors, the Court concluded that the aggregate class claims exceeded $5 million.
Next, in Hubbard II, the Courtconsidered whetherHubbard II’s amount in controversy of $4,999,999 could be aggregated with the amount in controversy of $4,999,999 in Nuckles to cross CAFA’s $5 million threshold into Dead Space.
The plaintiff argued that because Nuckles was voluntarily dismissed after removal, the issue was moot. The Court disagreed, and found that jurisdiction is determined at the time of removal, and subsequent events, whether beyond the plaintiff’s control or the result of his volition, do not oust the district court’s jurisdiction once it has attached. Accordingly, the Court concluded that Nuckles’ dismissal might not act as grounds to oust the Court of jurisdiction.
To decide the issue, the Court reconciled two Sixth Circuit cases, Smith v. Nationwide Property and Casualty Insurance Company, 505 F.3d 401 (6th Cir. 2007), and Freeman v. Blue Ridge Paper Products, Inc., 551 F.3d 405 (6th Cir. 2009). In Smith, the Sixth Circuit stated, “A disclaimer in a complaint regarding the amount of recoverable damages does not preclude a defendant from removing the matter to federal court upon a demonstration that damages are ‘more likely than not’ to ‘meet the amount in controversy requirement,’ but it can be sufficient absent adequate proof from defendant that potential damages actually exceed the jurisdictional threshold.” (Editors’ Note: See the CAFA Law Blog analysis of the decision in Smith posted on July 11, 2008).
In Freeman, the plaintiffs filed five separate suits for alleged nuisance covering successive six-month time frames. The Sixth Circuit held that all the five suits must be aggregated because there was no “colorable basis” for dividing up the sought-for retrospective relief into separate time periods, other than to frustrate CAFA. CAFA was designed to prevent such artificial structuring to avoid federal jurisdiction. Generally, if a plaintiff does not desire to try his case in the federal court he may resort to the expedient of suing for less than the jurisdictional amount, and though he would be justly entitled to more, the defendant cannot remove. But when recovery is expanded, rather than limited, by virtue of splintering of lawsuits for no colorable reason, the total of such identical splintered lawsuits may be aggregated. (Editors’ Note: See the CAFA Law Blog analysis of Freeman posted on February 17, 2009).
The Court noted that the Freeman Court treated the amount in controversy as one for a specific amount and not an indeterminate amount although the complaints never asked for a specific amount. Thus, it multiplied the top amount disclaimed by the five suits to reach an aggregate amount in controversy of $24.5 million. The complaints in the Hubbard II and Nuckles used similar language, and they stated that the actual amount of damages would be proved at trial. Nonetheless, the Court followed what the Sixth Circuit did in Freeman and treated the $4,999,999 disclaimer amount in Hubbard II and Nuckles as specific amounts.
The Court stated that under Smith and Freeman, a plaintiff is not the so-called master of his complaint if he specifically drafts it to avoid CAFA by “splintering” identical lawsuits by time. Thus, drafting a complaint this way divests him of the benefit of choosing his forum by disclaiming damages over the jurisdictional threshold.
The Court remarked that in Hubbard II and Nuckles, the plaintiff’s counsel had perhaps learned from his mistake in Freeman and had not admitted (as admitted in Freeman)that the only reason for structuring the suits was to avoid federal jurisdiction. Although he did break the suits up according to time, i.e., current student-athletes and former student-athletes, he also sued different defendants. Nevertheless, he alleged in both suits that the same entities were members of essentially the same conspiracy, and alleged the same counts. The plaintiff’s counsel also argued that Hubbard II and Nuckles were divided in such a way to avoid confusion and because the NCAA did not have a defense as to former players. Nonetheless, the Court found that the plaintiff’s counsel was co-counsel in a similar case in California in which a nationwide class has been certified for necessarily the same conspiracy pursuant to California law. The plaintiff’s counsel argued in that case that the cases of the current athletes and the former athletes were sufficiently similar for consolidation.
For these reasons, the Court concluded that Hubbard II and Nuckles were identical suits splintered by time for no other legitimate purpose other than to avoid federal jurisdiction. By aggregating the disclaimers in both the suits, the Court held that the amount in controversy required by CAFA was satisfied.