Bigsby v Barclays Capital Real Estate Inc., 170 F. Supp. 3d 568 (S.D.N.Y. 2016).

A district court in New York found that because the allegations in the complaint were sufficient to establish that the required amount in controversy and number of putative plaintiffs, it had jurisdiction under CAFA—even though the plaintiffs’ federal claims would not survive a Rule 12(b)(6) motion.

The plaintiffs, Lamar Bigsby Jr. and Karla Freeland, brought this putative class action alleging violation of the Racketeer Influenced and Corrupt Organization Act (“RICO”) based on predicate acts of mail fraud and wire fraud, and related state-law claims against the defendant Barclays Capital Real Estate, Inc., and various John Doe defendants. The plaintiffs claimed federal jurisdiction under RICO and CAFA.

The plaintiffs claimed that Barclays, the servicer of the plaintiffs’ home mortgage loans, engaged in two different schemes to overcharge borrowers fraudulently: (1) a fee shifting scheme, whereby Barclays allegedly charged borrowers for administrative and outsourcing fees that it concealed under the category of attorney’s fees; and (2) a related mortgages scheme, wherein Barclays allegedly inflated costs for borrowers with multiple mortgages.

Barclays moved to dismiss the complaint for lack of subject matter jurisdiction under Rule 12(b)(1) and for failure to state a claim under Rule 12(b)(6). It further argued that because the court would not have jurisdiction over them, that the state-law claims should also be dismissed.

As an initial matter, the District Court found that the complaint had insufficient allegations of fraud as to the fee-shifting and related mortgages, so plaintiffs’ RICO conspiracy failed as a matter of law.

Because the court did not have federal claim jurisdiction, the defendants next argued that the plaintiffs’ state law claims must also be dismissed for lack of subject-matter jurisdiction. The plaintiffs argued that the District Court had jurisdiction irrespective of the RICO claims pursuant to CAFA because the number of plaintiffs was sufficiently numerous and the alleged amount in controversy met the minimum threshold.

Plaintiffs did not allege a specific amount in controversy, and the alleged damages by each plaintiff were small. But the District Court held that because many thousands of plaintiffs were alleged to be damaged over a period of several years, the allegations were sufficient to create a presumption that the amount in controversy was satisfied.

Accordingly, the District Court held it jurisdiction under CAFA to adjudicate the state-law claims in federal court.

–Barry A. McCain