Pettett Funeral Home, Ltd. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 10-1000-GPM, 2010 WL 5463243 (S.D. Ill. Dec. 29, 2010).

Have you ever heard the old saw that “it ain’t what you know, but who you know?” In Pettett Funeral Home, the Southern District of Illinois took that a step further and held that, for CAFA jurisdictional purposes, it’s “who you say you know” – specifically, how many potential class members you say you know.

The putative class representative, Pettett Funeral Home, filed suit on behalf of other funeral homes and funeral home directors against Merrill Lynch and other defendants in connection with losses allegedly caused by the defendants to a trust maintained by the Illinois Funeral Directors Association.

The class complaint alleged the parties were minimally diverse and met CAFA jurisdictional prerequisite. Reviewing those jurisdictional allegations sua sponte, the Court found that jurisdiction was lacking, and directed the putative class representative to file an amended complaint.

As an initial matter, the Court noted that, even when jurisdiction was not challenged (as in this case) the Court had a responsibility to consider its jurisdiction on its own.

The Court first addressed diversity jurisdiction, finding that the parties were minimally diverse. The Court judicially notice certain Illinois Secretary of State corporation records (available online) that showed the putative class representative was an Illinois corporation.   Meanwhile, Merrill Lynch was alleged to be a Delaware corporation Accordingly, the Court found the complaint made sufficient allegations to trigger diversity jurisdiction.

Next, while the class complaint did not request a specific amount of damages, the loss to the trust allegedly caused by the defendants was allegedly around $184,000,000. The Court found this clearly exceeded the $5 million minimal amount in controversy threshold to trigger CAFA jurisdiction.

But the Court found the complaint’s class size allegations wanting. The class complaint alleged, based on the putative representative’s information and belief, the proposed class contained hundreds of similarly situated persons and entities who deposited funds in the Preneed Trust. The Court, relying on as series of non-CAFA jurisdictional cases, found that allegations of jurisdictional fact made on the basis of “information and belief” rather than on the basis of “personal knowledge” were insufficient to invoke the subject matter jurisdiction of a federal court. 

There being no reason to treat CAFA jurisdiction differently from other aspects of federal jurisdiction, the Court applied that rule to CAFA and determined it could not have jurisdiction where the allegations were based on “information and belief.” Accordingly, the Court directed the putative class representative to file an amended complaint omitting all reference to “information and belief” from their jurisdictional allegations.