Kessler v. American Resorts International’s Holiday Network, Ltd., Case Nos. 05 C 5844, 07 C 2439, 2007 WL 4105204 (N.D. Ill. Nov. 14, 2007).

This case concerns the management of a time share program operated by American Resorts International’s Holiday Network and its parent company, American Resorts International, Ltd. (collectively, “American Resorts”). 

Procedurally, the case involves two separate lawsuits which were consolidated in May, 2007 after the earlier filed suit, “Slodki” was removed to federal court from the Circuit Court of Cook County, Illinois. 

In 2002, Alan H. Slodki, a member of the time share program, brought suit in the Circuit Court of Cook County, Illinois, over American Resorts’ imposition of maintenance fees that Slodki alleged breached his member contract.   The state court judge certified a class composed of all current and former members of the timeshare program from whom American Resorts sought and collected maintenance fees (the “Slodki Class”). Id. at *1.

The removal occurred after the Slodki Class amended its complaint to add defendants and additional claims, allegedly worth $65 million. The addition of the new defendants allowed those defendants to remove the case to federal court on the theory that the suit against them commenced after CAFA’s effective date of February 18, 2005. Id. at *9.

In considering the Slodki Class’ motion to remand, it was undisputed that at least one member of the plaintiff class had a different citizenship from at least one defendant, but the Slodki plaintiffs questioned whether CAFA’s amount in controversy requirement was met. 

The court held that the proponent of federal jurisdiction has the burden of persuasion on the amount in controversy. Id. at *10. To carry this burden, the removing litigant “must show a reasonable probability that the stakes exceed the minimum.” Id. (citing Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 449 (7^th Cir. 2005) (Editors’ Note: See the CAFA Law Blog analysis of Brill posted on November 2, 2005). This burden does not require a plaintiff to prove that a favorable judgment for the plaintiff will exceed the statutory threshold; rather, “[t]he demonstration concerns what the plaintiff is claiming …, not whether plaintiff is likely to win or be awarded everything he seeks.” Id. 

The court held that the removing defendants met their burden because the Slodki Class claimed they were entitled to recover $65 million based on the amended claims.   Id. Even though the court noted its “doubt” that the plaintiffs actually would obtain a judgment in that amount, the doubt did not amount to the “legal certainty” necessary to defeat jurisdiction. Id.

The Slodki Class also requested that the court abstain from exercising its jurisdiction pursuant to 28 U.S.C. §1332(d)(3). Under that provision of CAFA, “[a] district court may, in the interests of justice and looking at the totality of the circumstances, decline to exercise jurisdiction under [28 U.S.C. §1332(d)(2)] over a class action in which greater than one-third but less than two-thirds of the members of all proposed plaintiff classes in the aggregate and the primary defendants are citizens of the State in which the action was originally filed based on consideration of the following six statutory factors:

(A) whether the claims asserted involve matters of national or interstate interest;

(B) whether the claims asserted will be governed by laws of the State in which the action was originally filed or by the laws of other States;

(C) whether the class action has been pleaded in a manner that seeks to avoid federal jurisdiction;

(D) whether the action was brought in a forum with a distinct nexus with the class members, the alleged harm or the defendants;

(E) whether the number of citizens of the State in which the action was originally filed in all proposed plaintiff classes in the aggregate is substantially larger than the number of citizens from any other state and the citizenship of the other members of the proposed class is dispersed among a substantial number of states; and

(F) whether, during the 3-year period preceding the filing of that class action, 1 or more other class actions asserting the same or similar claims on behalf of the same or other persons have been filed.

The court concluded that the Slodki Class met their burden of showing that permissive abstention under §1332(d)(3) was appropriate, and it remanded the case to the Circuit Court of Cook County. Id. at *12. 

The court determined that the case did not involve matters of significant interstate interest, would be governed by Illinois law, was not pled in a manner designed to avoid federal jurisdiction, “unquestionably was brought in a forum with a distinct nexus to the class members, the alleged harm, and the defendants,” involved class members drawn heavily from Illinois, and was the first class action to assert the claims it did on behalf of the class it did. Id. at *11. 

The defendants’ only serious contention regarding permissive abstention was that the case had been mismanaged in state court. The court seemed to agree, but noted that nothing in §1332(d)(3) or its legislative history suggests that in determining whether to abstain from exercising federal jurisdiction, a federal court should take into account how well the case has been managed in state court.

Following this decision, certain parties moved the court to reconsider its decision to abstain from exercising its jurisdiction and remand the Slodki case. See Kessler v. American Resorts International’s Holiday Network, Case Nos. 05 C 5944, 07 C 2439, (N.D. Illinois March 12, 2008), 2008 WL 687287. The issue on reconsideration was whether a court should give any independent effect to the statutory language immediately preceding the six statutory factors for discretionary abstention set forth in 28 U.S.C. §1332(d)(3), that the court should base its decision on the “totality of the circumstances” and the “interests of justice.” The court noted that it could find no authority in support of the defendants’ argument that those phrases have any effect independent of the applicability of the enumerated factors and, therefore, did not alter its earlier decision.

By: Rose Marie L. Fiore