Patterson v. Morris, No. 05-2177, Civil No. 05-2177, 2006 WL 196996 (E.D.La. Jan 25, 2006).
Bauer v. Morris, No. 05-2178, Civil No.05-2178, 2006 WL 196996 (E.D.La. Jan 25, 2006).
Petitions faxed to state court on February 17, 2005, “commenced” this pair of class actions the day before the Class Action Fairness Act took effect, declared U. S. District Court Judge Stanwood Duval, Jr., of the Eastern District of Louisiana, justifying his decision to remand these combined cases back to state court. In reaching this conclusion, the court rejected defense arguments that the pre-CAFA fax filing was ineffective as a result of the plaintiffs’ failure to timely pay the requisite filing fees. The court’s decision covered twin class actions combined on removal for the purposes of the decision, addressing the same underlying financial dispute: Patterson v. Morris, in which putative class members included those who had already filed for bankruptcy; and Bauer v. Morris, in which the putative class was intended to exclude plaintiffs who filed for bankruptcy (although two named plaintiffs in the Bauer class had actually filed for bankruptcy).
The defendants – a law firm handling collections and foreclosures, which was alleged to have charged borrowers excessive fees and costs related to collection and foreclosures, and the law firm’s lender clients – argued that the plaintiffs failed to comply with the requirements of La. R.S. 13:850, Louisiana’s “fax filing” statute, requiring payment of the “applicable filing fee” within five days of the fax filing. In this instance, a failure to comply would effectively mean that the action was not commenced until May 6, 2005, the day the plaintiffs filed their First Supplemental and Amended Class Action Petition for Damages, and thus would bring the action within the purview of CAFA.
Specifically, the defendants argued that the plaintiffs failed to remit the total amount of filing fees, $5,127, to the Clerk’s office within the requisite five days, and pointed to the Clerk’s request for the remainder of the filing fee, $2,145, in July as conclusive evidence of the failure. However, plaintiffs countered that they paid what the clerk demanded at the time of filing and could not have paid more without a court order, and thus, they had complied with the applicable statute.
The court agreed with the plaintiffs’ view: “The Court finds that plaintiffs filed the appropriate amount to the clerk’s office, both the filing fee and the fees for service, and thus, plaintiffs satisfied the requirements of La. R.S. 13:850.” The judge added that “costs were stamped PAID, and it was not until significantly later that the clerk notified plaintiffs that further fees were owed due to a mistake by the clerk’s office.” Judge Duval explained that Orleans Parish has a “pay as you go” system with no refunds or credit, so that plaintiffs could not have pushed the clerk to take more money than asked for on the spot. Therefore, he concluded that both class actions were properly filed February 17, 2005, the day before the effective date of CAFA, which would preclude removal under CAFA.
After concluding that CAFA was not a proper basis for federal jurisdiction due to the pre-CAFA commencement of both suits, Judge Duval turned to the defendants’ claim of federal bankruptcy jurisdiction. Although the court had previously been addressing both suits as one, the bankruptcy jurisdiction issue forced separate consideration of these fraternal twins. As to the Bauer class, class members who had not filed bankruptcy, the defendants argued that the court had bankruptcy jurisdiction since two of these named plaintiffs, the Duckworths, had previously filed for bankruptcy. In an attempt to remedy this blemish, the plaintiffs previously attempted to dismiss the Duckworths from the class, but were countered by one of the defendants, Deutsche Bank Trust Company Americas, filing a successful motion to compel arbitration of the Duckworths’ claims. Due to the court’s granting the motion to compel arbitration, thereby extracting the Duckworths from the Bauer class, and the subsequent lack of any federal claims, Judge Duval remanded the Bauer class back to state court.
The Patterson class offered its own interesting set of twists. Despite the Patterson plaintiffs conceding federal bankruptcy jurisdiction under Title 11, the defendants could not rest. Under 28 U.S.C. 1452, the court’s ability to remand the case is broadened beyond the normal 1441 standard, and allows the court to remand the case “on any equitable ground.” The plaintiffs took full advantage of this broadened standard, and argued that the court should abstain from granting jurisdiction and remand the case on equitable grounds. Judge Duval dutifully performed an analysis of mandatory abstention, discretionary abstention and equitable remand, ultimately finding that, while mandatory abstention did not apply in this case, equitable factors dictated that the case should be equitably remanded to state court. Thus, both actions were eventually remanded back to state court, although on different grounds.
Editor’s Note: CAFA Law Blog Co-Editor Anthony Rollo represented a number of the lender defendants in this multiparty class action, which is now on appeal to the U. S. Court of Appeals for the Fifth Circuit. Stay tuned to the CAFA Law Blog for further details on the appeal.