In re Sprint Nextel Corp., 593 F.3d 669 (7th Cir. Ill. Jan. 28, 2010).

In In re Sprint Nextel Corp., the Seventh Circuit held that it would take more than just cell phone numbers and mailing addresses for the plaintiffs to establish the home-state exception.

The plaintiffs in this case filed a putative class action in the Kansas state court alleging that Sprint Nextel – a Kansas corporation – conspired with other cell phone providers and imposed artificially high prices for its text-message service. The plaintiffs specified that their class was limited to those who had a Kansas number; who received their cell phone bill at a Kansas mailing address; and paid a Kansas USF free that applied to all long-distance calls within Kansas.

Sprint Nextel, asserting federal court jurisdiction under CAFA, removed the case to the United States District Court for the District of Kansas. In the district court in Kansas, Sprint Nextel identified five non-Kansas putative class members, all of whom were national corporations that subscribed to Kansas cell phone service. As a result, the panel on Multi-District Litigation transferred this case along with other similar cases to the United States District Court for the Northern District of Illinois.

The district court in Illinois concluded that the suit fell within the home-state exception of the CAFA and remanded the suit to the Kansas state court. The district court ruled that even though the plaintiffs produced no evidence to counter Sprint Nextel’s contention on the composition of their class, the class was defined in such a way as to leave little doubt that at least two thirds of the class members were Kansas citizens. The district court also refused to inquire whether there have been other class actions with similar allegations in the past three years, because the home-state exception, unlike the local-controversy exception, did not call for such an inquiry.

On appeal, Sprint Nextel contended that in the light of the other related suits and the fact that it was a nationwide cell phone provider, this was a national controversy, and just the sort of dispute that CAFA was designed to keep in federal court. 

The Seventh Circuit first addressed whether the denominator of the two-thirds provision was the total number of potential class members in the suit or in all suits with similar allegations, and rejected the Sprint Nextel’s argument that Congress’s reference to plural ‘classes in the aggregate’ required a district court to search out similar cases. The Seventh Circuit stated that to decide the citizenship based on the phone numbers and mailing addresses would be cumbersome and difficult. For example, on the one hand, any out-of state companies that purchase text messaging for Kansas cell phones used by their local employees and receive bills at a Kansas mailing address would be part of the class, but not Kansas citizens. On the other hand, only a fraction of businesses that use Kansas cell phone service are not Kansas citizens. However, the Seventh Circuit was inclined to think that at least two-thirds of those who have Kansas cell phone numbers and use Kansas mailing addresses for their cell phone bills are probably Kansas citizens.

Although the Seventh Circuit cast doubt on whether the district court’s ruling on the evidentiary issue was correct – as the plaintiffs did not submit any evidence about citizenship – and the district court thought the class definition itself, keyed as it was to Kansas cell phone numbers and mailing addresses, made it more likely than not that two-thirds of the putative class members were Kansas citizens. 

The Seventh Circuit agreed with the majority of district courts that a court may not draw conclusions about the citizenship of class members based on things like phone numbers and mailing addresses. The Seventh Circuit found that the district court could have relied on evidence going to the citizenship of a representative sample, and statistical evidence of any number greater than 50 percent would have allowed the district court to conclude that the plaintiffs had established the citizenship requirement by a preponderance of the evidence. 

Alternatively, the plaintiffs might have defined their class as all Kansas citizens who purchased text messaging from Sprint Nextel or an alleged coconspirator. By using that definition, the plaintiffs could have guaranteed that the suit would remain in the state court. The Seventh Circuit remanded the case directing the district court to give plaintiffs another opportunity to prove that the proposed class satisfied the requirements of the home-state exception. 

In conclusion, the plaintiffs must dial more than cell phone numbers prove the Kansas citizenship, oh! and mailing addresses are insufficient too.