Walsh v. Defenders, Inc, 2018 WL 555690 (D.N.J. Jan. 25, 2018).

On a motion for reconsideration, a District Court in New Jersey reversed an earlier ruling denying a motion to remand based on the “local controversy” exception to CAFA. The Court held that, in order to defeat diversity, the local-controversy test does not require a showing of predominance, i.e., that the local defendant’s conduct forms a more significant basis for the claims asserted than the conduct of the other defendants, but merely a showing that the local defendant’s actions formed a significant basis for the claims asserted.

Based in part on new evidence obtained during class discovery, the Court agreed that plaintiff could now establish that the local defendant’s conduct formed a significant basis of the claims asserted by the putative class. Specifically, the Court noted that 35.3% of the entire class entered into the allegedly unlawful contracts with the local defendant and thus had claims arising directly from the local defendant’s conduct. Although this evidence also showed that 64.7% of the class had claims arising from the foreign defendant’s conduct, the Court acknowledged that plaintiff need not demonstrate that the claims against the local defendant predominated over the other defendants; rather, to invoke the exception, the plaintiff must show that the local defendant’s conduct was a significant – defined as ‘important, notable’ – basis for the claims asserted.

Accordingly, the District Court granted the plaintiff’s motion for reconsideration and remanded the action to the state court.