Thatcher v. Hanover Ins. Group, Inc., No. 11–1610, 2011 WL 5247892 (8th Cir. Ark. Nov. 4, 2011).
In this action, the Eighth Circuit held that it is inappropriate for a plaintiff to use voluntary dismissal of an action removed under CAFA as an avenue for seeking a more favorable forum.
The plaintiff, Allen Thatcher, brought a class action in state court claiming that the defendants, Hanover Insurance Group, Inc. and Massachusetts Bay Insurance Co., failed to properly pay insureds for general contractors’ overhead and profit under the terms of their insurance policies.
After the defendants removed the case to federal court pursuant to CAFA, 28 U.S.C. § 1332(d), and filed their answer in the District Court, the plaintiff sought permission to voluntarily dismiss his case without prejudice so that he could refile an amended complaint in state court that would avoid federal jurisdiction.
The District Court granted the plaintiff’s motion, and it dismissed the complaint without prejudice.
The defendants appealed, arguing that the District Court should have considered whether the motion to voluntarily dismiss was an improper forum-shopping measure.
The Eighth Circuit agreed, and it reversed the District Court’s dismissal order.
The Eighth Circuit noted that it previously stated in Hamm v. Rhone–Poulenc Rorer Pharm., Inc., 187 F.3d 941, 950 (8th Cir. 1999) that prior to dismissing under Fed. R. Civ. P. 41(a)(2), a court should consider factors such as whether the party has presented a proper explanation for its desire to dismiss; whether a dismissal would result in a waste of judicial time and effort; and whether a dismissal will prejudice the defendants.
Likewise, a party is not permitted to dismiss merely to escape an adverse decision or to seek a more favorable forum. The Eighth Circuit stated that the District Court failed to address the plaintiff’s purpose in seeking to voluntarily dismiss– that the plaintiff was dismissing so he could return to the more favorable state forum. Specifically, the plaintiff’s expressed intent was to amend his complaint in order to avoid federal jurisdiction.
In the original complaint, the plaintiff included claims for unjust enrichment, fraud, constructive fraud, and breach of contract; whereas, in his motion to dismiss, the plaintiff set forth his intention to refile this matter in state court as a breach of contract claim only. The plaintiff set forth no adequate reason why it would benefit the class to abandon these additional claims.
The Eighth Circuit observed that it had repeatedly stated that it is inappropriate for a plaintiff to use voluntary dismissal as an avenue for seeking a more favorable forum. Likewise, under the rule laid down in St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283 (1938), in a diversity action a plaintiff may not merely amend his complaint after removal to claim damages below the jurisdictional amount and deprive the federal court of jurisdiction. The Eighth Circuit pointed that “as the right to remove an action which falls within the jurisdiction of the federal courts is a substantial right, the federal courts should be astute not to permit devices to become successful which are used for the very purpose of destroying that right.”
The Eighth Circuit pointed that the defendants exercised their right to removal under CAFA, and the plaintiff appeared to have sought dismissal merely to deprive the federal court of jurisdiction. As a result, determining whether the District Court had subject matter jurisdiction was at the crux of the issue of whether the motion to dismiss was being used for the improper purpose of seeking a more favorable forum.
Finding that the District Court erred in failing to take up the jurisdictional question, the Eighth Circuit directed the District Court to consider upon remand whether the motion to dismiss was a forum-shopping measure.