Hangarter v. The Paul Revere Life Insurance Co., No. C 05-04558 WHA, 2006 WL 213834 (N.D. Cal. January 26, 2006).
On January 26, 2006, United States District Judge William Alsup, writing for the Northern District of California, granted the motion to remand filed by class representative Joan Hangarter, determining that the portion of her claim against the defendant John Garamendi, the California Insurance Commissioner, fell within the Class Action Fairness Act’s “state-action exemption.” Although CAFA substantially expanded federal jurisdiction over class actions initially filed in state court, the Act also carved out certain exceptions, such as the state-action exemption, which essentially states that “district courts have no jurisdiction over class actions in which the primary defendants are States, State officials, or other governmental entities.”

Hangarter initially filed her class action in California state court, listing seven causes of action against Paul Revere and other insurance providers alleging that they unlawfully accepted premiums on disability insurance policies while never intending to pay benefits, and then denied valid claims. The complaint also asserted an eighth cause of action against Commissioner Garamendi, alleging that he failed to prevent the sale of misleading or unsound policies, and sought relief for this claim in the form of a Writ of Mandamus ordering the Commissioner to revoke, rescind or reform the allegedly misleading policies. Unsurprisingly, the insurance company defendants removed the case to federal court, asserting diversity jurisdiction under CAFA.
Judge Alsup distilled the remand motion to the singular determination of whether Commissioner Garamendi was a “primary defendant” under the state-action exemption. Paul Revere and its fellow defendants argued that the Commissioner was no more than a “bit player” in the litigation, since the plaintiffs sought no damages against the Commissioner and only requested official acknowledgments and clarifications. However, Judge Alsup disagreed, finding that the Commissioner was a primary defendant since he was the only defendant who could provide the relief requested in the eighth cause of action. Moreover, Judge Alsup determined that the defendants had minimized, without justification, the relief sought by the plaintiffs on this count, and made clear that injunctive relief was in no way inferior to damages.
Paul Revere also argued that CAFA’s legislative history, particularly Senate Report 109-14, provided guidance in applying this exemption. Judge Alsup was, however, unmoved by the offering, instead believing that the Report was “of dubious value as an interpretive aid,” and summarily dismissing the notion that the Report held any sway over the Legislator’s interpretation of CAFA since it was issued ten days after the President signed CAFA into law. He did, however, give weight to the provisions of the Report that stated “plaintiffs should not be permitted to name state entities as defendants as a mechanism to avoid federal jurisdiction over class actions that largely target non-governmental defendants.” Judge Alsup posited that this comment suggested that secondary or collateral defendants do not fall within the state action exemption. This determination was of no help to Paul Revere, though, as the court held that the Commissioner was the only target of the eighth cause of action and was therefore a “primary defendant” to that particular claim. The court averred, “In summary, the Commissioner is a primary defendant because the relief sought from him is substantial in its own light, because he is the only defendant potentially liable on the eighth cause of action and because he would be liable to the entire class.” Judge Alsup thus found that the state action exception applied to the claim asserted against Commissioner Garamendi, and the case went galloping back to state court.