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CAFA Law Blog Information, cases and insights regarding the Class Action Fairness Act of 2005

Plaintiff’s Use of Questionable Tactics to Avoid Remand Backfires and Court Declines to Apply CAFA’s “Interests of Justice” Exception

Posted in Case Summaries

Shelby v. Oak River Insurance Company, 2017 WL 6026672 (W.D. Mo. Dec. 5, 2017).

In this action, while denying the plaintiff’s motion to remand, a district court in Missouri found that the plaintiff’s tactics to avoid removal by being less than candid as to whether the case is a class action, influences the Court to not exercise its discretion to remand under the “interests of justice” exception.

The plaintiff brought a putative class action in the Circuit Court of Jackson County, Missouri against the defendant, an insurance company, seeking to recover on a judgment entered in a separate class action lawsuit (“the underlying litigation”). The underlying litigation was brought by a used car dealer, Miller Investment Group (“MIG”), seeking to recover against the plaintiff for a deficiency on his secured car loan.  In response, the plaintiff filed a class action counterclaim alleging that MIG violated the UCC and engaged in a deceptive pattern in repossessing cars.  MIG subsequently entered into a class-wide settlement with the plaintiff in which MIG assigned any claims it had against its insurers to the plaintiff and the other class members.

The defendant issued garage liability insurance policies to MIG, and purportedly denied coverage in the underlying litigation because it concerned financing activities, rather than activity associated with the operation of the garage.

The defendant removed the instant action to federal court pursuant to CAFA. The plaintiff moved to remand, which the District Court denied.

The plaintiff argued that the defendant’s removal was untimely, asserting that the defendant should have known the action was a class action all along. However, the plaintiff’s initial petition had no indication the action was a class action, and the plaintiff’s sworn statement further confirmed the action was not a class action. The District Court opined that the plaintiff’s argument suggested that the plaintiff may be attempting to forum shop and at worst, indicated that the plaintiff lied in his discovery responses.

In any event, after carefully reading the initial petition, the District Court found that it was unclear whether the plaintiff was attempting to plead a class action or not. The District Court further found that it was only after the defendant received the plaintiff’s motion for leave to amend, that it became clear that the plaintiff was asserting a class action.  Thus, the District Court ruled that the defendant’s notice of removal was timely, as it was filed twenty days after the plaintiff filed its amended petition.

The plaintiff, in the alternative, contended that the District Court should decline to exercise CAFA jurisdiction under CAFA’s “interests of justice” exception. Once the removing party establishes CAFA jurisdiction, the burden shifts to the party seeking remand to establish that one of CAFA’s three jurisdictional exceptions apply. Under the “interests of justice” exception, a “court may, in the interests of justice and looking at the totality of the circumstances, decline to exercise jurisdiction over a class action in which greater than one-third, but less than two-thirds of the members of all proposed plaintiff classes in the aggregate and the primary defendants are citizens of the state in which the action was originally filed based on consideration of the [six enumerated statutory factors].” 28 U.S.C. § 1332(d)(3) (emphasis added).

Assuming for the sake of argument that the defendant was deemed a citizen of Missouri and that approximately 60 percent of class members were Missouri citizens, the District Court weighed the six statutory factors.

For the first factor, whether the claims asserted involve matters of national or interstate interest; the District Court found that the parties agreed that the class claimants were from approximately twenty-one different states, that the defendant was a Nebraska company headquartered in Omaha, and that the relevant decisions were all made in Nebraska. The District Court further found that if 60% of class members were Missouri citizens, then the harms allegedly caused by the defendant’s decision making were mostly felt in Missouri, but other states still had some interest in this litigation.  Accordingly, the District Court ruled that there was some interstate interest in the case, which weighed slightly in favor of federal jurisdiction.

For the second factor, whether the claims asserted will be governed by laws of the State in which the action was originally filed or by the laws of other States; the District Court found that the parties agreed that Missouri law would likely govern most claims, and that it was unclear whether other states laws would govern the remaining claims. The District Court opined that this factor weighed slightly in favor of remand.

For the third factor, whether the class action has been pleaded in a manner that seeks to avoid federal jurisdiction; the District Court found that the original petition was pled in such a way as to attempt to avoid federal jurisdiction, and indeed the plaintiff used impermissible tactics to do so. The District Court thus ruled that this factor weighed heavily in favor of federal jurisdiction.

For the fourth factor, whether the action was brought in a forum with a distinct nexus with the class members, the alleged harm, or the defendants; the District Court found that the forum where the suit was brought had a nexus to most of the class members and the alleged harm, but no nexus to the defendant. Therefore, the District Court opined that this factor weighed slightly in favor of remand.

For the fifth factor, whether the number of class members in the forum is substantially larger than the number from any other state, and dispersal of class members; the District Court opined that assuming 60 percent of the class members were Missouri citizens, the number of Missouri class members was larger than the number of citizens from other states. The District Court found that the remaining 40 percent were dispersed throughout twenty-one other states, but mostly in Kansas.  Thus, the District Court opined that this factor weighed slightly in favor of remand.

For the sixth and final factor, whether previous lawsuits asserting the same or similar claim have been filed; the District Court found that the parties agreed that another class action asserting the same or similar claim had not been filed in the previous three years. Accordingly, the District Court opined that this factor favored remand.

Overall, the District Court found that the factors fairly balanced each other out. But, ultimately the plaintiff had not met his burden of establishing that the Court should exercise its discretion to remand.  In considering the totality of the circumstances, the District Court found that the plaintiff attempted to deprive the defendant of its statutory right to removal by being less than candid as to whether the case was a class action.  Therefore, the District Court therefore ruled that it would not reward the use of such tactics by granting the relief sought and accordingly, the District court denied the plaintiff’s motion to remand.

-Melissa Broussard Carroll