Hunter v. City of Montgomery, Alabama, 2017 WL 2634162 (11th Cir. June 14, 2017).
In this action, while affirming the order of a district court, the Eleventh Circuit found that primary defendants under the home state exception to CAFA are the defendants who are the real “targets” of the lawsuit, i.e., who have “substantial exposure” or would “incur most of the loss” if damages were awarded.
The plaintiff filed the action against the City of Montgomery, Alabama and American Traffic Solutions, Inc. (“Traffic Solutions”) in state court in Alabama claiming that the City of Montgomery’s red light program and fines violated state law. The City of Montgomery’s red light camera program was managed by Traffic Solutions. Under the program, Traffic Solutions sends photographs of potential red light violations to the Montgomery Police Department. If the police officers determine, based on the photographs, that the red light was run, Traffic Solutions sends a notice of violation to the owner of the vehicle driven through the red light. The resulting fine is paid to Traffic Solutions, which keeps a portion and remits the remainder of the fine to the City.
The plaintiff brought this action after receiving a notice of violation based on a photo taken by one of Traffic Solutions’ red light cameras. The plaintiff claimed that the defendants intentionally made yellow lights too short, so that drivers would not have enough time to stop before the light turned red, leading to more violations and more revenue. The plaintiff contended that the legislature’s creation of the category for “civil violations” for running red lights, which is otherwise a criminal misdemeanor, violated the Alabama Constitution, and that the City’s ordinance authorizing Traffic Solutions to collect fines violated state law. The plaintiff sought a declaration that the red light camera program was unlawful, a judgment requiring the City to refund all red light violation fines collected as a result of the program, an injunction directing both defendants to stop issuing tickets based on the program, and an award of attorney’s fees.
Traffic Solutions, with the City’s consent, removed the action to federal court based on both the § 1983 claim and CAFA diversity jurisdiction. The plaintiff then amended his complaint to drop the § 1983 claims and added a second plaintiff, another Alabama resident who received a red light ticket from a Traffic Solutions camera.
Ten months after the removal, the district court ordered supplemental briefing on the issue of subject matter jurisdiction. The order noted that the plaintiff had dropped the sole federal claim—the §1983 claim, and one of CAFA’s exceptions to the exercise of federal jurisdiction might require a remand to state court. The plaintiff then claimed that both CAFA’s local controversy and home state exception applied, which required the district court to remand the case back to state court. The district court agreed that both exceptions applied and remanded the case. The defendants appealed, but the Eleventh Circuit affirmed the district court’s order
The Eleventh Circuit first determined that it had jurisdiction over the appeal because the district court itself raised the possibility that a CAFA exception required remand. CAFA, through § 1332(d)(2), provides that the district courts shall have original jurisdiction, in cases where the amount in controversy is over $5 million and the parties are minimally diverse. Both of these requirements were met in this action. The Eleventh Circuit then noted that if the local controversy exception or the home state exception applies, CAFA requires that the district court decline to exercise jurisdiction. Because the two exceptions relied on by the district court do not affect a court’s subject matter jurisdiction, the Eleventh Circuit held that it was not barred from the review of the district court’s order.
The Eleventh Circuit next examined whether the home state exception to CAFA jurisdiction was applicable in the case. The home state exception applies when the action is filed in the state where both two-thirds of the proposed plaintiff class and the “primary defendants” are citizens. The parties agreed that two-thirds of the plaintiff class and the City of Montgomery were both citizens of Alabama, but Traffic Solutions was not. Thus, the dispositive issue was whether Traffic Solutions was a “primary defendant” under CAFA.
The Eleventh Circuit noted that the Senate Judiciary Committee’s report on CAFA contained the statements that suggest that the “primary defendants” be interpreted to reach those defendants who are the real “targets” of the lawsuit—i.e., the defendants that would be expected to incur most of the loss if found liable. The explanation in the Committee’s report made clear that the primary factor in answering the question concerning the primary defendant was the potential monetary loss that the defendant faced. Based on the statements in report and other legislative history, the Eleventh Circuit concluded that, where the class action seeks monetary relief, the “primary defendants” are those that have “substantial exposure” or would “incur most of the loss” if damages are awarded.
The plaintiff here sought only sought injunctive relief from Traffic Solutions – no monetary relief. This left the City, a citizen of Alabama, as the only “primary defendant” in this action. Because the only primary defendant was a citizen of the state in which the action was originally filed, and the other requirements were met, the Eleventh Circuit concluded that the home state exception to CAFA jurisdiction applied to this action.
Accordingly, the Eleventh Circuit affirmed the district court’s order remanding the action to Alabama state court.