Bowen v. HouserNo. CA 3:10-02398-MBS, 2011 WL 380455 (D.S.C. Feb. 03, 2011).

In this case, a District Court in South Carolina held that evidence concerning residency is insufficient to establish domiciliary intent because domicile requires physical presence, coupled with intent to make the State a home.

The plaintiffs/shareholders filed a class action lawsuit in the South Carolina Court of Common Pleas for Richland County against the defendants including officers and directors of BankMeridian, N.A. alleging causes of action for: 1) negligence; 2) breach of fiduciary duty; 3) improper hiring, supervision, retention and failure to monitor actions of officers; and 4) removal of the BankMeridian directors.

The plaintiffs defined the class as “all persons and/or entities who own, or previously owned, as of January 1, 2008, common stock in BankMeridian and who were harmed by the conduct alleged herein in an amount that exceeds $100 for each member of the class.” 

The defendants removed this case to the federal court. The plaintiffs then moved to remand based on exceptions to CAFA jurisdiction. The District Court granted the motion to remand.

First, the Court considered whether remand was appropriate under the local controversy and home state exceptions, 28 U.S.C. §1332(d)(4)(A)(B). All eleven defendants are citizens of South Carolina in which the action was originally filed; however, the parties disputed that greater than two-thirds of the members of the proposed class are citizens of South Carolina.

The plaintiffs contended that the defendants had admitted that 252 of BankMeridian’s 418 shareholders, or 60.3%, had their stock registered in South Carolina as of September 1, 2010. Therefore, the plaintiffs argued that they need only show that 27 additional shareholders were citizens of South Carolina to meet to statutory threshold of two-thirds. By cross-referencing the defendants’ ‘unofficial’ mailing list with the official shareholder lists, the plaintiffs determined that 49 of the shareholders who own BankMeridian stock that was registered out of state had mailing addresses in South Carolina. The plaintiffs also noted that 9 of the shareholders who have their stock registered out of state, but have mailing addresses in South Carolina are members of the South Carolina bar and practice frequently before this court.

The Court noted that for the purposes of diversity jurisdiction, to be a citizen of a State, a person must be both a citizen of the United States and a domiciliary of that State. Domicile requires physical presence, coupled with intent to make the State a home. However, residency by itself is insufficient to establish citizenship.

Although the plaintiffs had provided evidence that 49 class members reside in South Carolina, the Court observed that residency is insufficient to establish domiciliary intent. In addition, although active membership in the South Carolina bar is evidence of domiciliary intent, the plaintiffs have only asserted that 9 shareholders who have stock registered out of state are active members of the South Carolina bar. Thus, the Court concluded that the plaintiffs had not met the two-thirds citizenship threshold because they had not submitted to the court sufficient evidence of domiciliary intent.

Next, the plaintiffs contended that the Court should decline to exercise jurisdiction in this case under CAFA’s ‘discretionary jurisdiction exception.’ Section 1332(d)(3) provides that a district court may, in the interest of justice and looking at the totality of the circumstances, decline jurisdiction over a class action in which greater than one-third of all proposed plaintiff classes and primary defendants are citizens of the State in which the action was originally filed based on consideration of a number of factors.

As the parties agreed that more than one-third of the proposed class and all of the defendants are citizens of South Carolina, the Court considered the interests of justice and the totality of the circumstances in determining whether this case should be remanded to state court.

With regard to the first discretionary factor (the national interest factor), the Court found that this case did not necessarily involve the interpretation of federal law, because the claims in this case were state law claims of negligence and breach of fiduciary duty, which were governed by state law. 

Second, concerning the second discretionary factor (the state law governance factor), the Court stated that South Carolina law, as opposed to the laws of other states would apply because the plaintiffs’ claims were based on events that occurred in South Carolina. 

The third discretionary factor (the federal jurisdiction avoidance factor), also weighed in favor of remand because there was no evidence that this case was pleaded to avoid federal jurisdiction. 

The fourth discretionary factor (the nexus factor), supported remand because a large portion of the potential class was from South Carolina, all of the class members purchased stock in a bank that only has branches in South Carolina, and all of the defendants are South Carolina citizens. 

The fifth discretionary factor (the forum citizenship factor) was neutral because the Court did not have information on the citizenship of all of the class members to make the necessary determination. 

Finally, the sixth discretionary factor also weighed in favor of remand because no other similar class actions had been filed within the past three years. 

Based upon the foregoing, the Court exercised its discretion to remand this case to state court.