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

Section 1332(C)(1) Refers To Dual, Not Alternative, Citizenship For Corporations

Posted in Case Summaries

Roberts v. Mars Petcare US Inc., No. 17-6122 (6th Cir. Nov. 2, 2017).

In this action, while reversing a district court’s denial of the plaintiff’s motion to remand, the Sixth Circuit found that a corporation cannot rely on its State of incorporation and ignore its principal place of business to create diversity under CAFA.

The plaintiff, a citizen of Tennessee, brought a putative class action on behalf of Tennessee citizens in Tennessee state court against the defendant, a citizen of Tennessee and Delaware, alleging that the defendant conspired with other pet food manufacturers, veterinarian chains, and a retailer to employ a “prescription-authorization requirement” to sell pet food at above market prices in violation of the Tennessee Trade Practices Act.

The defendant removed the action to the federal court pursuant to diversity jurisdiction under CAFA. The defendant invoked its Delaware citizenship and claimed that its Tennessee citizenship did not matter.  The plaintiff moved to remand, which the district court denied. On appeal, the Sixth Circuit reversed the district court’s judgment.

The Sixth Circuit noted that CAFA extends federal court jurisdiction to class actions on behalf of 100 or more people and in request of $5 million or more in damages so long as “any member of a class of plaintiffs is a citizen of a State different from any defendant.” The question before the Sixth Circuit was whether CAFA granted jurisdiction over a class action brought by a group of Tennessee citizens against a company that was a citizen of both Tennessee and Delaware.

The Sixth Circuit noted that since the passage of 28 U.S.C. § 1332(c)(1), courts have considered corporations simultaneously citizens of both States for diversity purposes. Section 1332(c)(1) states that a corporation is a citizen of the State in which it was incorporated “and” the State of its principal place of business.  The Sixth Circuit found that a federal court has no jurisdiction to hear a case between a citizen of a State and a corporation headquartered in the same State under the ordinary grant of diversity jurisdiction, even if the corporation is incorporated elsewhere.  The Sixth Circuit noted the historical context that diversity jurisdiction sought to protect out-of-state parties from the potential risk that local juries would favor in-state parties.  The Sixth Circuit thus found that a Tennessee state court was the proper forum for the instant lawsuit against a company with its principal place of business in Tennessee.

The defendant argued that the plaintiff’s complaint defined the putative class as all persons in the State of Tennessee who purchased Prescription Pet Food manufactured by the defendant, a category that included non-Tennessee citizens. The defendant also argued that the plaintiff’s complaint stated only that he was a resident of Tennessee and not a citizen of the State.  The Sixth Circuit, however, found that the complaint later stated that the proposed Class was strictly limited to citizens of Tennessee, and it sought relief on behalf of “a Tennessee class” and “similarly situated Tennessee consumers.”  The Sixth Circuit thus opined that because the complaint restricted the putative class to Tennessee citizens, the defendant could not satisfy CAFA’s minimal diversity requirement.

Next, the defendant argued that the plaintiff had sued the wrong subsidiary of Mars, Inc., because Royal Canin, not the defendant Mars Petcare US, manufactured the pet food the plaintiff purchased. The defendant asserted that because Royal Canin was headquartered in Missouri, an identical class action against Royal Canin would satisfy 28 U.S.C. § 1332(d)(2)(A).  The Sixth Circuit, however, noted that the plaintiff remained the master of his claims and could choose whom he wanted to sue.  The Sixth Circuit further opined that it need not address those questions as they pertained to the merits of the case.  Alternatively, the Sixth Circuit opined that even if the defendant was right, the state court would either dismiss the claim or join Royal Canin, making the case properly removable to federal court.

The Sixth Circuit thus concluded that because § 1332(d)(2)(A) incorporated dual, not alternative, citizenship for corporations, the defendant had not demonstrated the minimal diversity required. Accordingly, the Sixth Circuit reversed the district court’s judgment.

-Melissa M. Grand