Edwards v. General Elec. Co., No. C 10-02431 SI, 2011 WL 479991 (N.D. Cal. Feb. 07, 2011).
While dismissing the action for lack of jurisdiction, a District Court in California found that a “necessary and indispensable” party to the action cannot be dismissed to avoid CAFA’s local controversy exception.
The plaintiffs brought this class action lawsuit in the federal court seeking relief for allegedly defective “SmartMeters” installed by Pacific Gas & Electric (“PG & E”).
The plaintiffs claimed that the SmartMeters had caused consumers to pay for more electricity than they consumed. However, instead of suing PG & E, the plaintiffs sued General Electric Co. (“GE”) and Landis+Gyr, Inc. (“Landis”) which had manufactured and provided PG & E with SmartMeters for PG & E’s SmartMeter program; and Silver Springs Network (“SSN”), which had manufactured the hardware and software contained in the SmartMeters. The plaintiffs pled three state law causes of action against the defendants: (1) violation of the Consumers Legal Remedies Act;(2) violation of the Unfair Competition Law; and for unjust enrichment/money had and received.
While the plaintiffs filed this lawsuit, a class action against PG & E was pending in California state court, Flores v. Pacific Gas & Electric Company, et al.
The plaintiffs asserted that the District Court had jurisdiction over this matter specifically under CAFA, 28 U.S.C. §1332(d), as there was diversity among the parties, the amount in controversy exceeded $5 million and the number of class members exceeded 100.
The defendants, however, moved to dismiss the complaint, inter alia, arguing that the Court lacked jurisdiction under CAFAs “local controversy” exception, 28 U.S.C. §1332(d)(4) (A), because SSN was a California citizen from whom significant relief was sought and whose conduct formed a significant basis of the claims.
The plaintiffs contended that CAFA jurisdiction was not an issue here because they filed a state court class action against the California defendant–SSN (Flores v. PG & E), and intended to move to dismiss SSN from this case. The plaintiffs then filed a motion to voluntarily dismiss SSN pursuant to Fed. R. Civ. P. 41(a)(2), arguing that dismissal of SSN would allow the Court to exercise jurisdiction over the defendants GE and Landis.
First, the Court refused to dismiss SSN finding that dismissal of SSN would result in legal prejudice to other defendants because SSN was a “necessary and indispensable” party. The Court noted that SSN’s status as a necessary and indispensable party was demonstrated by the plaintiffs’ own allegations establishing that: (1) the SmartMeters were allegedly defective because the firmware did not transmit the correct “usage” data to PG & E; (2) SSN manufactured the hardware and software contained in the Smart Meters that generated and transmited the usage data; and (4) SSN was selected by PG & E-not GE or Landis-to provide the “advanced networking technology” for PG & E’s SmartMeter program that was allegedly defective.
Further, the Court found that without SSN, the Court could not provide adequate relief to plaintiffs. The Court stated that the injunctive relief sought–“an injunction preventing the defendants from manufacturing the SmartMeters until the defendants remedy the defect,”–would be problematic without SSN, as the plaintiffs alleged that the defect in the SmartMeters was caused by SSN’s hardware and software.
More importantly, the Court found that litigating this case without SSN would impair SSN’s legally cognizable interests and SSN’s participation was necessary to protect GE and Landis from incurring inconsistent obligations. SSN’s selection by PG & E to provide the networking technology used to transmit the usage data, would likely be impaired by the injunction sought by the plaintiffs in this case, e.g., to prevent the defendants from manufacturing SmartMeters until the defect allegedly caused by SSN’s hardware and software was remedied.
The Court was likewise concerned about GE and Landis’ ability to litigate the case without the presence of SSN as a party. As majority of the allegations in the complaint referred to all three defendants as being responsible for the defect and for hiding that defect from class members, the Court concluded that GE and Landis would likely be prejudiced and likely subject to inconsistent obligations if SSN was dismissed but retained jurisdiction over the identical legal claims against GE and Landis.
Because the Court declined to dismiss SSN, it found that it lacked jurisdiction over this action under “local controversy” exception, because SSN was a California defendant from whom significant relief was sought and whose conduct formed a significant basis for the claims.
For the foregoing reasons, the Court dismissed the plaintiffs’ complaint for lack of jurisdiction.