Kitson v. Bank of Edwardsville,___ F. Supp.2d ___, 2006 WL 3392752, No. 06-528-GPM (S.D. Ill. Nov. 22, 2006).

The defendants’ sojourn in the Southern District of Illinois was nice while it lasted in this commercial lending case.  The defendants removed the case after the plaintiffs added a new defendant in June 2006, well after CAFA became law.  In fact, the case was removed approximately 4 years after it was filed in Illinois state court.  Alas, this is not so much a commencement case, as it is a local controversy and home state exception case. The judge sent everyone back to state court, refusing to give any quarter to defendants based on CAFA’s legislative history.

The plaintiffs first brought their putative class action in St. Clair County, Illinois, back in 2002, alleging that the Bank of Edwardsville improperly calculated interest on their loans. In 2006, the plaintiffs added as a defendant Harland Financial Solutions, Inc., which licenses software the bank used to create loan documents.  Harland did not want to stay in state court, so it removed the case to federal court pursuant to CAFA.

At first, it looked as if the case might stay put. After all, the removing defendant revealed that the case satisfied all of CAFA’s jurisdictional requirements. However, things went south when the judge turned his attention to CAFA’s local controversy and home state exceptions, and whether abstention was mandatory here. 

Ultimately, Chief Judge Murphy concluded  that both exceptions applied. To get there, he considered defense arguments that abstention was improper under the local controversy exception because it was not evident that two-thirds of the class are Illinois citizens.

(There was some wrangling over how one determined who was truly from Illinois, but there was no requirement that one identify the state fossil, none other than the Tully Monster, or the state amphibian, the beloved Eastern Tiger Salamander.  If you are from Illinois, we are sure you already knew this.)

Defendants also disputed whether the local controversy was implicated because the “principal injuries” did not transpire in Illinois.  The defendants relied on CAFA’s legislative history; however, the Judge preferred to rely on Black’s Legal Dictionary instead.  The Court noted that Black’s Legal Dictionary definition of  “principal” and “injury," and he  stated: “The purpose of this criterion is to ensure that this exception is used only where the impact of the misconduct alleged by the purported class is localized.”  He also noted that the legislative history declared that the exception should not apply in those sorts of cases where the injuries may have been geographically widespread, though plaintiffs decided only to sue on behalf of those harmed within a particular state.

The Court was unmoved by the legislative history. The legislative history relied on by the defense is irrelevant because it emerged after CAFA became law, Judge Murphy declared. “There is no reason to believe that the Judiciary Committee report on CAFA played any role in shaping debate and consideration of the statute,” Judge Murphy said, sticking by his trusty Black’s Law Dictionary definitions, and finding that the local controversy exception applied.  (Editors’ Note:  See the CAFA Law Blog analysis of the timing of issuance/printing/publication date of CAFA’s legislative history posted on January 26, 2007). 

Turning to the home-state exception, Murphy found that provision also required remand to state court, because two-thirds of or more of the proposed plaintiff class and the primary defendants are from Illinois. The removing defendant was not primary because its liability “is predicated solely on aiding and abetting” the Bank’s alleged wrongdoing, Judge Murphy concluded. Even so, CAFA did not intend that a primary defendant is the one with the biggest bankroll, Judge Murphy noted, taking a cue from Passa v. Derderian, 308 F. Supp. 2d 43 (D.R.I. 2004), which interpreted the term “primary defendants” in the Multiparty, Multiforum Trial Jurisdiction Act of 2002. Quoting the case, Judge Murphy said the key is to determine who has a “dominant relation to the subject matter of the controversy.”

Since the removing defendant’s liability depends on the liability of the bank, the removing defendant is not primary and the case must go back to state court under CAFA’s home state exception.