In re Text Messaging Antitrust Litigation, No. 08 C 7082, 09 C 2192, 2011 WL 305385 (N.D. Ill. Jan. 21, 2011). 

While remanding the action to state court under CAFA’s local controversy exception, a District Court in Illinois found that a representative sample obtained through the telephone survey to determine citizenship was sufficiently well-designed to yield data that satisfied the preponderance of the evidence standard. 

The plaintiffs brought a class action in Kansas state court alleging that Sprint Nextel Corporation, a Kansas corporation, conspired with other cell phone providers to impose artificially high prices for text-message service in violation of the Kansas Unfair Trade and Consumer Protection Act dealing with antitrust violations, Kan. Stat. §50-112. 

The plaintiffs brought the suit on behalf of themselves and all individuals who purchased texting from Sprint or an alleged co-conspirator from January 1, 2005 to the present; had a Kansas cell phone number; received their cell phone bill at a Kansas mailing address; and paid a Kansas ‘USF fee,’ excluding all government entities, as well as Sprint and its parents, affiliates, subsidiaries, officers, and directors.

Sprint removed the case to the federal court in Kansas pursuant to CAFA.  The Judicial Panel on Multidistrict Litigation transferred the case to the Northern District of Illinois. 

The District Court subsequently granted the plaintiffs’ motion to remand the case based on the “home-state exception” in 28 U.S.C. §1332(d)(4)(B).  (Editors’ Note: See the CAFA Law Blog analysis of the original District Court opinion posted on February 19, 2010). To establish the Kansas citizenship of two-thirds of the proposed class members, the plaintiffs relied on the fact that the class was defined to include only members with Kansas billing addresses and cell phone numbers.

On appeal, the Seventh Circuit reversed and remanded, holding that “a court may not draw conclusions about the citizenship of class members based on things like their phone numbers and mailing addresses.”  (Editors’ Note: See the CAFA Law Blog analysis of the 7th Circuit’s decision posted on March 28, 2010). Instead, the Seventh Circuit clarified that plaintiffs could have established Kansas citizenship through a representative sample or defining the class to include all Kansas citizens who purchased text messaging from Sprint Nextel or an alleged coconspirator. 

Following remand, the parties conducted jurisdictional discovery, where the plaintiffs obtained updated customer information from Sprint and its alleged co-conspirators.  Next, the parties conducted a telephone survey of a random sample of proposed class members.  The plaintiffs then executed a search of voter registration, driver’s license, and Internet information to ascertain the citizenship of individuals in the sample who failed to complete the survey.  For businesses in the sample that failed to complete the survey, the plaintiffs obtained “State of Organization” information from the Kansas Secretary of State website and conducted Internet searches to identify the businesses’ principal places of business and the location of their corporate headquarters. Following this, the plaintiffs again moved for remand, which the District Court granted.

While holding so, the Court agreed with the plaintiffs that they had established by a preponderance of the evidence that at least two-thirds of the proposed class consisted of Kansas citizens.  Over 85% of individuals who responded to plaintiffs’ telephone survey confirmed both that they resided in Kansas and did not plan to move from Kansas in the near future.  Likewise, over two-thirds of the business survey respondents stated that their business was either incorporated and headquartered in Kansas or had its principal place of business in Kansas.

Sprint faulted the plaintiffs for obtaining telephone survey responses from only 15% of the sample population.  The Court observed that Sprint presented no evidence suggesting that sample bias was present here.  To the contrary, voter registration information, driver’s license registration, State of Organization information from the Kansas Secretary of State website, and Internet search information supported the plaintiffs’ contention that survey non-respondents had similar rates of Kansas citizenship as respondents.  Moreover, updated information from Sprint and its alleged co-conspirators confirmed that significantly higher than two-thirds of all the individuals and businesses about which plaintiffs received data had a last known billing address in Kansas.

Sprint also criticized the telephone survey for inquiring whether respondents ‘plan to move out of Kansas in the near future’ rather than whether they ‘intend to remain indefinitely in Kansas’ and for declining to ask whether respondents have connections to other states.  The Court concluded that the telephone survey was sufficiently well-designed to yield data that satisfies the preponderance of the evidence standard.  Likewise, although additional information might have been helpful, the plaintiffs’ public records search adequately supported their position.  For these reasons, the Court found that the telephone survey results satisfied the plaintiffs’ burden to establish by a preponderance of the evidence that two-thirds of the proposed class members were Kansas citizens.  The plaintiffs were not required to prove the point beyond a reasonable doubt.

Sprint next argued that the plaintiffs failed to inquire about citizenship specifically as of October 2008, the month in which the plaintiffs filed the amended complaint and Sprint removed the case to federal court.  The Court observed that the standard that the plaintiffs must establish the citizenship of the proposed class members on the date the complaint was filed in, or removed to, federal court was satisfied here. 

The Court rejected Sprint’s reliance on Preston v. Tenet Healthsystem Memorial Medical Center, Inc., 485 F.3d 793 (5th Cir. 2007), where the Fifth circuit faulted the plaintiffs in that case for failing to make some minimal showing of the citizenship of the proposed class at the time that suit was filed. (Editors’ Note: See the CAFA Law Blog analysis of Preston posted on June 5, 2007). 

Preston is a personal injury and wrongful death suit by patients in connection with care provided in the wake of Hurricane Katrina in Orleans Parish, Louisiana. In Preston,pre-Katrina billing addresses in medical records did not accurately reflect patients’ domicile one year after the hurricane given the forced mass relocation of Orleans Parish citizens. The Court stated that here, in contrast; Sprint did not identify any similar circumstances calling into doubt the validity of plaintiffs’ evidence.

Finally, Sprint argued that the plaintiffs could have amended their class definition to include only Kansas citizens.  The Court remarked that as the plaintiffs explained, however, defining the class to include Kansas citizens could cause problems at the class certification stage regarding the plaintiffs’ obligation to define the class objectively.  

Accordingly, the Court remanded the action to the District Court of Douglas County, Kansas.