Smilow, et al. v. Anthem Blue Cross Life and Health Insurance Co., 2015 WL 4778824 (C.D. Cal. Aug. 13, 2015).

In this action, a district court in California found that a plaintiff’s motion to amend the complaint to change the class description so it referred to ‘citizens’ of California instead of ‘residents’ of California would constitute a clarification and not an amendment. The Court was allowed to consider the amended complaint in determining whether remand to the state court was appropriate. In so concluding, the Court explained that using an amended complaint to clarify certain jurisdictional facts is an exception to the general rule that courts must look at pre-removal filings to determine jurisdiction.

The plaintiff brought a putative class action in the superior court alleging that defendant, Anthem Blue Cross Life and Health Insurance Company d/b/a Anthem Blue Cross, failed to properly safeguard, secure and protect the sensitive personally identifiable information (“PII”) and personal health related information (“PHI”) of the plaintiff and the purported class. As a result of this purported failure, unknown hackers accessed the defendant’s records between December 10, 2014 and January 27, 2015, and acquired the personal and sensitive information of millions of California residents.

The plaintiff asserted claims for negligence, negligence per se, breach of implied contract, breach of covenant of good faith and fair dealing, unjust enrichment, invasion of privacy, bailment, conversion, and violations of California’s Data Breach Act, Confidentiality of Medical Information Act, and Unfair Competition Law. The plaintiff defined a class that consisted of “all California residents who purchased health insurance from Anthem and whose PII, PHI, and/or personal financial information was compromised as a result of the data breach first disclosed by Anthem on February 4, 2015.”

The defendant removed the action to the United States District Court for the Central District of California under CAFA, and the plaintiff moved to remand.

At the outset, the Court noted that minimal diversity exists under CAFA as long as one member of the proposed class is a citizen of a different state than the defendant. In order to foreclose any argument that minimal diversity existed between the parties, the plaintiff sought leave to amend their complaint to so that the class description refers to “California citizens” rather than “California residents.” The defendant argued that the plaintiff could not amend the complaint to destroy minimal diversity, as it existed at the time of removal.

The Court noted that Wickens v. Blue Cross of California, 2015 WL 3796272 (S.D. Cal. Jan. 18, 2015) directly addressed this exact argument as it applied to nearly identical facts. The Wickens court recognized that under applicable Ninth Circuit law, “citizenship of the plaintiff class is based on the complaint as of the date the case became removable,” and “a plaintiff cannot destroy diversity by amendment after removal.” The Wickens court, however, determined that “when the initial complaint facially precludes removal, courts may properly consider a timely-filed amended complaint ‘as a clarification to the allegations bearing on the federal court’s jurisdiction.’” The Wickens court ultimately concluded that, “an amendment to change ‘residents’ of California to ‘citizens’ of California would constitute a clarification and not an amendment,” and thus granted leave for the plaintiff to amend before accepting a renewed motion to remand, and subsequently, remanded the case to state court for lack of subject matter jurisdiction.

In reaching its conclusion, the court in Wickens relied on a comparison to Weight v. Active Network, Inc., 29 F. Supp. 3d 1289, 1291-93 (S.D. Cal. June 26, 2014).  In Weight, the defendant removed a class action complaint brought on behalf of affected “California residents.” The plaintiff then filed an amended complaint, which redefined the class to include only “California citizens,” and then moved to remand. In analyzing the issue, the Weight court explained that “if the revision is an amendment, the court cannot rely on the revised class definition in assessing its jurisdiction over this matter,” but if, on the other hand, “the revision is merely a clarification, then at the time of removal the class–defined, per the complaint, in terms of California citizenship—would be comprised solely of California citizens.” In examining the facts of the case, the Weight court determined that the plaintiff’s revision was a clarification rather than an amendment, because it “merely clarified that his original intent was to litigate on behalf of California citizens.” The Weight court explained that “the instant action was originally filed in the California state court system, which has no equivalent of diversity jurisdiction and thus does not require the careful distinction between ‘residents’ and ‘citizens.’”

The defendant argued that the Weight order conflicted with the Ninth Circuit’s subsequent opinion in Doyle v. OneWest Bank, FSB, 764 F.3d 1097, 1097 (9th Cir. 2014).  In Doyle, after a class action complaint was removed to federal court under CAFA, the parties stipulated to sever several claims and transfer them to another court, and accordingly amended the complaint to reflect the severance. The district court then granted the motion on the basis of the pleadings in the amended complaint. On appeal, the Ninth Circuit concluded that the district court erred by considering the amended complaint rather than the complaint “as of the date the case became removable.”

The Court remarked that Doyle was inapplicable in this case because the Ninth Circuit did not make a determination between an amendment and a clarification; thus, Doyle did not demonstrate that the Ninth Circuit had rejected the reasoning in Weight. In fact, the Ninth Circuit has recognized an exception to the general rule that courts must look to pre-removal filings to determine jurisdiction, where a party amends a complaint in order to clarify certain jurisdictional facts. In Benko v. Quality Loan Serv. Corp., 789 F.3d 1111, 1117 (9th Cir. 2015), the Ninth Circuit explained that, where the plaintiffs amend the complaint to explain the nature of the action for purposes of the court’s jurisdictional analysis, the court may consider the amended complaint to determine whether remand to the state court is appropriate.

The defendant also argued that Weight was based on a strict presumption against removal, which conflicted with the Supreme Court’s clarification in Dart Cherokee Basin Operating Co., LLC v. Owens, 135 S. Ct. 547, 554 (2014) that there is not a presumption against removal jurisdiction in CAFA cases. [Editors’ note: see CAFA law blog analysis on Dart Cherokee posted on August 26, 2014]. The Court rejected this argument because the Weight court did not rely on this factor in reaching its conclusion; rather, the Weight court based its decision on the distinction between amendments and clarifications.

Finally, the defendant argued that, in fact, the plaintiff was seeking to amend the complaint, and not clarify her prior intention. In support of this argument, the defendant pointed out that: (i) the named plaintiff identified herself as both “a citizen and resident of Los Angeles, California,” and therefore recognized the distinction between these words; and (ii) that several of the statutes under which the plaintiff was suing refer to “California residents,” and that she therefore purposefully identified the class as all affected “California residents” because anything else would be inconsistent with her claims.

The Court remarked that the reference to “California residents” in several of the applicable statutes provides a strong inference that the named plaintiff intended to specify a class of “residents” rather than a class of “citizens,” as doing so would simplify the litigation of these claims. On the other hand, the named plaintiff clearly identified at the outset of her Complaint that the action was not removable. While this statement was irrelevant in evaluating whether or not there was actually removal jurisdiction over this case, it was nonetheless instructive in determining the plaintiff’s intent, which the Court must do when determining whether the suggested amendment is a clarification or an amendment.

Here, it was clear that the plaintiff intended a class of “citizens and residents” that would render the case non-removable. As state court does not require parties to carefully distinguish between “residents” and “citizens,” the Court concluded that the plaintiff’s use of the term “residents” should not be controlling in determining the intended make-up of the class.

Ultimately, the Court concluded that since the complaint alleged claims against a California-based defendant, alleged only causes of action arising under California law, and clearly specified that the action was “not removable,” an amendment to change ‘residents’ of California to ‘citizens’ of California, in this case, would constitute a “clarification,” not an amendment. Accordingly, the Court granted the plaintiff’s request for leave to file an amended complaint, deemed the complaint amended to refer to California “citizens” rather than “residents,” and granted the plaintiff’s motion to remand.

– Melissa Broussard