Coit v. Fidelity Assurance Associates, LLC, 2008 WL 3286978 (N.D.Cal. Aug. 6, 2008).
Coit, a California resident, purchased interest in three viatical life insurance policy investments from the defendants (Editors’Note—we see you scratching your head. It’s ok, we’ll save you the time of hitting up Google. It has nothing to do with the Vatican. A viatical investment is the purchase of the death benefits of an insurance policy covering an individual (a/k/a a viator) whose life expectancy, whether through age or serious illness, is greatly diminished. Now you know.) While the opinion is not exactly clear what happened after Coit bought the viatical investment, given that a suit was filed, our penchant for deductive reasoning leads us to believe that things didn’t go so well for Coit’s investment.
In the class complaint, Coit sought damages from the defendants under a host of state law theories, claiming that the defendants: (1.) were not licensed to sell the investments; (2.) concealed the risk of the investments; (3.) failed to disclose adverse tax consequences associated with the investments; (4.) obtained fraudulent medical reports on the life expectancy of the viators; (5.) engaged in misleading advertising; and (6.) sold securities that were not qualified under California Law. In the complaint, Coit made no allegation as to the amount in controversy, and she made no mention of the size of the putative class.
The defendants removed the case to the Northern District of California under CAFA. Coit quickly filed for remand. In her motion to remand, Coit argued two grounds. First, Coit asserted that the threshold CAFA requirements of $5,000,000 in controversy and a class of 100 or more were not present. Second, in the alternative, Coit argued that, even if the threshold requirements were met, the case fell under the “securities” exception at 1332(d)(9).
At the outset, the court (citing Lowdermilk and Abrego) placed the burden of proving the threshold requirements on the defendants. From there, it was all downhill for the defendants. (Editors’ Note: See the CAFA Law Blog analysis of the Lowdermilk case from the 9th Circuit posted on July 30, 2007. See the CAFA Law Blog analysis of Abrego posted on May 25, 2006. You know exactly how we feel about this burden of proof issue. If not, see our law review article on the subject).
In the notice of removal, the defendants argued that, if at least 35 potential class members had purchased viatical investments of at least $166,000, then the amount in controversy would exceed $5,000,000. Unfortunately for the defendants, the calculation was only a hypothetical and was not backed up by any real evidence. Relying on Abrego and Lowdermilk, the court determined that, absent any evidence to back up the defendants’ theoretical calculation, the defendants had failed to meet their burden for establishing the amount in controversy.
After debunking the defendants’ $5,000,000 in controversy assertion, the Court decided to go for the sweep and turned its attention to the 100 member class requirement. In the notice of removal, the only mention of a potential class size came in the hypothetical used to support the defendants’ calculation of the amount in controversy—35 (we’re no math whizzes, but we’re pretty sure that 35 is just a tad short of 100). However, the defendants attached an affidavit to their opposition to the motion to remand stating that 106 California residents purchased the settlements. No additional information or documentation was provided to back up the 106 person class figure. Relying again on Lowdermilk, the court found that the defendants failed to meet their burden of proof on the class size. Based on the defendants’ failure to meet their burden on the amount in controversy and class size, the court granted the motion to remand without considering the plaintiff’s claim that the case fell under CAFA’s “securities exception.”
At that point, the defendant declared that "Coit interrupted us."