Higdon v. Pacific Bell Telephone Co., No. C 08-03526 RS, 2010 WL 2077195 (N.D. Cal. May 20, 2010).
After dismissing the plaintiff’s federal law claims, a District Court in California declined to exercise its discretion under CAFA over the remaining state law claims. While doing so, the Court observed that although the class definition in the initial complaint conferred federal jurisdiction, the Court need not retain such jurisdiction when the putative class is narrowed beyond the reach of CAFA in subsequent amended complaints.
The plaintiff brought a class action, challenging the caller ID practices employed by the defendant, Pacific Bell Telephone Company, d/b/a AT&T California (“AT&T”). The plaintiff’s fourth amended complaint alleged violations of the Federal Communications Act (FCA); and California’s Public Utilities Code, Unfair Competition Law, and Consumer Legal Remedies Act. It also claimed unjust enrichment, breach of contract, and fraudulent nondisclosure.
In April 2010 the District Court granted AT&T’s motion to dismiss the plaintiff’s FCA claim–the only federal claim asserted in the fourth amended complaint. Because the remaining claims arose under state law, the only possible remaining basis for federal jurisdiction in this case was CAFA. Thus, the Court deferred AT&T’s motion to dismiss state law claims and decided to consider whether CAFA applied here. Accordingly, the Court directed the parties to file supplemental briefing on the Court’s jurisdiction.
The Court noted that the initial complaint consisted of a nationwide class, but the fourth amended complaint restricted the class to California subscribers.
The plaintiff, who filed the initial complaint directly in the District Court and the party with the burden of establishing federal jurisdiction, conceded in his supplemental brief that although the complaint pleaded proper minimum diversity for CAFA jurisdiction, the Court should decline to exercise its discretion under CAFA.
AT&T, however, urged the Court to consider only the initial complaint, which consisted of a nationwide class, rather than the fourth amended complaint, in considering the question of CAFA jurisdiction. Under the class definition in the initial complaint, the existence of CAFA jurisdiction was self-evident.
As the basis for its argument, AT&T cited Freeport-McMoran, Inc. v. K.N. Energy, Inc., 498 U.S. 426, 428 (1991) for the proposition that “if diversity jurisdiction exists at the time an action is commenced, such jurisdiction may not be divested by subsequent events.”
The Court remarked that although the Ninth Circuit has not directly addressed the question, other circuits have noted that it makes no sense to construe Freeport to allow a plaintiff to circumvent the requirement of complete diversity simply by suing one or more joint tortfeasors and then adding via amended complaint any and all non-diverse joint tortfeasors. Likewise, it would make no sense to allow the plaintiff to invoke CAFA jurisdiction by positing a broad, nationwide class in his initial complaint, and then allow him to retain such jurisdiction even if he narrows the putative class beyond the reach of CAFA in subsequent amended complaints.
Next, in their supplemental briefs, the parties agreed that the fourth amended complaint’s formulation of the putative class likely brought the case under CAFA’s discretionary exception, §1332(d)(3). The Court observed that CAFA’s discretionary exceptions largely weighed in favor of declining to exercise discretionary jurisdiction because the remaining claims were based solely on state law and did not involve matters of national or interstate interest; and the number of citizens of California in the aggregate appeared substantially larger than the number of citizens from any other state, and the citizenship of the other members of the proposed class was dispersed among a substantial number of states.
Accordingly, the Court dismissed the plaintiff’s state law claims for lack of subject matter jurisdiction.