Hart v. Fed Ex Ground Package System, Inc., 457 F.3d 675 (7th Cir. August 9, 2006) (No. 06-2903).
It seems the plaintiff’s Hart was left in San Francisco because he used UPS instead of Federal Express. On August 9, 2006, Circuit Judge Diane P. Wood handed down an opinion that was pending before a three judge panel of the Seventh Circuit Court of Appeals including Judges Rovener and Williams. The appeal examined the burden of proof as to the home-state controversy and local controversy exceptions under the Class Action Fairness Act. A topic us bloggers have been watching closely, now that the commencement cases are just about concluded (we hope).
The plaintiff, Jeffery Hart, originally filed this class action in Pennsylvania State Court on behalf of his fellow FedEx Ground employees who worked as local package delivery drivers improperly classified as independent contractors by FedEx Ground. Probably had something to do with overtime pay and benefits.
FedEx removed the case to federal court pursuant to CAFA’s new minimal diversity standard. The Court noted that FedEx Ground’s principal place of business is in Pittsburgh, Pennsylvania and Hart was a citizen of Pennsylvania. In the absence of CAFA’s minimal diversity, nothing would support federal subject matter jurisdiction over these claims.
After removal, the case was transferred to the Northern District of Indiana to multi-district litigation, and Hart moved for remand citing the home-state controversy exception to CAFA’s jurisdictional rule. His argument relied on Brill v. Countrywide Home Loans that Fed Ex Ground, as proponent of CAFA jurisdiction, bore the burden of demonstrating not only that CAFA’s general jurisdictional requirements were met, but also that none of the mandatory exclusions under CAFA applied. (Editors’ Note: See the CAFA Law Blog analysis of Brill posted on November 2, 1995).
FedEx responded to the Motion to Remand arguing that Brill held only that the defendant bears the burden of showing CAFA’s threshold jurisdictional requirements are satisfied and did not address which party bears the burden of establishing that an exception to CAFA’s minimal diversity jurisdiction applies. In his reply, Hart noted that Brill rejected any reliance on CAFA’s legislative history and also that FedEx Ground had not met its burden to prove that the local controversy exception did not exist.
The district court denied the Motion to Remand holding that once FedEx Ground had established at least one plaintiff was not a citizen of Pennsylvania the burden shifted to Hart to show that the home-state controversy exception was applicable to the case. The Seventh Circuit accepted the appeal to address the question of which party bears the burden of establishing jurisdiction when the home-state and local controversy provisions of CAFA are implicated and affirmed the district court’s decision.
Judge Wood began her analysis by explaining the 60-day time limit for resolving CAFA appeals begins to run at the time a petition for appeal is granted, not when it is filed. She specifically joined the Fifth Circuit in its opinion in Patterson v. Dean Morris, the Ninth Circuit in its decisions in Bush v. Cheaptickets and Amalgamated Transit and the Eleventh Circuit’s decision in Evans v. Walter Industries. (Editors’ Note: See the CAFA Law Blog analysis of Patterson posted on June 5, 2006, the CAFA Law Blog analysis of Bush posted on October 23, 2005, the CAFA Law Blog analysis of Amalgamated posted on February 1, 2006, and the CAFA Law Blog analyses of Evans posted on May 25, 2006 and May 26, 2006).
Next, the Judge explained that CAFA amended the diversity jurisdiction statute, 28 U.S.C. § 1332, to give federal court jurisdiction over certain class actions, but that the statute also commands that district courts deny jurisdiction if one of the two exceptions to minimal diversity exists. First, under section 1332(d)(4)(B), the home-state controversy exception applies when two-thirds or more of the members of the proposed plaintiff class and primary defendants are citizens of the original filing state. Second, under section 1332(d)(4)(A), the local controversy exception applies when four particular circumstances are met: (1) more than two-thirds of the members of the proposed class are citizens of the filing state; (2) at least one defendant from whom the class is seeking significant relief and whose conduct forms a significant basis of the asserted claims is from the filing state; (3) the principal injuries were incurred in the filing state; and (4) no other class action asserting the same allegations has been filed against any of the defendants within the previous three years.
Without noting section 2 of CAFA or its legislative history, Judge Wood quickly stated “in general, of course, the party invoking federal jurisdiction bears the burden of demonstrating its existence” and “federal courts are courts of limited jurisdiction.” (Editors’ Note: While we agree with the Seventh Circuit’s holding in this case regarding the burden of proof as to CAFA’s two exceptions, we disagree with the court’s haste in addressing CAFA’s general burden of proof standard as to CAFA. If the court would have addressed Section 2 of CAFA along with its legislative history in this part of its analysis, it could have come to a different conclusion. See our article on the subject by clicking here.)
The opinion then turned directly to the burden of proof as to CAFA’s exceptions by following the Fifth Circuit’s opinion in Frazier v. Pioneer Americas and the Eleventh Circuit’s opinion in Evans v. Walter Industries. (Editors’ Note: See the CAFA Law Blog analysis of Frazier posted on August 17, 2006 and the CAFA Law Blog analyses of Evans posted on May 25, 2006 and May 26, 2006). Judge Wood, however, disagreed with those courts’ analyses explaining that the Eleventh Circuit in Evans did not discuss the language of CAFA itself. The Judge stated that the language of CAFA coupled with the United States Supreme Court’s opinion in Breuer v. Jim’s Concrete of Brevard, Inc., 538 U.S. 691 (2003)(recognizing that the opponent of removal under 28 U.S.C. § 1441(a) must prove the existence of an express exception) directs the conclusion that the party seeking to take advantage of the home-state or local controversy exception has the burden to show they apply.
The Breuer court stated that “since 1948 . . . there has been no question that whenever the subject matter of an action qualifies it for removal, the burden is on a plaintiff to find an express exception.” Judge Wood then pointed directly to the legislative history of CAFA, specifically the portion of the Senate Report that explains the allocation of the burden as to the exceptions, S. Rep. 14, 109th Cong. 1st Sess. 43 (2005). Most importantly, she also explained that the holding is consistent with the stated purposes of CAFA. She quoted a portion of Section 2 of CAFA which is the Findings and Purposes of CAFA itself. (Editors’ Note: other courts that have undertaken analysis of the general burden of proof in CAFA have failed to examine the text of the CAFA that is Section 2. Here, the Judge used Section 2 to bolster her opinion.) Judge Wood concluded stating “these exceptions are designed to draw a delicate balance between making a federal forum available to genuinely national litigation and allowing the state courts to retain cases when the controversy is strongly linked to that state.”