Wiley v. Advance America, 2008 WL 4179652 (D.S.C. Sept. 5, 2008) 

Try to remember back, its your first day of law school and you are sitting in basic civil procedure. You have carefully selected a seat in the middle of the class room. Not far back enough to look like a slacker but not so close to the front as to draw any extra unwanted attention from the grizzled looking man standing at the front of the room. You settle in for what you hope will be an painless and uneventful hour. It is not to be. All of a sudden you hear your name being called. Of course he mispronounces it, but not enough to leave any doubt that the tenured inquisitor is looking for you. “Why couldn’t Mr. Neff be served?” he asks.

“…..Ugh…..Umm…because he never ordered?” you answer to the resounding chuckles of your so called friends and classmates.

Looks like it is going to be a long semester. 

Well the good news from Wiley v. Advance America is that CAFA will not be making you revisit this nightmare anytime soon. At issue in the decision was whether the defendant was able to carry its burden of proof in proving diversity when it removed the case from state court in South Carolina to federal court under CAFA jurisdiction. 

In accepting the recommendation of the Federal Magistrate, the District Court of South Carolina held that minimal diversity under CAFA still means that at least one member of the plaintiff class has to be a citizen of a different state than at least one defendant and that a corporation having dual citizenship will not fulfill this requirement if one of its domiciles is still the same as the other party.   

This case arises from a class of plaintiffs bringing an action against several pay-day advance loan institutions for having the audacity of giving the likes of them loans in the first place. I wonder if they would have sued if they had been refused the loans too? Anyway, I digress. In the action, the complaint described the class as, “all South Carolina residents who have entered into a Deferred Presentment Loan or ‘payday loan’ as defined in South Carolina Deferred Presentment Services Act in South Carolina with Defendants.” The problem here is that all the companyies named as defendants were South Carolina residents as well.

In trying to maintain that minimal diversity required by CAFA, the defendants pointed to the fact that one of the defendants had its principal place of business in South Carolina but it was also incorporated in Delaware. The defendants alleged that by being a citizen of Delaware it was diverse from the class of plaintiff’s that consisted of only South Carolina residents. 

Now think back to the days of all-nighters with International Shoe. We learned that a corporation is a citizen for jurisdictional purposes in both the place where it is incorporated and also where its principal place of business is located. We also learned that corporate dual citizenship is just that; it is dual. It is not alternative. The defendant is not in either Delaware or South Carolina, it is in both. Did I just blow your mind? Apparently, the deciding judges learned this too. Come to think of it, this is also where we learned that just doing the minimal was supposed to be the easy way of doing things. Apparently too though, the attorneys for the defense did not. 

The court here acknowledges that while CAFA was enacted in order to expand federal jurisdiction over these matters; by interpreting minimal diversity in this way, the federal courts would basically be divesting the state courts of all jurisdiction since a large number of corporations are incorporated some place other than their principal place of business. 

The defendants also tried out an argument that not all the plaintiffs were still necessarily residents of South Carolina at the time the suit was filed and presented some evidence illustrating changes of address to places outside the state of some of its customers. However, the magistrate rejected this as baseless conclusions without the defendant meeting its burden of proof in asserting this change in domicile. 

Interestingly though, in addressing the plaintiffs Motion to Remand under the “Home State” and “Local Controversy” provisions of CAFA where the plaintiff bears the burden of proof, the magistrate also ruled that the plaintiff did not meet its burden in proving all the plaintiffs were actually citizens of South Carolina either! In other words, who ever ended up with the burden in this case did not do a very good job with it. 

Either way though, the district court accepted the magistrate’s recommendation and ordered the case remanded back to state court for lack of diversity. So rest easy. Even though CAFA is expanding jurisdiction, it is not rewriting the old laws of civil procedure completely. So now, all you have to worry about is mortgages, car notes, billable hours…. Wait a second, maybe law school wasn’t that bad after all. 

By: Chase Boeneke