Estate of Hanna, et al. v. Agape Senior, LLC, et al.,  2015 WL 247906 (D.S.C. Jan. 20, 2015).

A district court in South Carolina applied CAFA’s local controversy exception in remanding a case to state court, holding that the plaintiff class sought “significant relief” from local defendants, whose actions formed a “significant basis” for the proposed class’s claims.

This case arose out of the purported medical care provided to members of the class by an unlicensed physician. The complaint named nine Agape entities (“Agape”), Agape’s owner and CEO Scott Middleton, and recruiting agency Jackson Coker (collectively, the “Defendants”). The plaintiff class sought remand on the basis of CAFA’s local controversy exception, 28 U.S.C. § 1332(d)(4).

The local controversy exception applies to removed cases where: (1) more than two-thirds of the members of the proposed plaintiff class are citizens of the state where the suit was filed originally; (2) at least one defendant (a) is a defendant from whom members of the plaintiff class are seeking “significant relief,” (b) is a defendant whose conduct “forms a significant basis” for the proposed plaintiff class’s claims, and (c) is a citizen of the state in which the action originally was filed; (3) the principal injuries stemming from the conduct alleged in the complaint occurred in the state where the action was filed originally; and (4) in the three years before the filing of the class action complaint, no other similar class action was filed against any of the defendants on behalf of the same or other class. 28 U.S.C. § 1332(d)(4). The Court noted that the purpose of the local controversy exception is to permit class actions with a truly local focus to remain in state court. See S. Rep. No. 109–14, at 38 (2005).

Here, the Court’s analysis focused on the second factor: whether “significant relief” was sought from Agape, and whether Agape’s conduct formed a “significant basis” for the claims made.

The Court referred to the Eleventh Circuit, which has held that “a class seeks ‘significant relief’ against a defendant when the relief sought against the defendant is a significant portion of the entire relief sought.” Evans v. Walter Indus., 449 F.3d 1159, 1167 (11th Cir. 2006) (citation omitted). Such analysis requires not only an “assessment of how many members of the class were harmed by the defendant’s actions, but also a comparison of the relief sought between all defendants and each defendant’s ability to pay a potential judgment.” Id. (citation omitted).

Although the original complaint was unclear as to which defendant it sought actual and punitive damages from, the Court noted that it exclusively sought disgorgement of improper collections and a declaratory judgment against Agape only. Moreover, of the nine causes of action alleged, only one was asserted against Jackson Coker, the diverse defendant. Conversely, the complaint alleged numerous causes of action against Agape. Only one of those causes of action sought vicarious liability; the remainder held Agape primarily and independently liable. Finally, the complaint alleged that all members of the plaintiff class were harmed by actions of Agape.

Next, the Court noted that the “significant basis” component of the local controversy exception requires that there be “at least one local defendant whose alleged conduct forms a significant basis for all the claims asserted in the action.” Kaufman v. Allstate New Jersey Ins. Co., 561 F.3d 144, 155 (3d Cir. 2009). In relating the local defendant’s alleged conduct to all the claims asserted in the action, the significant basis provision effectively calls for comparing the local defendant’s alleged conduct to the alleged conduct of all the defendants. Id. at 156.

The Court referred to nine factors formulated in Kaufman to ascertain a “significant basis,”  and it analyzed four of those nine factors. (Editors’ Note: See the CAFA Law Blog analysis of Kaufman posted on October 14, 2009). The Court noted that: (1) the claims alleged against Agape were important to the action, relative to the other claims, as they were related to direct contact Agape made with the plaintiffs; (2) all of the claims alleged, save for one, relied on the alleged conduct of Agape; (3) only one out of nine causes of action had been asserted against a non-local defendant; and (4) the local defendants in this case were related to one another: all constituted the entities of Agape, and its owner and CEO, Scott Middleton. As such, all of the local defendants were related to one another, and comprised the vast majority of all defendants in this case.

Accordingly, the Court concluded that the “significant relief” and “significant basis” prongs were satisfied. Pursuant to CAFA’s local controversy exception, the Court remanded the action to state court.