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CAFA Law Blog Information, cases and insights regarding the Class Action Fairness Act of 2005

Seventh Circuit- Lawyers Who Launch Class Actions Are Not In A Good Position To Complain About The Expenses They Entail

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Myrick v. WellPoint, Inc., 764 F.3d 662 (7th Cir. 2014).

The Seventh Circuit held that a District Court’s denial of plaintiffs’ motion to remand due to their failure to meet their burden of proof, was proper, notwithstanding plaintiffs’ contention that class citizenship discovery would have been too expensive.

Plaintiffs were former health insurance policy holders who filed a state court putative class action alleging violation of Illinois law in the cancellation of existing insurance policies by WellPoint, Inc. following its acquisition of RightCHOICE Managed Care, Inc. Defendants removed the action to the District Court under CAFA.Plaintiffs moved to remand, relying on § 1332(d)(4), which states that District Courts shall decline to exercise federal jurisdiction, if at least two-thirds of class members are citizens of the state in which the suit began and at least one defendant from which “significant relief” is sought is a citizen of the same state. Plaintiffs claimed that the subject policies were offered only to persons who represented that they lived in Illinois, and the policies were cancelled in 2002.  Plaintiffs maintained that, even if their former holders left Illinois at the normal rate (the Census Bureau estimates that roughly 2% of the nation’s population changes states each year), about 87% of the class would have been Illinois residents when the suit was removed. It was otherwise agreed that the complaint sought “significant relief” from an Illinois defendant.

In denying remand, the District Court held that plaintiffs had failed to meet their burden to show that the exception under § 1332(d)(4) applied. The Court differentiated between citizenship from residence, noting that citizenship means domicile, rather than just current residence. It also noted that plaintiffs who said they resided in Illinois may have meant something else, for example, that they work in Illinois. Plaintiffs also failed to account for group policies, which may cover residents of other states and which may be purchased by employers that have non-Illinois citizenship.

On appeal, Plaintiffs pointed to the policies’ language and asked the Seventh Circuit to infer that: (i) because coverage under individual policies was supposed to be restricted to Illinois, it was so restricted in fact; (ii) all residents of Illinois also were citizens of Illinois; (iii) holders of the subject policies were no more likely to move than average citizens of every state; and (iv) employers purchasing group policies were all citizens of Illinois, even though the policies did not restrict the location of the employers.

The Seventh Circuit observed that, while these propositions might be correct, Plaintiffs offered no evidence to support them. In a supplemental memorandum, filed after oral argument, Plaintiffs argued that proving the citizenship of all class members was simply too expensive, so proof should be excused.  The Seventh Circuit remarked that Plaintiffs and their counsel must be prepared to meet the expense or be deemed inadequate representatives: “Lawyers who launch class actions are not in a good position to complain about the expenses they entail.”  The Seventh Circuit noted that if determining the citizenship of every policyholder was expensive, Plaintiffs could have resorted to ascertaining citizenship of a random sample of policyholders. Because nothing of that kind was done, the Seventh Circuit concluded that the District Court was right in refusing remand.