Class Action Defense Blog

Following Removal of Class Action to Federal Court under CAFA (Class Action Fairness Act), Plaintiffs Decision to Amend Complaint to Eliminate Class Action Allegations did not Destroy Federal Court Jurisdiction because Jurisdiction is Determined at Time of Removal and is not Affected by Subsequent Events Seventh Circuit Holds

Plaintiffs filed a putative class action in Wisconsin state court against Burlington Northern Santa Fe Railway Company and Burlington Northern Santa Fe Corporation alleging that defendants’ “failure to inspect and maintain a railroad trestle caused the town to flood in July 2007, damaging their property.” In re Burlington Northern Santa Fe Railway Co., 606 F.3d 379, 379-80 (7th Cir. 2010). Defense attorneys removed the class action to federal court under CAFA (Class Action Fairness Act); plaintiffs then amended the complaint to remove the class action allegations and the district court remanded the matter to state court on the ground that without the class action allegations federal court jurisdiction was lacking under CAFA. Id., at 379. Id. Defense attorneys sought leave to appeal the remand order; the Seventh Circuit granted the petition and reversed.

The Seventh Circuit noted that “the parties battled extensively over jurisdiction” in the district court. In re Burlington, at 380. Defense attorneys argued diversity jurisdiction existed because the joinder of the non-diverse individual employee defendants was fraudulent, but the district court found it to be tactical rather than fraudulent. Id. The district court agreed, however, that jurisdiction existed under CAFA, and denied plaintiffs’ first motion to remand. Id. Plaintiffs thereafter sought and obtained leave of court to amend the complaint to remove the class action allegations. Id. The federal court also considered the motion to amend to be “an implied motion to remand the case, which it granted.” Id. In the district court’s view, because the amended complaint did not contain any class action allegations, jurisdiction under CAFA no longer existed. Id.

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Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Even if Defendants Removed Class Actions to Federal Court Prematurely, Subsequent Class Action Complaints Filed by Plaintiffs Prior to Filing Motion for Remand Established Federal Court Jurisdiction under Class Action Fairness Act (CAFA) so District Court did not Err in Denying Motion to Remand Class Actions to State Court Fourth Circuit Holds

In 2003, three plaintiffs filed individual state court lawsuits against various defendants, including Residential Funding, “alleging violations of the Maryland Secondary Mortgage Loan Law.” Moffitt v. Residential Funding Co., LLC, ___ F.3d ___ (4th Cir. May 3, 2010) [Slip Opn., at 1, 4]. The lawsuits were dismissed in 2006 on statute of limitations grounds, “[b]ut in 2009, the Maryland Court of Appeals reversed, permitting the cases to go forward.” Id., at 4 (citation omitted). Plaintiffs’ counsel then advised the various defendants, in writing, “that plaintiffs intended to amend their individual complaints into class actions.” Id. Plaintiffs’ counsel also provided defendants with copies of the three anticipated class action complaints. Id. The draft class action lawsuits alleged that the putative class covered “thousands of members” and, though they did not pray for a specific amount in damages, the cover letter estimated that the damage suffered by each class member ranged from $20,000 to $90,000. Id. Believing that the draft complaint constituted “other paper[s]” within the meaning of 28 U.S.C. § 1446(b) and that the draft class action complaints established federal jurisdiction under the Class Action Fairness Act (CAFA), and “[f]earing that the thirty-day deadline would expire before plaintiffs actually filed the amended complaints,” defense attorneys removed the lawsuits to federal court. Id. Plaintiffs’ counsel thereafter filed the amended class action complaints in the federal court, id., at 4-5, and “defendants filed motions for leave to amend their original notices of removal in order to base removal on plaintiffs’ actual filing of the complaints,” id., at 5. Plaintiffs then moved to remand the class actions to state court, id., at 5. Plaintiffs’ counsel conceded that the amended class action complaints fell within the scope of CAFA for purposes of federal court jurisdiction, but they argued that the removals were premature because neither the letter nor the draft class action complaints constituted “other paper[s]” within the meaning of § 1446(b). Id. The district court denied the motion, id. Plaintiffs obtained leave to appeal the district court’s order, id., at 5-6, and the Fourth Circuit affirmed.

The Circuit Court began its analysis by observing that it “need not decide whether the cases were improperly removed” because even if they were “the amended complaints provided an independent basis for the district court to retain jurisdiction.” Moffitt, at 3. Plaintiffs’ “principal argument” is that federal court jurisdiction “did not exist at the time of removal,” accordingly, the motion for remand should have been granted. Id., at 6. The Fourth Circuit recognized that the removal statute requires the case be subject to federal court adjudication “at the time the removal petition is filed,” id. (citation omitted), but held that “the mere fact that a case does not meet this timing requirement is not ‘fatal to federal-court adjudication’ where jurisdictional defects are subsequently cured.” Id. (citation omitted). It was therefore unnecessary for the Court to decide whether federal court jurisdiction over the cases existed at the time defense counsel removed them to federal court, because “plaintiffs independently conferred jurisdiction on the district court by filing their amended class action complaints prior to moving to remand.” Id., at 7. The Circuit Court also reasoned, “Requiring pointless movement between state and federal court before a case is tried on the merits can…impose significant costs on both courts and litigants[,]” and “Here, it would be a waste of judicial resources to remand these cases on the basis of an antecedent violation of the removal statute now that jurisdiction has been established.” Id., at 8. Put simply, the Fourth Circuit found that “these cases would likely end up in federal court regardless of whether we ordered remands at this juncture.” Id. Thus, “considerations of judicial economy weigh against requiring such a pointless exercise and in favor of allowing this case to go forward in a federal forum where jurisdiction has been perfected.” Id. The Circuit Court therefore affirmed the district court order denying plaintiffs’ motion to remand the class actions to state court, id., at 9.

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

“Mass Action” Provision in Class Action Fairness Act (CAFA), Extending Federal Court Jurisdiction to Lawsuits Involving at Least 100 Plaintiffs, did not Permit Federal Courts to Treat Multiple, “Virtually Identical Complaints” by Same Plaintiffs’ Counsel as a Single Lawsuit for Purposes of Determining Number of Plaintiffs Seventh Circuit Holds

Five separate but “mostly identical complaints” (not class actions) were filed against various Bayer entities in Illinois state court seeking damages for personal injuries allegedly caused by Bayer’s prescription drug Trasylol. Anderson v. Bayer Corp., ___ F.3d ___ (7th Cir. June 22, 2010) [Slip Opn., at 1, 3]. According to the “virtually identical” lawsuits, “plaintiffs (or their decedents) suffered injuries as a result of being administered Trasylol during heart surgery.” Id., at 3-4. Defense attorneys removed the lawsuits to federal court under the Class Action Fairness Act (CAFA), asserting that the lawsuits fell within CAFA’s “mass action” provision “which allows the removal of cases joining the claims of at least 100 plaintiffs that otherwise meet CAFA’s jurisdictional requirements.” Id., at 3. The district court remanded four of the five lawsuits on the ground that they involved less than 100 – it was, apparently, only by accident that the fifth lawsuit named precisely 100 plaintiffs. Id. Bayer asked the Seventh Circuit for permission to appeal the remand order; defense attorneys argued that the Circuit Court should “hold that (1) plaintiffs cannot avoid federal diversity jurisdiction by carving their filings into five separate pleadings, and (2) there is diversity jurisdiction over most plaintiff’s claims because the claims of the small number of non-diverse plaintiffs were fraudulently misjoined and should be severed.” Id. The Circuit Court rejected the appeal because it agreed with the district court that the lawsuits fell outside the scope of CAFA’s “mass action” provision because they involved fewer than 100 plaintiffs; accordingly, the Court held that it was without jurisdiction to reach the second issue advanced by Bayer. Id.

Plaintiffs’ counsel originally filed “four virtually identical complaints, using verbatim language,” in Illinois state court “on behalf of 57 unrelated plaintiffs.” Anderson, at 3-4. Defense attorneys removed the lawsuits to federal court on grounds of diversity, arguing that the non-diverse plaintiffs had been joined fraudulently to defeat diversity jurisdiction. Id., at 4. The federal court remanded the complaint to state court sua sponte. Id. On remand, plaintiffs’ counsel amended the lawsuits to add another 111 plaintiffs, distributed across the four complaints and bringing the total number of plaintiffs in one of those lawsuits to 100; plaintiffs’ counsel also filed a fifth lawsuit. Id. Bayer again removed the lawsuits to federal court on the ground that the five separate complaints “should be treated as a single mass action,” id. The lawsuits were again remanded to state court and Bayer filed a petition seeking permission to appeal under the CAFA provision that “creates an exception for class actions to the general rule that remand orders are not reviewable.” Id. (citing 28 U.S.C. § 1447(d)).

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Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

District Court Properly Remanded Class Action to State Court on Ground that Variable Life Insurance Policy Constituted a “Security” Within the Meaning of Exception to Federal Court Jurisdiction under CAFA (Class Action Fairness Act) Seventh Circuit Holds

Plaintiff filed a putative class action against the issuer of his life insurance policy, Lincoln National Life Insurance, alleging that it breached the terms of certain of its variable life insurance policies. Lincoln Nat’l Life Ins. Co. v. Bezich, ___ F.3d ___ (7th Cir. June 25, 2010) [Slip Opn., at 1]. According to the allegations underlying the class action complaint, “Each month, Lincoln deducts cost-of-insurance charges from the accounts of its policyholders…[that] are not determined based on expected mortality, as promised by the policy.” Id., at 1-2. Defense attorneys removed the class action to federal court, asserting jurisdiction under the Class Action Fairness Act (CAFA), id., at 2. However, the district court remanded the class action to state court on the ground that CAFA provides an exception for class actions “that solely involves a claim . . . that relates to the rights, duties (including fiduciary duties), and obligations relating to or created by or pursuant to any security (as defined under section 2(a)(1) of the Securities Act of 1933 (15 U.S.C. 77b(a)(1)) and the regulations issued thereunder).” Id. (citing § 1332(d)(9)(C)). Defendant filed a petition with the Seventh Circuit seeking permission to appeal the district court’s remand order. Id., at 1-2. Lincoln National Life argued “that its petition raises a ‘novel and important issue’ under CAFA: ‘whether contract claims grounded in the traditional insurance features of variable life insurance policies, as opposed to those related to their security features, qualify under the securities exception to CAFA.’” Id., at 2. Because the Seventh Circuit agreed with the district court’s conclusion that § 1332(d)(9)(C) required remand, it dismissed the appeal for lack of jurisdiction. Id.

The Circuit Court explained that Lincoln allowed the holders of single variable life insurance policies to “allocate money between a General Account, which accumulates value from premium payments, and a Separate Account, an investment account whose value varies depending on the performance of the investments selected.” Bezich, at 2-3. The policyholder may place 100% of his or her funds in either the General or Separate Account, or may split the funds between the accounts in any percentage they desire. Id., at 3. “The Separate Account is registered with the Securities and Exchange Commission as a unit investment trust under the Investment Company Act of 1940,” id. (citation omitted). The class action challenges the insurance charges deducted from both the General and Separate Account based on the percentage of funds in each account. Id. Defense attorneys argued that the appeal should be accepted because “no court of appeals has ever considered the application of CAFA to this type of variable life insurance policy.” Id.

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Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions, PSLRA/SLUSA Class Actions

District Court Order Remanding Class Action to State Court Must be Dismissed because Class Action Fairness Act did not Authorize Appellate Review of Specific Facts of the Case Second Circuit Holds

Plaintiffs, the “holders of certificates issued by the trusts,” filed a putative class action in New York state court against various Countrywide Financial entities seeking a declaratory judgment that, under the terms of Pooling and Servicing Agreements between plaintiffs and defendants, Defendant Countrywide Servicing is required to repurchase the certain loans from the plaintiff-trusts “at a price equal to their unpaid principal plus any accrued interest.” Greenwich Financial Services Distressed Mortgage Fund 3 LLC v. Countrywide Financial Corp., ___ F.3d ___, 2010 WL 1541628, *1, *2 (2d Cir. April 20, 2010). Defense attorneys removed the class action to federal court pursuant to the Class Action Fairness Act (CAFA), id., at *1. Plaintiffs moved to remand the class action to state court on the grounds that “while CAFA extended federal jurisdiction for most class actions meeting certain monetary and diversity requirements, it did not apply to this action because the statute exempted suits involving claims that ‘relate[d] to the rights, duties[,] ... and obligations relating to or created by or pursuant to any security.’” Id. (quoting 28 U.S.C. § 1332(d)(9)(C)). The district court agreed and remanded the class action to state court, id. Defendants appealed the remand order. The Second Circuit dismissed the appeal, concluding that it lacked jurisdiction to consider it.

The Circuit Court explained that appeal turned on a provision in CAFA that “bars appellate review of orders remanding securities class actions to state court.” Greenwich Financial, at *1. By way of background, the defendants originate and service residential home loans. Id. Defendant Countrywide Home Loans raised money to finance the loans by selling mortgages in securitization transactions “to specially created trusts, which received payment of interest and principal from mortgage borrowers.” Id. The trusts then “sold certificates to investors,” which entitled the owners to repayment of their principal and to interest payments, id. Defendant Countrywide Servicing administered the loans under Pooling and Servicing Agreements (PSAs). Id. Defendants Countrywide Home Loans and Countrywide Servicing, together with various other entities, were parties to the PSAs; however, the holders of the certificates and Defendant Countrywide Financial were not. Id. According to the allegations underlying the class action, in 2008, the attorneys general of seven states filed lawsuits against various Countrywide entities alleging predatory lending; specifically, “The states alleged that Countrywide engaged in deceptive sales practices, charged unlawful fees, and made loans it had no reasonable basis to think could be repaid.” Id., at *2. Countrywide eventually entered into a single settlement agreement resolving the multi-state litigation, which required Countrywide “to modify the terms of many of the mortgages owned by the trusts and administered by Countrywide Servicing on behalf of the trusts.” Id. Under the terms of the settlement, some homeowners “would make smaller payments of interest and principal to the trusts, thereby decreasing the value of the certificates.” Id.

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Posted In: Class Action Fairness Act (CAFA), Class Action Court Decisions, PSLRA/SLUSA Class Actions

Class Action Complaint Premised on Risk of Identity Theft Failed to Adequately Allege Injury in Fact and, Accordingly, Must be Dismissed for Lack of Standing Pennsylvania Federal Court Holds

Plaintiff filed a putative class action against Aetna in federal court, asserting jurisdiction under the Class Action Fairness Act (CAFA), arising out of “an alleged security breach of Defendant’s online job application database”; specifically, the class action complaint alleged that plaintiff (who had worked for Aetna previously) applied online for a position with Aetna and, as part of the application, “uploaded his personal information as well as his resume” and subsequently learned that Aetna’s job application website had been hacked. Allison v. Aetna, Inc., ___ F.Supp.2d ___ (E.D. Pa. March 8, 2010) [Slip Opn., at 1-2]. According to the allegations underlying the class action complaint, Aetna “tout[ed] the security measures that [it] employed to protect such information against accidental or unauthorized access or disclosure.” Id., at 1. The website contained email addresses, Social Security numbers, and personal contact information of people to whom Aetna had extended job offers. Id..at 2. Aetna disclosed that the email addresses had been stolen but that it did not know whether any other information had been compromised, id. Additionally, Aetna could not confirm that plaintiff’s email address had been stolen, and the class action complaint did not allege that plaintiff had received any phishing email or that there was “any other sort of misuse of the database information or his information specifically.” Id., at 2-3. In response to the intrusion, Aetna “offered Plaintiff credit monitoring assistance and identity theft insurance.” Id., at 3. Instead, plaintiff filed his putative class action, alleging that Aetna’s data security system was inadequate and asserted causes of action “for negligence, breach of implied contract, breach of express contract, negligent misrepresentation, and invasion of privacy.” Id., at 3-4. Defense attorneys moved to dismiss the class action, id., at 4. The district court granted the motion, concluding that plaintiff had failed to establish an injury in fact.

The district court explained that the class action complaint was light on facts. The complaint “details the various ways in which Sensitive Information can be exploited, the dangers of identity theft, and the costs and inconvenience it causes its victims”; however, the “only allegation of actual misuse relates solely to the phishing emails that were sent to others.” Allison, at 3-4. The complaint also outlines various steps taken by putative class members, largely centered on monitoring identity theft, and concludes that class members “face a significant risk of identity theft” and that he, personally, suffered anxiety, emotional distress, and loss of privacy. Id., at 4. In analyzing the motion to dismiss, the federal court began by noting that Article III jurisdiction requires plaintiff establish standing to prosecute the class action and, specifically, that he establish “an injury in fact . . . ; a causal connection between the injury and the conduct complained of; and substantial likelihood of remedy - rather than mere speculation – that the requested relief will remedy the alleged injury in fact.” Id., at 4-5 (citation omitted). Moreover, “[t]he assumption of truth does not apply . . . to legal conclusions couched as factual allegations or to ‘[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements.’” Id., at 6 (citation omitted).

Continue reading "Aetna Class Action Defense Cases–Allison v. Aetna: Pennsylvania Federal Court Dismisses Class Action Holding Plaintiff Failed To Establish Standing Because Alleged Injury Too Speculative" »

Posted In: Class Action Fairness Act (CAFA), Class Action Court Decisions

Class Action Complaint Alleging TILA Violations for Failing to Disclose “Key Terms” Associated with Negative Amortization/Option ARM Loan Satisfied Rule 23 Requirements for Class Action Certification California Federal Court Holds

Plaintiff filed a class action against U.S. Financial Funds, with whom she had refinanced her home loan, alleging violations of the federal Truth in Lending Act (TILA) and asserting various California statutory and common law claims; specifically, the class action complaint challenged disclosures made by defendant “in connection with the terms of a residential mortgage product that was sold to Plaintiff.” Lymburner v. U.S. Financial Funds, Inc., ___ F.3d ___ (N.D.Cal. January 22, 2010) [Slip Opn., at __]. According to the allegations underlying the class action complaint, plaintiff refinanced her home loan in 2006, obtaining an Option ARM loan. Id., at 1-2. The initial payments due on the loan reflected a “substantially discounted initial interest rate,” and while the interest rate could adjust monthly, the minimum monthly payment was fixed for five years. Id., at 2. U.S. Financial served as plaintiff’s mortgage broker and originated the loan, id. The loan documents disclosed the maximum interest rate that would be charged, as well as the maximum “unpaid principal that might result from negative amortization.” Id. The class action complaint alleged that just before her retirement in October 2006, defendant contacted her and advised that it could reduce her monthly mortgage payment to $700; plaintiff agreed to the loan without realizing that the principal amount owing on the loan could increase. Id. (The loan documents inflated plaintiff’s income; she initialed this page of the loan application and asserted that “the higher numbers did not strike her as being incorrect.” Id.) When plaintiff received her first bill and discovered the 9% interest rate and negative amortization, she tried to refinance the loan and made two mortgage payments before successfully refinancing her loan in April 2007. Id., at 2-3. The class action alleged that the failure to disclose “the key terms of the loan” violated TILA and constituted fraud under California’s Unfair Competition Law (UCL). Id., at 3. Plaintiff’s counsel moved to certify the litigation as a class action. Id., at 1, 3. The district court initially indicated that it planned to grant class action treatment, but ordered the parties to meet and confer concerning the proposed definition of the class because the court believed it to be inadequate. Id., at 1. Based on a joint letter proposing a new definition of the class, the federal court granted the motion for class action certification. Id.

The district court began by analyzing the adequacy of the proposed definition of the class, which focused on whether the loan documents disclosed that the interest rate “may” change (instead of “will” change), and that negative amortization “may” result (instead of “will” result). See Lymburner, at 4-5. The court held that the proposed class is ascertainable, particularly given that defendant used only one set of loan documents. Id., at 5. The federal court concluded at page 5 that “class membership can be ascertained by looking at the documents, particularly in light of the joint revised class definition.” The numerosity test in Rule 23(a)(1) for class action certification was met because the class contained at least 100 members, id., at 5. The district court also rejected defense challenges to the commonalty test in Rule 23(a)(2) because plaintiff’s class action was not premised on any representations made to her orally but, rather, on the disclosures contained in the written loan documents. Id., at 5-6. And the court rejected defendant’s claim that plaintiff’s claims were not “typical” as required by Rule 23(a)(3) because of differences in the remedies available to class members. Id., at 6-7. “Plaintiff’s claims are based on loans issued by Defendant allegedly without proper disclosures.” Id., at 7. Further, there was no evidence that defendant treated plaintiff differently or that her loan documents were materially different from those of other class members. Id. Accordingly, the typicality requirement was satisfied. Id. Finally, the court held that plaintiff satisfied the adequacy of representation test of Rule 23(a)(4). See id., at 7-8.

Continue reading "TILA Class Action Defense Cases–Lymburner v. U.S. Financial: California Federal Court Grants Class Action Treatment To TILA/UCL Class Action Complaint Holding Requirements Of Rule 23 Satisfied" »

Posted In: Class Action Fairness Act (CAFA), Class Action Court Decisions, RESPA/TILA Class Actions

In Case Removed to Federal Court under Class Action Fairness Act (CAFA), District Court Erred in Remanding Class Action Complaint to State Court Following Denial of Class Action Treatment because Jurisdiction is Generally Determined at Time Complaint is Filed and Class Action Allegations were not Frivolous Seventh Circuit Holds

Plaintiff filed a putative class action in Illinois state court against Learjet alleging breach of warranty and product liability claims; the class action complaint sought to represent all purchasers of Learjets “who had received the same warranty from the manufacturer that [plaintiff] had received.” Cunningham Charter Corp. v. Learjet, Inc., 592 F.3d 805 (7th Cir. 2010) [Slip Opn., at 1]. Defense attorneys removed the class action to federal court under CAFA (the Class Action Fairness Act of 2005), id., at 1-2. Plaintiff then moved the district court to certify two classes, but the court denied class action treatment “on the ground that neither proposed class satisfied the criteria for certification set forth in Rule 23.” Id., at 2. The federal court then ruled that the denial of the class action certification motion removed federal court jurisdiction under CAFA and remanded the complaint to state court. Id. Defendant petitioned the Seventh Circuit for leave to appeal the remand order; the Circuit Court granted the petition “to resolve an issue under the Class Action Fairness Act that this court has not heretofore had to resolve.” Id. The Circuit Court reversed.

The Seventh Circuit explained that CAFA creates federal court diversity jurisdiction in cases of minimal diversity; that is, “over certain class actions in which at least one member of the class is a citizen of a different state from any defendant (that is, in which diversity may not be complete).” Learjet, at 2. CAFA expressly applies “to any class action [within the Act’s scope] before or after the entry of a class certification order.” Id. (quoting § 1332(d)(8)). The Circuit Court explained that CAFA implies an “expectation” of class certification in that a district court should remand a putative class action to state court if “it would have been certain from the outset of the litigation that no class could be certified.” Id., at 3. On the other hand, “jurisdiction attaches when a suit is filed as a class action, and that invariably precedes certification.” Id. The Circuit Court concluded, therefore, “All that section 1332(d)(1)(C) means is that a suit filed as a class action cannot be maintained as one without an order certifying the class. That needn’t imply that unless the class is certified the court loses jurisdiction of the case.” Id.

Continue reading "CAFA Class Action Defense Cases–Cunningham Charter v. Learjet: Seventh Circuit Court Holds Class Action Removed To Federal Court Under CAFA Remains In Federal Court Following Denial Of Class Action Certification" »

Posted In: Class Action Fairness Act (CAFA), Certification of Class Actions, Removal & Remand, Class Action Court Decisions

UCL Class Action Alleging Apple iPod Created Unreasonable Risk of Hearing Loss Properly Dismissed for Failure to State a Claim because while iPod was Capable of Causing Hearing Loss it was Consumer Behavior that Proximately Caused Injury rather than iPod’s Design Ninth Circuit Holds

Plaintiffs filed a putative class action against Apple alleging inter alia violations of California’s Unfair Competition Law (UCL); specifically, the class action complaint alleged that Apple’s iPod “is defective because it poses an unreasonable risk of noise-induced hearing loss to its users.” Birdsong v. Apple, Inc., 590 F.3d 955 (9th Cir. 2009) [Slip Opn., at 16867, 16870.] Federal court jurisdiction was premised on the Class Action Fairness Act (CAFA). Id., at 16872 n.1. The class action originated in Louisiana, but it was transferred to California and a California resident was added as a putative class representative in the third amended class action complaint. Id., at 16871. According to the allegations underlying the class action complaint, the iPods were sold with “detachable ‘earbud’ headphones” (but other headphones and audio devices could be used for playback), and were capable of “producing sounds as loud as 115 decibels.” Id., at 16870. Each iPod can with a warning concerning the risk of hearing damage, id., at 16870-71. The class action alleged that iPod’s ability to produce 115 decibels was a “defect” that constituted a “breach of the implied warranty of merchantability and fitness for a particular purpose,” id., at 16870. Defense attorneys moved to dismiss the third amended class action complaint for failure to state a claim and on the ground that plaintiffs lacked standing to prosecute the class action’s UCL claim. Id. The district court granted the motion and dismissed the class action. Id., at 16871-72. The Ninth Circuit affirmed.

The Circuit Court first summarized California law concerning the implied warranty of merchantability. See Birdsong, at 16872-73. The district court dismissed that class action claim based on its determination that it was the manner in which a consumer used the iPod, not its design, that created the risk of hearing loss. Id., at 16873. The Ninth Circuit agreed, explaining at page 16873 that “the iPod has an ‘ordinary purpose of listening to music,’ and nothing [plaintiffs] allege suggests iPods are unsafe for that use or defective.” While iPods are capable of playing music at loud volumes, and capable of playing music for 12-14 hours before the batteries need to be recharged or replaced, the bottom line is that “users have the option of using an iPod in a risky manner, not that the product lacks any minimum level of quality.” Id.

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Posted In: Class Action Fairness Act (CAFA), Class Action Court Decisions

Class Action Seeking Monetary and Injunctive Relief Arising from Theft of Personal Information, Allegedly Creating “Increased Risk” of Identity Theft Requiring Monitoring of Credit, Dismissed for Lack of Standing because Putative Class Representative did not Allege his Information was Stolen or had been used or Disclosed so Plaintiff Failed to Establish Injury-in-Fact Missouri Federal Court Holds

Plaintiff filed a putative class action against Express Scripts for negligence, breach of contract, violations of various “data breach notification laws” and violations of Missouri’s Merchandising Practices Act, arising out of the theft of its customers’ personal identification information; the class action complaint alleged that “inadequate security measures in relation to its computerized database system allowed unauthorized persons to gain access to confidential information of Express Scripts members contained in the database, with such information including names, dates of birth, Social Security numbers, and prescription information.” Amburgy v. Express Scripts, Inc., ___ F.Supp.2d ___ (E.D.Mo. November 23, 2009) [Slip Opn., at 1, 3.] Plaintiff filed the class action in federal court, asserting jurisdiction under the Class Action Fairness Act of 2005 (CAFA), id., at 3. According to the allegations underlying the class action complaint, the criminals who stole the information advised Express Scripts “that they would make public the confidential information obtained through the breach if Express Scripts did not pay a certain amount of money to them.” Id., at 2. Express Scripts advised its customers of the security breach, id. The class action alleged that the theft placed class members “at an increased risk of becoming victims of identity theft crimes, fraud, abuse, and extortion,” and that class members would be required to spend “considerable time and money to protect themselves” from injury. Id. Defense attorneys moved to dismiss the class action complaint on the grounds that plaintiff lacked standing and that the class action failed to state a claim for relief. Id., at 3. The district court granted the motion.

The federal court noted, “Database breaches appear to provide the basis for a new breed of lawsuits, and especially class action lawsuits, in which plaintiffs allege, as here, that the database handlers’ negligence in developing and maintaining security measures have resulted in otherwise personal and confidential information being compromised, thereby increasing the risk of identity theft for those individuals whose information was so compromised. The remedies sought in these actions vary, but generally include costs for credit monitoring, costs for closing and opening financial accounts, and damages for emotional distress.” Amburgy, at 5. The district court observed that federal courts have reached different conclusions as to whether individuals have Article III standing to prosecute such lawsuits, though the “recent trend” has been to find that standing exists based on a Seventh Circuit decision in Pisciotta v. Old Nat’l Bancorp., 499 F.3d 629 (7th Cir. 2007). See id., at 5-7. But the court explained at page 7, “because the requirement of standing is firmly rooted in the Constitution and is not subject to whim, the undersigned is reluctant to look to a ‘recent trend’ when analyzing whether or not a party has standing to sue in federal court.” Accordingly, it examined the standing issue with fresh eyes.

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Posted In: Class Action Fairness Act (CAFA), Class Action Court Decisions

District Court Erred in Refusing Motion to Stay Class Action Against Bank and Compel Arbitration of Individual Claim based on Arbitration Clause with Class Action Waiver because Class Action Waiver, and Cost-Sharing Provision, of Arbitration Clause did not Render Provision Unconscionable Eighth Circuit Holds

Plaintiff filed a putative class action in Missouri state court against Chase Bank alleging that it had imposed penalties on credit card holders and that it had violated Missouri’s Merchandising Practices Act (MMPA); in essence, the class action complaint alleged that Chase improperly increased the interest rate charged on credit card balances. Cicle v. Chase Bank USA, 583 F.3d 549, 2009 WL 3172157, *1 (8th Cir. 2009). According to the allegations underlying the class action complaint, plaintiff’s credit card with Chase initially “carried a 7.99% annual percentage rate (APR) on unpaid balances,” but then “increased dramatically, to 25.99%.” Id. When asked about the increase, the Bank responded that “a credit agency had reported her as past due on an unrelated loan or account, so Chase increased the APR from the 7.99% ‘Preferred Customer Pricing’ rate.” Id. Defense attorneys removed for the class action to federal court under CAFA (Class Action Fairness Act of 2005) and on the ground of federal question jurisdiction under the National Bank Act (NBA). Id. The Bank then asked the district court to stay the class action to compel plaintiff to arbitrate her individual claim pursuant to the terms of the arbitration clause in her Cardmember Agreement, which included a class action waiver. Id. The district court denied the defense motion, concluding that the class action waiver and the provisions for cost-sharing were unconscionable under Missouri law, id., at *3. The Eighth Circuit reversed, holding that the class action waiver was neither substantively nor procedurally unconscionable.

The Cardmember Agreement contained an arbitration clause, governed by the Federal Arbitration Act (FAA), that required arbitration on an individual basis of any dispute with the bank; specifically, the arbitration clause contained a class action waiver, prohibiting the cardmember from bringing “a class action or other representative action” and precluding the cardmember from being “part of any class action or other representative action.” Cicle, at *1-*2. The arbitration was to be binding, and covered “any claim, dispute or controversy by either you or us against the other, or against the employees, parents, subsidiaries, affiliates, beneficiaries, agents or assigns of the other, arising from or relating in any way to the Cardmember Agreement, any prior Cardmember Agreement, your credit card Account or the advertising, application or approval of your Account (‘Claim’).” Id., at *2. The arbitration clause provided an exception for small claims court matters, id. With respect to costs, the arbitration clause provided that the Bank would pay for the filing fee (up to $500) and, “if there is a hearing, we will pay any fees of the arbitrator and arbitration administrator for the first two days of that hearing.” Id. The agreement provided that all other fees would be “allocated in keeping with the rules of the arbitration administrator and applicable law,” and that each side otherwise would be responsible for their own attorney fees and costs, regardless of whether they prevailed, unless the arbitrator orders otherwise based on “any applicable law.” Id. Reviewing the district court’s decision de novo, see id., at *3, the Eighth Circuit reversed its refusal to enforce the arbitration clause.

Continue reading "Arbitration Class Action Defense Cases–Cicle v. Chase: Eighth Circuit Reverses Denial Of Bank Motion To Compel Arbitration Of Plaintiff's Class Action Claims On Individual Basis Holding Class Action Waiver Enforceable" »

Posted In: Arbitration, Class Action Fairness Act (CAFA), Class Action Court Decisions

Class Action Complaint Against Amazon Challenging Shipping and Handling Fees Satisfied Rule 23 Requirements for Class Action Treatment California Federal Court Holds

Plaintiff filed a putative class action against Amazon.com alleging violations of California’s Unfair Competition Law (UCL) and Consumer Legal Remedies Act (CLRA); specifically, the class action complaint alleged that Amazon, in addition to receiving “a sales commission and a percentage of the sales price for each item sold,” charged shipping and handling fees to buyers “without input from Marketplace Sellers” even though it was the sellers who “took care of packaging and shipping products.” Baghdasarian v. Amazon.Com, Inc., 258 F.R.D. 383, 385 (C.D. Cal. 2009). According to the allegations underlying the class action complaint, Amazon failed to disclose to buyers that it kept a portion of the shipping and handling fees and this act was “fraudulent” within the meaning of the UCL and CLRA, id. Plaintiff decided not to seek class action treatment of the class action complaint’s CLRA claim, but moved for class action certification of the UCL claim. Id. Plaintiff argued that the lawsuit satisfied the requirements for class action certification under Rule 23(b)(3), id., at 386. Defense attorneys opposed class action treatment, but the district court granted the motion.

The district court first held that plaintiff had standing to prosecute the class action. See Baghdasarian, at 386-87. Specifically, the federal court held that plaintiff had standing to prosecute the class action’s UCL claim, rejecting defense arguments that plaintiff had not suffered any economic harm because he “received the benefit of his bargain.” See id., at 386-87. The court also had little difficulty in finding that the requirements of Rule 23(a) for class action certification had been met. Id., at 388-89. The court also found that the class action requirements for certification under Rule 23(b)(3) had been met. The federal court readily found that the predominance test had been satisfied, see id., at 389-90, and also concluded that a class action would be “the most efficient way to resolve the claims of all class members, especially since the individual claims are small and economically unfeasible to litigate individually,” id., at 390, thus satisfying the superiority prong of Rule 23(b)(3). Accordingly, the district court granted plaintiff’s motion for class certification, see id., at 391.

Posted In: Class Action Fairness Act (CAFA), Class Action Court Decisions

Plaintiffs’ Amendment to Class Action Complaint Following Removal under Class Action Fairness Act (CAFA) Defeated CAFA Jurisdiction Warranting Remand of Lawsuit to State Court Wisconsin Federal Court Holds

Plaintiffs filed a putative class action in Wisconsin state court against various defendants seeking “damages resulting from a flash flood that inundated plaintiffs’ homes in the town of Bagley, Wisconsin in 2007.” Irish v. Burlington Northern Santa Fe Railway Co., 632 F.Supp.2d 871, 872 (W.D. Wis. 2009). Defense attorneys removed the class action to federal court on grounds of diversity even though two of the defendants shared Wisconsin citizenship with the plaintiffs, arguing that the Wisconsin-resident defendants were fraudulently joined to defeat diversity, and also asserting removal jurisdiction under the Class Action Fairness Act (CAFA). Id., at 872-83. “Plaintiffs’ moved to remand the case to state court, arguing that joinder was not fraudulent and that their suit was not subject to the Class Action Fairness Act.” Id., at 873. The district court determined that the joinder was not fraudulent but that CAFA removal jurisdiction existed, id. Plaintiffs sought and obtained leave to amend their class action complaint, “disavowing their class action allegations and seeking relief for only the named plaintiffs.” Id. The district court then remanded the class action to state court on the ground that it “no longer had subject matter jurisdiction under the Class Action Fairness Act.” Id. Defense attorneys moved the district court to reconsider its remand order, arguing that because CAFA jurisdiction existed at the time of removal, it could not be taken away by subsequent amendment “even if the case was no longer a class action.” Id. The district court granted reconsideration but again held that the case had to be remanded to state court.

As a preliminary procedural matter, the district court noted that defendants also filed a notice of appeal from the remand order with the Seventh Circuit. Irish, at 873. For reasons we do not discuss here, the district court concluded that it retained jurisdiction over the matter to reconsider its remand order. See id., at 873-74. Turning to the merits, the district court noted that the reconsideration motion was primarily directed at “[the] decision to remand the suit on the basis of a post-removal amendment of the complaint.” Id., at 874. The district court rejected the argument that “for the purpose of determining whether subject matter jurisdiction exists in a case removed from state court under [CAFA], the court is bound by the allegations of the original complaint and may not consider any later amendments.” Id., at 875. The court reaffirmed its holding that “the dismissal of plaintiff's class action claims eliminated the ground for the court's grant of diversity jurisdiction under the Class Action Fairness Act.” Id., at 876.

Continue reading "CAFA Class Action Defense Cases–Irish v. Burlington: Wisconsin Federal Court Reaffirms Order Remanding Class Action To State Court Holding Post-Removal Amendments Destroyed CAFA Removal Jurisdiction" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Class Action Failed to Allege Violation of California’s Unfair Competition Law (UCL) based on Merchant’s Refusal to Redeem Gift Card for Cash because California Law gives Merchant Option Whether to Redeem (So Long as Gift Card Value Less than $10) California Federal Court Holds

Plaintiff filed a putative class action in California state court against McDonald’s alleging violations of California’s Unfair Competition Law (UCL) and unjust enrichment. Marilao v. McDonald's CORP., 632 F.Supp.2d 1008, 1009-10 (S.D. Cal. 2009). According to the allegations underlying the class action complaint, plaintiff sought “to redeem a gift card he received for cash instead of dining at McDonald's, but was told…that he could not receive cash for his gift card.” Id., at 1010. The class action complaint further alleged that “McDonald's gift cards provide…‘[t]he value on this card may not be redeemed for cash ... unless required by law.’” Id. Defense attorneys removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA), id., at 1009-10. McDonald’s then moved to dismiss the class action for failure to state a claim, id., at 1010. The district court granted the motion and dismissed the class action with leave to amend.

With respect to the class action’s UCL claim, plaintiff alleged that McDonald’s conduct violated California Civil Code § 1749.5(b)(1), which provides that “[a]ny gift certificate sold after January 1, 1997, is redeemable in cash for its cash value, or subject to replacement with a new gift certificate at no cost to the purchaser or holder.” Marilao, at 1011. However, California Civil Code § 1448 provides, “If an obligation requires the performance of one of two acts, in the alternative, the party required to perform has the right of selection, unless it is otherwise provided by the terms of the obligation.” In this case, then, the district court reasoned, McDonald’s had the option of “either redeeming a gift card in cash for its cash value or by replacing a gift card with a new card at no cost to the purchaser or holder.” Marilao, at 1011. The statute relied upon by plaintiff does not compel a contrary finding, so McDonald’s did not violate § 1749.5(b)(1) by refusing to redeem plaintiff’s gift card for cash. Id., at 1011-12. The court stressed that the class action did not implicate § 1749.5(b)(2), added in 2007, which requires merchants to redeem gift certificates with a cash value of less than $10, id., at 1012. The federal court also agreed with defense attorneys that plaintiff lacked standing to assert the class action’s UCL claim because he had not suffered injury in fact, or lost money or property, as a result of the allegedly unfair act. Id., at 1012. The court explained at page 1013, “Plaintiff did not expend money on his gift card, as he alleges that he received it as a gift…. Plaintiff does not allege that he lost money or property, as his gift card still retains its value to redeem it for McDonald's products. Plaintiff also does not sufficiently allege that he has been denied money to which he has a cognizable claim, as Plaintiff is not entitled to redeem his McDonald's gift card for cash whenever presented to McDonald's under § 1749.5(b)(1). Accordingly, the Court concludes that Plaintiff fails to sufficiently allege his standing to bring a claim under the UCL.”

Continue reading "UCL Class Action Defense Cases–Marilao v. McDonald’s: California Federal Court Dismisses Class Action Alleging McDonald’s Legally Required To Redeem Gift Cards For Cash But Grants Leave To Amend Class Action Complaint" »

Posted In: Class Action Fairness Act (CAFA), Class Action Court Decisions

Class Action Alleging Failure to Online Hotel Room Reseller to Pay Proper Occupancy Taxes, Dismissed by District Court for Failure of County to Comply with Administrative Process for Assessing and Collecting Taxes, Remanded for District Court Consideration of Whether Class Action Certification is Appropriate Second Circuit Holds

Plaintiff County of Nassau filed a putative class action against Hotels.Com alleging failure to pay the proper hotel occupancy taxes. County of Nassau v. Hotels.Com, LP, 577 F.3d 89, 90-91 (2d Cir. 2009). According to the allegations underlying the class action complaint, “defendants are online sellers and/or resellers of hotel rooms who negotiate discounted room rates with hotels and then resell the rooms at higher retail rates.” Id., at 91. The State of New York authorizes counties to impose a tax “upon persons occupying hotel or motel rooms in such county.” Id. (citation omitted). The class action alleged that defendant improperly calculated the tax owed to the County in that defendant calculated the taxes owed “based on the discounted price that it negotiated with the hotels and accordingly remitting too little to the County.” Id. The class action complaint sought to represent a “state-wide class of all New York cities, counties and other local governmental entities that have imposed hotel taxes since March 1, 1995.” Id. The County filed the class action in federal court under the Class Action Fairness Act (CAFA), id. Defense attorneys moved to dismiss the class action on the ground that the County failed to comply “with administrative processes for assessing and collecting taxes, thus exhausting its administrative remedies, prior to commencing its action to recover those taxes”; the district court granted the motion and dismissed the class action. Id., at 90-91. The Second Circuit reversed without addressing the administrative process issue, remanding the matter “for consideration of a different jurisdictional concern, which we raised nostra sponte at oral argument: whether the complaint meets the requirements for class certification under Fed.R.Civ.P. 23, without which both we and the District Court would lack jurisdiction over the suit as presently constituted.” Id., at 91.

The Second Circuit explained, Because the case presents no federal questions, the only statutory jurisdictional grant that might allow us to consider the case with its current parties is CAFA, which grants district courts original jurisdiction over class action suits on certain conditions, among them that ‘the number of members of all proposed plaintiff classes in the aggregate’ be no less than one hundred.” Id., at 91-92 (quoting 28 U.S.C. § 1332(d)(5)(B)). The parties had stipulated that the requirements of CAFA had been met, but as parties cannot stipulate to federal court jurisdiction the Second Circuit, at oral argument, “asked nostra sponte whether they are in fact satisfied, as the District Court lacked jurisdiction to hear the case if they were not.” Id., at 92. The County stated in a post-argument letter brief that there were more than 100 local government entities owed hotel taxes under the theory of the complaint, id. The Second Circuit noted that this would satisfy the numerosity requirement under CAFA, but that “the allegation raises the distinct possibility that questions common to the members of the class do not predominate over those affecting only individual members” because “[a]ssuming that each locality imposes its hotel tax as Nassau does, under its own tax law, the cause of action for each member of the plaintiff class might well arise under a law unique to that class member.” Id. Accordingly, the Circuit Court remanded the class action to the district court to “consider in the first instance” whether class certification is appropriate. Id., at 92-93.

Posted In: Class Action Fairness Act (CAFA), Certification of Class Actions, Class Action Court Decisions

Class Action Improperly Removed to Federal Court under CAFA (Class Action Fairness Act) because Declaration of Plaintiff’s Counsel in Unrelated Lawsuit Against Different Defendant was Insufficient to Establish $5 Million Amount in Controversy and, in Any Event, did not Constitute an “Other Paper” within Meaning of Removal Statute, Warranting Remand of Class Action and Award of Attorney Fees and Costs for Frivolous Removal Washington Federal Court Holds

Plaintiff filed a putative class action in Washington state court against Motricity alleging violations of Washington’s Consumer Protection Act; specifically, the class action complaint alleged that defendant “facilitated placing unauthorized charges for mobile content on customers’ bills.” Rynearson v. Motricity, Inc., 626 F.Supp.2d 1093, 1095 (W.D. Wash. 2009). Defense attorneys removed the class action to federal court under CAFA (Class Action Fairness Act); plaintiff moved to remand the class action to state court (Rynearson I). Id., at 1094-95. Defense attorneys argued that “the estimate of the cost of injunctive relief was sufficient to establish the amount in controversy requisite for jurisdiction,” and at oral argument added that “removal would also be appropriate based on the damages sought by Plaintiff because of a declaration filed by Plaintiff's counsel in a separate case,” id., at 1095. The district court remanded the class action to state court, id. Defense attorneys then removed the class action to federal court again (Rynearson II), this time arguing that while it had removed the class action previously, it now sought “to remove this action based on new and previously unknown grounds.” Id.¸ at 1096. Specifically, the second removal was based on the declaration of plaintiff’s counsel (Edelson) in a different matter that, according to defense counsel, constituted an “other paper” for removal purposes. Id. Plaintiff’s lawyer moved the district court to reassign Rynearson II to the court that had handled Rynearson I, and sought an OSC re contempt and sanctions, in addition to remand. Id. The district court denied the OSC, but remanded the class action and awarded plaintiff fees and costs. Id., at 1094-95.

In order to establish the $5 million threshold of removal jurisdiction under CAFA, defense attorneys argued that the declaration plaintiff’s counsel in an unrelated case showed that the amount in controversy had been met. Rynearson, at 1096. In explaining why that declaration was “new and previously unknown” when it had been relied on in Rynearson I, defense counsel claimed that this was true because Motricity had been unaware of the declaration at the time it had filed its first notice of removal. Id., at 1096-97. The district court was unimpressed. First, the Court held that the “other paper” may not be a pleading filed in an unrelated case “where the litigants are entirely different.” Id., at 1097. Accordingly, it had no bearing on Rynearson II. Id., at 1098. Second, while it was admittedly “perplexed by Motricity’s description of the Edelson declaration as ‘new and previously unknown,’” it found that defendant’s conduct did not rise to the level of civil contempt. Id. However, the federal court did find that defendant’s conduct warranted an award of attorney fees and costs, as there was no legal authority supporting defendant’s broad use of the phrase “other paper” to include documents filed in other actions. Id., at 1098-99. In the district court’s view, “Defendant's argument in support of removal was frivolous and unsupported by caselaw or a plain reading of the removal statute.” Id., at 1099. Accordingly, the federal court again remanded the class action to state court, and awarded plaintiff attorney fees and costs. Id.

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Class Action Filed in State Court Against Defendant and Co-Defendant Debtor in Bankruptcy Removable to Federal Court under CAFA (Class Action Fairness Act) because Co-Defendant Sued in Violation of Automatic Stay and because Co-Defendant’s Bankruptcy does not Preclude Defendant from Removing Class Action to Federal Court Third Circuit Holds

Plaintiffs filed a putative class action against JEVIC Transportation and its parent company, Sun Capital Partners, alleging labor law violations; specifically, the class action complaint alleged that defendants violated New Jersey’s WARN Act which, “[l]ike its federal counterpart, …requires advance notice of a plant closing under certain circumstances.” Brown v. JEVIC, 575 F.3d 322, 325 (3d Cir. 2009). JEVIC had filed for bankruptcy protection, and the class action was filed as an adversary proceeding in the United States Bankruptcy Court, id. One week later, and despite the automatic stay afforded by the bankruptcy proceeding, plaintiffs filed a class action in New Jersey state court against JEVIC and Sun Capital Partners. Id. Defense attorneys for JEVIC removed the state court class action to federal court under the Class Action Fairness Act (CAFA); the district court remanded the class action sua sponte on the grounds that the automatic stay precluded the debtor’s petition for removal. Id. Defense attorneys for Sun Capital then removed the state court class action to federal court under CAFA; the district court again remanded the class action, ruling that “[w]hen an action is initiated after the filing of a Chapter 11 petition, in violation of the accompanying stay, removal is not available.” Id., at 325-26. The Third Circuit granted Sun Capital’s petition for leave to appeal the remand order, id., at 326. The Circuit Court explained at page 325, “In this appeal implicating the Class Action Fairness Act of 2005, we consider whether a defendant is precluded from removing a class action to federal court because a co-defendant is in bankruptcy. We hold that it is not.”

The Third Circuit began its analysis by noting that Sun Capital bore the “heavy burden” of establishing federal court jurisdiction. Brown, at 326 (citation omitted). Central to the Circuit Court’s analysis was the fact that Sun Capital was not in bankruptcy, so the district court’s reliance “on cases dealing with debtor defendants who attempted to remove actions” were inapplicable. Id. Also central to its analysis was the fact that the state court class action against JEVIC was improper because it was filed in knowing violation of the automatic stay, so plaintiffs had “improperly joined JEVIC in the [state court class action], [and] that joinder cannot prevent Sun from removing the action.” Id. In essence, plaintiffs fraudulently joined JEVIC in the state court class action. Id., at 326-27. The Third Circuit summarized its holding at page 327: “In sum, because [plaintiffs] had no reasonable basis to believe that JEVIC was amenable to suit, we hold that JEVIC was a fraudulently joined party and its status as a Defendant could not be used to defeat otherwise proper federal jurisdiction.” (The Third Circuit also held that the district court erred in remanding the class action to state court because JEVIC had never been served with legal process and therefore was not properly before the district court. See id., at 327. We do not here analyze that aspect of the Circuit Court's opinion.) Accordingly, the Circuit Court reversed the district court order remanding the class action to state court, id., at 329.

Continue reading "Class Action Defense Cases–Brown v. JEVIC: Third Circuit Reverses Order Remanding Class Action To State Court Holding Class Action Properly Removed Under Class Action Fairness Act Despite Fact Co-Defendant Was In Bankruptcy" »

Posted In: Class Action Fairness Act (CAFA), Employment Law Class Actions, Removal & Remand, Class Action Court Decisions

Class Action Properly Removed to Federal Court under Class Action Fairness Act (CAFA) because Defendants Adequately Established $5 Million Amount in Controversy and because Plaintiffs Failed to Establish that Local Controversy Exception or Home-State Controversy Exception Applied Massachusetts Federal Court Holds

Plaintiffs filed a putative class action in Massachusetts state court against GMAC Mortgage and various other defendants challenging defendant’s mortgage foreclosure practices; specifically, the class action complaint alleges GMAC violated Massachusetts state law in connection with its foreclosure proceedings because “the foreclosed mortgages had not been validly assigned to the foreclosing banks at the time the foreclosure actions were undertaken.” Manson v. GMAC Mortgage, LLC, 602 F.Supp.2d 289, 291-92 (D. Mass. 2009). Plaintiffs’ class action seeks to represent some 1000 people, all residents of Massachusetts residents, “whose primary residence was foreclosed by a power of sale...by a defendant that did not contemporaneously possess a written assignment of the underlying mortgage at the time the Notice of Sale was served” or “who face a pending foreclosure initiated by a defendant that did not have a written assignment of the underlying mortgage when the Notice of Sale was served and/or when a Right to Cure notice was sent.” Id., at 292. According to the allegations underlying the class action complaint, “the defendant banks and law firms knew that the foreclosures violated: (i) the Statute of Frauds…; (ii) the statutory notice and sale requirements…; and (iii) the common-law duty of good faith and diligence.” Id. Defense attorneys removed the class action to federal court under CAFA (Class Action Fairness Act), id. Plaintiffs moved to remand the class action to state court on the grounds that the $5 million amount-in-controversy had not been shown and that CAFA’s “local controversy” or “home-state controversy” exceptions required that the district court “decline jurisdiction.” Id. The district court denied plaintiffs motion, concluding that the class action had been properly removed.

The federal court began by noting that CAFA, inter alia, creates federal jurisdiction over class actions with minimal diversity where the combined amount in controversy exceeds $5 million and the class action involves 100 members or more. GMAC, at 293. Plaintiffs conceded that minimal diversity was present and that the putative class contained more than 100 members, but insisted that it was not “reasonably probable” that the amount in controversy exceeded $5 million at the time of removal. Id. (In this regard, the district court observed that the time of removal was the relevant inquiry because “[e]vents subsequent to removal that reduce the amount in controversy do not divest a federal court of CAFA jurisdiction.” Id., at 293 n.5 (citing Coventry Sewage Assocs. v. Dworkin Realty Co., 71 F.3d 1, 6 (1st Cir. 1995)).) Under plaintiffs’ analysis, the class action seeks primarily injunctive and declaratory relief, and each class members’ monetary damage is approximately $1200; thus, the amount in controversy is only $1.2 million. GMAC, at 293. Defense attorneys countered that a total of 3,934 loans were “referred for foreclosure” during the putative class period, with 1,048 of these loans proceeding to foreclosure and 48 foreclosed properties being sold to third parties for more than $15 million. Id., at 293-94. GMAC argued that this fact went directly to “plaintiffs’ contingent claim that defendants may be liable for the collective replacement value of the homes that were foreclosed.” Id., at 294 n.8. In the alternative, defense attorneys argued that “the actual amount assessed foreclosed borrowers in costs and fees was approximately $8,000 per transaction,” not the $1200 figure provided by plaintiffs, which would make the amount in controversy approximately $8 million. Id., at 294. The district court found defendant’s evidence sufficient to meet the amount in controversy test, id.

Continue reading "CAFA Class Action Defense Cases–Manson v. GMAC Mortgage: Massachusetts Federal Court Denies Motion To Remand Class Action To State Court Holding Class Action Removable Under CAFA" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Class Action Improperly Removed to Federal Court (Twice) because Defendant Failed to Establish $5 Million Amount in Controversy Required by Class Action Fairness Act (CAFA) and Basis for Defendant’s Removal of Class Action Warrants Sanctions Sua Sponte California Federal Court Holds

Plaintiff filed a putative class action in California state court against Motricity alleging violations of every conceivable statute, including the kitchen sink (see NOTE), arising from Motricity’s alleged act of billing for unwanted mobile content. Walker v. Motricity Inc., 627 F.Supp.2d 1137, 1139-40 (N.D. Cal. 2009). According to the allegations underlying the class action complaint, Motricity “allegedly operates mobile transaction networks to help companies develop, deliver and bill for ‘mobile content’ services to compatible mobile devices in California and the nation,” including such services as “customized ring tones, premium text messages, and sports score reports,” and is purportedly “able to reach and bill millions of wireless subscribers nationwide and has registered thousands of transactions and processed thousands of dollars in California over recent years.” Id., at 1139. Plaintiff alleges that Motricity billed her for “unwanted mobile content services on her cellular telephone bill in the form of premium text messages” that she did not authorize, leading to the filing of her class action. Id., at 1139-40. But plaintiff’s act of excessive pleading was more than matched by defendant’s act in response. Defense attorneys removed the class action to federal court under the Class Action Fairness Act (CAFA), but the district court granted plaintiff’s motion to remand the class action on the ground that Motricity failed to show the requisite $5 million amount in controversy. Id., at 1139, 1140. Defense attorneys again removed the class action to federal court under CAFA “just fifteen days later,” based on a declaration filed by plaintiff’s counsel in an unrelated action which (Motricity alleged) set forth a ratio for revenue that would (if applied in this case) meet the $5 million threshold for removing class actions under CAFA. Id., at 1140. Plaintiff again moved to remand it to state court. Id. The district court granted plaintiff’s motion, and awarded sanctions for frivolous removal of the class action.

After summarizing CAFA and noting the removing party’s burden of demonstrating that removal jurisdiction exists, see Walker , at 1140-41, the federal court observed that Ninth Circuit authority establishes “different burdens of proof for establishing removal jurisdiction in the CAFA context, depending on what has been pled in the complaint,” id., at 1141. If the class action complaint specifically alleges the amount of damages at issue, then it must appear to a “legal certainty” that the amount prayed for is incorrect; in other words, “If the complaint alleges specific damages in excess of the jurisdictional minimum, then the amount in controversy is presumptively satisfied unless it appears to a ‘legal certainty’ that the claim is actually for less than the jurisdictional minimum, whereas if the specific damages are less than the statutory minimum, it must be shown to a legal certainty that the amount in controversy exceeds that minimum for removal.” Id., at 1141 (citation omitted). But if the complaint does not specify the amount in controversy, then “then the court must look beyond the facts of the complaint and apply the preponderance of the evidence standard.” Id. (citations omitted). In its initial order granting plaintiff’s motion to remand the class action to state court, the district court noted that the class action complaint is silent as to the amount in controversy so Motricity was required to show that the amount in controversy exceeded $5 million. Id., at 1141-42. Because it failed to meet that burden, the court remanded the class action to state court. Id.

Continue reading "Class Action Defense Cases–Walker v. Motricity: California Federal Court Remands Class Action To State Court Holding CAFA’s Amount In Controversy Requirement Not Met And Sanctions Defendant For Removal" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

District Court Erred in Dismissing Class Action because Class Action’s State Law Claims Alleging Snapple’s Use of Term “All Natural” was Deceptive were not Impliedly Preempted by Federal Nutrition Labeling and Education Act Third Circuit Holds

Plaintiff filed a putative class action in New Jersey state court against Snapple Beverage Corporation alleging inter alia violations of the state’s Consumer Fraud Act; specifically, the class action complaint alleged that plaintiff purchased a Snapple beverage advertised as “All Natural” when in truth the beverage “contained high fructose corn syrup (‘HFCS’), an ingredient manufactured from processed cornstarch.” Holk v. Snapple Beverage Corp., 575 F.3d 329 (3rd Cir. 2009) [Slip Opn., at 1, 5-6]. According to the allegations underlying the class action complaint, “the FDA has acknowledged[] ‘[t]he word “natural” is often used to convey that a food is composed only of substances that are not manmade and is, therefore, somehow more wholesome.’” Id., at 5. The class action therefore alleged that use of the phrase “All Natural” was deceptive because the beverages contain HFCS. Id., at 6, 7. Defense attorneys removed the class action to federal court under the Class Action Fairness Act (CAFA), id., at 7. Eventually, defense attorneys moved to dismiss the class action’s claims on the grounds that they were preempted by federal law, id. Ultimately, the only issue before the district court was “the claim that Snapple products containing HFCS were deceptively labeled ‘All Natural.’” Id. The district court agreed that plaintiff’s claims were preempted and dismissed the class action, id., at 7-8. The district court rejected the express preemption argument, but concluded that plaintiff’s claims were “impliedly preempted by the detailed and extensive regulatory scheme established by the [FDCA] and the FDA’s implementing regulations.” Id., at 8. The Third Circuit reversed.

The Third Circuit noted that Congress has regulated food and beverage labeling for more than 100 years.” Holk, at 3. The statute implicated by this class action is the Nutrition Labeling and Education Act (NLEA), enacted in 1990. Id., at 5. The Circuit Court also noted that there is “a presumption against preemption.” Id., at 11 (citation omitted). Additionally, health and safety issues, including the labeling and branding of food and beverage, has “traditionally fallen within the province of state regulation.” Id. (citation omitted). The federal government became involved in this field only 100 years ago, id., at 11-12. And finally, the Third Circuit held that Snapple’s arguments in the district court waived the express preemption ground as a basis for affirming the judgment on appeal, id., at 12-15, and that “field preemption” did not apply, id., at 15-22. So the Court turned to the issue of implied preemption.

Continue reading "Class Action Defense Cases–Holk v. Snapple: Third Circuit Reverses Dismissal Of Class Action Holding Class Action’s State Law Claims Regarding "All Natural" Label Not Preempted By Federal Nutrition Labeling And Education Act" »

Posted In: Class Action Fairness Act (CAFA), Class Action Court Decisions

Class Action Complaint Satisfied Amount in Controversy and Minimal Diversity Requirements for Removal under Class Action Fairness Act (CAFA), but Remand Warranted because Plaintiffs Met Burden of Establishing Exception to Removal Jurisdiction in that Class Action Related Solely to Securities New York Federal Court Holds

Plaintiffs, the holders of mortgage-backed securities certificates issued by various trusts, filed a putative class action in New York state court against various Countrywide entities seeking declaratory relief; specifically, the class action complaint alleged inter alia that Countrywide violated the federal Truth-in-Lending Act (TILA). Greenwich Fin. Servs. Distressed Mtg. Fund 3, LLC v. Countrywide Fin. Corp., ___ F.Supp.2d ___ (S.D.N.Y. August 18, 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action complaint, the Attorneys General for 7 states sued Countrywide in 2008 alleging violations of predatory lending laws; Countrywide settled those lawsuits with “a multistate settlement, requiring it to modify the terms of numerous mortgage loans that it currently services – including at least some of the loans it services on behalf of plaintiffs.” Id., at 2-3. Plaintiffs argued that the loan modifications caused them to suffer monetary damage, and that Countrywide was required to repurchase the loans that it modified “at a price equal to the unpaid principal and accrued interest thereon” in order to make plaintiffs whole. Id., at 2-3. Defense attorneys removed the class action to federal court; Countrywide argued that removal was proper under the Class Action Fairness Act of 2005 (CAFA), and further argued that the class action was removable “because plaintiffs’ claims raise substantial, disputed federal questions under the Truth-in-Lending Act [(TILA)],” id., at 1. Plaintiffs moved to remand the class action to state court. Id. The district court held that neither CAFA nor TILA provided subject-matter jurisdiction over the dispute and remanded the class action as requested.

The district court first examined whether removal jurisdiction existed under CAFA, which authorizes removal of class actions where the amount in controversy exceeds $5 million and where minimal diversity exists. Greenwich, at 4. (A more detailed discussion of CAFA may be found HERE.) Plaintiffs conceded that the requirements for removal had been met, but countered that their class action fell within an exception to removal – viz., a class action that “solely involves a claim…that relates to the rights, duties (including fiduciary duties), and obligations relating to or created by or pursuant to any security.” Id. (quoting 28 U.S.C. § 1332(d)(9)(C)). The burden of establishing that the exception applied rests with plaintiffs, id. Relying on the Second Circuit decision in Estate of Barbara Pew v. Cardarelli, 527 F.3d 25 (2d Cir. 2008), the district court held that the class action fell squarely within the scope of the exception to CAFA removal jurisdiction, see Greenwich, at 4-8, and rejected Countrywide’s arguments to the contrary, see id., at 8-11.

Continue reading "Class Action Defense Cases–Greenwich v. Countrywide: New York Federal Court Remands Class Action To State Court Holding Class Action Complaint Fell Within Exception To CAFA (Class Action Fairness Act) Removal" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Class Action Improperly Removed to Federal Court under Class Action Fairness Act (CAFA) because Defendant Failed to Adequately Establish that the $5 Million Amount in Controversy Requirement Eleventh Circuit Holds

Plaintiff filed a class action in Georgia state court against Bank of America and its wholly-owned subsidiary FIA Card Services (collectively “BofA”) alleging insurance fraud, unfair and deceptive acts, bad faith, and violations of the state’s Racketeer Influenced and Corrupt Organizations Act (RICO); the class action complaint was premised on the allegation that BofA “[sold] a bundled insurance product, known as Credit Protection Plus, to ineligible individuals.” Thomas v. Bank of America Corp., 570 F.3d 1280, 2009 WL 1636535, *1 (11th Cir. 2009). According to the class action, BofA’s credit protection plan provides benefits for various contingencies, including “credit life insurance, credit accident and sickness insurance, involuntary unemployment insurance, hospitalization, and unpaid family leave of absence.” Id. However, the class action complaint alleged that most benefits were conditioned on the customer being gainfully employed for at least 30 hours per week, and that BofA sold the product to individuals (such as plaintiff) who were not so employed. Id. Among the damages prayed for by the class action were treble damages and attorneys’ fees under RICO, id. The class action complaint did not identify the number of individuals in the proposed class or the amount of money sought as damages. Id. Defense attorneys removed the class action to federal court under the Class Action Fairness Act (CAFA), id. However, because the class action complaint was silent on the amount of damages sought to be recovered, it fell to BofA to establish that the amount in controversy exceeded $5 million; it sought to meet this burden by presenting evidence that it collected more than $4.8 million from almost 78,000 customers during the class period, and that because plaintiff sought treble damages and attorney fees “the amount in controversy clearly exceeded $5,000,000.” Id. Plaintiff moved to remand the class action to state court on the grounds that the $5 million threshold had not been satisfied; the district court agreed, finding the $4.8 million inaccurate because the class action “did not allege that all of the Georgia Credit Protection Plus customers were entitled to relief for the entire amount of their Credit Production Plus fees.” Id. BofA appealed, and the Eleventh Circuit affirmed.

The Eleventh Circuit explained that under CAFA a class action is not removable until the defendant receives a document from the plaintiff “be it the initial complaint or a later received paper ... [that] unambiguously establish[es] federal jurisdiction.” Thomas, at *2 (citation omitted). The defendant then has 30 days to file a notice of removal, id. Here, however, the class action complaint does not unambiguously establish federal court jurisdiction under CAFA because it “provided no information indicating the amount in controversy or the number of individuals in the alternative classes.” Id. The Circuit Court concluded, therefore, that remand of the class action to state court was proper “because defendant has not shown the amount in controversy and the sizes of the alternative classes by a preponderance of the evidence,” id. Accordingly, it affirmed the judgment of the district court. Id.

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

District Court Erred in Remanding Class Action to State Court because Decertification Order and Dismissal of Co-Defendants Substantially Increased Remaining Defendant’s Liability such that Amended Class Action Complaint did not “Relate Back” to Original Class Action Complaint, Rendering Class Action Removable under Class Action Fairness Act of 2005 (CAFA) Seventh Circuit Holds

Plaintiff filed a putative class action in Illinois state court against various H & R Block companies alleging violations of the state’s Consumer Fraud Act; the class action complaint alleged that defendants “had used deceptive practices to sell ‘Peace of Mind’ insurance against mistakes by H & R Block that increased customers’ tax liabilities.” Marshall v. H & R Block Tax Services, Inc., 564 F.3d 826, 827 (7th Cir. 2009). The state court granted plaintiff’s motion to certify the litigation as a nationwide class action, identifying three classes and defining the defendant class (which it also certified) as “any entity with the names ‘H & R Block’ or ‘HRB’ in its name, or otherwise affiliated or associated with [TSI], and which sold or sells the [Peace of Mind] product.” Id. Eventually all of the defendants were dismissed from the class action except H & R Block Tax Services (TSI), id. “Subsequently, however, the court decertified the defendant class at TSI's request, leaving TSI, which already was the only defendant, with no class-representative status since there was no longer a defendant class. TSI had asked the court to decertify the plaintiff classes as well, and while the court refused to do so, it did narrow the classes to residents of 13 states.” Id. Defense attorneys removed the class action to federal court under CAFA (Class Action Fairness Act of 2005), id. TSI argued that “decertification of the defendant class had made the case removable under the Class Action Fairness Act because the decertification occurred after the Act's effective date, and had increased TSI's potential liability notwithstanding the elimination of claims by residents of 37 states.” Id., at 828. Plaintiff argued that TSI’s liability had not increased because it had been jointly and severally liable for the misconduct of the other H & R Block defendants, id. The district court found that CAFA did not apply and remanded the class action to state court. Id. TSI sought and received leave to appeal the remand order, and the Seventh Circuit reversed.

The Seventh Circuit explained that TSI is the franchisor of the H & R Block retail tax offices – it does not operate them. Marshall, at 828. TSI claimed that, based on the decertification order, its potential liability has increased by $60 million, and argued that “a ruling that increases a defendant's potential liability may make a case originally filed before the effective date of the Class Action Fairness Act removable if the ruling comes after that date, unless the alteration in the scope of the plaintiff's claim ‘relates back’ to the original claim.” Id. (citations omitted). The district court remanded the class action to state court because it believed that “only a formal amendment of the complaint could commence a new action for CAFA purposes”; the Circuit Court disagreed, noting that such an interpretation would elevate form over substance. Id. Turning to whether the class action complaint adequately alleged joint and several liability, the Circuit Court concluded that the class action did not meet this test and that plaintiff now sought to “pin the entire liability of all the former members of the defendant class on TSI.” Id., at 829. The Seventh Circuit concluded at page 829, “They may, for all we know, be able to do so, but that will, so far as appears, enlarge TSI's liability; the plaintiffs have presented no evidence to the contrary.” This significant change in potential liability did not “relate back” to the original class action complaint – “the expansion of potential liability was a surprise.” Id. Accordingly, the district court erred in remanding the class action to state court, id.

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Motion to Remand Class Action to State Court Granted because $5 Million Amount in Controversy Required by Class Action Fairness Act (CAFA) not Established because “Cost” of Complying with Possible Injunction not Sufficient to Support Removal Jurisdiction Washington Federal Court Holds

Plaintiff, a citizen of Florida, filed a class action in Washington state court against Motricity, a Delaware corporation with its principle place of business in Washington; the class action complaint alleged that Motricity, which “represents providers of mobile content in dealing with wireless carriers whose networks and billing services the providers use” and “receives a fee per content transaction billed to cellular telephone users,” violated the Washington Consumer Protection Act by “placing unauthorized charges for mobile content on customers' bills.” Rynearson v. Motricity, Inc., 601 F.Supp.2d 1238, 1239 (W.D.Wash. 2009). The class action sought damages, treble damages, restitution, interest, attorney fees and costs, as well as injunctive and declaratory relief. Id., at 1239-40. Defense attorneys removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA), id., at 1240. Plaintiff moved to remand the class action to state court, arguing that the amount in controversy did not exceed $5 million. Id. The district court granted plaintiff’s motion

The district court noted that plaintiff did not contest that numerosity and minimal diversity existed under CAFA; rather, plaintiff focused on the CAFA requirement that the amount in controversy exceed $5 million. Rynearson, at 1240. The federal court explained at page 1240, “The burden of proving the amount in controversy depends on what the plaintiff has pleaded: (1) when the complaint does not specify an amount of damages, the party seeking removal must prove the amount in controversy by a preponderance of the evidence; (2) when the complaint alleges damages in excess of the jurisdictional requirement, the requirement is presumptively satisfied unless it appears to a ‘legal certainty’ that the claim is actually for less than the amount in controversy requirement; and, (3) when the complaint alleges damages less than the jurisdictional requirement, the party seeking removal must prove the amount in controversy with legal certainty.” (Citation omitted.) In this case, the class action complaint did not seek a specific amount of damages so defendant was required to prove that the amount in controversy had been met, id. The thrust of the defense argument was that the cost of developing an “access code” system to comply with a possible injunction the district court may issue would exceed $5 million, thereby satisfying the amount in controversy requirement. Id. The district court disagreed, holding that the defendant’s interpretation of the class action complaint was flawed because “[t]he plain language of the complaint does not request Defendant to implement its own access code system.” Id. Accordingly, the federal court lacked subject matter jurisdiction over the class action warranting remand of the class action to state court. Id., at 1240-41.

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Class Action on Behalf of Florida Citizens Against Florida Corporation, Removed to Federal Court under Class Action Fairness Act (CAFA), Properly Remanded to State Court because Home State Exception to CAFA Jurisdiction Applies First Circuit Holds

Plaintiff filed a class action in Florida state court against Kash N’ Karry Food Stores (a chain of grocery stores in Florida) alleging “alleging that Kash N' Karry had failed to adopt adequate security measures to protect its customers' credit card information.” In re Hannaford Bros. Co. Customer Data Security Breach Litig., 564 F.3d 75 (1st Cir. 2009) [Slip Opn., at 3]. According to the allegations underlying the class action, a computer hacker stole from defendant the credit and debit card information of approximately 1.6 million Kash N’ Karry customers, and limited the class action’s definition to Florida residents, id., at 3-4. Defense attorneys removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA), and the Judicial Panel on Multidistrict Litigation coordinated plaintiff’s class action for pretrial purposes with two dozen other class actions in the District of Maine. Id., at 4. The other 24 class actions had been filed against entities that were related to Kash N’ Karry; specifically, its sister corporation Hannaford Brothers, and their common parent company, Delhaize America. Id. Plaintiff moved to remand his class action to state court under the home state exception to CAFA jurisdiction; the district court granted plaintiff’s motion and the First Circuit gave defendant leave to appeal. Id. The Circuit Court stated that this case “presents an issue of first impression for this circuit regarding the application of the home state exception to federal jurisdiction under [CAFA].” Id., at 2. Defense attorneys argued that the class action complaint had been drafted to defeat CAFA jurisdiction “in violation of congressional intent”; plaintiff responded that the home state exception to CAFA jurisdiction applied and, accordingly, that the district court order remanding the class action to state court was correct. Id. The Circuit Court affirmed the remand of the class action to state court, holding that the class action complaint fell squarely within the home state exception to CAFA jurisdiction.

CAFA’s home state exception “requires a federal court to decline to exercise jurisdiction if at least two-thirds of the members of all proposed plaintiff classes in the aggregate and the primary defendants are citizens of the state where the action was originally filed.” In re Hannaford, at 2 (citing 28 U.S.C. § 1332(d)(4)(B)). The First Circuit observed that plaintiff’s class action complaint limits the scope of the class to Florida citizens, and is brought against a single corporation, Kash N’ Karry, which also is a Florida citizen. Id. The district court remanded the class action to state court on the basis of the home state exception, and the Circuit Court affirmed, rejecting defense attorney claims that “the application of CAFA's home state exception depends on a broader assessment of the claims brought by others who do not fall within the complaint's class definition or of the claims available to the class against other possible defendants.” Id.

Continue reading "CAFA Class Action Defense Cases–In re Hannaford Bros.: First Circuit Affirms Remand Of Class Action Holding Home State Exception To CAFA (Class Action Fairness Act) Jurisdiction Applies" »

Posted In: Class Action Fairness Act (CAFA), Multidistrict Litigation, Removal & Remand, Class Action Court Decisions

District Court Erred in Remanding Securities Class Action to State Court because Evidentiary Hearing Required to Determine Whether Section 22(a) of Securities Act Precluded Removal of Class Action to Federal Court Pursuant to CAFA (Class Action Fairness Act) Complaint Seventh Circuit Holds

Plaintiff filed a putative class action in state court against various defendants purportedly on behalf of “a class of persons who contributed real property (or interests in real property) to the Archstone real estate investment trust, in exchange for interests called ‘A-1 Units’”; the class action complaint asserted that defendants violated federal securities laws. Katz v. Gerardi, 552 F.3d 558, 559 (7th Cir. 2009). According to the allegations underlying the class action, “In 2007 Archstone merged into Tishman-Lehman Partnership. Holders of A-1 Units were offered a choice of cash or Series O Preferred Units in the entity formed by the merger. [Plaintiff] contends that the merger violated the terms of the A-1 Units, because neither cash nor the Series O Preferred Units offered investors the same tax benefits as A-1 Units.” Id. Defense attorneys removed the class action to federal court pursuant to the Class Action Fairness Act of 2005 (CAFA), id. The district court remanded the class action to state court on the grounds that the Securities Act of 1933 prohibited removal, id., at 560. The Seventh Circuit granted defendants’ application for permission to appeal and reversed the district court’s remand order.

The Circuit Court began its analysis by observing, “One might suppose that a statute enacted in 2005 supersedes a statute enacted in 1933, but the district court held that § 22(a) [of the Securities Act of 1933] controls because it is ‘more specific’ than the 2005 Act – for § 22(a) deals only with securities litigation, while the 2005 Act covers class actions in many substantive fields.” Katz, at 560. The Seventh Circuit also noted that “[o]nly purchasers of securities may pursue actions under the 1933 Act,” id. (citation omitted). But the district court found it sufficient that the class action complaint “invokes the Securities Act of 1933,” which, in the district court’s view, was alone sufficient to preclude removal.” Id. The Seventh Circuit disagreed: “It is hard to distinguish between a claim artfully designed to defeat federal jurisdiction and one that is properly pleaded but unsuccessful on the merits, but it cannot be right to say that a pleader's choice of language always defeats removal.” Id. Based on the Circuit Court’s analysis, “Section 22(a) and the 2005 Act are incompatible; one or the other must yield,” id., at 561, and further that § 22(a) did not “insulate” the class action’s alleged claims under the Securities Act from removal under CAFA. See id., at 561-63.

Continue reading "CAFA Class Action Defense Cases–Katz v. Gerardi: Seventh Circuit Reverses Order Remanding Class Action To State Court Holding Class Action Fairness Act May Trump Securities Act Of 1933" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Class Action Properly Remanded to State Court because under CAFA (Class Action Fairness Act) Defendant is Citizen of Both State of Incorporation and State of Principal Place of Business, and CAFA does not Permit Defendant to Choose State of Citizenship to Satisfy Minimal Diversity for Removal Jurisdiction Fourth Circuit Holds

Plaintiff filed a class action in South Carolina state court against Carolina Payday Loans alleging violations of state law in “payday loans” that were allegedly unconscionable; plaintiff was a South Carolina citizen, and brought the putative class action complaint on behalf of herself and other South Carolina citizens. Dennison v. Carolina Payday Loans, Inc., 549 F.3d 941, 942 (4th Cir. 2008). Defense attorneys removed the class action to federal court asserting removal jurisdiction under the Class Action Fairness Act (CAFA); the defense argued minimal diversity had been met because Carolina Payday “is a citizen of Georgia, where it claims it has its principal place of business, even though it is also a citizen of South Carolina, where it is incorporated,” or because some members of the putative class may have moved out of state. Id. The district court granted plaintiff’s motion to remand the class action to state court because Carolina Payday and the putative class members were citizens of South Carolina. Id. The district court additionally found that the class action “fell within the ‘home-state exception’ to CAFA jurisdiction set forth in 28 U.S.C. § 1332(d)(4) because in a class limited by definition to ‘citizens of South Carolina,’ at least two-thirds of the class members necessarily are citizens of South Carolina.” Id. The Fourth Circuit granted defendant’s request for permission to appeal the remand order, and affirmed.

The Circuit Court found this case to be “substantively identical” to Johnson v. Advance America, Cash Advance Centers of South Carolina, Inc., 549 F.3d 932 (4th Cir. 2008). Dennison, at 942. Because the class action complaint expressly defined the putative class “to include only citizens of South Carolina,” defense counsel’s speculation that class members may have moved out of state was inaccurate. Id. The Fourth Circuit first held that a class defined as “all citizens of South Carolina” is indistinguishable from a class defined as “citizens of South Carolina who are domiciled in South Carolina” because “an individual must be domiciled in a State in order to be a citizen of that State.” Id., at 942-43 (citations omitted). Accordingly, the class action complaint properly limited the scope of the class to South Carolina residents/citizens. Id., at 943. The Court therefore found irrelevant Carolina Payday’s evidence that some of its South Carolina borrowers were now citizens of other states because class membership was limited to “citizen[s] of South Carolina at the time the complaint was filed.” Id. The Fourth Circuit also found unpersuasive the defense argument that because Carolina Payday has its principal place of business in Georgia, it is allowed to rely on its Georgia citizenship to establish minimal diversity under CAFA. See id., at 943-44. The Circuit Court explained at page 944 that CAFA “does not give greater weight to a corporation's principal place of business than to its place of incorporation” and that, accordingly, for purposes of establishing diversity under CAFA “Carolina Payday is a citizen of both South Carolina, its State of incorporation, and Georgia, assuming it is able to demonstrate that its principal place of business is in Georgia.” The Fourth Circuit therefore affirmed the district court order remanding the class action to state court, id., at 944.

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Posted In: Class Action Fairness Act (CAFA), Class Action Court Decisions

Class Action Properly Removed to Federal Court under CAFA (Class Action Fairness Act of 2005) because Defendants Established by Preponderance of the Evidence that Class Action Placed more than $5 Million in Controversy Connecticut Federal Court Holds

Plaintiffs filed a class action in Connecticut state court against Bank of New York Mellon (“Mellon”) and People’s United Bank (“Bank”) alleging negligence, invasion of privacy, breach of fiduciary duty, and violations of Connecticut’s Unfair Trade Practices Act (CUTPA); the class action complaint asserted that Mellon lost electronic data belong to Bank customers. McLoughlin v. People's United Bank, Inc., 586 F.Supp.2d 70, 71 (D.Conn. 2008). According to the allegations underlying the class action, the Bank entered into a contract with Mellon to store customer data and records electronically, and Mellon created backup tapes of this information which were later lost. Id. The class action “alleged damages [that] include ‘improperly charged account fees,’ ‘the costs of remedying the [data] breach through the purchase of identity theft protection and monitoring of accounts to ensure against identity theft,’ damages for ‘unnecessary and illegal intrusion into their privacy rights,’ and ‘mental and emotional distress’ as well as punitive damages and attorney's fees.” Id., at 71-72. Defense attorneys removed the class action to federal court pursuant to the Class Action Fairness Act of 2005 (CAFA); plaintiffs moved to remand the class action to state court. Id., at 72. Plaintiffs argued that the $5 million amount in controversy had not been met because the class may consist of only 450,000 people (whereas defendants asserted up to 10 million people may have been affected). Id. The district court refused to remand the class action to state court.

After summarizing removal jurisdiction under CAFA, the and defendants’ burden of establishing that removal jurisdiction exists, the district court observed that, because the class action complaint failed to specify the amount of damages sought, Mellon and the Bank were required to show by a preponderance of the evidence that the amount in controversy exceeds $5 million. McLoughlin, at 72. The federal court observed that this was “the only point of dispute,” id., at 72, and the parties were entitled to introduce evidence to establish the amount in controversy, id., at 72-73. Defendants introduced the only evidence on this issue, which showed that 556,000 Bank customers and a total of 10 million people were affected. Id., at 73. Also, plaintiffs’ counsel had stated that he was seeking “seeking seven years of credit monitoring, credit insurance, and other damages for his clients.” Id. Defendants also introduced evidence that Experian charges $14.95 per month for credit monitoring services, id. Plaintiffs did not challenge these figures, and the district court explained that “at $14.95 a month, for seven years, the amount in controversy for each class member would be $1,255.80.” Id. The amount in controversy for 10 million class members, then, would be more than $12 billion, id. Accordingly, defendants had adequately established removal jurisdiction under CAFA, and the district court denied plaintiffs’ motion to remand the class action to state court. Id., at 74.

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Class Action Properly Removed to Federal Court under CAFA (Class Action Fairness Act) because State Farm Declaration Established “Reasonable Probability” that Amount in Controversy Exceeded $5 Million and Plaintiffs Failed to Establish Relief Sought Against “Significant” Local Defendant New York Federal Court Holds

Plaintiffs, medical providers who had “been assigned No-Fault medical reimbursement claims by eligible injured persons (‘EIPs’),” filed a class action in New York state court against various defendants, including State Farm, alleging “that defendant insurers have fraudulently failed to pay statutorily mandated medical benefits under New York's No-Fault Insurance Law” and that, together with “their legal counsel and special investigation units (‘SIUs’),” violated various New York state laws. Ava Acupuncture P.C. v. State Farm Mutual Auto. Ins. Co., ___ F.Supp.2d ___, 2008 WL 5170186, *1 (S.D.N.Y. December 9, 2008). According to the allegations underlying the class action, the defendants engaged in “harassing, abusive verification and litigation tactics” and used “preset numeric targets to limit claim payouts,” and allegedly bribed individuals at the Suffolk County District Attorney's office. Id. Defense attorneys for State Farm and two other defendants removed the class action to federal court, asserting removal jurisdiction existed under the Class Action Fairness Act of 2005 (CAFA), id. In response, plaintiffs voluntarily dismissed their class action claims against the two other removing defendants, leaving State Farm as “the only remaining removing defendant,” and then filed a motion to remand the class action back to state court. Id. The district court denied the motion.

Plaintiffs argued that the class action should be remanded to state court for two reasons: (1) because State Farm failed to establish that the amount in controversy exceeded $5,000,000, and (2) because the class action falls within the scope of CAFA’s “local controversy” exception. Ava Acupuncture, at *1. After summarizing New York’s no-fault insurance law and federal subject matter jurisdiction requirements of CAFA, see id., at *2, as well as the general rules for calculating the amount in controversy and summarizing the “local controversy” exception to CAFA removal jurisdiction and the burden of the party opposing removal to establish the applicability of exceptions to CAFA removal, see id., at *3, the district court turned to whether the removing parties had met their burden of establishing federal court jurisdiction within a “reasonable probability,” id., at *2. While the class action complaint outlined damages “in only the most general terms, indicating that the exact number of class members will be ascertained through discovery and review of defendants' records.,” and while the class action failed to “plac[e] a value on the object of the litigation,” the complaint did allege that “thousands” of individuals would be covered by the class action and attacked every denial of insurance coverage by State Farm over a 6-year period. Id., at *4. To meet its burden, State Farm submitted as evidence a declaration stating that “over the last six years State Farm has denied $40,265,558 worth of claims arising out of investigations conducted by its SIU investigators” and that “the amount of unpaid denied claims since 2003 far exceeds $5,000,000.” Id. The district court rejected plaintiffs’ objections to this declaration and concluded that the $5 million threshold was “easily” met. Id., at *4-*5. The federal court therefore turned to the local controversy exception.

Continue reading "CAFA Class Action Defense Cases--Ava Acupuncture v. State Farm: New York Federal Court Denies Motion To Remand Class Action To State Court Holding "Reasonably Probable" $5,000,000 Was At Stake And Plaintiffs Failed To Establish Local Controversy Exception" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

District Court Properly Remanded Class Action to State Court because under Class Action Fairness Act (CAFA) a Defendant is Citizen of Both its State of Incorporation and the State where it has its Principal Place of Business Fourth Circuit Holds

Plaintiffs filed a class action against Advance America in South Carolina state court alleging labor law violations; alleging violations of state law in “payday loans” that were allegedly unconscionable and failed to meet the state law requirement for good faith and fair dealing; plaintiffs were South Carolina citizens, and brought the putative class action complaint on behalf of themselves and other South Carolina citizens. Johnson v. Advance America, 549 F.3d 932, 933 (4th Cir. 2008). Advance America removed the class action to federal court asserting removal jurisdiction under the Class Action Fairness Act (CAFA); defense attorneys asserted that minimal diversity existed because, even though it had its principal place of business in South Carolina, it was a Delaware corporation. Id. The defense argued also that minimal diversity existed because some class members may have moved out of state, id. The district court granted plaintiff’s motion to remand the class action to state court because Advance America and the putative class members were citizens of South Carolina. Id. The district court found also that the class action “fell within the ‘home-state exception’ to CAFA jurisdiction set forth in 28 U.S.C. § 1332(d)(4) because in a class limited by definition to ‘citizens of South Carolina,’ at least two-thirds of the class members necessarily are citizens of South Carolina.” Id. The Fourth Circuit granted defendant’s request for permission to appeal the remand order and affirmed.

The Circuit Court explained that despite the fact that Advance America was a citizen of Delaware, it was also a citizen of South Carolina. Johnson, at 934. Because the class action defined the class “to include only citizens of South Carolina, thus excluding persons who may have moved from South Carolina and established citizenship elsewhere at the time the action was commenced,” minimal diversity under CAFA had not been established. Id. Specifically, plaintiffs’ class action defined three proposed subclasses limited to “[a]ll citizens of South Carolina who are domiciled in South Carolina” or “[a]ll citizens of South Carolina,” id. The district court granted plaintiffs’ motion to remand both because minimal diversity had not been satisfied and because of the home-state exception. Id., at 934-35.

In broad terms, the Class Action Fairness Act permits removal of class actions if, inter alia, the citizenship of a single defendant is diverse from the citizenship of a single member of the class, and the defendant, as the removing party, bears the burden of establishing federal court jurisdiction. See Johnson, at 935. The Fourth Circuit first held that the fact Advance America has “dual citizenship” does not mean that it may select the citizenship of a diverse state to establish removal jurisdiction under CAFA: in short, Advance America has dual citizenship, not alternative citizenship, and it may not “rely on only one citizenship where its other citizenship would destroy federal jurisdiction.” Id., at 935-36. Further, the Circuit Court rejected defense efforts to create diversity among the plaintiffs, holding that the definitions of the proposed classes were limited to individuals who resided in South Carolina, not to former South Carolina citizens who had moved out of state. See id., at 936-37. The Court noted, “To be a citizen of a State, a person must be both a citizen of the United States and a domiciliary of that State.” Id., at 937 n.2 (citing Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 828 (1989)). The fact certain Advance America customers may indeed have moved out of state was irrelevant for purposes of removal: “as the maters of their complaint, [plaintiffs] can choose to circumscribe their class definition” so as to exclude such persons and preclude removal. Id., at 937 (citations omitted). Accordingly, the defense failed to establish minimal diversity and the district court did not err in remanding the class action to state court. Id., at 937-38. (The Fourth Circuit found it unnecessary to reach the home-state exception argument, but noted “as a matter of logic, that if the class is limited to citizens of South Carolina, it could hardly be claimed that two-thirds of the class members were not citizens of South Carolina.” Id., at 938.)

Continue reading "CAFA Class Action Defense Cases–Johnson v. Advance America: Fourth Circuit Affirms Remand Of Class Action Against Payday Lender To State Court Because Minimal Diversity Under Class Action Fairness Act (CAFA) Not Met" »

Posted In: Class Action Fairness Act (CAFA), Class Action Court Decisions

District Court Erred in Remanding Labor Law Class Action Complaint to State Court because Defendants Separately Filed Notices of Removal Pursuant to Class Action Fairness Act (CAFA), and Timely Removal under CAFA by One Defendant was Sufficient to Remove Class Action to Federal Court for All Defendants Ninth Circuit Holds

The United Steel Workers union filed a class action in California state court against Shell Oil, Equilon and Tesoro alleging various labor law violations; the class action complaint asserted that defendants failed to provide employees with meal or rest periods, failed to provide proper wage statements, and failed to timely pay wages on termination. United Steel, etc. v. Shell Oil Co., 549 F.3d 1204, 1206-07 (9th Cir. 2008). Royal Dutch Shell plc is the parent company of both Shell Oil and Equilon (collectively “Shell”); the union served Shell with the class action complaint on May 6, 2008, and served Tesoro on May 7, 2008. Id., at 1207. On the thirtieth day after service, Shell removed the class action to federal court alleging removal jurisdiction under the Class Action Fairness Act (CAFA) and asserting federal question jurisdiction; the following day, Tesoro filed a separate notice of removal on the same grounds. Id. The class actions were assigned to different federal district court judges, id. The district court in Shell’s case remanded the class action to state court because Shell had failed to join Tesoro in its notice of removal; the court rejected Shell’s argument that “CAFA permits one defendant to remove the entire case without the consent of all defendants.” Id. Plaintiff then had the Tesoro case transferred to the same district court judge, and the federal court then remanded that class action on the same grounds. Id. The Ninth Circuit granted Shell’s and Tesoro’s separate petitions for permission to appeal the orders remanding the class actions to state court, and reversed. Id., at 1206.

Defense attorneys argued that because CAFA permits a single defendant to remove an entire class action, the district court erred in remanding the class action to state court because Shell and Tesoro failed to include each other in their separate notices of removal. , at 1207. The union conceded that Shell properly removed the class action under CAFA, but argued that the class action was properly remanded as to Tesoro because its notice of removal was untimely as it was filed more than 30 days after service of the class action on Shell., id. The Ninth Circuit disagreed. The Circuit Court noted the split in authority, still unresolved in the Ninth Circuit, over whether the 30-day period for removal “begins to run on the day of service on the first-served or last-served defendant,” but that federal courts have “traditionally required that all defendants consent to, or join in, removal.” Id., at 1208 (citations omitted). CAFA, however, expanded rights to removal in class actions and expressly states that class actions “may be removed by any defendant without the consent of all defendants.” Id. (citation omitted). The Ninth Circuit cited with approval an Eleventh Circuit opinion that held it “‘need not concern [itself] with the circumstances pertinent to each named defendant’” because any single defendant could, under CAFA, remove the entire class action to federal court. Id. (quoting Lowery v. Alabama Power Co., 483 F.3d 1184, 1194 n.25 (11th Cir. 2007). Thus, the Ninth Circuit concluded at page 1208, “it is undisputed that United Steel Workers's class action is removable under CAFA, and it is undisputed that Shell timely filed its notice of removal,” so Shell’s removal governed the entire class action to the point where “Tesoro could not have prevented removal even if it wished to do so,” id., at 1208-09. Accordingly, the Circuit Court reversed the district court orders remanding the class action to state court, id., at 1209.

Posted In: Class Action Fairness Act (CAFA), Employment Law Class Actions, Class Action Court Decisions

District Court Properly Granted State Farm’s Summary Judgment Motion in Class Action Challenging Conversion Of Homeowners Insurance Policies because Conversion did not Constitute Cancelation or Nonrenewal of Policies in Violation of Louisiana Law Fifth Circuit Holds

Plaintiff filed a class action in Louisiana state court against State Farm alleging that its conversion of homeowner insurance policies to new policy forms violated Louisiana law. Moore v. State Farm Fire & Cas. Co., ___ F.3d ___, 2009 WL 130204, *1 (5th Cir. January 21, 2009). Defense attorneys removed the class action to federal court on the basis of the Class Action Fairness Act of 2005 (CAFA), id., at *2. The class action followed State Farm’s participation in various administrative proceedings concerning rates to be charged for Louisiana homeowners’ insurance policies. Id., at *1-*2. According to the allegations underlying the class action, State Farm’s act of issuing new forms of homeowners’ insurance coverage at time of renewal amounted to “cancelation” of the policies, id., at *1. The class action was filed after plaintiff pursued administrative proceedings that were resolved in favor of State Farm, id., at *2. The parties filed cross motions for summary judgment; the district court granted defense counsel’s motion for partial summary judgment and for judgment on the pleadings, and denied plaintiff’s summary judgment motion, concluding that State Farm’s actions complied with state law. Id., at *1. Put simply, the federal court “determined that, at the end of the day, the parties' motions ‘boil down to the same issue: Whether or not State Farm's conversion of its [former] homeowner policies to its [new] homeowner policy form, effective February 1, 2005, was in violation of Louisiana law?’” Id., at *3. The district court ruled in favor of State Farm, and the Fifth Circuit affirmed.

Plaintiff argued that State Farm’s conversion of the homeowners’ policies “constituted a cancellation or nonrenewal of existing homeowner policies and violates the prohibitory laws of Louisiana, which disallow cancellation or nonrenewal of a homeowner insurance policy that has been in effect for more than three years.” Moore, at *3 (citations omitted). After discussing the standard of review, see id., at *4, the Fifth Circuit turned to its analysis of the statutory interpretation of Louisiana law, id., at *5-*6. The Circuit Court agreed with defense attorneys, and the district court, that Louisiana law “clearly and unambiguously provides that conversion is neither a cancellation nor a nonrenewal, and that such conversion is allowed when the insurer's form is filed with and approved or deemed approved by the Commissioner.” Id., at *6. Accordingly, it affirmed the judgment of the district court dismissing the class action against State Farm, id., at *8.

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Posted In: Class Action Fairness Act (CAFA), Class Action Court Decisions

Trial Court Amendments to Class Definitions in Response to Defense Motion to Decertify Class Action did not Create a “New Action” Sufficient to Justify Removal under Class Action Fairness Act of 2005 (CAFA) Illinois Federal Court Holds

Plaintiffs filed a state court class action complaint against H&R Block Tax Services in January 2002 alleging “statutory fraud by omission in violation of the Illinois Consumer Fraud Act (‘ICFA’) and ‘the substantially similar statutes of specific sister states’ and breach of fiduciary duty.” Marshall v. H&R Block Tax Services Inc., ___ F.Supp.2d ___ (S.D.Ill. December 17, 2008) [Slip Opn., at 2]. According to the allegations underlying the class action, H&R Block sold a “Peace of Mind” (POM) guarantee – an “extended-warranty product under which consumers are paid additional taxes owed as a result of a tax-preparation error.” Id., at 1. The state court granted plaintiffs’ motion to certify the litigation as a class action, and subsequently partially granted a defense motion to decertify the class action. Id. Following partial decertification of the class action, defense attorneys removed the class action to federal court claiming removal jurisdiction under the Class Action Fairness Act of 2005 (CAFA); according to H&R Block’s theory, “the decertification order greatly increased its potential liability for POM sales with which it had no involvement, which commenced a new, removable cause of action.” Id., at 1-2. Plaintiffs’ moved to remand the class action to federal court, arguing that “the state court’s August 5, 2008 decertification order narrowed the action from a multistate class to a thirteen-state class”; accordingly, it did not constitute the commencement of a new action for purposes of removal under CAFA. Id., at 1. The district court granted the motion and remanded the class action to state court.

After summarizing the applicable legal standard, see Marshall, at 2-4, the district court noted that the defense removed the class action based on the state court’s decision to amend the class definition to address, in part, the defense motion to decertify, id., at 4. The defense argued “[the] amended class definitions commenced a new action by expanding the scope of Block’s potential liability to include the acts of entities merely affiliated with Block as well as independent franchisees.” Id. According to the federal court, the state court believed that his modifications to the class definitions “related back to Plaintiffs’ amended complaint” and “expressly set forth his rationale for limiting the Plaintiff Classes to make the action more manageable and to eliminate from the action those states where applicable laws differed significantly.” Id., at 7. The federal court rejected defense arguments that the new class definitions “greatly increased” H&R Block’s liability and thus constituted a new lawsuit within the meaning of CAFA. Id., at 7-9. Put simply, the amendments to class definitions did not add any “new or different POM transactions” to the case; accordingly, the class action “does not fall within the ambit of ‘sufficiently independent of the original contentions that it must be treated as fresh litigation.’” Id., at 10 (citation omitted). In sum, “Block has identified no basis for the Court to conclude that the state court’s modification of the classes commenced a new, removable action.” Id. Accordingly, it remanded the class action to state court, id., at 11.

Continue reading "H&R Block CAFA Class Action Defense Cases–Marshall v. H&R Block: Illinois Federal Court Remands Class Action To State Court Holding Modifications To Class Definition Did Not Support Removal Under Class Action Fairness Act (CAFA)" »

Posted In: Class Action Fairness Act (CAFA), Certification of Class Actions, Class Action Court Decisions

California State Law does not Require Testing Accommodations for Reading-Related Learning Disabilities so Class Action Against Association of American Medical Colleges for Failing to Afford Accommodations, other than those Required by Federal Americans with Disabilities Act (ADA), Fails California State Court Holds

Plaintiffs, individuals with reading-related learning disabilities who applied to take the MCAT in California, filed a putative class action against the Association of American Medical Colleges (AAMC) for violations of California’s Unruh Civil Rights Act and Disabled Persons Act; specifically, the class action complaint alleged that plaintiffs “requested more time and/or a private room in which to take the test,” but that the AAMC denied the requests, thus failing to afford them accommodations for reading-related disabilities. Turner v. Ass’n of American Medical Colleges, 167 Cal.App.4th 1401, ___ Cal.Rptr.3d ___, 97-98 (Cal.App. 2008). The Association of American Medical Colleges (AAMC) is a nonprofit organization that, among other things, develops and administers the Medical College Admission Test (MCAT) in an effort to “predict success during medical school.” Id., at 97. Because the MCAT is timed, the AAMC gives reasonable accommodations to individuals with reading disabilities “such as additional time to complete the examination or a separate room to minimize distractions.” Id. The AAMC also “flags” such tests “to alert medical schools that the score should carry less weight relative to other factors in the admissions process.” Id. In the end, however, the accommodations made by the AAMC are “designed to level the playing field, not to give those individuals an advantage.” Id. The AAMC reviews accommodation requests under the federal Americans with Disabilities Act (ADA), which requires that one seeking such accommodation demonstrate “a physical or mental impairment that substantially limits one or more of the major life activities of such individual.” Id., at 98 (citation omitted). “This case presents the question of whether persons taking such tests in California are additionally entitled to accommodations under the State's Unruh Civil Rights Act and Disabled Persons Act.” Id., at 97. The trial court, following a bench trial, ruled against the AAMC, and awarded plaintiffs’ counsel $2 million in fees, id., at 98-99. The Court of Appeal reversed, holding that California state law does not require testing accommodations for reading-related disabilities.

We do not discuss the appellate court opinion in detail. In brief, the Court of Appeal held: (1) that the Unruh Act “does not require the alteration of standardized testing conditions to accommodate applicants with learning and reading-related disabilities,” see Turner, at 100-03, and (2) that California’s Disabled Persons Act “guarantees access to public places but does not require a modification of standardized testing procedures to accommodate learning and reading-related disabilities,” see id., at 103-04. The appellate court concluded at page 104, “Individuals with learning and reading-related disabilities affecting their ability to rapidly process written information are entitled to reasonable accommodations when taking the MCAT, assuming they suffer from an impairment that ‘substantially limits’ the major life activities of reading and/or test-taking within the meaning of the ADA.” However, “AAMC is not required to utilize the more inclusive standard for assessing disabilities under the Unruh Act and DPA.” Id. Accordingly, it reversed the judgment of the trial court, id., at 105.

Posted In: Class Action Fairness Act (CAFA), Class Action Court Decisions

Labor Law Class Action Dismissed because Class Action Predominance Test of Rule 23(b) could not be Satisfied and, Absent Potential for Class Action Certification, Federal Court Lacked Subject Matter Jurisdiction because Class Action Fairness Act (CAFA) was Inapplicable Mississippi Federal Court Holds

Plaintiffs filed a class action lawsuit against Wal-Mart Stores alleging violations of Mississippi’s labor laws; specifically, the class action complaint alleged that Wal-Mart required plaintiffs to work hours “off the clock,” and to work through meal and rest periods for which they were not paid in violation of state law. Robinson v. Wal-Mart Stores, Inc., 253 F.R.D. 396, 397-98 (S.D. Miss. 2008). The class action sought to represent “all current and former hourly-paid employees of Wal-Mart Stores, Inc., in the State of Mississippi that were employed from May 28, 1999 until the present,” and prayed for compensatory and punitive damages. Id., at 398. Defense attorneys moved to dismiss the class action for lack of subject matter jurisdiction, and the district court granted the motion with leave to amend because plaintiffs had failed to allege citizenship as required to establish diversity jurisdiction, id. The amended class action complaint is “virtually identical” to the original class action complaint, and defense attorneys again moved to dismiss for lack of subject matter jurisdiction because the class action failed to allege the $5 million amount in controversy required for federal court jurisdiction under the Class Action Fairness Act (CAFA). Id. Also, the defense asked the federal court to dismiss the class action allegations in the complaint. Id. The district court granted the defense motion in part, and denied it in part.

Consistent with Fifth Circuit authority, the district court began its analysis with the jurisdictional attack under Rule 12(b)(1): “When a Rule 12(b)(1) motion is filed in conjunction with other Rule 12 motions, the court should consider the Rule 12(b)(1) jurisdictional attack before addressing any attack on the merits.” Robinson, at 398 n.1 (quoting Ramming v. United States, 281 F.3d 158, 161 (5th Cir.2001)). After noting that the burden of establishing federal court jurisdiction rested on “the party seeking to litigate in federal court,” id., at 398, the district court turned to Wal-Mart’s argument that CAFA’s $5 million amount in controversy requirement had not been met, id., at 399. Plaintiffs’ argued that the putative class consisted of 80,000 people and, accordingly, “each class member's claim would only need to equal $62.50 to satisfy the $5,000,000 jurisdictional requirement.” Id., at 399. Plaintiffs’ noted also that they sought punitive damages, id. Defense attorneys made several arguments in support of the position that the $5 million threshold had not been met, but the district court concluded “it is not apparent, to a legal certainty, that Plaintiffs cannot recover the jurisdictional amount of $5,000,000 as claimed in their Amended Complaint.” Id. On this ground, then, the district court denied the motion to dismiss the class action, id. It rejected also Wal-Mart’s claim that the federal court lacked subject matter jurisdiction because the claims of some of the class members arose prior to CAFA’s effective date. Id., at 399-400.

Continue reading "Wal-Mart Class Action Defense Cases–Robinson v. Wal-Mart: Mississippi Federal Court Grants Wal-Mart Motion To Dismiss Labor Law Class Action Holding Rule 23(b) Requirements For Class Action Treatment Could Not Be Met" »

Posted In: Class Action Fairness Act (CAFA), Certification of Class Actions, Employment Law Class Actions, Class Action Court Decisions

Products Liability Class Action Complaint Originally Filed in 1999 Removable under CAFA (Class Action Fairness Act) because Maryland Law Holds Amendments that Add New Party Plaintiffs do not Relate Back so 2007 Amendment to Add New Named Plaintiffs Commenced New Class Action under CAFA Maryland Federal Court Holds

In 1999, plaintiffs filed a putative class action in Maryland state court against four automobile manufacturers seeking “damages arising from the cost of replacing allegedly defective seating systems”; Eight years later, defense attorneys removed the class action to federal court on the ground that removal jurisdiction existed under the Class Action Fairness Act of 2005 (CAFA). Lloyd v. General Motors Corp., 560 F.Supp.2d 420, 421 (D.Md. 2008). Plaintiffs did not dispute that their class action involved more than 100 plaintiffs, or that the amount in controversy was more than $5,000,000, or that the minimal diversity test under CAFA had been met. Id., at 423 n.3. Instead, plaintiffs moved to remand the class action to state court on the ground that the Class Action Fairness Act applies only to class actions “commenced” on or after February 18, 2005 – long after they had filed their class action complaint in this case. Id., at 421. Defense attorneys countered that plaintiffs’ fourth amended class action complaint materially changed the lawsuit so as to “commence” a new action within the meaning of CAFA. Id. The district court agreed and denied the motion to remand the class action state court.

The initial class action complaint alleged that the seating systems in defendants' cars were “unreasonably dangerous” because they were “susceptible to rearward collapse in the event of a rear-end collision.” Lloyd, at 421. Over the following six months, plaintiffs amended the class action complaint three times “adding several new named plaintiffs and significantly expanding the class of relevant automobiles.” Id. In March 2000, the Maryland state court granted defendants' motion to dismiss the third amended class action complaint “ruling that the Plaintiffs had failed to plead actual injury and that their claims were barred by the economic loss doctrine.” Id., at 422. The case was tied up in the appellate courts until February 2008, when the Maryland Court of Appeals reinstated the class action complaint. Id. (citing Lloyd v. General Motors Corp., 916 A.2d 257 (Md. 2007). On August 19, 2007, plaintiffs filed a fourth amended class action complaint that, in the district court’s words, “alter[ed] their claims in three significant respects: first, by adding five new named plaintiffs, three of whom were never a part of the putative class; second, by including in the putative class lessees of class vehicles for model years 1988-2005; and third, by including in the putative class owners of class vehicles for model years 1988-89 and 2000-2005. “ Id. It was based on these amendments that defense attorneys removed the class action to federal court, arguing that under CAFA a new action had been “commenced” after February 18, 2005. Id.

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Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Antitrust Lawsuit Brought by State on Behalf of Insurance Policyholders as a Parens Patriae Action, not a Class Action, Removable to Federal Court under Class Action Fairness Act (CAFA) because “Real Parties in Interest” were Policyholders and “Real Nature” of Lawsuit was “Mass Action” Fifth Circuit Holds

The State of Louisiana filed a parens patriae action (not a class action) against numerous insurance companies, including Allstate, State Farm, Farmers and USAA, alleging violations of the state’s antitrust laws; specifically, the complaint alleged that defendants “worked together to form a ‘combination’ that illegally suppressed competition in the insurance and related industries” and that “[i]n a scheme to thwart policyholder indemnity and in direct violation of their fiduciary duties, insurer defendants and others continuously manipulated Louisiana commerce by rigging the value of policyholder claims and raising the premiums held in trust by their companies for the benefit of policy holders to cover their losses as taught by McKinsey Company. Louisiana ex rel. Caldwell v. Allstate Ins. Co., 536 F.3d 418, 421-22 (5th Cir. 2008). Pursuant to the Class Action Fairness Act (CAFA), defense attorneys removed the lawsuit to federal court, id., at 422. The defense urged that the law was “in substance” a “class action” or a “mass action” within the meaning of the Class Action Fairness Act because it seeks treble damages on behalf of all Louisiana insurance policyholders. Id., at 423. Louisiana moved the district court to remand the action to state court, arguing that CAFA did not apply because the lawsuit was not a class action. Id., at 422-23. Focusing on who the “real parties in interest” are, the district court denied the motion. As permitted by the Class Action Fairness Act, the Fifth Circuit granted Louisiana permission to appeal the remand order. The central issue on appeal was “whether the ‘person who [was] injured in his business or property’ – in this case the policyholders – are the real parties in interest.” Id., at 430. The Fifth Circuit concluded, “We have no reason to believe that they are not,” id., and affirmed.

We do not here discuss the factual allegations in the State’s complaint. See Allstate, at 422-23. The Fifth Circuit summarized defendants’ arguments as follows: Even though the complaint is styled as a parens patriae action, it is “in substance and in fact” a class action within the meaning of the Class Action Fairness Act. Id., at 423. Defense attorneys argued that the fact Louisiana was not proceeding under Rule 23 was not dispositive; rather, they urged the district court to “look beyond the labels used in the complaint and determine the real nature of Louisiana’s claims,” and they “highlighted that several other similar purported class actions are and/or were pending before the same federal district court, where the same group of lawyers filed, or attempted to file, nearly identical claims as those alleged in this case by the state of Louisiana, as further evidence that this lawsuit is in fact a class action.” Id., at 423 (citations omitted). The Circuit Court explained at page 423 that “the district court was primarily concerned about who the real parties in interest are in this case.” The district court believed that he was obligated to examine the true nature of the lawsuit, explaining that “it's the Court's responsibility to not just merely rely on who a plaintiff chose to sue, or, in this case, how the plaintiff chose to plead, but I have to look at the specific substance” of the action. Id. The district court concluded that the State was but a nominal party, and the real parties were the insurance policyholders; accordingly, it concluded that the lawsuit was properly removable under CAFA and denied the motion to remand. Id.

Continue reading "CAFA Class Action Defense Cases - Louisiana v. Allstate: Fifth Circuit Holds State's Parens Patriae Lawsuit Removable To Federal Court Under Class Action Fairness Act (CAFA) Based On "Real Parties In Interest" And "Real Nature" Of Action" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

As Matter of First Impression, Class Action Fairness Act Permitted Removal of Suit as a “Mass Action” because Plaintiffs’ Counsel Designed the Lawsuit as a “Class Action Substitute” Seventh Circuit Holds

Plaintiffs filed a complaint in Illinois state court against four defendants alleging that they had “designed, manufactured, transported, or used chemicals that allegedly escaped from a wood-processing plant and injured people living nearby”; defense attorneys removed the complaint to federal court, arguing that federal court jurisdiction existed under the Class Action Fairness Act (CAFA). Bullard v. Burlington Northern Santa Fe R.R. Co., 535 F.3d 759 (7th Cir. 2008) [Slip Opn., at 1-2]. Specifically, defense attorneys argued that the litigation constituted a “mass action” within the meaning of the Class Action Fairness Act, id.¸ at 2. (Under the Class Action Fairness Act, “mass actions” also may be removed to federal court; the Seventh Circuit summarized the definition of “mass actions” under CAFA as cases “involving the claims of 100 or more litigants – if at least one plaintiff demands $75,000, the stakes of the action as a whole exceed $5 million, and minimal diversity of citizenship exists.” Id., at 2 (citing 28 U.S.C. § 1332(d)(11)).) Plaintiffs’ moved the district court to remand the case to state court; they conceded that the diversity and amount-in-controversy tests had been met, but argued that the lawsuit was not a “mass action” under the Class Action Fairness Act. Id. The district court denied the motion, and the Seventh Circuit granted leave to appeal “because the legal issue is novel” and “has not been addressed in this or any other circuit.” Id. The Circuit Court affirmed.

The Class Action Fairness Act permits removal of “mass actions” when “monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that plaintiffs’ claims involve common questions of law or fact.” Bullard, at 2. Plaintiffs argued that this means “defendants may remove a ‘mass action’ only on the eve of trial, once a final pretrial order or equivalent document identifies the number of parties to the trial.” Id. The Circuit Court characterized the lawsuit as “a class-action substitute.” Id., at 3. The Court explained at page 3, “Their complaint alleges that several questions of law and fact are common to all 144 plaintiffs; it provides no more information about each individual plaintiff than an avowed class [action] complaint would do. No one supposes that all 144 plaintiffs will be active; a few of them will take the lead, just as in a class action, and as a practical matter counsel will dominate, just as in a class action. Nonetheless, plaintiffs say, they are entitled to litigate in state court because the Class Action Fairness Act has a loophole.” The loophole envisioned by plaintiffs, however, would prevent the application of the removal of “mass actions” until just before trial. As the Seventh Circuit noted, this reading would eviscerate the statute. “Courts do not read statutes to make entire subsections vanish into the night.” Id., at 3.

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Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

District Court erred in Remanding Class Action to State Court because Defense Established Removal Jurisdiction under CAFA (Class Action Fairness Act) Seventh Circuit Holds

Plaintiff filed a class action complaint in state court against Vertrue alleging that it improperly billed its customers for unauthorized charges; specifically, the putative class action “proposed to represent a class of persons whose credit cards had been charged without authorization through 22 of Vertrue's programs.” Spivey v. Vertrue, Inc., 528 F.3d 982, 983 (7th Cir. 2008). Defense attorneys removed the class action to federal court, asserting that federal court jurisdiction existed under the Class Action Fairness Act (CAFA); plaintiff’s lawyer moved to remand the class action to state court, arguing that the amount in controversy did not exceed $5 million. Id. The district court agreed with plaintiff and remanded the class action to state court, id. Defense attorneys petitioned the Seventh Circuit for leave to appeal, as authorized by CAFA. Id. Plaintiff objected on the ground that the petition was untimely – defense attorneys “mailed the petition on the seventh day after the district court's remand order, and the petition reached [the Circuit Court], and so was ‘filed,’ see Fed. R.App. P. 25(a)(2), on April 18, 2008, the tenth day after the district court's order.” Id. The Seventh Circuit granted leave to appeal, held that the petition was timely, and reversed.

The Class Action Fairness Act authorizes an appellate court to review a district court order “granting or denying a motion to remand a class action to the State court from which it was removed if application is made to the court of appeals not less than 7 days after entry of the order.” Spivey, at 983 (quoting § 1453(c)(1)). The Seventh Circuit held at page 983 that “[t]he petition was timely under this language” because it was filed “not less than 7 days” following entry of the order remanding the class action to state court. Id. Plaintiff’s lawyer argued that Congress clearly intended to require a petition for review to be filed “not more than 7 days” after the order is entered, and that “not less than 7 days” is patently erroneous. Id. The Circuit Court noted that several courts have noted this ambiguity and yet Congress has not acted, thus suggesting that CAFA says what Congress intended. Id., at 983-84 (citations omitted). It therefore rejected the arguments of treatises and other courts that reading § 1453(c)(1) literally creates an absurdity, id., at 984. Indeed, the Seventh Circuit noted at page 984, “To the extent that our colleagues in other circuits hold that a petition filed within seven days of the district court's order should be accepted, rather than thrown out with instructions to submit another once a week has passed, we concur. Whether a petition filed within a week after the remand is timely was the question actually presented in those appeals. An affirmative answer tracks Fed. R.App. P. 4(a)(2), which says that a premature notice of appeal remains on file and springs into effect when the decision becomes appealable. It makes sense to use the same approach for a premature permission for leave to appeal.” But on the other hand, no federal court had thrown out a petition as untimely when it complied with the literally language of the statute as that would be fundamentally unfair, id., at 984-85. “Litigants and lawyers always should be safe in relying on a statute's actual language.” Id., at 985. This is particularly true in this case, the Circuit Court explained, because defense attorneys expressly attempted to avoid the ambiguity in the statute “by straddling the deadline.” Id. Accordingly, the Court held that the petition was timely.

Continue reading "CAFA Class Action Defense Cases–Spivey v. Vertrue: Seventh Circuit Reverses Order Remanding Class Action To State Court And Holds Petition Under CAFA For Leave To Appeal May Be Filed More Than 7 Day After Entry Of Order" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Class Action Claims Against Bank of America Preempted by SLUSA (Securities Litigation Uniform Standards Act of 1998) Eighth Circuit Holds

Plaintiffs, beneficiaries of trust accounts at Bank of America, filed a class action against the Bank and other defendants alleging violations of federal securities law; the class action complaint also asserted state-law claims for unjust enrichment and breach of fiduciary duty, asserting that federal court jurisdiction existed under the Class Action Fairness Act (CAFA). Siepel v. Bank of America, N.A., 526 F.3d 1122, 1124 (8th Cir. 2008). The allegations underlying the class action were that the Bank decided to “implement[] a plan to consolidate the trust management activities of other banks it had acquired” and led class members to believe that “their assets were being managed on an individualized basis, when in fact the assets were being invested in shares of the Nations Funds mutual fund, managed by an investment company substantially owned by the Bank.” Id. The class action alleged further that “higher-yielding and better-managed mutual funds were available in the marketplace,” but the Bank directed customers to Nations Funds for the Bank’s economic benefit and that the Bank accomplished this by sending “misleading letters” to trustees and beneficiaries that, in part, threatened “adverse tax consequences” if they went elsewhere. Id. Defense attorneys moved to dismiss the federal claims on the merits, and moved to dismiss the state-law claims as preempted by SLUSA (Securities Litigation Uniform Standards Act of 1998). Id. In part, the defense argued that the class action should be dismissed on the grounds of judge shopping because plaintiffs’ counsel “had already filed at least five class actions in various jurisdictions seeking redress for the same alleged injuries.” Id., at 1125. The district court granted the defense motion in its entirety, and denied plaintiffs’ request for leave to file an amended class action complaint. Id., at 1125. The Eighth Circuit affirmed.

The class action argued that the Bank failed to disclose “conflicts of interest, higher expenses, and increased tax liability” that would result from using Nations Funds, and plaintiffs argued on appeal that SLUSA did not preempt their class action’s state-law claims that a trustee breaches its fiduciary duty “by failing to disclose conflicts of interest in its selection of nationally-traded investment securities.” Siepel, at 1124. SLUSA “expressly preempts all ‘covered’ state-law class actions that allege: (1) an untrue statement or omission of a material fact, or (2) use of a manipulative or deceptive device or contrivance, ‘in connection with the purchase or sale of a covered security.’” Id., at 1126 (citations omitted). The district court had held that SLUSA preempted the state law claims because the alleged misrepresentations were made “in connection with the purchase or sale of a covered security,” and that the alleged misrepresentations were “central to the Plaintiffs’ state-law claims.” Id., at 1125. The Eighth Circuit easily concluded that the class action was a “covered class action” within the meaning of SLUSA, and that the alleged misrepresentations concern a “covered security” within the meaning of SLUSA. Id., at 1126. The issue on appeal, then, was “whether the alleged misrepresentations and omissions were ‘in connection with’ the purchase or sale of securities.” Id.

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Posted In: Class Action Fairness Act (CAFA), Class Action Court Decisions, PSLRA/SLUSA Class Actions

Amendment of Class Action Complaint to Add Party-Defendant Years after Plaintiff Learned Defendant’s Identity Constituted a New Action Under Class Action Fairness Act of 2005 (CAFA) thereby Creating CAFA Removal Jurisdiction over Class Action Seventh Circuit Holds

In July 2003, plaintiff file a putative class action in Illinois state court against AIG Claim Services and Illinois National Insurance Company for violations of state fraud and consumer protection laws; the class action complaint alleged that AIG Claim Services, in processing claims under Illinois National insurance policies, systematically underpaid accident insurance benefits. Springman v. AIG Marketing, Inc., 523 F.3d 685, 686 (7th Cir. 2008). In December 2003, defense attorneys disclosed that AIG had not adjusted plaintiff’s claim; plaintiff did not inquire further until October 2004, at which time he learned that at affiliate, AIG Marketing, had handled the claim underlying the class action. Id. Nonetheless, plaintiff waited another three years before seeking leave to file an amended class action complaint to sue AIG Marketing in place of AIG Claim Services, id. The state court granted the motion, and defense attorney removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA). Id. AIG Claim Services could not have removed the class action itself because the class action complaint had been filed well before CAFA’s effective date, id. Plaintiff’s lawyer moved to remand the class action to state court, but the motion was denied, id. The Seventh Circuit affirmed.

The question before the Circuit Court was whether the substitution of AIG Marketing for AIG Claim Services constituted “the commencement of a suit against AIG[ Marketing] within the meaning of the Class Action Fairness Act, thus enabling removal of the entire suit.” Springman, at 686-87 (citing 28 U.S.C. § 1453(b)). After reaffirming the Seventh Circuit’s law, adoption by all but one other circuit courts, that post-filing acts may affect whether a class action complaint is removable under CAFA, see id., at 687 (citations omitted), the Court reiterated the federal removal doctrine, which permits removal based on post-filings acts if, inter alia, the amended complaint “adds a new defendant.” Id. (citation omitted).

Continue reading "CAFA Class Action Defense Removal Cases–Springman v. AIG: Seventh Circuit Affirms Denial Of Plaintiff’s Motion To Remand Class Action To State Court Upholding Removal Jurisdiction Under Class Action Fairness Act (CAFA)" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Defense Evidence in Support of Removal of Class Action to Federal Court Adequately Established Removal Jurisdiction under Class Action Fairness Act (CAFA) California Federal Court Holds

Plaintiff filed a putative class action lawsuit in California state court against Polo Ralph Lauren alleging violations of California’s Song-Beverly Act; specifically, the class action complaint alleged that defendant requested personal information from customers as part of credit card transactions in violation of California Civil Code § 1747.08. Korn v. Polo Ralph Lauren Corp., 536 F.Supp.2d 1199, 1202 (E.D. Cal. 2008). Defense attorneys removed the class action to federal court alleging removal jurisdiction under the Class Action Fairness Act (CAFA); plaintiffs moved to remand the class action to state court on the grounds that defendant failed to establish the requisite diversity or amount in controversy. Id. As the district court explained, “CAFA grants district courts original jurisdiction over civil class actions filed under federal or state law in which any member of a class of plaintiffs is a citizen of a state different from any defendant and the amount in controversy for the putative class members in the aggregate exceeds the sum or value of $5,000,000, exclusive of interest and costs.” Id. (citing 28 U.S.C. § 1332(d)(2)). The district court refused to remand the class action to state court, holding that defendant sufficiently established CAFA removal jurisdiction.

Plaintiff first argued that Polo Ralph Lauren did not establish that it was not a citizen of California, Korn, at 1201; the district court rejected this argument, noting that plaintiff is bound by the judicial admission in his complaint that defendant is a Delaware corporation with its principal place of business in New Jersey, id., at 1203. Accordingly, the federal court held plaintiff “bound by the allegations in his complaint that assert defendant's citizenship, for purposes of diversity jurisdiction, is in Delaware and New Jersey.” Id. Plaintiff next argued that the defense failed to establish the $5,000,000 amount in controversy requirement. Id., at 1201. While the class action complaint did not seek a specific amount of damages, the district court observed that the class action seeks “statutory civil penalties for the alleged violations [of] up to $1000 per violation.” Id., at 1202. Further, as part of the documentation supporting removal of the class action to federal court, defense attorneys had submitted a declaration establishing that Polo Ralph Lauren had “processed more than 5,000 credit card transactions over the last year in the state of California.” Id. The district court held that this was sufficient.

Continue reading "CAFA Class Action Defense Cases–Korn v. Polo Ralph Lauren: California Federal Court Denies Motion To Remand Class Action To State Court Holding Defense Established Class Action Alleging Song-Beverly Act Violations Involved More Than $5 Million" »

Posted In: Class Action Fairness Act (CAFA), FCRA Class Actions, Removal & Remand, Class Action Court Decisions

District Court Erred in Remanding Class Action to State Court because while Class Action Complaint Involved Sale of Securities it was Premised on Fraudulent Concealment of Company’s Financial Condition so Exception to CAFA (Class Action Fairness Act) Removal Jurisdiction did not Apply Second Circuit Holds

Plaintiffs filed a putative class action in New York state court against various defendants, including Agway (the issuer) and PriceWaterhouseCoopers (its auditor), alleging violations of New York’s consumer fraud statute; specifically, the class action complaint asserted “that officers of an issuer – abetted by the issuer’s auditor – failed to disclose, while marketing certain debt certificates, that the issuer was insolvent.” Estate of Pew v. Cardarelli, 527 F.3d 25 (2d Cir. 2008) [Slip Opn., at 3]. Plaintiffs had filed a prior class action complaint in New York state court alleging Agway failed to disclose in financial statements that it was insolvent, and was discharging its debts through the issuance of new certificates; defense attorneys removed that class action to federal court, so plaintiffs amended the class action “to plead essentially the same acts of concealment under New York’s consumer fraud law.” Id., at 5. The district court subsequently granted a defense motion to dismiss with prejudice the federal securities claims, but dismissed without prejudice the remaining state law claim based on its decision not to exercise supplemental jurisdiction over it. Id., at 6. Plaintiffs then filed another class action in New York state court that sought relief only under New York law, id. Defense attorneys again removed the class action to federal court, asserting removal jurisdiction existed under the Class Action Fairness Act of 2005 (CAFA), id. The district court granted plaintiffs’ motion to remand the class action to state court on the ground that it “falls within an exception to CAFA’s removal provision for actions ‘that relate[] to the rights, duties (including fiduciary duties), and obligations relating to or created by or pursuant to any security.” Id., at 6-7. The Second Circuit granted a defense request for permission to appeal, and reversed.

Agway was an agricultural supply and marketing cooperative that sought to raise money by issuing unsecured, fixed-interest debt instruments (money market certificates). Pew, at 4. The question presented was whether the class action’s “state-law consumer fraud claim” falls within the exception to CAFA jurisdiction, as determined by the district court. Id., at 13. Finding that “the imperfect drafting of the status makes it ambiguous,” id., and elsewhere describing CAFA’s text as “cryptic,” see id., at 19, the Circuit Court examined the statute’s wording, context and legislative history. Based on its analysis, the Second Circuit held that even though the Agway Certificates are “securities” and create “obligations” and “rights” in the holders, id., at 18, the exception to CAFA did not apply because the gravamen of the class action complaint “does not ‘relate[] to’ those rights; rather, it is a state-law consumer fraud action alleging that Agway fraudulently concealed its insolvency when it peddled the Certificates.” Id., at 19. In sum, the Court held that Congress intended to reserve the exception to CAFA removal jurisdiction for “‘disputes over the meaning of the terms of a security,’ such as how interest rates are to be calculated, and so on.” Id., at 23. Accordingly, it concluded that the district court erred in remanding the class action to state court and reversed. Id.

Continue reading "CAFA Class Action Defense Cases–Pew v. Cardarelli: Second Circuit Holds District Court Erred In Remanding Class Action Because Exception To CAFA Removal Jurisdiction Limited To "Disputes Over The Meaning Of The Terms Of A Security"" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

As Master of Class Action Complaint Plaintiffs Successfully Limited Amount in Controversy so as to Preclude Removal Jurisdiction on Diversity Grounds or under CAFA (Class Action Fairness Act) Necessitating Remand of Class Action to State Court, but South Carolina Federal Court Expressly Limits Plaintiffs’ Individual and Class Action Recovery to Limits Pleaded in Class Action Complaint

Plaintiffs filed a putative class action lawsuit in South Carolina state court against GAF Materials “alleging claims for negligence, negligent representation, breach of warranty, breach of implied warranties, fraud, a violation of the South Carolina Unfair Trade Practices Act (‘SCUPTA’), and unjust enrichment.” Brooks v. GAF Materials Corp., 532 F.Supp.2d 779, 780 (D.S.C. 2008). The class action complaint alleges the class “suffered property damage as a result of the Defendant's defective roofing materials” and seeks compensatory and punitive damages, but in order to avoid removal jurisdiction the class action complaint expressly states that the “amount in controversy for the entire proposed Class does not exceed five million dollars” and that “[t]he Plaintiffs' individual recovery, as well as any putative Class Members individual recovery, exclusive of interest and costs, is not to exceed $74,999.00.” Id. Defense attorneys removed the suit to federal court under the Class Action Fairness Act (CAFA), and plaintiffs’ moved to remand the action to state court. Id. Defense attorneys originally removed the class action in May 2006, but the district court granted plaintiffs’ motion to remand “because the amount in controversy does not exceed $75,000, exclusive of interest and costs, for diversity jurisdiction under 28 U.S.C. § 1332.” Id., at 780. After plaintiffs amended their class action complaint, defense attorneys again removed the action to federal court but the district court remanded the action “for lack of jurisdiction based on the one-year cap on removal set forth in 28 U.S.C. § 1446(b),” id., at 780-81, but the court subsequently rescinded its remand order and requested briefing on whether the amount in controversy exceeded $5 million for purposes of CAFA removal jurisdiction, id., at 781.The district court granted the motion.

In analyzing whether the Class Action Fairness Act authorized removal of this lawsuit, the district court stressed that “Plaintiffs have placed a clear limitation on damages in their complaint.” Brooks, at 782. The Court held at page 782, “the court declines to ‘adopt any approach under which the court will be required to undertake its own independent review of the amount in controversy despite a specific limitation on damages in the plaintiff's complaint.’” As the master of their complaint, plaintiffs are entitled to limit damages sought therein in order to avoid removal jurisdiction, and they effectively did so here. Id. Accordingly, the district court granted plaintiffs’ motion to remand the class action to state court, finding that the amount in controversy requirement had not been met. Id., at 782-83. However, the federal court expressly barred plaintiffs from playing games with removal. The court’s remand order expressly states, “with respect to all claims, the Plaintiffs are barred from recovering a total amount of damages, including actual damages, punitive damages, treble damages, and statutory attorney's fees, exceeding five million dollars ($5,000,000), exclusive of interest and costs for the putative class action, and the Plaintiffs are barred from recovering a total amount of damages, including actual damages, punitive damages, treble damages, and statutory attorney's fees, exceeding seventy-four thousand nine hundred ninety-nine dollars ($74,999.00), exclusive of interest and costs, for any individual claims.” Id., at 783.

Continue reading "CAFA Class Action Defense Cases–Brooks v. GAF: South Carolina Federal Court Remand Class Action To State Court For Lack Of Requisite Amount In Controversy But Expressly Prohibits Plaintiffs From Recovering Damages In Excess Of Prayer" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Class Action by State on Behalf of Itself and Citizens Properly Removed under Class Action Fairness Act (CAFA) because State’s Sovereign Immunity not Applicable to Citizens Fifth Circuit Holds

Louisiana’s Attorney General Louisiana filed a putative class action against more than 200 insurance companies on behalf of the State and numerous Louisiana citizens based on defendants’ alleged failure to pay for covered insurance claims arising out of Hurricanes Katrina and Rita; the class action complaint alleged only state law claims, and sought compensatory, declaratory and injunctive relief. In re Katrina Canal Litig. Breaches, 524 F.3d 700, 2008 WL 1118176, *1 (5th Cir. 2008). Defense attorneys removed the class action to federal court asserting removal jurisdiction under the Class Action Fairness Act (CAFA) and the Multiparty Multiform Trial Jurisdiction Act (MMTJA). Id., at *1, *3. Louisiana moved to remand the class action to state court, “arguing that CAFA did not apply and that Louisiana enjoyed sovereign immunity from involuntary removal to federal court in that it was suing in its state court to enforce state law.” Id., at *1. The district court denied the motion; because it found that removal jurisdiction existed under CAFA, it did not reach the issue of whether jurisdiction also existed under MMTJA. Id., at *3. The Fifth Circuit granted the State’s petition under CAFA for permission to appeal the remand order under CAFA, and then affirmed.

On appeal, Louisiana argued “CAFA does not apply, and that even if it does apply by its terms, it cannot abrogate sovereign immunity from federal process, or at the least Congress did not clearly do so in CAFA.” In re Katrina, at *3. (Louisiana also raised arguments under MMTJA, but the Fifth Circuit did not address this issue so we do not discuss it here.) The only aspect of CAFA removal jurisdiction challenged on appeal was diversity; specifically, Louisiana argued that a state is not a person for purposes of diversity jurisdiction and, further, that “it has not filed a class action as defined by CAFA.” Id. The Fifth Circuit held that this was not the relevant inquiry, because “Louisiana seeks relief for both the State and the citizens as “recipients” of insurance.” and the citizens adequately satisfied the minimal diversity required by CAFA. Id. The “difficult question” addressed by the Circuit Court was whether state sovereignty barred removal. Id.

Continue reading "CAFA Class Action Defense Cases–In re Katrina Canal: Fifth Circuit Affirms Denial Of Motion To Remand Class Action To State Court Holding State Sovereignty Did Not Preclude Removal Of Class Action Under CAFA Because Citizens Were Class Members" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Following Remand of Labor Law Class Action to State Court on Grounds that Class Action had been “Commenced” Prior to Effective Date of Class Action Fairness Act of 2005 (CAFA) thus Precluding Removal Jurisdiction under CAFA, District Court did not Abuse its Discretion in Refusing to Award Plaintiffs Attorney Fees because Defense Removed Class Action under a Novel Theory of First Impression Ninth Circuit Holds

Plaintiffs filed a class action lawsuit against Dollar Tree Stores alleging various labor law violations. The class action was filed in Oregon state on February 14, 2005 – four days before the effective date of the Class Action Fairness Act of 2005 (CAFA) – and plaintiffs served Dollar Tree with the class action complaint on April 29, 2005. Lussier v. Dollar Tree Stores, Inc., ___ F.3d ___ (9th Cir. March 7, 2008) [Slip Opn., at 2204]. Defense attorneys removed the class action to federal court on May 27, 2005, alleging removal jurisdiction under CAFA, id., at 2204-05. Plaintiffs’ lawyers moved to remand the class action to state court on the ground that it had been filed prior to CAFA’s effective date, and had been “commenced” on the date it was filed rather than the date served. Id., at 2205. Dollar Tree responded that Ninth Circuit authority holds an action is not “commenced” under Oregon law until the complaint is served, see id., at 2205-06, but the district court granted the motion to remand the class action, holding that the authority relied on by defense attorneys applied only to statutes of limitation and not to “commencement” under CAFA, id., at 2206-07. Plaintiffs then sought attorney fees under 28 U.S.C. § 1447(c), but the district court denied the motion finding that Dollar Tree’s argument raised a novel issue of first impression, id., at 2207. Plaintiffs appealed the denial of attorney fees, and the Ninth Circuit affirmed.

The Circuit Court cited the now settled test that attorney fees arising out of remand motions are awarded based on the reasonableness of the act of removal: if an objectively reasonable ground existed for removing the action to federal court, then attorney fees should be denied. Lussier, at 2207-08 (quoting Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005)). Appellate review of such district court decisions is subject to an abuse of discretion standard, id., at 2208 (citations omitted). The Ninth Circuit concluded that while Dollar Tree’s arguments did not prevail, the district court did not abuse its discretion in determining that its interpretation of CAFA and Ninth Circuit case law was objectively reasonable. Id., at 2208-11. Accordingly, it affirmed the district court order denying attorney fees, id., at 2211.

Posted In: Class Action Fairness Act (CAFA), Employment Law Class Actions, Removal & Remand, Class Action Court Decisions

Defense Removal of Class Action to New York Federal Court under CAFA (Class Action Fairness Act of 2005) was not Objectively Reasonable thus Warranting Award of Attorney Fees to Plaintiff Following Remand of Class Action to State Court

Plaintiff filed a putative class action lawsuit in New York state court against Circuit City. Alicea v. Circuit City Stores, Inc., 534 F.Supp.2d 432, 2008 WL 344695, *1 (S.D.N.Y. 2008). The class action complaint, a copy of which may be found here, alleged that Circuit City’s “return policy and imposition of a ‘restocking fee’ in the amount of 15% of the purchase price of certain returned items” violated New York General Business Law § 349. Defense attorneys removed the class action to federal court on the ground that removal jurisdiction existed under the Class Action Fairness Act of 2005 (CAFA); plaintiff’s lawyer moved to remand the class action complaint to state court arguing that Circuit City had failed to establish that the $5 million amount-in-controversy requirement had been met for CAFA removal jurisdiction. Alicea, at *1. Plaintiff also sought attorney fees under 28 U.S.C. § 1447(c), id. The district court granted the motion to remand the class action to state court, and in the order summarized here, awarded plaintiff attorney fees under § 1447(c). (The order remanding the class action to state court may be found here.)

As a threshold matter, the district court noted that “the standard governing the application of section 1447(c)…is whether the removing party ‘lacked an objectively reasonable basis for seeking removal.’” Alicea, at *1 (quoting Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005)). The federal court also “‘recognize[d] the desire to deter removals sought for the purpose of prolonging litigation and imposing costs on the opposing party, while not undermining Congress’ basic decision to afford defendants a right to remove as a general matter, when the statutory criteria are satisfied.’” Id. (quoting Martin, at 140). Here, defense attorneys argued that a reasonable basis existed for removing the class action under CAFA because “(1) it was ‘unclear to defendant whether plaintiff was seeking treble damages’…, (2) ‘at the time of removal, it objectively appeared that plaintiff’s claims were not limited to New York State consumers’…, and (3) ‘the costs of compliance would extend in perpetuity,’ and thus ‘CAFA’s jurisdictional limits would have been easily met.’…” Id. The district court rejected each of these arguments.

Continue reading "CAFA Removal Class Action Defense Cases-Alicea v. Circuit City: New York Federal Court Awards Plaintiff Attorney Fees Following Remand Of Class Action To State Court Holding Removal Jurisdiction Did Not Reasonably Exist Under Class Action Fairness Act" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Amount in Controversy Required for Removal Jurisdiction under CAFA (Class Action Fairness Act) not Defeated by Plaintiff’s Statement in Class Action Complaint that Damages “May” not Exceed $5 Million Kansas Federal Court Holds

Plaintiff filed a class action lawsuit in Kansas state court against BP America on behalf of royalty owners alleging that BP engaged in self-dealing and “failed to properly account and pay royalties to the plaintiff and the class”; defense attorneys removed the class action to federal court arguing that removal jurisdiction existed under the Class Action Fairness Act (CAFA). Eatinger v. BP America Prod. Co., 524 F.Supp.2d 1342, 2007 WL 4395068, *1 (D. Kan. 2007). Plaintiff’s lawyer moved to remand the class action to state court on the ground that the amount in controversy failed under either test because the class action complaint specifically pleads amounts in controversy below the jurisdictional requirements. Id. The district court denied the motion to remand.

The district court noted plaintiff did not dispute diversity,” Eatinger, at *5; accordingly, the jurisdictional issue is whether the amount in controversy requirement is met. Accordingly, “the single matter in dispute” is whether “the requisite amount in controversy” had been shown, id., at *1. Defense attorneys submitted that, based on the definition of the proposed class, “the minimum amount of total royalty payments alleged to be in controversy to be at least $693,000,000” so unless the alleged underpayment is less than .7215009% the amount in controversy exceeds $5,000,000. Id. Moreover, the defense argued that plaintiff’s individual claim places in excess of $440,000 at issue, so unless he claims less than a 16% underpayment his amount in will exceed $75,000. Id. Plaintiff’s lawyer responded that central to BP’s arguments is the claim that plaintiff has “refused to stipulate to an amount of damages at stake,” and advanced various objections to this reasoning, id., at *2. Defense attorneys countered that requiring more than its percentage-based calculations of damages “would create a virtually impossible standard of proof,” id. Additionally, plaintiff’s “vague statement in the initial complaint that the amount in controversy ‘may’ exceed $5 million,” combined with his refusal to stipulate otherwise, “is sufficient to establish jurisdiction in federal court.” Id.

Continue reading "BP CAFA Removal Class Action Defense Cases-Eatinger v. BP: Kansas Federal Court Refuses To Remand Class Action To State Court Holding Removal Jurisdiction Exists Under Class Action Fairness Act (CAFA)" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

In Motion for Remand of Class Action Against Insurer for Failure to Provide No-Fault Insurance, both Plaintiff and Defense Failed to Present Admissible Evidence of Amount in Controversy so Court had Insufficient Evidence to Determine Whether Removal Jurisdiction Existed Under CAFA (Class Action Fairness Act) Arkansas Federal Court Holds

Plaintiff filed a putative class action in Arkansas state court against her automobile insurance carrier, Sagamore Insurance, alleging various breaches of the terms of the auto policy. Toller v. Sagamore Ins. Co., 514 F.Supp.2d 1111, 1113-14 (E.D. Ark. 2007). The class action complaint alleged that Sagamore “has consistently issued automobile liability insurance policies without providing no-fault coverages or obtaining waivers of such coverage as required by Arkansas law.” Id., at 1114. Defense attorneys removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA); plaintiff’s lawyer moved to remand the class action on the ground that removal jurisdiction did not exist under CAFA because the requisite amount in controversy had not been established. Id. The district court found that it lacked sufficient evidence from either side to rule on the remand motion and, accordingly, held the motion in abeyance pending receipt of such evidence.

Plaintiff’s class action alleged that Sagamore issued her an automobile insurance policy without providing her no-fault coverage and without obtaining from her a waiver of such coverage in writing. Toller, at 1114. Following a car accident in which she suffered $48,000 in medical costs, Toller filed her lawsuit alleging that Sagamore wrongly denied her claim. The class action complaint provided no further information regarding alleged damages, and plaintiff did not limit her damages to an amount under $75,000. Id. The relief sought in the complaint includes attorney fees, penalties for breach of contract, and declaratory and injunctive relief, but the class action provides that “the amount in controversy will not exceed the sum or value of $4,999,999, and she specifically waives any amount of compensatory damages, restitution, interest, costs, and attorneys' fees above that amount.” Id. Defense attorneys removed the class action to federal court alleging both diversity jurisdiction and CAFA removal jurisdiction: we do not discuss here the district court’s conclusion that the requirements for diversity jurisdiction had not been met, see id., at 1116-18; rather, we discuss here solely removal jurisdiction under CAFA, and Sagamore’s argument “that this case is a class action, that the class has more than 100 members, that the amount in controversy exceeds $5,000,000, and that minimal diversity exists, so this Court has jurisdiction pursuant to the Class Action Fairness Act, codified at 28 U.S.C. § 1332(d),” id., at 1114.

Continue reading "CAFA Class Action Defense Cases-Toller v. Sagamore: Arkansas Federal Court Delays Ruling On Motion To Remand Class Action Against Insurer Pending Additional Evidence Of Amount In Controversy For Removal Under Class Action Fairness Act (CAFA)" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Failure to Timely Seek Permission to Appeal Denial of Motion to Remand Class Action Complaints Removed to Federal Court under CAFA (Class Action Fairness Act) Required Dismissal of Appeals for Lack of Jurisdiction Eleventh Circuit Holds

Plaintiff, a pharmacy, filed a putative class action against insurance/pharmacy benefit management companies for misrepresentation, breach of contract, unjust enrichment and conspiracy, alleging that defendants failed to reimburse pharmacies “according to an agreed-upon formula for brand name prescriptions dispensed to Defendants' insureds.” Main Drug, Inc. v. Aetna U.S. Healthcare, Inc., 455 F.Supp.2d 1323, 1324 (M.D. Ala. 2006). Defense attorneys removed the action to federal court asserting, inter alia, federal court jurisdiction under the Class Action Fairness Act of 2005 (CAFA), 28 U.S.C. § 1332(d). Id. Plaintiffs moved to remand the class action to state court, arguing that the defense had not established the requisite $5 million amount-in-controversy, id. The district court held that even under CAFA the defense bears the burden of establishing removal jurisdiction, but concluded that the defense had satisfied the amount in controversy requirement. Our summary of that district court order may be found here. Plaintiffs filed notices of appeal with the Eleventh Circuit; the Circuit Court dismissed the appeals for lack of jurisdiction. Main Drug, Inc. v. Aetna U.S. Healthcare, Inc., 475 F.3d 1228 (11th Cir. 2007).

The Eleventh Circuit noted the two consolidated class action lawsuits had been filed prior to CAFA’s effective date but the clerk of the court did not issue the summons until after CAFA’s effective date. Defense attorneys removed the class actions to federal court, and plaintiffs’ lawyers filed motions to remand arguing that the class action complaints had been filed before CAFA went into effect. The district court denied the motion. Main Drug, at 1229. Plaintiffs appealed the denial of the motion to remand within seven (7) days of the district court order, but never sought permission to appeal pursuant to Rule 5. Id. The Circuit Court explained at pages 1229 and 1230,

Continue reading "CAFA Class Action Defense Cases-Main Drug v. Aetna: Eleventh Circuit Dismisses For Lack Of Jurisdiction Appeal From District Court Refusing To Remand Class Action Removed Under Class Action Fairness Act (CAFA)" »

Posted In: Class Action Fairness Act (CAFA), Class Action Court Decisions

Order Granting Intervention to New Party Plaintiffs did not “Commence” Class Action for Purposes of Removal Jurisdiction under CAFA (Class Action Fairness Act of 2005) Tenth Circuit Holds

Plaintiffs, owners of royalty interests filed a class action lawsuit in Oklahoma state court against Mobil Oil and Mobil Exploration & Producing, North America: The class action complaint, filed in May 2001, “sought damages for breach of contract, breach of plan unitization, conversion, fraud, breach of fiduciary duties, and for a violation of the Oklahoma Production Revenue Standards Act.” Weber v. Mobil Oil Corp., 506 F.3d 1311, 1312 (10th Cir. 2007). The class action complaint was amended in December 2004 to add Mobil Exploration & Producing, U.S. and Mobil Natural Gas, Inc. as party-defendants, id., at 1313. In September 2005, defense attorneys removed the putative class action to federal court under the Class Action Fairness Act of 2005 (CAFA ). Id. The federal court remanded the class action to state court, and defense attorneys sought leave to appeal the remand order. Id. The Tenth Circuit denied the request, concluding that the class action did not fall within the scope of CAFA and, accordingly, that it lacked jurisdiction to consider the appeal.

As a preliminary matter, the Tenth Circuit noted that the parties agreed that the class action was properly removed to federal court if the Class Action Fairness Act applied. Weber, at 1314 n.4. The original complaint was filed in 2001, but in October 2004 other members of the putative class filed a “similar, though not identical, class action in federal district court against the same two defendants.” Id., at 1313. The federal court class action defined the class more broadly than the state court class action, and it additionally sought certain damages not requested in the state court complaint. Id. In December 2004, the state court class action complaint was amended to add Mobil Exploration & Producing, U.S. and Mobil Natural Gas, Inc. as defendants, neither of which was ever named in the federal court class action. Id. In September 2005, plaintiffs in the federal and state court actions agreed that the class action pending in federal court would be voluntarily dismissed and a petition for leave to intervene filed in the state court class action, id. As part of the intervention motion, the plaintiff-intervenors “sought to assert class claims under its expanded class definition and to assert the additional claims for damages and equitable relief it raised in its federal petition.” Id. The state court granted the motion for intervention, but restricted the intervenors to the claims and class definition asserted in the then-pending state court complaint, id. Based on the granting of the motion for intervention, defense attorneys for Mobil Exploration & Producing, U.S. and Mobil Natural Gas, Inc. removed the class action to federal court, arguing that CAFA provided removal jurisdiction; plaintiffs moved to remand the class action to state court on the ground that CAFA did not apply, and the district court ordered remand. Id.

Continue reading "CAFA Class Action Defense Cases-Weber v. Mobil Oil: Tenth Circuit Dismisses Appeal Of Order Remanding Class Action To State Court Holding Class Action Fairness Act (CAFA) Did Not Afford Jurisdiction To Consider Appeal" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Amendment of Class Action Complaint After Effective Date of Class Action Fairness Act of 2005 (CAFA) did not Trigger Removal Period Because Under State Law the Amendment Related Back to Original Complaint Alabama Federal Court Holds

Plaintiff, operator of three gasoline distribution facilities, filed a putative class action against Total Containment (TCI) arising out of the manufacture, sale and installation of allegedly defective gas station piping systems. May's Distributing Co. Inc. v. Total Containment, Inc., 523 F.Supp.2d 1303, 2007 WL 4180362, *1 (M.D. Ala. November 28, 2007). The class action complaint was filed in January 2003, and was amended twice prior to March 2004 to add new defendants, including Underwriters Laboratories (UL). Id. In March 2004, TCI filed for bankruptcy protection and defense attorneys removed the class action to federal court on the ground that it was “related to” the bankruptcy, id. On February 16, 2005, two days before the effective date of the Class Action Fairness Act of 2005 (CAFA), the district court remanded the class action to state court finding (1) the complaint was not related to TCI’s bankruptcy, and (2) even if it was, abstention was appropriate. Id., at *2. In September 2005 plaintiffs filed a third amended class action complaint that “added certain allegations related to UL,” and in July 2006 plaintiffs amended the class action yet again, this time to “add[] to its statement of facts and consolidate[] its claims against all defendants into one negligence claim.” Id. In August 2006, defense attorneys again removed the class action to federal court, this time arguing that removal jurisdiction existed under CAFA. Id. The district court disagreed and remanded the class action to state court.

The issue presented is whether the post-CAFA amendments to the class action complaint were sufficient so as to constitute “commencement” of the action after CAFA’s February 18, 2005, effective date. May’s Distributing, at *3. With respect to the threshold inquiry of whether a post-CAFA amendment to a class action complaint may constitute “commencement” under CAFA, the district court concluded that the Eleventh Circuit had not squarely addressed the issue, id., at *3-*4, but adopted the majority view that “an amendment to a complaint does not commence a new action for CAFA purposes if the amended complaint ‘relates back’ to the original complaint under state law.” Id., at *4. Defense attorneys argued that the July 2006 amendment to the class action “was such a dramatic change from the prior complaints, that it constituted a new claim against them.” Id., at *3. The district court rejected this argument, concluding that the fourth amended complaint “arises out of the same ‘conduct, transaction, or occurrence’ as the original complaint.” Id., at *5. Accordingly, removal jurisdiction under CAFA did not exist and the class action was remanded to state court. Id., at *5-*6.

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Amendment to Complaint Adding Class Action Allegations “Commences” Action within Meaning of Class Action Fairness Act (CAFA) but Plaintiff may Disclaim Damages in Order to Defeat Federal Court Jurisdiction and Defense Failed to Establish Requisite Amount in Controversy to Satisfy CAFA Removal Jurisdiction Sixth Circuit Holds

In 2004, plaintiff filed an individual lawsuit (not a class action) in Tennessee state court against his automobile insurance carrier for failing to pay for the post-repair loss of value he suffered - that is, alleging that when the insurer pays for repairs to the vehicle, it is further “obligated to restore vehicles to their prior appearance, function and value” and breaches this alleged duty “by not assessing the vehicle after it [is] repaired, not informing Plaintiff of any lost value following such an assessment, and failing to pay the post-repair loss of value unless Plaintiff demands and proves loss of value.” Smith v. Nationwide Prop. & Cas. Ins. Co., 505 F. 3d 401, 403 (6th Cir. 2007). Plaintiff amended the complaint so as to assert class action allegations in September 2006, and limited recovery on behalf of individual insureds to $74,999, and on behalf of the class to $4,999,999. Id. Defense attorneys removed the class action complaint to federal court under the Class Action Fairness Act of 205 (CAFA), but the district court granted plaintiff’s motion to remand the class action to state court. Id., at 402-03. Defense counsel appealed this order pursuant to 28 U.S.C. § 1453(c)(1), id., at 404, and the Sixth Circuit affirmed.

The Sixth Circuit began its analysis by employing the majority rule that CAFA does not alter the defendant’s burden of establishing federal court jurisdiction. Smith, at 404-05. It then turned to the question of whether CAFA applies to this class action, given that the original complaint was filed in 2004 but the class action allegations were not added until 2006. Id., at 405. The Circuit Court held that under Tennessee law the class action was “commenced” after the effective date of CAFA because “Defendant was neither afforded adequate notice of the generic identity of the proposed class nor provided adequate notice of claims of all plaintiffs who might someday fall within a putative class by virtue of [the] original complaint.” Id., at 406. Accordingly, the Sixth Circuit resolved the threshold inquiry by holding that defendant’s notice of removal was timely, id., at 406-07.

Continue reading "CAFA Class Action Defense Cases-Smith v. Nationwide: Sixth Circuit Affirms Applicability Of CAFA To Class Action Complaint And Affirms Order Remanding Class Action To State Court Because Plaintiff Disclaimed Damages Over $5 Million" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

District Court Erred in Awarding Attorney Fees Against Defendant for Removing Class Action Under CAFA (Class Action Fairness Act of 2005) Because even though Basis for Removal was Flawed - that Class Action was “Commenced” when Removed rather than when Filed - Defense had Objectively Reasonable Grounds for its Interpretation of the Statute Seventh Circuit Holds

In an effort to avoid removal to federal court, plaintiffs filed a putative class action in Illinois state court on February 17, 2005: the class action alleged violations of Illinois’ Consumer Fraud and Deceptive Business Practices Act in that defendant Pfizer misrepresented the health risks of using Celebrex and Bextra, and charged more than fair market value for these drugs. Lott v. Pfizer, Inc., 492 F.3d 789, 790-91 (7th Cir. 2007). Defense attorneys removed the class action to federal court on the basis of CAFA, id., at 790, arguing that the action “commenced” when defense attorneys removed the class action to federal court, id., at 791. The district court remanded the class action to state court on the ground that CAFA applied only to class actions filed after CAFA’s effective date, and awarded attorney fees and costs against Pfizer. Id. The defense appealed the award of fees and the Seventh Circuit reversed.

We do not here discuss the unsuccessful arguments made by the defense in support of removal, both under CAFA and under traditional diversity jurisdiction: suffice it to say that the district court remanded the class action to state court based on its conclusion that it lacked subject matter jurisdiction and that the requirements for diversity jurisdiction had not been met - a decision affirmed by the Seventh Circuit in Pfizer, Inc. v. Lott, 417 F.3d 725, 727 (7th Cir.2005), which held that for purposes of CAFA jurisdiction a class action was “commenced” when it was “filed” not when it was “removed,” and that Pfizer had not established diversity jurisdiction. We address here the defense appeal from the award of attorney fees against Pfizer.

Continue reading "CAFA Class Action Defense Cases-Lott v. Pfizer: Seventh Circuit Holds Defense Basis For Erroneous Removal Of Class Action Pursuant To CAFA (Class Action Fairness Act of 2005) Was Objectively Reasonable So Sanction Award Was Improper" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Letter from Plaintiff’s Counsel Sent as Part of Effort to Settlement Labor Law Class Action and Estimating Damages at $10 Million Placed Defense on Notice that Class Action Sought Damages in Excess of Amount Required by Class Action Fairness Act (CAFA) Requiring Removal of Class Action to Federal Court Within 30 Days of Letter Ninth Circuit Holds

In April 2005, plaintiffs filed a class action lawsuit in California state court against LensCrafters alleging violations of various labor laws. Babasa v. LensCrafters, Inc., ___ F.3d ___, Slip Opn., at 2 (9th Cir. August 16, 2007). An amended class action complaint was filed in September 2005, and soon thereafter defense and plaintiffs’ attorneys agreed to mediate the dispute: as part of that process, in December 2005 plaintiffs’ lawyer sent LensCrafters a letter opining that damages would approach $10 million, id. Mediation efforts failed, and state court discovery ensued: in November 2006, plaintiffs’ counsel again stated that damages would exceed $5 million, id. Approximately 4 weeks later, defense attorneys removed the action to federal court under the Class Action Fairness Act of 2005 (CAFA), alleging that the November 1, 2006 telephone conference with opposing counsel “first put it on notice that the amount in controversy exceeded the jurisdictional amount,” id., at 2-3. The district court granted plaintiffs’ motion to remand the class action to state court, holding that the December 2005 letter placed defense counsel on notice of the amount in controversy. Id., at 3. The Ninth Circuit affirmed.

Defense attorneys argued that December 2005 letter “could not serve as proper notice of the amount in controversy for removal purposes, because the letter is privileged under state law.” Babasa, at 3. The Ninth Circuit held that Rule 501 of the Federal Rules of Evidence governs, not California state law, id., at 4-5, and that “LensCrafters could have ascertained, upon receiving the [December 2005] letter, that the case was removable,” id., at 5. The Circuit Court explained at page 5, “We have previously held that ‘[a] settlement letter is relevant evidence of the amount in controversy if it appears to reflect a reasonable estimate of the plaintiff’s claim.’” (Citation omitted.) Here, the December 2005 letter estimated “$4.5 million in unpaid wages, based on missed meal periods, plus an addition[al] $5 million in civil penalties,” and that these amounts easily satisfied the jurisdictional limit under CAFA, id., at 6. The class action thus was not removable in November 2006, because LensCrafters knew in December 2005 that the amount placed in controversy by the class action allegations exceeded CAFA’s jurisdictional limit. Id. Accordingly, the Ninth Circuit affirmed the district court order remanding the class action to state court, id., at 6-7.

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

After Denying Motion to Certify Class Action on Grounds that Named Plaintiff would be an Inadequate Class Representative, New York District Court Denies Plaintiff's Lawyer Leave to Conduct Discovery to Identify New Class Representative and Dismisses Class Action Because Subject Matter Jurisdiction Under Class Action Fairness Act of 2005 (CAFA) no Longer Existed

Plaintiff filed a putative class action against Philips Electronics alleging design defects in certain television models that caused them to require repair after the expiration of the express warranty period; federal court jurisdiction existed solely because of the Class Action Fairness Act (CAFA). Falcon v. Philips Electronics North Am. Corp., 489 F.Supp.2d 367,368 (S.D.N.Y. 2007). Plaintiff moved the district court for an order certifying the litigation as a class action; the district court denied the motion, agreeing with defense attorneys that plaintiff was not an adequate representative of the class. Id. Plaintiff’s lawyers then sought further discovery in an effort to find an adequate representative of the class, id. The district court denied the motion and dismissed the class action for lack of jurisdiction.

The district court order refusing to certify a class action turned on the fact that the sole named plaintiff “could not be an adequate class representative, because, among other problems, she did not actually purchase the television in question and because after receiving it, she subsequently discarded it.” Falcon, at 368. Plaintiff’s lawyer sought discovery of the names of customers who complained about the television models identified in the class action complaint “in the hope that that will lead to identification of an adequate class representative.” Id. The district court refused to reopen discovery so plaintiff’s lawyer could go “fishing” for a new class representative, explaining at page 369:

Continue reading "CAFA Class Action Defense Cases-Falcon v. Philips Electronics: New York District Court Holds Plaintiff's Lawyer Not Entitled To Go "Fishing" For New Class Representative And Dismisses Class Action For Lack Of Jurisdiction" »

Posted In: Class Action Fairness Act (CAFA), Certification of Class Actions, Class Action Court Decisions

Defense Claims of $75,000 Controversy for Diversity Jurisdiction and $5 Million Controversy for Removal Jurisdiction under Class Action Fairness Act of 2005 (CAFA) were Speculative Warranting Remand of Class Action to State Court

Plaintiff filed a putative class action against Esurance Insurance in Illinois state court alleging bad faith in the processing of insurance claims. Defense attorneys removed the class action to federal court arguing diversity jurisdiction and removal jurisdiction under the Class Action Fairness Act of 2005 (CAFA). Atteberry v. Esurance Ins. Services, Inc., 473 F.Supp.2d 876, 877 (N.D. Ill. 2007). Faced with the issue of whether the class action should be remanded to state court, the defense conceded that the class action was not subject to removal at the time it filed the notice of removal, but argued that plaintiff’s subsequent amendment of the class action complaint “operated to trigger potential removability.” Id. The district court disagreed and remanded the class action to state court.

The thrust of the defense argument was its interpretation of state law permitting a statutory award of up to $60,000 plus attorney fees for the bad faith handling of an insurance claim. Atteberry, at 877. The district court found the argument wanting in two respects. First, the federal court held that the defense failed to establish that the maximum statutory penalty would be awarded, characterizing the defense evidence as a “hypothetical valuation,” id. Second, the defense improperly assumed attorney fees in excess of $15,000 because “only fees already incurred at the time that federal jurisdiction is invoked, not anticipated fees, may be counted toward the requisite amount in controversy.” Id. (citing Gardynski-Leschuck v. Ford Motor Co., 142 F.3d 955, 958 (7th Cir. 1998)). In the words of the Seventh Circuit, “jurisdiction depends on the state of affairs when the case begins; what happens later is irrelevant.” Gardynski-Leschuck, 142 F.3d at 958.

Turning to the question of removal jurisdiction under CAFA, the district court held that the defense “has indulged [in] nothing beyond unsupported speculation as to the size of the potential class and hence as to the prospect . . . that the $5 million jurisdictional minimum under CAFA is at issue.” Id., at 878. Accordingly, the federal court remanded the lawsuit to the Illinois state court.

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Louisiana Federal Court Holds that Local Controversy Exception to Class Action Removal Under CAFA (Class Action Fairness Act of 2005) was not Established Because Two Defendants had been Named in Class Actions Alleging Similar Claims Within the Three Years Preceding the Filing of the Instant Class Action Complaint

Six property owners filed a single class action complaint in Louisiana state court against six insurers alleging violations of the state’s Valued Policy Law, breach of contract and bad faith; Allstate’s defense attorneys removed the class action to federal court asserting jurisdiction under CAFA (Class Action Fairness Act of 2005). Caruso v. Allstate Ins. Co., 469 F.Supp.2d 364, 365-66 (E.D. La. 2007). Plaintiffs moved to remand the class action to state court based on CAFA’s “local controversy” exception to removal, id., at 366. The district court denied the motion, agreeing with defense arguments that plaintiffs had not met their burden of proving the applicability of that exception.

The class action plaintiffs alleged that Hurricane Katrina caused substantial damage to their homes and they sued their homeowner’s insurance carriers to recover policy benefits. Caruso, at 365. Each plaintiff was insured by a different insurer, so the class action complaint named as defendants Allstate Insurance Company, State Farm Insurance Company, Republic Fire & Casualty Insurance Company, Auto Club Family Insurance Company, Lafayette Insurance Company and Louisiana Citizens Property Insurance Company. Id. Allstate timely removed the lawsuit to federal court under CAFA, and plaintiffs’ sought remand alleging that the “local controversy” exception applied. Id., at 366. The district court found that “the proposed class action undoubtedly satisfies the CAFA's criteria for removal,” id.; the relevant inquiry was whether the local controversy exception applied.

Continue reading "CAFA/Hurricane Katrina Class Action Defense Case-Caruso v. Allstate: Removal Of Class Action Proper Under Class Action Fairness Act (CAFA) And Plaintiffs Failed To Establish Local Controversy Exception To Removal" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Ninth Circuit Holds that Amendment of Class Action Cross-Complaint did not “Commence” New Action for Purposes of Removal under CAFA (Class Action Fairness Act of 2005), and that CAFA would not Avail a Plaintiff/Cross-Defendant Because CAFA Permits only a “Defendant” to Remove a Class Action to Federal Court

In December 2004, Progressive West Insurance Company filed a breach of contract lawsuit against its insured in California state court; on February 17, 2005 – the day before the effective date of the Class Action Fairness Act of 2005 (CAFA) – the insured filed a cross-complaint alleging violations of California’s Unfair Competition Law (UCL) and seeking to prosecute the cross-complaint as a class action. Progressive West Ins. Co. v. Preciado, 479 F.3d 1014 (9th Cir. March 6, 2007) [Slip Opn., 2]. The initial class action allegations were deficient, and in August 2006 the trial court granted plaintiff leave to amend the cross-complaint to assert the necessary allegations for a class action. Id. Progressive responded by removing the class action to federal court on the basis of CAFA, id.; the federal court remanded the class action to state court and the Ninth Circuit granted Progressive’s request for leave to appeal, id., at 3. The Court of Appeals affirmed the district court order, holding that CAFA did not confer federal court jurisdiction over the putative class action.

Urging the Ninth Circuit to follow the Seventh Circuit opinion in Knudsen v. Liberty Mut. Ins. Co., 411 F.3d 805 (7th Cir. 2005), Progressive argued that CAFA governed the class action complaint because under California’s “relation back” doctrine the “amended cross-complaint commenced a new action because it substantially changed the nature of the action from an individual action to a representative [class] action.” Slip Opn., at 4-5. The Ninth Circuit declined the invitation. The appellate court reaffirmed that a class action is “commenced” for purposes of removal under CAFA “when a suit becomes ‘a cognizable legal action in state court’ under ‘[a] state’s own laws and rules of procedure.’” Id., at 4 (citation omitted). California law deems an action “commenced” as of the date the complaint, or cross-complaint, is filed with the court, id. (citations omitted). Under California law, then, the class action complaint against Progressive “commenced” for purposes of CAFA on February 15, 2005 – the date the initial cross-complaint was filed. Id.

Continue reading "CAFA Class Action Defense Cases-Progressive West v. Preciado: Class Action Fairness Act Of 2005 (CAFA) Does Not Permit Cross-Defendant To Remove Class Action Cross-Complaint Ninth Circuit Holds" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Under California Law, Class Action is not “Commenced” under Class Action Fairness Act of 2005 (CAFA) by Amending Complaint to Name Doe Defendant Ninth Circuit Holds

In August 2004, plaintiff Ball filed a class action in California state court against various Capital One entities alleging that certain provisions of defendants’ credit card contracts constituted unlawful business practices. McAtee v. Capital One, F.S.B., ___ F.3d ___ (9th Cir. March 16, 2007) [Slip Opn., 2-3]. Three months later, California voters passed Proposition 64 which necessitated that a plaintiff must have suffered actual injury in order to have standing to bring a claim under California’s Unfair Competition Law (UCL), and this new requirement applied to cases pending at the time of its passage. Id., at 3. In May 2005, the trial court precluded Ball from pursuing her claims against the named Capital One defendants; an amended complaint was filed naming McAtee as the new party-plaintiff. Id. Defense attorneys removed the class action to federal court on the basis of the Class Action Fairness Act of 2005 (CAFA), which became effective February 18, 2005, arguing that the substitution of plaintiffs constituted the commencement of a “new action” within the meaning of CAFA, id., at 3-4. The federal court remanded the action, holding that the class action had been commenced in August 2004 when Ball filed the original class action complaint, id., at 4. Following remand, McAtee amended the complaint to add Capital One Bank as a party-defendant and dismissing the original Capital One entities as defendants; defense attorneys again removed the class action to federal court under CAFA, and the federal court again granted plaintiff’s motion for remand. Id. The Ninth Circuit granted defendant’s petition for appeal and affirmed the remand order.

As a matter of first impression in the Ninth Circuit, the Court of Appeals addressed “whether substitution of a named defendant for a Doe defendant in a California state court action commences a civil action against the new named defendant within the meaning of CAFA.” Slip Opn., at 4-5. The question of when an action is “commenced” for purposes of removal under CAFA turns on state law, id., at 7-8. In this regard, the Ninth Circuit rejected the approach taken by some other federal courts that relies, at least in part, on state-law relation back doctrine. Id., at 8-9. The appellate court explained that “[w]hen the ultimate question before the court is whether to dismiss an action for lack of timeliness, it makes sense to apply the relationship back doctrine, for in such cases the very survival of the action is at issue.” Id., at 9. But the consequences are far less severe when the issue is commencement for purposes of jurisdiction only: “The case will be allowed to go forward, in some forum, whether CAFA applies or not. If CAFA applies, the action may go forward in federal court if a defendant files a timely motion for removal. If CAFA does not apply, the action must go forward in state court unless there is some other basis for removal to federal court.” Id., at 10. For this reason, the relation back doctrine simply does not apply to a determination of whether a class action filed in state court may be removed under CAFA: the Ninth Circuit “simply look[s] to the date on which the original complaint in the action was filed.” Id., at 11.

Continue reading "CAFA Class Action Defense Cases-McAtee v. Capital One: Ninth Circuit Holds That Naming Doe Defendant Does Not Commence New Action For Purposes Of Class Action Fairness Act Of 2005 (CAFA)" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Entity that Employed Significant Number of Putative Class Members was an Indispensable Party under Rule 19 of the Federal Rules of Civil Procedure and could not be Joined in Class Action Without Destroying Federal Court Diversity Jurisdiction thus Necessitating Dismissal of Class Action Complaint New York Court Holds

Plaintiff filed a putative class action against Clear Channel Communications and Clear Channel Broadcasting for violations of New York's labor laws, alleging that defendants "made and continue to make unauthorized deductions from the wages of sales representatives for the New York radio stations that Defendants own and operate." Mattera v. Clear Channel Communications, Inc., 239 F.R.D. 70, 71-72 (S.D.N.Y. 2006). Plaintiff invoked federal court jurisdiction solely on the basis of diversity, id., at 72. Defense attorneys moved to dismiss the class action complaint for failure to join an indispensable party, id.; the thrust of the defense motion was that the class action failed to name Capstar Radio Operating Company (the owner of the two radio stations where plaintiff worked) as a defendant, and that joinder of Capstar would eliminate diversity jurisdiction thereby compelling dismissal of the action, id., at 73. The district court agreed with the defense and dismissed the class action.

Plaintiff was a sales representative, selling advertising spots or on-air time for two of the 1200+ radio stations defendants own and operate. Mattera, at 72. Sales representatives were received biweekly draws against commissions earned on each sale. The commissions were to be "paid one month after the contract for a sale is executed and the advertising spot purchased is aired,." But if the customer failed to pay for the service within 120 days then there would be a "charge back," with the entire amount of the commission deducted from the employee's next paycheck. According to the allegations in the class action complaint, the customer, "typically an advertising agency or corporation with a longstanding relationship with Defendants," would pay the bill more than 120 days after service, but in such instances defendants would not reverse the charge back. Id.

Continue reading "CAFA Class Action Defense Cases-Mattera v. Clear Channel: New York Federal Court Grants Defense Motion To Dismiss Labor Law Class Action For Failure To Join Indispensable Party" »

Posted In: Class Action Fairness Act (CAFA), Employment Law Class Actions, Class Action Court Decisions

State Law Governed the Effective Date of the Filing of an Amended Complaint for Purposes of CAFA (Class Action Fairness Act of 2005) Illinois Federal Court Holds

In January 2004, plaintiff filed a lawsuit in Illinois state court against its cargo loss insurer for breach of contract, delay in paying insurance claim and fraud. On February 7, 2005, plaintiff requested leave of court to file an amended complaint to allege class action allegations and to represent three nationwide classes against the insurer; the motion was granted on February 18 - the same date that CAFA(Class Action Fairness Act of 2005) became effective. Buller Trucking Co. v. Owner Operator Independent Driver Risk Retention Group, Inc., 461 F.Supp.2d 768, 770-71 (S.D. Ill. 2006). On March 7, 2005, defense attorneys removed the class action to federal court. The district court remanded the class action to state court and defense attorneys petitioned the Seventh Circuit for leave to appeal. Id., at 771. The Circuit Court vacated the district court's remand order and instructed the lower court to consider whether the filing of the amended complaint after CAFA became effective rendered the class action removable under CAFA. Id. The district court concluded that the effective date of the amended complaint pre-dated CAFA thus compelling remand to state court.

After summarizing CAFA and observing that CAFA does not apply retroactively to cases filed before its effective date, Buller Trucking, at 772, the district court explained that whether an amended complaint "recommences" a class action under state law for purposes of CAFA generally turns on "whether the amendment 'relates back' to the filing date of the original complaint: if it does, then the case is not removable, but if it does not, the case is subject to removal under CAFA." Id. (quoting Knudsen v. Liberty Mut. Ins. Co., 411 F.3d 805, 807 (7th Cir. 2005)). In the Seventh Circuit, "a new claim for relief (a new 'cause of action' in state practice), the addition of a new defendant, or any other step sufficiently distinct that courts would treat it as independent for limitations purposes, could well commence a new piece of litigation for federal purposes even if it bears an old docket number for state purposes." Id. (quoting Knudsen, 411 F.3d at 807).

Continue reading "Buller Trucking Class Action Defense Case: Illinois Federal Court Remands Class Action To State Court Holding Lawsuit Not Removable Under Class Action Fairness Act Of 2005 (CAFA)" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Class Action Fairness Act of 2005 (CAFA) did not Shift Burden of Proof of Amount in Controversy Requirements to Plaintiffs in Mass Actions or Class Actions Alabama Court Holds

In 2003, nine property owners filed suit in Alabama state court against eleven defendants asserting various common law based on defendants' discharge of pollutants and demanding as damages in excess of $1 million each. Lowery v. Honeywell Int'l, Inc., 460 F.Supp.2d 1288, 1290-91 (N.D. Ala. 2006). In an amended complaint filed in October 2005, 533 named plaintiffs sought damages against 12 named defendants seeking damages "in an amount of compensatory and punitive damages to be determined by a jury," id., at 1291. The complaint was amended against in March 2006 and June 2006; none of the complaints sought class action status, none of the theories of liability changed, and the indefinite prayer remained the same in the first through third amended complaints. Id. The Third Amended Complaint added as a party-defendant Alabama Power and Filler Products Company, and in July 2006 Alabama Power removed the action to federal court based in part on the Class Action Fairness Act of 2005 (CAFA) on the theory that "the action constitutes a 'mass action', which, under 28 U.S.C. § 1332(d)(11)(B)(i), is removable." Id. Plaintiffs moved to remand the case to state court on the grounds that CAFA did not apply and that defendants had not demonstrated the requisite amount in controversy. In an opinion that contains some surprising legal conclusions but in the author's view reached the correct result, the federal court remanded the action to state court.

The district court noted that the complaint was filed long before CAFA's February 18, 2005 effective date, but the amendment that precipitated removal post-dated CAFA. Lowery, at 1292. The court explained at page1292, "This procedural fact creates two potentially dispositive removability questions: (1) did the filing of the third amended complaint 'commence' a new suit for purposes of CAFA; and (2) if so, did the new suit, by retroactive effect, 'commence' as to all defendants, or only as to [those defendants added by the third amended complaint]." CAFA looks to state law for determining when an action is "commenced," which under Alabama law was the date the original complaint was filed. Id. However, federal law holds that "as to the new defendant, removability is determined as of the date of receipt of service of the amended complaint, not as of the date on which the original suit was filed in state court." Id. (citations and italics omitted). The question, then, is whether Alabama Power properly removed the action. Id., at 1292-93.

Continue reading "CAFA Mass Action Defense Case-Lowery v. Honeywell: Alabama Federal Court Rejects Defense Arguments And Remands Mass Action To State Court Due To Defense Failure To Establish $75,000 Amount In Controversy" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Federal Class Action Fairness Act of 2005 (CAFA) did not Shift Burden of Proving $5 Million Amount in Controversy to Plaintiff and Plaintiff's "Damages-Limitation Provision" could be used to Avoid Federal Court Provided Plaintiff did not Thereafter Seek to Recover More than $5 Million Third Circuit Holds

Plaintiff filed a putative class action in New Jersey state court based on false advertising claims in the sale of the skin cream StriVectim-SD and asserting various state law claims. Morgan v. Gay, 471 F.3d 469, 471 (3d Cir. 2006). Defense attorneys removed the class action to federal court under the federal Class Action Fairness Act of 2005 (CAFA), and plaintiff moved to remand the class action to state court. Id. The district court granted the motion, concluding that defense attorneys had failed to establish CAFA's $5,000,000 amount-in-controversy requirement, and the Third Circuit granted the defense leave to appeal. Id., at 471-72. As a matter of first impression in the Third Circuit, the Court of Appeals held that CAFA did not shift to plaintiff the burden of proving the amount in controversy for removal purposes, and affirmed the district court order remanding the class action to state court.

With respect to the amount in controversy, plaintiff's class action complaint expressly stated that the damages sought in the action, including treble damages and punitive damages, "'shall not [in total] exceed $5 million in sum or value.'" Morgan, at 471. The district court granted the motion to remand because the defense had not established that the amount in controversy met the $5 million threshold. Id. On appeal, the Third Circuit first addressed whether CAFA shifted the burden of establishing federal court jurisdiction from the defense to the plaintiff. Id., at 472. The Circuit Court agreed with defense attorneys that the legislative history evidenced a willingness to "switch the burden of proof from the party seeking removal to the party seeking remand," id., but ultimately concluded - as a matter of first impression in the Third Circuit - that CAFA did not alter the time-honored burden of proof and held that "the party seeking to remove the case to federal court bears the burden to establish that the amount in controversy requirement is satisfied," id., at 473.

Continue reading "Class Action Defense Cases-Morgan v. Gay: Third Circuit Holds As Matter Of First Impression That Under CAFA (Class Action Fairness Act Of 2005) Defense Still Bears Burden Of Establishing Amount-In-Controversy" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Class Action Alleging Improper Credit Card Charges does not Implicate "Securities Exception" to Federal Court Jurisdiction under CAFA (Class Action Fairness Act) so Defense Removal of Class Action was Proper California Court Holds

Plaintiff filed a putative class action against Chase Bank alleging improper finance charges in connection with retail purchases made with a "rewards" credit card arising out of a no-interest promotional offer Chase extended to cardholders. Davis v. Chase Bank U.S.A., N.A, 453 F.Supp.2d 1205, 1207 (C.D. Cal. 2006). Defense attorneys removed the action to federal court under the Class Action Fairness Act (CAFA), and the district court sua sponte issued an order to show cause why the case should not be remanded to state court. Id., at 1206. Following briefing, the district court concluded that the defense properly removed the class action.

Plaintiff made a $2000 purchase at Circuit City using his Chase "Rewards Card," taking advantage of a no-interest promotional offer whereby no finance charges would be assessed if the balance was paid in full prior to January 2008. Davis, at 1207. At the time of the purchase, plaintiff had an outstanding balance on his credit card account, and the billing statement he received following his Circuit City purchase included a finance charge which, he alleges, included interest on the $2,000 "no-interest" amount as well as his otherwise outstanding balance. Id. Plaintiff filed a class action lawsuit in California state court, and the defense removed the action asserting that it involved more than $5,000,000 and thus fell within the scope of CAFA. Id. In response to the federal court's OSC on the issue of whether the class action indeed involved more than $5 million, plaintiff's lawyer argued that even if it did the class action complaint fell within the securities exception to CAFA and therefore remand was appropriate. Id. The district court disagreed.

Continue reading "Davis v. Chase Bank Class Action Defense Case: California Court Holds Defense Properly Removed Class Action To Federal Court Under Class Action Fairness Act Of 2005 (CAFA) Because Securities Exception Did Not Apply" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Eighth Circuit Holds that CAFA (Class Action Fairness Act) Authorizes Appellate Review of Remand Orders Only Where Removal was Based on CAFA so Circuit Court could not Review Denial of Motion to Remand Class Action Removed on Grounds of Diversity Jurisdiction

Plaintiff filed a putative class action against Home Depot in Missouri state court, and defense attorneys removed the action to federal court on the grounds of diversity jurisdiction under 28 U.S.C. § 1332(a). Plaintiff filed a motion to remand the class action to state court, but the motion was denied. Plaintiff then asked the Eighth Circuit to accept an appeal of the district court's order, arguing that CAFA (Class Action Fairness Act) authorizes appellate review of remand orders in all class action cases. Saab v. Home Depot U.S.A., Inc., 469 F.3d 758, 759 (8th Cir. 2006). Defense attorneys had not sought to remove the class action under CAFA, and "made no assertion of jurisdiction under CAFA," id., at 759 n.2. Nonetheless, plaintiff argued that CAFA should be read "expansively" so as "to give federal courts of appeal the jurisdiction to review the grant or denial of a motion to remand any class action." Id. The Eighth Circuit disagreed.

Continue reading "Saab v. Home Depot-Class Action Defense Cases: Class Action Fairness Act (CAFA) Does Not Permit Appellate Review Of Federal Court Order Denying Motion To Remand Action Removed On Grounds Of Diversity Jurisdiction Eighth Circuit Holds" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

District Court Holds as Matter of First Impression in Fourth Circuit that CAFA Shifts Burden of Proof to Establish Local Controversy Exception to Removal Jurisdiction and Denies Motion to Remand

Plaintiff filed a putative class action in North Carolina state court against Pella Corporation, a window manufacturer, for unfair business practices and products liability based on the allegation that the blazing system utilized on defendants' windows was defective, leading to water damage following rain. The defense removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA). Eakins v. Pella Corp., 455 F.Supp.2d 450, 451 (E.D. N.C. 2006). Plaintiffs filed a motion to remand the class action to state court on the ground that it fell within CAFA's "local controversy" to federal court jurisdiction. Id. The district court agreed with defense attorneys that plaintiff bore the burden of establishing the applicability of the local controversy exception, and denied the motion for remand.

The federal court found the law clear that "the party requesting removal to federal court has the burden of proving that such removal is warranted," but in cases of class actions removed to federal court under the Class Action Fairness Act of 2005, "[l]ess clear is which party bears the burden of proving an exception to CAFA requires remand." Eakins, at 452. Because this was a matter of first impression in the Fourth Circuit, the district court relied on decisions out of the Fifth, Seventh and Eleventh Circuits which "have held that once the removing party proves the prima facie case for removal, the burden shifts to the plaintiff to prove that the local controversy exception should apply." Id. (citations omitted). The district court found "no reason to depart" from those cases, and held that plaintiff had the burden of establishing that the class action should be remanded to state court by virtue of the local controversy exception. Id.

Continue reading "Class Action Defense Cases-Eakins v. Pella: North Carolina Federal Court Holds Once Defense Establishes Prima Facie Case For Removal Under Class Action Fairness Act (CAFA) Burden Shifts To Plaintiff To Prove Exception To Removal Jurisdiction" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Court Holds as Matter of First Impression in Second Circuit that CAFA does not Modify Burden of Proof to Establish Removal Jurisdiction, and Affirms Remand of Class Action to State Court because Defense Failed to Establish Requisite Amount in Controversy

Plaintiff filed a putative class action against the third party administrator of a pool funded by Medicaid and Medicare, seeking '"an accounting of all amounts by which the Pool has been funded and reduced"; defense attorneys estimated this amount to be $40 million (though the complaint was silent as to the amount), and argued that plaintiff had placed that entire amount at issue. The defense removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA), but the district court remanded the action to state court. DiTolla v. Doral Dental IPA of New York, LLC, 469 F.3d 271, 272-73 (2d Cir. 2006). On appeal, defense attorneys argued that the $5 million "amount in controversy" test was satisfied. Id., at 273. The Second Circuit disagreed.

Preliminarily, the Second Circuit considered the statutory requirement that, absent an extension of time under 28 U.S.C. § 1453(c)(3), the appellate court issue an opinion within 60 days of the granting of an appeal from an order granting or denying remand. DiTolla, at 274. Under 28 U.S.C. § 1453(c)(4), the appeal is deemed denied if a final judgment is not issued within that 60-day window. In DiTolla, defense attorneys sought permission to appeal in May 2006, and permission was granted in July 2006. The defense team filed their brief on August 17, 2006, and a month later, on September 21, 2006, the parties stipulated to extend time for issuance of a opinion. Id. Plaintiff argued that the appeal was "filed" in May, and that the Circuit Court therefore lacked authority to grant permission to appeal because that order came 66 days after the "filing" of the appeal. Id. The Second Circuit disagreed, holding at page 274: "We reject this interpretation . . . and hold that the 'filing' of the appeal for CAFA purposes occurs on the date in which this Court issues an order granting permission to appeal." The Court observed at page 275 that its interpretation is consistent with case law out of the Fifth, Seventh, Ninth and Eleventh Circuits.

Continue reading "Class Action Defense Cases-DiTolla v. Doral Dental: Second Circuit Holds Class Action Fairness Act (CAFA) 60-Day Deadline For Issuing Opinion Runs From Grant Of Permission To Appeal And That Removing Party Bears Burden Of Proving Jurisdiction" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

CAFA (Class Action Fairness Act) did not Shift Burden of Proving Federal Jurisdiction to Plaintiff but Defense Established Requisite Amount In Controversy so Alabama Federal Court Denies Motion to Remand Class Action to State Court

Plaintiff, a pharmacy, filed a putative class action against insurance/pharmacy benefit management companies for misrepresentation, breach of contract, unjust enrichment and conspiracy, alleging that defendants failed to reimburse pharmacies "according to an agreed-upon formula for brand name prescriptions dispensed to Defendants' insureds." Main Drug, Inc. v. Aetna U.S. Healthcare, Inc., 455 F.Supp.2d 1323, 1324 (M.D. Ala. 2006). Defense attorneys removed the action to federal court asserting, inter alia, federal court jurisdiction under the Class Action Fairness Act of 2005 (CAFA), 28 U.S.C. § 1332(d). Id. Plaintiffs moved to remand the class action to state court, arguing that the defense had not established the requisite $5 million amount-in-controversy, id. The district court held that even under CAFA the defense bears the burden of establishing removal jurisdiction, but concluded that the defense had satisfied the amount in controversy requirement.

The federal court began its discussion by addressing the issue of whether under CAFA the removal-requesting defendant bore the burden of establishing federal court jurisdiction or whether the remand-requesting plaintiff must demonstrate that such jurisdiction does not exist. Main Drug, at 1326-27. The district court's analysis led it to "apply the traditional burden" that requires the defense "to show by a preponderance of the evidence that the amount in controversy has been met." Id., at 1327. The court also concluded that the defense had met its burden of proof in showing that the amount in controversy exceeds $5 million, id., at 1327-28.

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Second Circuit Holds that CAFA (Class Action Fairness Act) did not Shift Burden of Proving Federal Jurisdiction to Plaintiff and Remands Class Action Case to District Court for Further Proceedings

Plaintiffs filed a putative class action against Blockbuster in New York state court challenging the company's "No Late Fee" program as a deceptive business practice on the grounds that Blockbuster did not adequately inform customers that in order to avoid the late fees the transaction was converted from a video rental to a video sale. Blockbuster, Inc. v. Galeno, 472 F.3d 53, 2006 WL 3775326, *1 (2d Cir. 2006). Defense attorneys removed the action to federal court asserting both general diversity jurisdiction under 28 U.S.C. § 1332(a) and federal court jurisdiction under the Class Action Fairness Act of 2005 (CAFA), 28 U.S.C. § 1332(d). Id., at *2. Plaintiffs moved to remand the class action to state court, arguing that the defense had not established the requisite $5 million amount-in-controversy, id.; defense attorneys countered that "CAFA had reversed the traditional rule that the party seeking removal to federal court bears the burden of establishing federal jurisdiction," id. The district court agreed with the defense, but its order denying the motion to remand the class action stated not only that "the defendant has met its burden" but also that "the plaintiff has not met [its] burden," id. The Second Circuit held that the district court should not have assigned any burden to the plaintiff, and remanded the action for further proceedings in light of the ambiguity in the lower court's order.

After summarizing CAFA and the appropriate standard of review of an order denying a motion to remand, Galeno, at *3, the Circuit Court addressed whether CAFA "shifted the burden of proof to the remand-requesting plaintiff to show that federal jurisdiction does not exist," id., at *4. The Second Circuit's analysis led it to the same conclusions reached by "[e]very other circuit court that has considered this issue," id., at *5 - viz., that CAFA had not affected the defense burden of establishing federal court removal jurisdiction, id.

Continue reading "Blockbuster v. Galeno-Class Action Defense Cases: Defense Bears Burden Of Establishing Federal Court Jurisdiction Under Class Action Fairness Act (CAFA) Second Circuit Holds" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Error in Refusing to Remand Class Action is not Jurisdictional Error but Defense Improperly Removed Class Action under CAFA (Class Action Fairness Act of 2005) Because Amendments to Complaint Related Back Original Filing Which Predated CAFA's Effective Date

In January 2005, prior to the effect date of the Class Action Fairness Act of 2005 (CAFA), plaintiff filed a barebones class action in California state court against Sears alleging false representations that certain Craftsman tools are made in the U.S. when they are manufactured abroad. Santamarina v. Sears, Roebuck & Co., 466 F.3d 570, 571 (7th Cir. 2006). Defense attorneys demurred, and plaintiff's lawyer filed an amended complaint after CAFA became effective. The defense then removed the class action to federal court arguing that the amended complaint did not relate back and was therefore removable under CAFA. The California federal court denied plaintiff's motion for remand and plaintiff did not appeal that ruling. However, after the Judicial Panel on Multidistrict Litigation (MDL) transferred the case to Illinois, plaintiff asked the district court to reconsider the California court's ruling. The Illinois federal court held that the defense removal had been improper and remanded the class action to California state court. Id. Sears appealed, and the Seventh Circuit Court of Appeals affirmed.

Sears first argued that the Illinois federal court should not have reconsidered the ruling of the California federal court. Santamarina, at 571-72. The Seventh Circuit disagreed, explaining that a court has inherent power to reconsider prior rulings in the same lawsuit, even the rulings of a different judge, "if there is a compelling reason, such as a change in, or clarification of, law that makes clear that the earlier ruling was erroneous." Id., at 572. The Circuit Court reasoned at page 572, "Not to reconsider in such circumstances would condemn the parties to the unedifying prospect of continued litigation when they knew that a possibly critical ruling was in error and, unless it became moot in the course of the proceedings, would compel a reversal of the final judgment at the end of the case." The Court of Appeals was critical of plaintiff's delay in seeking reconsideration "almost 15 months since the case was removed to the federal court and 13 months since it was transferred to Chicago," but held that "some latitude" was warranted because the class action was removed and remand denied "only a few months after the promulgation of the Class Action Fairness Act." Id.

Continue reading "Sears Class Action Defense Case-Santamarina v. Sears: Seventh Circuits Holds Class Action Not Removable By Defense Because Under California Law Amendments To Class Action Complaint Related Back To Original Filing" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Massachusetts Federal Court Agrees With Defense that Post-CAFA Amendment of Class Action Complaint Rendered Suit Removable But Rejects Defense Claim that CAFA Shifts Burden of Proof to Plaintiff to Prove Remand is Warranted

Plaintiff filed a putative class action in Massachusetts state court against Bayer, Crompton Corporation and Uniroyal Chemical on February 10, 2005, alleging a conspiracy to fix prices on certain rubber and urethane products. Plaintiff amended the complaint in May 2005, and defense attorneys consented to the filing of a second amended class action complaint on February 6, 2006. Defense attorneys then removed the action to federal court on February 10, 2006, under the Class Action Fairness Act of 2005 (CAFA). Moniz v. Bayer A.G., 447 F.Supp.2d 31, 32-33 (D.Mass. 2006). Plaintiff filed a motion to remand the action to state court.

CAFA became effective on February 18, 2005. As a preliminarily matter, the federal court rejected the defense claim that CAFA shifted the burden of proof to the plaintiff to demonstrate that remand is warranted. Moniz, at 33-34. As the district court explained at page 34, “the clear majority of courts that have addressed the issue have held that, even where CAFA applies, the burden of proof on a motion to remand remains with the removing party because the text of the statute says nothing about changing that long-standing rule.”

Continue reading "Moniz v. Bayer-Class Action Defense Cases: Defense Removal Of Class Action To Federal Court Proper Under CAFA (Class Action Fairness Act of 2005) Because Of Post-CAFA Amendment To Class Action Complaint Massachusetts Federal Court Holds" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

As a Matter of First Impression, Eleventh Circuit Holds that Jurisdiction Exists to Review District Court Order Based on Finding that Class Action Fairness Act of 2005 (CAFA) does not Apply and Agrees with District Court Decision to Remand Class Action to State Court

Plaintiff filed a putative class action in Alabama state court against health insurer alleging breach of contract. Defense attorneys removed the action to federal court based on the Class Action Fairness Act of 2005 (CAFA). Plaintiffs moved to remand the class action to state court on the grounds that Class Action Fairness Act did not apply because the lawsuit had been filed prior to CAFA’s effective date. Tmesys, Inc. v. Eufaula Drugs, Inc., 462 F.3d 1317, 1318 (11th Cir. 2006). The district court agreed and remanded the matter to state court; defense attorneys appealed. The Eleventh Circuit held, as a matter of first impression, that the Court of Appeals “do[es] have jurisdiction to review a district court’s order to remand [a class action to state court] when that order is based on a determination that CAFA does not apply, at least to the extent of reexamining that jurisdictional issue.” Id., at 1319 (citations omitted).

The facts underlying the removal/remand issue are as follows. Plaintiff filed its class action on February 14, 2005 - four days before CAFA’s effective date of February 18, 2005 - but the summons was not issued until February 28, 2005. Defense attorneys removed the case under CAFA on the ground that the action was “commenced” on the date the summons issued, which was after CAFA’s effective date. Plaintiff argued, and the district court found, that plaintiff intended the complaint be served on the date it filed its complaint and thus, under Alabama law, the class action had been commenced prior to CAFA’s effective date. Tmesys, at 1318. The Circuit Court held (1) as noted above, the federal Courts of Appeals have jurisdiction to review on appeal the foundational jurisdictional issue of whether CAFA applies, and (2) that “the consensus among circuits is that state law determines when an action is commenced for purposes of CAFA.” Id., at 1319. The Eleventh Circuit summarized its holdings at page 1319 as follows:

Accordingly, because the district court’s application of Alabama law established that the action was commenced prior to the effective date of the act and it is clear that the district court properly applied Alabama law to the undisputed underlying facts, both the district court and our court are without jurisdiction under CAFA. Thus, we DENY the petition for permission to appeal.

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

As a Matter of First Impression in Seventh Circuit, Court Holds that Class Action Fairness Act of 2005 (CAFA) Shifts Burden to Plaintiff to Establish Exceptions to Federal Court Jurisdiction

After plaintiff filed a putative labor law class action against FedEx in Pennsylvania state court, defense attorneys removed the case to federal court under CAFA (Class Action Fairness Act of 2005). The Judicial Panel on Multidistrict Litigation transferred the class action to the Northern District of Indiana, and plaintiff moved to remand the case to Pennsylvania state court under the “local controversy” or “home-state controversy” exceptions to federal court jurisdiction under CAFA. The district court denied the motion on the ground that plaintiff had failed to meet his burden of establishing that the exceptions applied. Plaintiff appealed the order, and the Seventh Circuit held that CAFA shifted the burden to plaintiff and affirmed. Hart v. FedEx Ground Package System Inc., 457 F.3d 675, 676-77 (7th Cir. 2006).

Plaintiff’s class action alleged the FedEx delivery drivers were misclassified as “independent contractors.” Hart, at 676. The complaint alleged that “greater than two-thirds of the members of the plaintiff class, if not all of the members of the plaintiff class, are citizens of Pennsylvania.” Id., at 677. FedEx removed the lawsuit to federal court under CAFA alleging in the notice of removal that “[u]pon information and belief, some of the proposed class members are not residents of Pennsylvania,” id. Absent CAFA, diversity jurisdiction would not exist. Id., at 676. Plaintiff sought to remand the action under CAFA’s “local controversy” and “home-state controversy” exceptions, see § 1332(d)(4)(B), and urged that under Brill v. Countrywide Home Loans¸ 427 F.3d 446 (7th Cir. 2005), FedEx bore the burden of establishing jurisdiction under CAFA and “also that none of the mandatory exclusions from CAFA jurisdiction found in § 1332(d)(4) applied,” id., at 677.

Continue reading "FedEx Class Action Defense Case-Hart v. FedEx: CAFA (Class Action Fairness Act) Shifts Burden Of Persuasion From Defense To Plaintiff To Establish Exceptions To Federal Court Jurisdiction Seventh Circuit Holds" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Federal District Court Denies Motion for Reconsideration of Order Denying Motion to Remand Class Action to State Court Because Defense Established Jurisdiction Under Class Action Fairness Act (CAFA).

Plaintiff filed a putative antitrust class action against Intel Corporation in state court, which the defense removed to federal court under CAFA (Class Action Fairness Act). The district court denied plaintiff’s motion to remand the class action to state court, and plaintiff moved for reconsideration. In re Intel Corp. Microprocessor Antitrust Litig., 436 F.Supp.2d 687 (D. Del. 2006). The district court explained that it refused to remand the lawsuit to state court because the defense “had carried its burden of proving that federal jurisdiction exists” because the defense “carr[ied] its burden of setting out the amount in controversy” and plaintiff did not “establish to a legal certainty that the amount in controversy was less than the statutorily required $5,000,000.” Id., at 688. Plaintiff’s motion for reconsideration argued that the district court erred by (1) failing to consider his evidence concerning the amount in controversy, and (2) accepting Intel’s estimate which was based on the cost of the computer as a whole rather than the cost of the microprocessor itself. Id., at 689. The district court denied plaintiff’s motion.

Continue reading "In re Intel-Class Action Defense Cases: Defense Keeps Class Action Removed Under CAFA (Class Action Fairness Act) In Federal Court Because Amount In Controversy Exceeds $5 Million" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Federal Court Remands Putative Class Action Over Defense Objection Because at Least One Member of Class Must Satisfy Jurisdictional Requirement for Damages and Because Under Alabama State Law Class Action was Commenced Prior to CAFA Even Though Summons Issued After CAFA's Effective Date

Issues regarding removal and remand, and regarding federal court jurisdiction under the Class Action Fairness Action of 2005 (CAFA), have been covered in several separate articles. On May 22, 2006, an Alabama federal court remanded to state court a putative class action over defense claims that the court had either diversity jurisdiction or jurisdiction under CAFA. Eufaula Drugs, Inc. v. Tmesys, Inc., 432 F.Supp.2d 1240 (M.D. Ala. 2006). Plaintiff filed the putative class action on February 14, 2005 - four days before the effective date of CAFA - but the summons was not issued until February 28 because plaintiff's lawyer "did not file the summons or a completed certified mail card or provide the appropriate postage to the state court clerk's office until then." Id., at 1242. Defense attorneys removed the action to federal court. The defense urged that federal diversity jurisdiction existed and, alternatively, that the action was removable under CAFA. Id., at 1243.

The federal court rejected both arguments. As to diversity jurisdiction, while the district court agreed that the parties were diverse, Eufaula Drugs, at 1243 n.4, "at least one class representative or named plaintiff must meet the amount-in-controversy requirement before supplemental jurisdiction can arise," id., at 1244 (citing Exxon Mobil Corp. v. Allapattah Servs., Inc., ___ U.S. ___, 125 S.Ct. 2611, 2615 (2005)). As to CAFA, the court recognized that "commencement" for purposes of CAFA turned on state law, id., at 1245-46. and under its analysis of Alabama state law, on the particular facts of the case, the action would be deemed "commenced" as of the date the complaint was filed and accordingly remanded the action to state court, id., at 1246-50.

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Changing Class Definition in Class Action Does Not Constitute New Case Permitting Removal Under CAFA (Class Action Fairness Act) Seventh Circuit Holds

Congress enacted CAFA (Class Action Fairness Act of 2005) for the purpose of expanding defense access to federal courts in class action cases. CAFA applies only to class actions filed after its effective date (February 18, 2005), but federal courts have held that certain pleading amendments - such as adding a new party-defendant - constitutes the commencement of a "new case" thus permitting removal by defense attorneys to federal court. Class action defendants often benefit if they can remove the case to federal court, and many have tested the limits of CAFA by removing class action cases on the grounds that different actions by the plaintiffs' lawyer commenced a new suit.

Continue reading "Class Action Defense Cases: Knudsen v. Liberty Mutual" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

CAFA (Class Action Fairness Act of 2005) Requires Defendant Prove Subject Matter Jurisdiction Supporting Removal Eleventh Circuit Holds

Removal under CAFA (Class Action Fairness Act of 2005) continues to raise basic questions. On June 5, 2006, the Court of Appeals for the Eleventh Circuit addressed several of these questions in Miedema v. Maytag Corporation, ___ F.3d ___, 2006 WL 1519630 (11^th Cir. 2006). The main issue presented was whether CAFA shifted the burden of proof to the plaintiff to establish that remand was proper. Before addressing that question, however, the Circuit Court joined the growing list of sister circuits to hold that 28 U.S.C. § 1453(c)(1) requires that appellate review be sought not more than 7 days after the district court order granting or denying remand, despite the statutory language of “not less than 7 days,” Slip Opn., at 5-7 (italics added, citations omitted). In the Court’s words,

to read it literally would produce an absurd result: there would be a front-end waiting period (an application filed 6 days after entry of a remand order would be premature), but there would be no back-end limit (an application filed 600 days after entry of a remand order would not be untimely).

Slip Opn., at 6-7. The Court also reaffirmed that CAFA requires that the appeal be resolved within 60 days of the granting of an application to appeal, rather than 60 days from the filing of the petition for review. Id., at 7-8.

Turning to the merits, Miedema joined the Seventh and Ninth Circuits in holding that a class action defendant bears the burden of proving removal jurisdiction: CAFA did not shift that burden to class action plaintiffs. Slip Opn., at 8-14. Miedema held that “the district court did not err by placing the burden of establishing subject matter jurisdiction on Maytag, or by invoking the rule that doubts are to be resolved in favor of remand.” Id., at 14. The Court then analyzed the evidence Maytag provided to the district court and concluded that it was insufficient to establish removal jurisdiction. Class defendants will find the Court’s analysis instructive, and it will assist class defendants in establishing subject matter jurisdiction in any federal court. For this reason, the opinion is well worth reading.

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Class action litigation is rampant in the United States, and defending against a class action lawsuit is both expensive and time-consuming. In enacting CAFA (Class Action Fairness Act of 2005), Congress acknowledged that class actions are an important and valuable part of the legal system “when they permit the fair and efficient resolution of legitimate claims of numerous parties by allowing the claims to be aggregated into a single action against a defendant that has allegedly caused harm.” However, Congress also recognized that the abusive use of class actions has harmed the public, harmed businesses, and undermined public respect for the judicial system.

In particular, Congress was concerned that many class actions benefited plaintiffs’ counsel more than the public. “Class members often receive little or no benefit from class actions, and are sometimes harmed,” whereas “[plaintiffs’] counsel are awarded large fees, while leaving class members with coupons or other awards of little or no value.” Moreover, certain plaintiffs receive unjustifiable awards at the expense of other class members.

Congress was also concerned that by manipulation of diversity jurisdiction plaintiffs’ counsel had managed to keep cases of “national importance” in state court, and that state courts would “sometimes act[] in ways that demonstrate bias against out-of-State defendants” and enter judgments that would “impose their view of the law on other States and bind the rights of the residents of those States.”

Congress therefore enacted the Class Action Fairness Act (“CAFA”) for several purposes. When a proposed class action settlement awards coupons to class members, then CAFA requires that the federal district court expressly find that the settlement is fair, reasonable and adequate. The federal court also cannot approve such a settlement if attorney fees awarded to class counsel result in a net monetary loss to the class unless the court expressly finds that the monetary loss is substantially outweighed by nonmonetary benefits to the class. CAFA also specifies the calculation of contingent and other attorney fee awards when the proposed class action settlement involves providing coupons to class members. Finally, CAFA prohibits class settlements that give greater benefits to some class members because they are geographically nearer to the court. To ensure the fairness of proposed class settlements, CAFA requires that notice of proposed settlements be served on the appropriate State and Federal officials, and forbids the court from approving such settlements less than 90 das after service of such notice.

Continue reading "CAFA (CLASS ACTION FAIRNESS ACT OF 2005)" »

Posted In: Class Action Fairness Act (CAFA)

CAFA (Class Action Fairness Act of 2005) Places Burden of Proof on Plaintiff to Establish Local Controversy Exception to Removal Eleventh Circuit Holds

CAFA contains several provisions that still require judicial interpretation. On May 22, 2006, the Eleventh Circuit considered as a matter of first impression for any Circuit Court of Appeals “the specific question of which party should bear the burden of proof on CAFA’s local controversy exception.” Evans v. Walter Industries, Inc., 449 F.3d 1159, 1164 (11th Cir. 2006). Evans "hold[s] that the plaintiffs bear the burden of proving the local controversy exception," id., at 1165 (italics added). The Court noted that this "places the burden on the party most capable of bearing it" because "plaintiffs have defined the class and have better access to information about the scope and composition of the plaintiff class." Id., at 1164 n.3.

The Eleventh Circuit analyzed the evidence presented to the district court and found it wholly inadequate to establish a local controversy. See Evans, at 1164-68. The court rejected the purported showing that two-thirds of the plaintiff class are Alabama citizens, and rejected further that the token Alabama corporation was a "significant defendant" within the meaning of CAFA. In so doing, Evans appears to have adopted (or at the least to have applied) the test "that a class seeks 'significant relief' against a defendant when the relief sought against that defendant is a significant portion of the entire relief sought by the class." Id., at 1167 (citations omitted).

NOTE: The Eleventh Circuit expressly noted that its opinion concerns only the local controversy exception in 28 U.S.C. § 1332(d)(4)(A), and does not reach the question of the local controversy exception in 28 U.S.C. § 1332(d)(4)(B). Evans, at 1163 n.2.

Posted In: Class Action Fairness Act (CAFA), Class Actions In The News, Removal & Remand, Class Action Court Decisions

When defending against a class action, it is important to understand that special rules apply under Class Action Fairness Act (CAFA) concerning the appealability of remand orders. Whether a federal district court order remanding an action to state court may be reviewed on appeal is important to any defendant, but special rules apply if the action has been removed to federal court under the Class Action Fairness Act of 2005. Because the focus of this article is on appellate review of district orders granting motions to remand a lawsuit to state court a case removed under CAFA, removal and remand are not discussed here; discussions of each may be found in separate articles, as is a discussion concerning appellate review of remand orders in non-CAFA cases.

Put simply, appellate review is available for remand orders in cases governed by the Class Action Fairness Act of 2005. Under CAFA, Congress expressly provided that “notwithstanding section 1447(d), a court of appeals may accept an appeal from an order of a district court granting or denying a motion to remand a class action to the State court from which it was removed if application is made to the court of appeals not less than 7 days after entry of the order.” 28 U.S.C. § 1453(c)(1). A defendant must be wary, however, of the quick fuse on filing its notice of appeal: by its terms, the 7-day time limit runs from “entry of the order,” rather than from “notice of entry of the order.”

CAFA also provides for expedited appellate review of remand orders: “If the court of appeals accepts an appeal under paragraph (1), the court shall complete all action on such appeal, including rendering judgment, not later than 60 days after the date on which such appeal was filed, unless an extension is granted under paragraph (3).” 28 U.S.C. § 1453(c)(2) (italics added). The extensions are limited to either (1) “any period of time” agreed upon by all parties, 28 U.S.C. § 1453(c)(3)(A), or (2) no more than 10 days, 28 U.S.C. § 1453(c)(3)(B). If the Circuit Court fails to rule within the statutory time period, then the appeal is deemed denied. 28 U.S.C. § 1453(c)(4).

Posted In: Class Action Fairness Act (CAFA)

CAFA (Class Action Fairness Act of 2005) Requires Appeal From Grant or Denial of Motion to Remand Be Made Within 7 Court Days Ninth Circuit Holds

On January 26, 2006, the Court of Appeals for the Ninth Circuit denied a motion to dismiss as untimely an appeal under CAFA (Class Action Fairness Act of 2005) from a district court order denying a motion to remand a putative class action to state court. Amalgamated Transit Union Local 1309 v. Laidlaw Transit Serv., Inc., 435 F.3d 1140 (9^th Cir. 2006). Specifically, the Ninth Circuit held that "the petition for permission to take an appeal must be filed not more than seven court days after the district court's order." Id., at 1141.

The underlying action was filed in San Diego Superior Court in April 2005, and removed to federal court in June 2005. Plaintiffs moved to remand the matter to state court; the district court denied the motion on October 4, 2005, and the order thereon was entered October 5, 2005. Plaintiffs filed a notice of appeal therefrom on October 11, 2005.

On November 9, 2005, a defendant moved to dismiss the appeal. While the opinion addresses several issues, we focus here on the Ninth Circuit's interpretation of CAFA's provision for appeal of district court orders granting or denying motions for remand. 28 U.S.C. S 1453(c)(1) literally provides that review must be sought "not less than 7 days after entry of the order" (italics added). As the Court observed,

The Tenth Circuit in Pritchett v. Office Depot, Inc., 420 F.3d 1090, 1093 n.2 (10^th Cir. 2005), concluded that the statute contains a "typographical error," and the word "less" should be "more," thereby avoiding "a result demonstrably at odds with the intentions of its drafters."

Amalgamated Transit, at 1145 (citations omitted).

The Ninth Circuit agreed, concluding that the legislative history reveals an intent "to create a time limit for appeal, specifically to require that the party seeking to appeal do so not more than seven days after the district court's order." 435 F.3d at 1146 (citations omitted, italics in original).

The Ninth Circuit thus joined the Tenth Circuit in "striking a word passed on by both Houses of Congress and approved by the President, and replacing it with a word of the exact opposite meaning." 435 F.3d at 1146.

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

CAFA (Class Action Fairness Act of 2005) Allows Removal of Suit Filed Prior to CAFA’s Effective Date by Defendant Added to Suit by Amendment After CAFA’s Effective Date Tenth Circuit Holds

On May 12, 2006, the Court of Appeals for the Tenth Circuit considered as a matter of first impression the question of “whether CAFA permits the removal of a class action filed before the Act’s effective date if the removing defendant was first added by amendment after the effective date.” Prime Care of Northeast Kansas, LLC v. Humana Ins. Co., 447 F.3d 1284, 1285 (10^th Cir. 2006). The district court had concluded that CAFA did not apply in such cases and remanded the matter to state court. The Tenth Circuit reversed, vacating the district court’s remand order and remanding the action to federal court.

The Tenth Circuit recognized that courts that have considered post-CAFA amendments to the operative pleading have reached one of three competing conclusions. In brief, those courts “have held that such amendments either (1) do not affect the pre-CAFA commencement date of the case; (2) affect the commencement date only if they do not relate back; or (3) affect the commencement date if they do not relate back or if they add new defendants to the case.” Prime Care, at 1286. The Court “adopt[ed] the second position.” Id. Specifically, “whether a post-CAFA amendment triggers a substantive right to removal under CAFA by the affected parties depends on whether the amendment relates back to the pre-CAFA pleading that is being amended.” Id., at 1289

Posted In: Class Action Fairness Act (CAFA), Class Actions In The News, Removal & Remand, Class Action Court Decisions

CAFA (Class Action Fairness Act of 2005) Determination of “Commencement” of Action Turns on State Law Fifth Circuit Holds

On May 3, 2006, the Fifth Circuit Court of Appeals issued its opinion in Patterson v. Dean Morris, L.L.P., ___ F.3d ___, 2006 WL 1156388 (5^th Cir. 2006), where it considered whether an action that had been filed on February 17, 2005 (prior to CAFA’s February 18, 2005 effective date), but the filing fees not paid until February 22, 2005, could be removed to federal court under CAFA (Class Action Fairness Act of 2005). Slip Opn., at 6-7. The district court remanded the consolidated actions finding that CAFA did not apply, and the Fifth Circuit affirmed. Id., at 6. The Fifth Circuit’s analysis turned entirely upon state law, determining when Louisiana would deem the action to have been “commenced.” In so analyzing the case, the Court joined several sister circuits in relying upon state law to determine when an action has “commenced” under CAFA.

Louisiana law permits a party to fax-file a complaint, provided that the filing fee be paid within 5 days thereof, together with a $5 “transmission fee.” If a plaintiff fails to pay the required filing fee and transmission fee, then the fax filing “shall have no force or effect.” Slip Opn., at 7 (citations omitted). In Patterson, plaintiffs paid the court $3,039 on February 22. However, on May 12 plaintiffs learned that they owed the court an additional $2,145 in fees, which they did not pay until June 14. Defendants urged that the late payment took the action outside of the Louisiana statute’s five-day deadline, so the effective date of the commencement of the lawsuit was after the effective date of CAFA. Slip Opn., at 7.

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Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

CAFA (Class Action Fairness Act of 2005) Requires Defendant Establish Removal Jurisdiction in "Mass Action" Cases and Jurisdictional Discovery Discretionary Ninth Circuit Holds

CAFA greatly expands access to federal courts to class action defendants, as well as to defendants in "mass action" cases. One question federal courts have grappled with is whether Congress intended to shift the burden from a class action defendant to establish removal jurisdiction, to a class action plaintiff to prove that the matter should be remanded to state court. On April 4, 2006, the Ninth Circuit held that CAFA does not shift the burden of proof to plaintiffs in mass action cases. Abrego Abrego v. Dow Chemical Co., 443 F.3d 676 (9^th Cir. 2006).

Abrego Abrego involved a mass action brought by 1160 Panamanian workers against Dow Chemical for alleged distribution and use in Panama of a pesticide banned in the United States. Dow removed the case to federal court under 28 U.S.C. § 1332(d)(11), added by CAFA to provide federal court jurisdiction over "mass actions." (The requirements of mass actions are discussed in a separate article.) In response to plaintiffs' motion to remand the action to state court, Dow argued:

[U]nder CAFA and contrary to preexisting removal jurisdiction law: (1) plaintiffs bear the burden of refuting the district court’s removal jurisdiction; (2) a “mass action” is removable regardless of whether there is jurisdiction over all plaintiffs whose claims are necessary to qualify the action as a mass action; and (3) the district court must allow jurisdictional discovery to determine the amount in controversy.

443 F.3d at 677-78. The district court found that Dow had failed to establish removal jurisdiction and remanded the case to state court. Id., at 679.

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Posted In: Class Action Fairness Act (CAFA), Class Action Court Decisions

Post-CAFA (Class Action Fairness Act of 2005) Amendment of Complaint to Add Defendant Allows Removal to Federal Court by that Defendant of Suit Filed Prior to CAFA’s Effective Date Fifth Circuit Holds

On April 6, 2006, the Fifth Circuit Court of Appeals considered “an issue of first impression for this court: whether amending a complaint to add a defendant ‘commences’ a new suit under the Class Action Fairness Act of 2005 (CAFA),” Braud v. Transport Service Co. of Illinois, 445 F.3d 801, 802 (5th Cir. 2006).

In Braud, the class action petition was filed in August 2004. In April 2005 (after CAFA’s February 18, 2005 effective date), plaintiffs amended their petition to add an additional party-defendant, Ineos. Ineos timely removed the action to federal court on the ground of CAFA. Braud, at 802. In considering plaintiffs’ motion for remand, the district court concluded that the amendment did not draw the action into the ambit of CAFA and remanded the matter to state court. The Fifth Circuit reversed.

The sole question on appeal was whether the addition of a new defendant affected the applicability of CAFA. Braud recognized that whether the action was “commenced” after CAFA’s effective date turns entirely upon state law. Braud, at 803. In this regard, the Court explained that the question is not one of “retroactivity” but of “commencement”: “the issue is not whether CAFA should apply to suits commenced before February 18, 2005, but whether the addition of a new defendant commences a new suit.” Id., at 804. In other words, if adding a party-defendant constitutes a new action under state law, then CAFA applies by its terms, not because of retroactivity.

The Fifth Circuit “agree[d] with the Seventh Circuit that amendments that add a defendant commence the civil action as to the added party,” Braud, at 804. It based this holding on two grounds. First, “caselaw holds that generally a party brought into court by an amendment, and who has, for the first time, an opportunity to make defense to the action, has a right to treat the proceeding, as to him, as commenced by the process which brings him into court.” Id. at 805 (citations omitted). Second, “the addition of a new defendant opens a new window of removal under 1446(b).” Id. The full opinion is well worth reading.

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Post-CAFA (Class Action Fairness Act of 2005) Amendment of Complaint to Add or Substitute Named Plaintiffs Does Not “Commence” New Action Under CAFA Seventh Circuit Holds

The Class Action Fairness Act of 2005 (CAFA) became effective on February 18, 2005. Understandably, then, federal courts still confront matters of first impression under CAFA. On January 30, 2006, the Seventh Circuit Court of Appeals addressed “whether amending a complaint to add or substitute named plaintiffs (class representatives) ‘commences’ a new suit” for purposes of CAFA. Phillips v. Ford Motor Co., 435 F.3d 785, 786 (7^th Cir. 2006). The Court noted, “No appellate court has yet decided whether adding named plaintiffs to a class action suit ‘commences’ a new suit for purposes of removal under CAFA.” Id.

In Phillips, the lawsuits at issue had been filed prior to the enactment of CAFA, but new plaintiffs were added by amendment after CAFA’s effective date. The Seventh Circuit held that the amendment did not commence a new suit for purposes of CAFA. In analyzing the legal issue presented, the Court observed that state law controlled: because the question “is whether adding named plaintiffs commences a new suit in state court, the answer should depend on state procedural law.” Phillips, at 787.

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Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions