Class Action Defense Blog

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., ___ F.3d ___, 2009 WL 1636535, *1 (11th Cir. June 12, 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

FAA does not Enlarge Federal Court Jurisdiction but Simply Permits District Court to Entertain Petition to Compel Arbitration where Jurisdiction Exists but for Arbitration Clause, and while District Courts may “Look Through” Pleadings to Decide Petition under FAA Section 4, Counterclaims are not Removable if Complaint is not Subject to Federal Court Jurisdiction Supreme Court Holds

Discover Card filed a “garden-variety, state-law-based contract action” against a cardholder in Maryland state court to collect $10,610.74, plus interest and attorney fees; the cardholder agreement provided for arbitration of “any claim or dispute” between Discover and the cardholder, and included a class action waiver in that it prohibited “any claims as a representative or member of a class.” Vaden v. Discover Bank, 129 S.Ct. 1262, 1268-69 and n.2 (2009). The cardholder answered and filed a putative class action counterclaim that also asserted only state law claims, id., at 1268. According to the allegations underlying the class action counterclaim, “Discover's demands for finance charges, interest, and late fees violated Maryland's credit laws.” Id. Neither Discover nor the cardholder invoked the arbitration clause in the cardholder agreement. Id., at 1268-69. In response to the class action counterclaim, Discover petitioned the federal court for an order compelling arbitration under § 4 of the Federal Arbitration Act (FAA), id., at 1269 (9 U.S.C. § 4). Though the class action claims were brought under state law, Discover argued that the counterclaims were governed by § 27(a) of the Federal Deposit Insurance Act (FDIA), which “prescribes the interest rates state-chartered, federally insured banks like Discover can charge, ‘notwithstanding any State constitution or statute which is hereby preempted.’” Id. Discover’s argument was that the cardholder’s state law claims were preempted by the FDIA and, accordingly, the federal court had jurisdiction to rule on Discover’s petition under the FAA. Id. The district court granted Discover’s petition and ordered arbitration of the cardholder’s individual claims. Id. The cardholder appealed: the Fourth Circuit questioned whether the district court had federal question jurisdiction over Discover’s FAA petition; the Circuit Court remanded the case to the district court with instructions to “‘look through’ the § 4 petition to the substantive controversy between the parties” and to make “an express determination whether that controversy presented ‘a properly invoked federal question.’” Id. (citations omitted). On remand, the cardholder conceded that his state law claims were completely preempted by the FDIA because Discover was a federally insured bank; based on this concession, the district court held it had federal-question jurisdiction and again granted the petition compelling arbitration. Id. This time, the Fourth Circuit affirmed. Id. The Supreme Court reversed.

Under Section 4 of the FAA, a district court may consider a petition to compel arbitration “if the court would have jurisdiction, ‘save for [the arbitration] agreement,’ over ‘a suit arising out of the controversy between the parties.’” Vaden, at 1267-68. The petition for certiorari presented the Supreme Court with two questions “concerning a district court’s subject-matter jurisdiction over a § 4 petition”: First, “Should a district court, if asked to compel arbitration pursuant to § 4, ‘look through’ the petition and grant the requested relief if the court would have federal-question jurisdiction over the underlying controversy?” And second, “[I]f the answer to that question is yes, may a district court exercise jurisdiction over a § 4 petition when the petitioner's complaint rests on state law but an actual or potential counterclaim rests on federal law?” Id., at 1268. The High Court summarized its holding at page 1268 as follows, “A federal court may ‘look through’ a § 4 petition and order arbitration if, ‘save for [the arbitration] agreement,’ the court would have jurisdiction over ‘the [substantive] controversy between the parties.’” But the Supreme Court reversed the Fourth Circuit’s decision because it had “misidentified the dimensions of ‘the controversy between the parties’ by ignoring that the lawsuit originated with “Discover's claim for the balance due on Vaden's account” – “Given that entirely state-based plea and the established rule that federal-court jurisdiction cannot be invoked on the basis of a defense or counterclaim, the whole ‘controversy between the parties’ does not qualify for federal-court adjudication.” Id. Accordingly, the Supreme Court reversed.

Continue reading "Arbitration Class Action Defense Cases–Vaden v. Discover Bank: Supreme Court Reverses District Court Order Under Federal Arbitration Act (FAA) Compelling Arbitration Of Class Action Counterclaims On Individual Basis" »

Posted In: Arbitration, Removal & Remand, Class Action Court Decisions

Class Action Premised on Violations of “Best Execution” Duty Fell within Scope of SLUSA (Securities Litigation Uniform Standards Act of 1998) so Properly Removed and then Properly Dismissed because Time-Barred and no Proof of Injury Seventh Circuit Holds

Plaintiffs, former investors in portfolio managed by Fidelity Management & Research and FMR Co. (collectively “Fidelity”), filed a class action in state court against Fidelity alleging violations of state law and breach of contract based on the allegation that “some of [Fidelity’s] employees placed trades through Jeffries & Co.” because “Jeffries bribed the employees to send business its way.” Kurz v. Fidelity Management & Research Co., ___ F.3d ___ (7th Cir. February 23, 2009) [Slip Opn., at 1-2]. The rules of the National Association of Securities Dealers (NASD) prohibit trading through a broker “paid under the table” as violative of the duty of “best execution,” that is, failing to get “the optimal combination of price, speed, and liquidity for a securities trade.” Id., at 2 (citation omitted). The conduct underlying the class action is covered by regulations under the Securities and Exchange Act of 1934, the Investment Advisers Act of 1940 (IAA) and the Investment Company Act of 1940 (ICA). Id. The SEC commenced proceedings against Fidelity under the IAA and the ICA, and Fidelity entered into a consent decree governing “how future trades will be placed and executed.” Id. In response to plaintiffs’ class action, Fidelity argued that the employee misconduct involved securities laws and, accordingly, removed the class action to federal court under the Securities Litigation Uniform Standards Act of 1998 (SLUSA). Id., at 2-3. In essence, defense attorneys argued that, according to the allegations in the class action, Fidelity “had either misrepresented that best execution would be achieved, or failed to disclose that best execution was not being achieved,” and that under either scenario “the wrong took place ‘in connection with the purchase or sale’ of covered securities because it affected trades in those securities (and potentially the net price obtained).” Id., at 3-4. Plaintiffs moved to remand the class action to state court; the district court agreed with Fidelity that the class action fell within the scope of SLUSA and denied the motion. Id., at 4. The district court subsequently entered judgment in favor of Fidelity on the class action complaint on the grounds that plaintiffs “filed suit after the federal statute of limitations had run and also was unable to show injury.” Id. The Seventh Circuit affirmed.

The Seventh Circuit first held that removal was proper. Plaintiffs argued that the class action was based on contract law, and that further the duty of “best execution” is not one “in connection with the purchase or sale” of securities; accordingly, plaintiffs insisted that the class action did not fall within the scope of SLUSA. Kurz, at 4. The Circuit Court concluded “[t]hat argument is frivolous,” id., at 4-5 (citations omitted). The Seventh Circuit recognized that a true contract claim would fall outside of SLUSA, but no contract existed in this case. Id., at 5. The class action complaint did not allege that Fidelity breached any promise to plaintiffs; rather, the class action asserted that plaintiffs were third-party beneficiaries of a contract between Fidelity and Jeffries. Id. Moreover, plaintiffs could not produce that contract, and the Circuit Court observed at page 5 that “for all we know none exists.” On the other hand, a securities law violation would support plaintiffs’ class action claims. Id., at 6. Put simply, “How Fidelity discharges its duties toward investors is a subject requiring disclosure under federal law.” Id. And even though Fidelity’s top managers and board did not know about the misconduct, and therefore could not have acted with the necessary scienter to support a securities liabilities claim, the individual employees did act with scienter and Fidelity may be derivatively liable for their misconduct. Id., at 6-7. In sum, the Seventh Circuit held that the district court correctly determined that plaintiffs had either a federal securities claim or nothing. Id., at 7. Assuming it was the former, plaintiffs’ class action advanced “a bad securities claim, given the expiration of the federal statute of limitations and the class’s inability to show loss causation.” Id. (citation omitted). Accordingly, the Circuit Court affirmed the judgment.

Posted In: Removal & Remand, Class Action Court Decisions, PSLRA/SLUSA Class Actions

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 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

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.

Continue reading "CAFA Class Action Defense Cases–Lloyd v. General Motors: Maryland Federal Court Denies Motion To Remand Class Action Holding That Under Maryland Law Amendment Adding New Plaintiffs Commenced New Action Under Class Action Fairness Act" »

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.

Continue reading "Class Action Fairness Act Cases–Bullard v. Burlington Northern: Seventh Circuit Affirms Denial Of Remand Motion Holding Suit On Behalf Of 144 Plaintiffs Was A Mass Action Within Meaning Of Class Action Fairness Act" »

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

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).

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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.

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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.

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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

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

Circuit Court Lacks Jurisdiction to Review Order Remanding Class Action Lawsuits to State Court under 28 U.S.C. § 1446(c) Seventh Circuit Holds

This appeal resolving three class action lawsuits arose as follows: Plaintiffs (investors in various mutual funds) filed putative class action lawsuits in state court that defense attorneys removed to federal court. Following district court orders remanding the class actions to state court, the Seventh Circuit held that it had jurisdiction to review the remand orders and reversed. The Supreme Court subsequently held that the district court erred in its conclusion that federal jurisdiction did not exist, see Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, 547 U.S.71 (2006), but that district court orders remanding class actions to state court - even if error under the Securities Litigation Uniform Standards Act of 1998 (SLUSA) - were not reviewable on appeal. In re Mutual Fund Market-Timing Litig., 495 F.3d 366, 367 (7th Cir. 2007) (citing Kircher v. Putnam Funds Trust, ___ U.S. ___, 126 S.Ct. 2145 (2006). Once the class actions were back in state court, defense attorneys filed new notice of removal arguing that Dabit was “a new ‘order’ that creates another opportunity for removal under 28 U.S.C. § 1446(b).” Id., at 367-68. The district court handling two of the three class actions disagreed, and again remanded the lawsuits to state court, id., at 368. Defense attorneys appealed, and the Seventh Circuit held that it lacked jurisdiction to review the remand orders.

The Seventh Circuit explained that § 1447(d) precludes appellate review of remand orders to the extent that the district court remands the complaint to state court under § 1447(c). In re Mutual Fund, at 368. That statute covers remand orders based on lack of jurisdiction or defects in the removal process. Id. (citing Powerex Corp. v. Reliant Energy Services, Inc., __ U.S. ___, 127 S.Ct. 2411 (2007)). In this case, the district court remanded the class actions to state court because the notices of removal were untimely, and because they were “successive and represented attempts to relitigate issued decided adversely to defendants.” Id. Whether the district court was mistaken was irrelevant: the Seventh Circuit held that the remand order fell within the scope of § 1447(c) thereby precluding appellate review. Id. Accordingly, the Circuit Court dismissed the appeal for lack of jurisdiction. Id., at 369.

Posted In: Removal & Remand, Class Action Court Decisions, PSLRA/SLUSA Class Actions

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

While Defense Failed to Timely Remove Class Action to Federal Court Thereby Necessitating Remand of the Class Action Complaint to State Court, the Class Action Claims are Precluded by SLUSA (Securities Litigation Uniform Standards Act) thus Entitling Defense to Judgment in State Court Illinois District Court Holds

Plaintiff filed a putative class action in Illinois state court against securities brokerage firm Citigroup, as successor in interest to Salomon Smith Barney, seeking damages because it allegedly “disseminated misleading research concerning the value of shares in certain Internet and telecommunications companies, thereby inducing Smith Barney customers like [plaintiff] to hold the shares.” Disher v. Citigroup Global Markets, Inc., 487 F.Supp.2d 1009, 1012 (S.D. Ill. 2007). Defense attorneys removed the class action federal court under the Securities Litigation Uniform Standards Act (SLUSA), but the district court remanded the matter to state court, id. On appeal, the Seventh Circuit reversed, holding that SLUSA applied and required dismissal of the class action complaint, id., at 1012-13 (see Disher v. Citigroup Global Markets, Inc., 419 F.3d 649 (7th Cir. 2005)). The Supreme Court granted certiorari and reversed, holding that district court remand orders of class actions removed under SLUSA are not reviewable on appeal, see Disher v. Citigroup Global Markets, Inc., ___ U.S. ___, 126 S.Ct. 2964 (2006), causing the class action to wind its way back to state court, id., at 1013. Once there, defense attorneys again removed the class action to federal court, and the plaintiff again sought remand, id. The district court granted the motion finding “procedural defects in removal,” id., at 1012, but essentially hands defense victory on the merits by holding that the class action claims are barred by SLUSA and declaring that holding to be law of the case.

After discussing the general rules governing removal, including the burden placed on the party seeking removal to establish federal jurisdiction and the general rule that removal must be sought within 30 days of service of the initial pleading, see Disher, at 1014-15, the district court turned to whether an amended pleading created a basis to support defense removal of the class action, id., at 1015. Defense attorneys “point[ed] to numerous purported orders or other papers supposedly authorizing removal of the claims” in the class action complaint, id., but the district court found each pleading insufficient to support the delayed filing of the notice of removal including (1) that the motions and orders filed in state court authorized removal, see id., at 1015-17; (2) that plaintiff’s amended class action complaint did not trigger a right of removal because even though “the claims alleged in both [plaintiff’s] original complaint and his amended complaint are precluded by SLUSA,” id., at 1018, the fact remained that the defense failed to timely file its notice of removal and the amended class action complaint did not revive the right to remove because it did not alter the basic nature of the allegations, id., at 1019-22; and (3) that the appellate proceedings did not authorize removal of the action to federal court, id., at 1022. Accordingly, the federal court remanded the putative class action to state court, id., at 1023-24.

But while the district court denied the defense effort to maintain the class action federal court, it nonetheless handed the defense a victory on the merits. The federal court concluded at pages 1022 and 1023,

Continue reading "SLUSA Class Action Defense Cases-Disher v. Citigroup: Illinois Federal Court Holds Securities Class Action Must Remanded To State Court But Holds Further That SLUSA Bars Prosecution Of Class Action Claims" »

Posted In: Removal & Remand, Class Action Court Decisions, PSLRA/SLUSA Class Actions

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

Class Action Complaint Alleging Fees Charged were in Excess of Contractually Agreed Amount did not Constitute Challenge to Interest Rate and so National Bank Act did not Completely Preempt Claims in Putative Class Action Ohio Federal Court Holds

Plaintiff filed a putative class action in Ohio state court against credit card company FIA Card Services alleging that it collected cash advance fees in excess of the maximum allowed under its cash advance agreements. Levitanksy v. FIA Card Services, N.A., 492 F.Supp.2d 758, 760 (N.D. Ohio 2007). Defense attorneys removed the action to federal court on the basis of National Bank Act, alleging that the class action complaint challenged the interest rate charged to customers and that usury claims are completely preempted under the NBA, id., at 760-61; plaintiff filed a motion to remand the class action to state court on the ground that the class action alleged only state-law breach of contract claims, id., at 759. The district court granted plaintiff’s motion, holding that the National Bank Act did not completely preempt the claims set forth in the class action complaint.

Plaintiff’s class action seeks to represent all individuals who entered into cash advance agreements with FIA, setting forth as common class allegations that FIA “extended one or more promotional offers for balance transfers and cash advance checks where the transaction fees would be limited to 3% of each advance” and that the FIA contracts “stipulated that the maximum allowable transaction fee was $75,” but that FIA charged cash advance fees in excess of that agreed amount. Levitansky, at 760. Defense attorneys removed the class action complaint to federal court under the National Bank Act; plaintiff filed a motion to remand the class action on the ground that the complaint set forth a state-law breach of contract claim. Id.

Continue reading "Removal Class Action Defense Cases- Levitanksy v. FIA: Ohio Federal Court Holds That Putative Class Action Stated Breach Of Contract Claim Warranting Remand Of Class Action Complaint To State Court" »

Posted In: Removal & Remand, Class Action Court Decisions

In Decision with Significant Impact on Defense of Class Action Lawsuits, U.S. Supreme Court Holds that Private Party cannot Remove Lawsuit to Federal Court under Federal Officer Removal Statute Merely because it Complies with Federal Laws

Plaintiffs filed a suit in Arkansas state court against Philip Morris alleging violations of the state’s unfair and deceptive business practices statutes arising out of its marketing of “light” cigarettes, which plaintiffs argued suggested that they were “safer” - i.e., lower in tar and nicotine - than regular cigarettes. Watson v. Philip Morris Cos., Inc., 551 U.S. __, 127 S.Ct. 2301 [Slip Opn., at 1-2] (2007). Defense attorneys removed the action to federal court on the basis of the federal officer removal statute, which the district court agreed authorized removal, id., at 2. The Supreme Court explained that the district court reasoned the lawsuit “attacked Philip Morris’ use of the Government’s method of testing cigarettes” and that plaintiffs “had sued Philip Morris for ‘act[s]’ taken ‘under’ the Federal Trade Commission, a federal agency (staffed by federal ‘officer[s]’).” Id. The district court certified the question for interlocutory review, and the Eighth Circuit affirmed “emphasiz[ing] the FTC’s detailed supervision of the cigarette testing process” and relying upon cases authorizing removal “by heavily supervised Government contractors.” Id., at 2-3. The Eighth Circuit held that Philip Morris was “acting under” the FTC with respect to its marketing of “light” cigarettes, thus authorizing removal. Id., at 3. The Supreme Court granted certiorari and reversed.

The federal officer removal statute, 28 U.S.C. § 1442(a)(1), permits removal of suits brought against the “United States or any agency thereof or any officer (or any person acting under that officer) of the United States or of any agency thereof, sued in an official or individual capacity for any act under color of such office” (italics added). The Supreme Court recognized that the phrase “acting under” are “broad” and that “the statute must be ‘liberally construed,’” but added that “broad language is not limitless.” Watson, at 3 (citations omitted). The High Court’s analysis of the legislative history led it to conclude that the Congressional intent was to cover persons “aiding or assisting” federal officers in the performance of their duties, or acting directly “under or by authority of any such officer.” Id., at 3-7. So viewed, the Supreme Court held that the words “acting under” in the federal officer removal statute must be a reference to “a relationship that involves ‘acting in a certain capacity, considered in relation to one holding a superior position or office.’” Id., at 7. “In our view, the help or assistance necessary to bring a private person within the scope of the statute does not include simply complying with the law.” Id., at 8 (italics in original).

Continue reading "Watson v. Philip Morris-Class Action Defense Issues: U.S. Supreme Court Rejects Tobacco Company Argument That Heavily Regulated Industry Falls Within Scope of Federal Officer Removal Statute" »

Posted In: Removal & Remand, 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

Class Action Remanded to State Court because Circuit Court of Appeals Opinion in a Different Case does not Constitute “an Amended Pleading, Motion, Order or Other Paper” Within the Meaning of 28 U.S.C. § 1442(b) Eighth Circuit Holds

In 2003, plaintiffs filed a class action in Minnesota state court against R.J. Reynolds & Touche for fraud and violations of state consumer protection laws alleging that the company engaged in “unfair business practices and/or deceptive and unlawful conduct in connection with the manufacture, distribution, promotion, marketing, and sale” of “light” cigarettes. Dahl v. R.J. Reynolds Tobacco Co., 478 F.3d 965, 966 (8th Cir. 2007). Defense attorneys removed the class action complaint to federal court but the district court remanded the class action to state court because the claims of the individual plaintiffs were less than $75,000; the state court then dismissed the class action complaint on the ground that the claims therein were preempted by federal law under the Cigarette Labeling and Advertising Act of 1965, 15 U.S.C. § 1331. Id. During the pendency of the state court appeal, the Eighth Circuit issued an opinion that held another tobacco company had established federal officer jurisdiction in a case involving the marketing of light cigarettes, id. (citing Watson v. Philip Morris Cos., 420 F.3d 852 (8th Cir. 2005), cert. granted, ___ U.S. ___, 127 S.Ct. 1055 (January 12, 2007); defense attorneys again removed the class action to federal court, arguing federal officer jurisdiction, id. Plaintiffs’ lawyer moved to remand the class action complaint to state court, arguing that the notice of removal was untimely, but the district court denied the motion. Id. The Circuit Court reversed.

Briefly, the class action complaint was filed in 2003 and timely removed to federal court; following remand, the trial court dismissed the class action and plaintiffs appealed. Dahl, at 966. On August 25, 2005, while the appeal from the dismissal of the class action complaint was pending, the Eighth Circuit issued its opinion in Watson holding that Philip Morris had established federal officer jurisdiction under 28 U.S.C. § 1442(a), and on September 22, 2005, defense attorneys removed the class action to federal court under § 1442(a). Id., at 967. Plaintiffs argued that the removal was untimely as it was not brought within the 30-day limit set forth in § 1442(b); the district court denied the motion, agreeing with the defense that “Watson made it clear for the first time that federal courts have jurisdiction over claims like those in this case and its receipt of that opinion recommenced the thirty day time period for removal.” Id.

Continue reading "Tobacco Class Action Defense Cases-Dahl v. R.J. Reynolds: Eighth Circuit Reverses Denial Of Motion To Remand Class Action To State Court" »

Posted In: 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

A Hurricane is not an "Accident" under the Federal Multiparty, Multiforum Trial Jurisdiction Act (MMTJA) and Defense Failed to Prove that Individual was Fraudulently Joined for Purposes of Defeating Diversity Jurisdiction over Class Action Louisiana Federal Court Holds

Plaintiffs filed a putative class action in Louisiana state court against their homeowners insurance carrier, State Farm, alleging that it wrongfully denied insurance benefits for damage caused by Hurricane Katrina. Roby v. State Farm Fire & Cas. Co., 464 F.Supp.2d 572, 574 (E.D. La. 2006). Specifically, after plaintiffs provided State Farm evidence that Hurricane Katrina caused them to suffer more than $400,000 in damages, State Farm tendered a $23,000 check to plaintiffs representing its "estimated damages for their claim for damages to their home" and ultimately refused to pay plaintiffs' claim in full or to pay policy limits because it concluded that "[plaintiffs'] home sustained flood damage from Hurricane Katrina and that flood damages are excluded from the policy." Id. State Farm also denied personal contents benefits on the ground that flood damage excluded coverage, id., at 574 n.5. Plaintiffs countered that their home had sustained damage caused by rain that entered through holes in the roof caused by the hurricane, and filed a class action complaint for a declaratory judgment that the exclusion relied upon by State Farm did not apply and, alternatively, that their State Farm agent should have informed them to obtain flood insurance. Id., at 574-75. Defense attorneys removed the class action to federal court, asserting both federal question and diversity jurisdiction. Id., at 575 and n.6. As to diversity, defense attorneys argued that plaintiffs had named the State Farm agent solely to defeat diversity. Id. Plaintiffs filed a motion for remand. The district court granted plaintiffs' motion and remanded the class action to state court.

After noting that State Farm bore the burden of proof as the party invoking federal court jurisdiction, Roby, at 575, the district court addressed State Farm's argument that federal jurisdiction exists under the Multiparty, Multiforum Trial Jurisdiction Act (MMTJA) - "specifically 28 U.S.C. § 1369 . . . and its corresponding removal statute, 28 U.S.C. § 1441(e)," id. As the district court explained at pages 575 and 576, "Section 1369 is a federal statute that establishes subject matter jurisdiction in federal court over a single accident in which at least 75 persons died. Section 1441 allows a defendant to remove a § 1369 case to federal court. Congress enacted the MMTJA to allow full consolidation of state and federal cases related to a common disaster in order to eliminate multiple or inconsistent awards arising from multiforum litigation." (Footnote and citations omitted.) The district court held that MMTJA did not apply because a hurricane is not an "accident" within the meaning of the Act, id., at 576.

Continue reading "State Farm Katrina Class Action Defense Case-Roby v. State Farm: Louisiana Federal Court Grants Motion To Remand Class Action To State Court Holding Hurricane Is Not An Accident Under Federal MMTJA" »

Posted In: Removal & Remand, Class Action Court Decisions