Class Action Defense Blog

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.

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

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

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

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

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

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

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

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

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

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

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.

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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.

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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