As a Matter of First Impression in Seventh Circuit, Court Holds that Class Action Fairness Act of 2005 (CAFA) Shifts Burden to Plaintiff to Establish Exceptions to Federal Court Jurisdiction
After plaintiff filed a putative labor law class action against FedEx in Pennsylvania state court, defense attorneys removed the case to federal court under CAFA (Class Action Fairness Act of 2005). The Judicial Panel on Multidistrict Litigation transferred the class action to the Northern District of Indiana, and plaintiff moved to remand the case to Pennsylvania state court under the “local controversy” or “home-state controversy” exceptions to federal court jurisdiction under CAFA. The district court denied the motion on the ground that plaintiff had failed to meet his burden of establishing that the exceptions applied. Plaintiff appealed the order, and the Seventh Circuit held that CAFA shifted the burden to plaintiff and affirmed. Hart v. FedEx Ground Package System Inc., 457 F.3d 675, 676-77 (7th Cir. 2006).
Plaintiff’s class action alleged the FedEx delivery drivers were misclassified as “independent contractors.” Hart, at 676. The complaint alleged that “greater than two-thirds of the members of the plaintiff class, if not all of the members of the plaintiff class, are citizens of Pennsylvania.” Id., at 677. FedEx removed the lawsuit to federal court under CAFA alleging in the notice of removal that “[u]pon information and belief, some of the proposed class members are not residents of Pennsylvania,” id. Absent CAFA, diversity jurisdiction would not exist. Id., at 676. Plaintiff sought to remand the action under CAFA’s “local controversy” and “home-state controversy” exceptions, see § 1332(d)(4)(B), and urged that under Brill v. Countrywide Home Loans¸ 427 F.3d 446 (7th Cir. 2005), FedEx bore the burden of establishing jurisdiction under CAFA and “also that none of the mandatory exclusions from CAFA jurisdiction found in § 1332(d)(4) applied,” id., at 677.
FedEx submitted declarations showing that at least a dozen class members resided outside of Pennsylvania, and argued that it need only show “that CAFA’s threshold jurisdictional requirements are satisfied” but that plaintiff bore the burden of establishing that the “local controversy” exception applied. Hart, at 677-78. The Circuit Court agreed. The Court acknowledged the general rule that “the party invoking federal jurisdiction bears the burden of demonstrating its existence,” id., at 679 (citations omitted), but noted Fifth and Eleventh Circuit opinions holding that CAFA shifts the burden of establishing a local controversy to the plaintiff, id., at 679-80. The Seventh Circuit performed its own analysis of the statutory provisions at issue and held, as a matter of first impression in the circuit, that “the party seeking to take advantage of the home-state or local exception to CAFA jurisdiction has the burden of showing that it applies.” Id., at 680.
NOTE: The Circuit Court reaffirmed and “explain[ed] more fully” its prior holding that “the 60-day time limit for resolving CAFA appeals begins to run at the time a petition is granted,” Hart, at 678. The Court also summarized the relevant exceptions at page 679 as follows:
Under the “home-state controversy” exception, district courts must decline to exercise jurisdiction where two-thirds or more of the members of the proposed class and the primary defendants are citizens of the original filing state. [Citation.] Under the “local controversy” exception, district courts must decline jurisdiction where four circumstances are met: (1) more than two-thirds of the members of the proposed plaintiff class are citizens of the original filing state; (2) at least one defendant is a defendant from whom members of the proposed plaintiff class seek significant relief, whose alleged conduct forms a significant basis of the asserted claims, and who is a citizen of the original filing state; (3) the principal injuries were incurred in the original filing state; and (4) no other class action asserting the same or similar factual allegations has been filed against any of the defendants within the three years preceding the filing of the case. [Citation.]