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

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

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

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

The federal court summarized the elements of CAFA’s local controversy exception at pages 451 and 452 as follows:

Under the local controversy exception, remand is proper where: (1) more than two-thirds of the members of the proposed class are citizens of the original filing state; (2) at least one defendant is a defendant from whom members of the class seek significant relief, whose alleged conduct forms a significant basis for the claims and who is a citizen of the state in which the action was originally filed; (3) principal injuries were incurred in the original filing state; and (4) no other class action has been filed against the defendants asserting the same or similar factual allegations in three years preceding the case. 28 U.S.C. § 1332(d)(4)(A) (2006).

Defense and plaintiff attorneys agreed that the motion to remand turned on the applicability of the second element of the local controversy exception. Eakins, at 452. The district court observed that neither CAFA nor case law “shed light on the definition of ‘significant basis’ and ‘significant relief,'” id., but gleaned from CAFA’s legislative history “several factors” that must be examined in order to determine whether the local controversy exception applies, id., at 452-53. The court summarized those factors at page 453 as: “(1) whether the product was sold outside of the locality; (2) whether the injury incurred was specific to the locality; [and] (3) whether the class as a whole seeks relief against the local defendant.” Under this test, plaintiff had not established that the windows were “sold exclusively in North Carolina,” particularly in light of the fact that Pella Corporation distributes its windows worldwide. Id. Nor had plaintiff shown that the resulting injury was “specific to North Carolina” or that “the class as a whole has a cause of action against the local defendant.” Id. Accordingly, the district court denied the motion to remand the class action to state court.

Download PDF file of Eakins v. Pella Corp.