Class Action Fairness Act Blog

No Blue Skies For Allstate When It Tried To Remove Case From Seattle State Court

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Tue, 23 Feb 2010 06:30:00 -0600

Somal v. Allstate Property and Casualty Insurance Company,Case No. C09-1064RSL (W.D. Wash. Sept. 29, 2009).

Teen idol Bobby Sherman performed the hit song, Seattle, declaring that “the bluest skies you’ve ever seen are in Seattle…and the hills the greenest green in Seattle.” Last year, the defendant, Allstate, must have been gazing at the blue skies and hiking the green hills instead of focusing on the preponderance of the evidence standard required to establish the amount in controversy under CAFA!

In Somal, Judge Lasnik in the U.S. District Court for the Western District of Washington, at Seattle, held that Allstate failed to establish the required amount in controversy when it removed a case that sought recovery under an insurance policy provided by Allstate, alleging failure to reimburse plaintiff for the full amount of her deductible following Allstate’s recovery from a third party. The plaintiff sought to recover on behalf of herself and all others who were not fully reimbursed for their out of pocket expenses after Allstate recovered money from a third party for the insured’s property damages.

The only evidence provided in Allstate’s notice of removal regarding the amount in controversy was a declaration setting forth a calculation based on the number of claims Allstate paid under its collision coverage to Washington insureds for a specific time period and the amount of revenue Allstate recovered in subrogation claims arising from its payment of collision benefits during the same period. Allstate provided no evidence that its calculation bore any relation to the actual class size or amount in controversy. In subsequent briefing, Allstate also attempted to quantify additional amounts for attorneys’ fees and injunctive relief, both of which were sought by the plaintiff.

The court held that Allstate offered “overinclusive figures” as its only evidence of CAFA jurisdiction, leaving the court to speculate as to the size of the class and the amount of unreimbursed deductible payments at issue. The court also held that the evidence regarding the amount of attorneys fees was insufficient because it involved only citations to other Ninth Circuit class action cases awarding attorneys’ fees, but offered nothing to suggest that those cases were relevant to prediction the attorney fees in this case. The court found that the cost of an injunction would be zero because it would not obligate Allstate to do anything it was not already required to do.

Finding that it could not base jurisdiction on “speculation and conjecture,” the court forced Allstate to say bye-bye to the blue skies of federal court, and trek its way all the way down those green hills back to Seattle state court!

By: Rose Marie L. Fiore

CAFA Meets Jamster: Kill the Crazy Frog!!

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Mon, 22 Feb 2010 06:30:00 -0600

In re Jamster Marketing Litigation, MDL No. 1751, U.S.D.C. S. D. Cal. Sept. 29, 2008 (Miller, J.).

You may want to think twice about accepting an offer for a “free” download of your favorite Lady Gaga song as a cell phone ring tone. The sound that you may hear may be the ringing cash register of Jamster, a former subsidiary of Internet infrastructure provider VeriSign, which specializes in custom content for mobile devices, and which has been accused of defrauding customers into paying for ring tones that they didn’t authorize, and using deceptive marketing methods to lure consumers into purchasing its products. Say it ain’t so!

In March 2005, Charles Ford filed a lawsuit in San Diego state court against VeriSign, Jamster, Cingular, AT&T Wireless, and T-Mobile, after his young daughter unwittingly subscribed to a Jamster service in 2004. Jamster leaped to prominence in 2004 on the strength of its “Crazy Frog” ring tone, which spawned hit musical singles and remixes in world music markets, and earned the company $500 million in sales in 2005.

You know the suicide-inducing “Crazy Frog” mascot with the flying helmet, who advertises an annoying polyphonic tune that’s meant to sound like an engine, and who prances across the screen revealing his visibly small – uh -- tadpole, to the consternation of parents worldwide.

The lawsuit claimed that Jamster (and its annoying Crazy Frog) lured children and teens into costly ring tone subscriptions through advertisement run heavily on TV channels that are aimed at children, such as MTV, Nickelodeon, and the Cartoon Network. The ads promise a free or single ring tone to mobile phone users who send a text message to Jamster. What the ads allegedly failed to disclose is that consumers who responded were automatically subscribed to a service to receive additional ring tones each week for which they were charged up to $5.99.

The Complaint further alleges that cellular phone providers T-Mobile, AT&T Wireless, and Cingular profited from their relationship with Jamster by receiving a portion of the Jamster subscription revenue, in return for allowing Jamster to direct-bill their customers. The wireless providers also allegedly charged their customers per-text charges for unsolicited text messages from Jamster.

According to critics, the Jamster service was so hard to unsubscribe from that customers would often cancel their entire plans just to get rid of it, and then cellular carriers would then recycle the numbers for new customers, who would then receive messages from Jamster without ever having subscribed.

Ford sought to represent a class of individuals who were charged for unauthorized mobile content on their mobile telephone bills arising from allegedly deceptive marketing practices.

In April 2005, VeriSign removed the Ford action to federal court under CAFA. After the Ford action was filed, five other complaints were filed as part of a pending MDL proceeding, which included the state-court McFerran action against AT&T in Georgia alleging that AT&T did not require adequate proof of customer authorization prior to billing for third party mobile content. In May 2008, counsel in McFerran presented a proposed settlement that provided the class with refunds equal to the amount of all unauthorized third-party mobile content damages.

In January 2006, plaintiff’s counsel in Ford filed a motion before the Judicial Panel on Multidistrict Litigation, requesting that all related cases be centralized before the court. According to the MDL Rules and the pre-trial order, the Jamster MDL parties were required to promptly advise the court of any potential tag-along action.

Only two tag-along actions were identified, the Harmon action in the Northern District of Illinois, and the Edwards action in the Southern District of Florida. The MDL panel concluded that the MDL actions involved common factual allegations that VeriSign and Jamster falsely represented to consumers that mobile customers could get a free ring tone by sending a message to Jamster or by registering on the internet, and that instead of receiving the free content, those customers then received repeated text messages for which they were charged by the defendants.

These core common factual allegations, properly characterized as deceptive marketing practices, formed the basis for the MDL’s transfer, and instructions to the Court to preside over coordinated or consolidated pretrial proceedings.

Motion for Sanctions:

In Jamster MDL action, the plaintiffs moved for sanctions against AT&T on the ground that it failed to notify the court of the McFerren litigation.

California Uniform District Court Rule 40.1 provides that whenever counsel has reason to believe that a pending action is related to another pending action, counsel shall promptly file and serve on all known parties to each related action for proceeding a notice of related case. The criteria for determining whether an action is related are, among other things, where the actions arise from the same or substantially identical transactions, happenings, or events; or involve the same or substantially the same parties or property, or call for determination of the same or substantially identical questions of law.

The parties agree that the Jamster MDL action and the McFerren action – as filed -- were virtually the same action, given that the present focus of both actions was the core allegation that class members were improperly billed for third-party content.

The court, however, found that the Jamster MDL cases focused on false advertising for mobile content that resulted in the improper billing for such mobile content. McFerren, however, did not allege injuries caused by false advertising content, but focused on allegations that AT&T did not have sufficient internal controls to prevent unauthorized billing practices by mobile content providers.

The court concluded that the actions were not sufficiently related so as to impose sanctions because, even though that both actions arose from alleged acts of improper billing, the genesis of the Jamster MDL and the McFerren actions was fundamentally different. The focus of the Jamster MDL claims was that class members were misled through false advertising, and the focus of the McFerren action was that AT&T did not require adequate proof of customer authorization prior to billing for third party content.

The court found that, prior to May 2008, AT&T knew that the McFerren and Jamster MDL actions had “morphed beyond the original scope of the complaints and merged into substantially similar actions,” and that AT&T had used the legitimate litigation strategy of attempting to use the McFerren action to fold related actions to achieve a global settlement. Because AT&T moved to inform the court of the status of the McFerren action within days (or a few weeks at most), of learning of the viability of its settlement proposal, the court found no basis to impose sanctions on AT&T.

Motion to Stay State-Court McFerren Action:

The plaintiffs argued that AT&T must be enjoined from pursuing settlement in the state-court McFerren action under the All Writs Action, which enjoins a litigant from proceeding with a state-court action where it is “necessary to prevent a state court from so interfering with a federal court’s consideration or disposition of a case as to seriously impair the federal court’s flexibility and authority to decide a case.”

The proposed settlement in McFerren generally provided the class with refunds equal to the amount of all unauthorized third-party mobile content charges. Importantly, however, the terms of the settlement place the burden on the putative class members to discover any improperly billed mobile content.

The court concluded that the principles of federalism and comity were further by entry of an injunction narrowly tailored to enjoin AT&T from proceeding with the McFerren settlement as it related to the deceptive marketing claims. The court found that entry of a limited and narrowly crafted stay in the McFerren action as to the deceptive marketing claims did not interfere with the Georgia state-court action, but preventing the action from interfering with the federal Jamster proceeding consisting of MDL related actions that presented common issues involving a substantial class of individuals from many different states.

In sum, the Jamster MDL action was sufficiently advanced and presented unique circumstances such that the entry of a limited injunction to enjoin AT&T from proceeding with the settlement of the deceptive marketing claims was necessary to aid the Court’s jurisdiction. The court enjoined AT&T in the McFerren action from proceeding to settle or otherwise litigate the deceptive marketing claims encompassed within the scope of the Jamster MDL action.

The noisy, smug, and faintly obscene Crazy Frog, also known as “The Annoying One,” has now entered into CAFA lore.

Until next time:

brrr-ding-da-dingding-ding-da-ding-daaaaaa-dingding

WTH! A CAFA Case on Texting (Not Sexting)

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Fri, 19 Feb 2010 06:30:00 -0600

In Re Text Messaging Antitrust Litigation, MDL No. 1997, Case No. 08-7082 (N.D. Ill. August 13, 2009).

In In re Text Messaging Antitrust Litig., the United States District Court for the Northern District of Illinois, Eastern Division found the home state controversy exception applied and told the parties BCNU. Can’t figure that one out? Ask your nine year old.

Am I RMOCC (running my own cuckoo clock)? Maybe, but here’s the deal. I’m funny. I mean, really funny. Sometimes people take one look at me and LOL before I’ve even said a word. (If I have to translate LOL for you, you’ve just been living under a rock and even The Blog can’t help you.) I am so beyond LOL, or even LMAO. I am more in the league of ROTFLUTS (rolling on the floor laughing unable to speak). But when our editors assigned this case to me, I just was not inspired. Seriously, I had nothing. I was AAK (asleep at keyboard), not to be confused with AFK (away from keyboard)) on this one.

WTH could I do to make this post interesting? I asked myself, WWAKD (what would Ashton Kutcher do)? WWM9YOD (what would my 9 year old do)? I needed inspiration….and then I found it - in the underlying class action, the plaintiffs allege the defendants, “conspired to fix, raise, maintain, and stabilize the price of text messaging services sold in the United States in violation of the Sherman Antitrust Act.”

So, then I decided that before anyone raises the price of my text messaging plan, I’d write the entire post in text message format! Since my 9 year old wasn’t available, I just needed a little help from some texting dictionaries (TKS and TIA to http://www.txtdrop.com/abbreviations.php and http://ezinearticles.com/?Text-Message-Abbreviations---SMS-Dictionary-Examples&id=534837 ) and I was well on my way.

And a post all in text message might help The Blog become cool enough to close that 1,812,805 twitter follower lead Ashton Kutcher has on us and finally beat the ***** out of Ashton Kutcher! People, that’s 5 of those little asterisks, NOT 4 of them. Get your minds out of the gutter.

Remember in our 5/20/09 post, we noted that Ashton Kutcher claimed victory over CNN being the first to have 1 million followers on Twitter. If you don't remember, click here. We asked for your help in passing up Kutcher, who was then at 1,812,820 while we were at 15. Thanks to our loyal fans we are beating the ***** out of Ashton in the Twitter battle with our 20 followers.

AAR (at any rate), here is my case summary in a nutshell, or a text message, or whatever.

BDN (big damn number, as in $5,000,000 is a big damn number and the matter in controversy did exceed it)

BCNU (be seeing you, as in go back to state court anyway, the home state controversy exception applies and the case is remanded).

Oh, IOIWTS (if only it were that simple) You see, I have a POS (parent over shoulder). Yes, the editors.* And the editors unreasonably require us analysts to actually say something more than eight letters about the case in our case summary. WTH? So, here is the 411 for the POS --

This case was one of over a dozen suits in which the plaintiffs alleged wrongdoing with respect to the amounts charged for text messages. Although the Court had jurisdiction pursuant to the CAFA (the BDN was present), the Court found it had to remand because the home state controversy exception applied.

The only defendant was a Kansas resident and the plaintiffs “defined the putative class in such a way as to leave little doubt that at least two-thirds of the class members are Kansas citizens.” The defendant argued the Court should consider the citizenship of all the plaintiffs in all the text messaging antitrust class action lawsuits containing similar allegations, not just the plaintiffs in the particular case at issue.

The Court declined to so interpret the language of 28 USC 1332(d)(4)(B), noting that as the local controversy exception contains a specific requirement that courts consider similar class actions, but the home state exception contains no such instruction, the existence of other lawsuits was not a consideration in applying the home state controversy exception. So, only the citizenship of the plaintiffs in the instant case was considered, the home state controversy exception was met and BCNU, back to Kansas state court!

That’s it. But, hey, DQMOT(don’t quote me on this). IANAL(I am not a lawyer). Well, I really am a lawyer but SICNR (sorry I could not resist) the opportunity to use that abbreviation. SOMY (sick of me yet)? Look, you can read the case if you want, but YRYOCC (you’re running your own cuckoo clock) if you do since I did all the work for you.

I leave you with this one last thought. The courts should really follow my lead and write their opinions in a text message. Talk about judicial economy. Kitson could have been summed up in four letters - RTFM (read the f***king manual)! (Hush. “freaking” fits there) (See our 6/15/09 post Landmark Decision! Court finds CAFA "required reading for all who engage in class-action litigation." Kitson v. Bank of Edwardsville) I’m just saying. The possibilities are endless:

BLNT – better luck next time

SMHID – scratching my head in disbelief

SSINF- so stupid it’s not funny

GIAR – give it a rest

GIGO – garbage in, garbage out

WOMBAT – waste of brains, money and time

TNSTAAFL - there's no such thing as a free lunch

And, finally,

WTcaFa? -- I could explain but GTG (got to go) GTRM (going to read mail) -- fan mail in my case. If you really can’t figure it out, ask Ashton. Though I would be SIS (shocked into silence) if Ashton knows what CAFA is unless of course he attended the University of Pennsylvania Law Review Symposium with Sarah Palin. (See our 11/3/08 post.) IIRC (if I remember correctly), he does prefer older women.

TAFN (that’s all for now)

The Removal Clock...What Starts the Ticking?

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Thu, 18 Feb 2010 06:30:00 -0600

Thomas v. Bank of America Corporation, et al, 09-11143 (11th Cir. June 12, 2009).

In Thomas v. Bank of America Corp., the Eleventh Circuit found a case does not become removable as a CAFA case until a document is received by the defendant from the plaintiff that unambiguously establishes federal jurisdiction.

The plaintiff, Rosa Thomas, filed a class action against Bank of America and a wholly-owned subsidiary of Bank of America in the Superior Court of Clarke County, Georgia. Thomas alleged Bank of America committed unfair and deceptive acts in violation of Georgia state law with regard to the sale of an insurance product. The complaint defined a putative class and an alternative putative class but did not indicate the number of individuals in either of the proposed classes or the monetary amount of the recovery they were seeking. We are sure that was just an oversight by the plaintiffs’ counsel.

Bank of America filed a Notice of Removal to the United States District Court for the Middle District of Georgia, contending that jurisdiction was appropriate because the action qualified as a “mass action” under the CAFA.[1] Bank of America supplemented its Notice of Removal with a declaration there were 77,787 customers of the of the product at issue and that Bank of America collected a total of $4,825,809 in fees from the customers and Bank of America argued that because Thomas sought treble damages and attorneys' fees, the amount in controversy exceeded $5,000,000.

Thomas argued jurisdiction under CAFA was lacking and moved the district court to remand the case to the state court on the ground that Bank of America had not shown by a preponderance of the evidence that the amount in controversy exceeded $5,000,000. The district court agreed, finding that the $4.8 million figure did not accurately identify the amount in controversy because Thomas' complaint did not allege that all of the customers were entitled to relief for the entire amount of their fees and that there was “great uncertainty regarding the amount in controversy and the class size.”

The Eleventh Circuit noted Bank of America, as the party removing the case to the district court, bore the burden of establishing federal subject matter jurisdiction and that a case does not become removable as a CAFA case until a document is received by the defendant from the plaintiff that unambiguously establishes federal jurisdiction. The Eleventh Circuit held a defendant may not simply file a notice of removal thirty days after the filing of the complaint unless that document shows that the CAFA's jurisdictional requirements for an action to be deemed a mass action are met and found Thomas’ complaint provided no information indicating the amount in controversy or the number of individuals in the alternative classes and Bank of America did not show the amount in controversy and the sizes of the alternative classes by a preponderance of the evidence.

[1] Loyal followers of The Blog know under the CAFA, to remove a mass action to federal court, a defendant must show: (1) an amount in controversy of an aggregate of $5,000,000 in claims: (2) minimal diversity; (3) numerosity involving monetary claims of 100 or more plaintiffs; and (4) commonality showing that the plaintiffs' claims involve common questions of law or fact.

If You Want to Remove Under CAFA, Then You Must Use the Plaintiff's Own Words Against Him.

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Wed, 17 Feb 2010 06:30:00 -0600

Pretka v. Kolter City Plaza II, Inc., No. 09-80706-CIV-MARRA, 2009 WL 4547042 (S.D. Fla. Nov. 30, 2009)

A basic lesson in removal procedure for defendants: your evidence that removal is proper must come from the plaintiffs and must be submitted with your notice of removal. If you had any doubt on this subject, then the decision in Pretka, shows that this procedure applies to removing under CAFA as well.

The defendant in Pretka v. Kolter City Plaza II, Inc. lost its day in (federal) court when it relied on its own affidavit – and not a document produced by the plaintiffs – for support that removal was proper under CAFA. Documents produced by the plaintiffs even existed at the time of removal, but they were not submitted to the court at the time of removal, so the court could not consider them.

The defendant, a corporation selling condominiums in West Palm Beach, filed a notice of removal under CAFA, alleging that there were over 100 members in the plaintiffs’ proposed class of unhappy condominium purchasers, that at least one purchaser was a citizen of a state different than the defendant’s states of citizenship, and that the amount of controversy exceeded $5,000,000. Unfortunately for the defendant, its sole support for its allegation that more than $5,000,000 was at stake was the declaration of its own Chief Financial Officer.

When the plaintiffs, six named unhappy condominium purchasers, filed their motion to remand, they argued that under Lowery v. Alabama Power Co., 483 F.3d 1184 (11^th Cir. 1007), the court could only consider evidence of the amount in controversy that comes exclusively from the plaintiffs. (Editors’ Note: See the CAFA Law Blog analysis of Lowery posted on May 15, 2007). The court could not, therefore, consider the declaration of the defendant’s own Chief Financial Officer. And because the defendant did not offer any other support of its contention that the claims exceeded $5,000,000 at the time of removal, the case must be remanded. The court agreed.

The defendant tried to recover its case for removal by submitting more evidence with its response to the plaintiffs’ motion. This strategy failed, too.

Among the evidence submitted with its response, the condo seller submitted three demand letters from plaintiffs. While the court agreed that this evidence satisfied the requirement under Lowery that the evidence in support of removal jurisdiction must come from plaintiffs, the court pointed out that this was too little too late. The court could not consider the demand letters – or those other exhibits attached to the response – because the defendant did not submit them at the time of its notice of removal.

What were those other exhibits? One was a collection of potential class members’ purchase agreements. Because the agreements were not provided by the named plaintiffs, the court could not consider this evidence under Lowery either. What was the third? A declaration by the defendant’s Contract and Closing Manager that the total amount in controversy exceeded $41,000,000.

Yes, that’s right. In response to plaintiffs’ argument that the court could not rely on a declaration generated by the defendant for support, the defendant generated another declaration in support. Perhaps the defendant thought the $41,000,000 figure would impress more than “exceeds $5,000,000.” The court found, however, that, as with the first declaration, it could not consider this second declaration because it was not provided to the defendant by the plaintiffs.

The Lowery rule is not really that the evidence must come from the plaintiff exclusively, but rather that neither defendants nor courts can speculate as to the amount of controversy to make up for a lack of evidence at the time of removal. At the time of removal, it is up to a defendant to show that removal jurisdiction is proper. If a defendant is lucky, the allegations in the petition itself show that removal is proper and the defendant’s burden is met. But because plaintiffs, like the ones here, who file in state court often want to stay in state court, they avoid revealing the amount in controversy in the petition on purpose.

The defendant then must rely on some other document to show that removal is proper. And that other document must inevitably come from the plaintiff. Otherwise, the defendant would submit its own documents, which would be pure speculation. Hence, the practical version of the Lowery rule: the court can only consider evidence that removal is proper that comes exclusively from the plaintiff.

Under Pretka v. Kolter City Plaza II, Inc., the Lowery rule applies to removal under CAFA, too. The court thus held that it could not consider defendant’s original declaration. And without it, there was no evidence at the time of removal that the amount in controversy exceeded $5,000,000 to satisfy CAFA so the case was remanded. Had only the defendant known basic removal procedure, it could have had its day in (federal) court!

Remember Those Bikes with the Banana Seat?

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Tue, 16 Feb 2010 06:30:00 -0600

Vanegas v. Dole Food Co., Inc., No. 09-181 (C.D. Cal. Jan. 29, 2009)

Well, this post has absolutely nothing to do with those banana-seated bikes. Sorry. Rather, this very brief, non-reported case highlights the fact that – in a banana peel (like “in a nutshell” – c’mon!) – the CAFA removal statute “is to be ‘strictly construed against removal jurisdiction and any doubt must be resolved in favor of remand.’”

In this case, the plaintiffs, banana plantation workers from various Central American countries, sued the household-name banana producers (Dole, Chiquita, Del Monte) and a few chemical companies (Shell, Dow, Occidental) alleging a variety of claims ranging from products liability to conspiracy (what would a case be without it?).

The plaintiffs brilliantly or cleverly (depending upon whom you represent) divided themselves alphabetically and by country, into multiple suits such that each suit had less than 100 plaintiffs – and, therefore, fell short of the CAFA jurisdictional requirements.

Not surprisingly, the defendants argued that the plaintiffs designed their suits in such a manner so as to avoid federal court jurisdiction under CAFA. The court very clearly rejected the defendants’ argument, noting that “as master of their complaint,” the plaintiffs may file multiple actions with fewer than 100 plaintiffs if they so choose. Nothing under CAFA or otherwise prohibits it. The court also noted that the defendants failed to show that any plaintiff satisfied the $75,000 jurisdictional amount requirement applicable to “mass” actions.

Ultimately, the court ordered the parties to show cause (in 15 pages or less) why the suit should not be dismissed for lack of subject matter jurisdiction or remand.

(Editors’ Note: See the CAFA Law Blog analysis of the Villareal case, a companion case of Vanegas, posted on June 2, 2009)

Do not try the old bait and switch on the Fifth Circuit

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Mon, 15 Feb 2010 06:30:00 -0600

Alvarez et al v. Midland Credit Management, Inc. et al, 585 F.3d 890 (5^th Cir., October 19, 2009).

The plaintiffs should not have tried it. Did they really think the judges of the United States Fifth Circuit Court of Appeals would not see right through it? What were they thinking? [Ok, ok, maybe it was all an innocent change of circumstances, but it is more fun to think of it this way.]

When the Fifth Circuit grants permission for an interlocutory appeal of the denial of a motion for remand, based on certain representations about the reason for the appeal, the Fifth Circuit will expect to see those reasons in the substantive briefing. If the reason the Fifth Circuit granted permission to appeal is not briefed, the Fifth Circuit can be expected to evaluate whether it should permit the appeal to proceed.

This is the lesson of Alvarez et al v. Midland Credit Management. The defendants removed the case to federal court, alleging jurisdiction under CAFA. The plaintiffs moved for remand, but the district court denied the motion. Normally, denial of a motion to remand would not be subject to an immediate interlocutory appeal. However, appellate courts have discretion under CAFA to accept an appeal of such a decision, on an accelerated basis, in order to “facilitate the development of a body of appellate law interpreting CAFA without unduly delaying the litigation of class actions.” 585 F.3d at 894 (internal quotations omitted).

The plaintiffs sought permission to appeal based on four grounds, two of which concerned the existence of jurisdiction under CAFA, two of which did not. [There’s the bait.] The Fifth Circuit granted permission for the appeal, and the plaintiffs submitted their brief shortly thereafter.

The plaintiffs only briefed one of the arguments presented in their petition for permission to appeal, and it had nothing to do with CAFA. [There’s the switch.]

The Fifth Circuit recognized that the elimination of the CAFA arguments eliminated the basis upon which permission for the appeal had been granted, and stated “in exercising our discretion to hear such appeals we must weigh the time taken from earlier-filed appeals to tend to the CAFA appeal against the benefit of hearing such an appeal at this juncture. Part of this weighing necessarily involves consideration of the unique nature of the issues presented in the proposed appeal.” 585 F.3d at 894. As a result, the court vacated its order granting permission to appeal and remanded the matter to the district court. Disclaimer: results may vary [but I would not recommend this strategy. What a waste of resources.].

SGJ

Hushpuppies-in-Controversy Not A CAFA Prerequisite

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Fri, 12 Feb 2010 06:30:00 -0600

Delaney v. Landry’s Restaurants, Inc., No. 09-cv-1421 (D. N.J. Oct. 21, 2009)

9,269 gift cards can buy a lot of shrimp platters, but they are not redeemable for CAFA jurisdiction if your calculation of the maximum damages per putative class member is tad low.

This action arose from the sale of Landry’s Restaurants gift cards that allegedly violated New Jersey law by failing to include certain fee disclaimers. The defendant removed under CAFA based on the sale of approximately 10,000 in New Jersey in the relevant time period and $520 maximum damages per putative class member. [$520 + four zeroes = more than enough to satisfy CAFA’s amount-in-controversy requirement].

Unfortunately, after discovery revealed that only 9,269 gift cards were sold in the relevant period, the defendant could not find $19 to add to the damages figure and the $520 amount stuck. [$520 x 9,269 = remand]. The rule that amount-in-controversy is assessed at the time of removal could not save jurisdiction, where, as here, the evidence was only revealed after removal and did not depend on events after removal.

Migration Patterns of Classmemberia putativus Not Needed (But Helpful) to Meet CAFA's Home State Exception

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Thu, 11 Feb 2010 06:30:00 -0600

Redd v. Suntrup Hyundai, Inc., No. 09CV411MLM (E.D. Mo. Aug. 28, 2009) and Tonnies v. Southland Imports, Inc., No. 09CV414SNLJ (E.D. Mo. Sept. 29, 2009).

Sometimes you don’t need to argue the kitchen sink, but, then again, you might need to wash dishes. This pair of opinions from the Eastern District of Missouri illustrates that proving the domicile of class members to meet CAFA’s “home state” exception (28 U.S.C. § 1332(d)) can involve some strange evidence.

In each case, after the defendants removed under CAFA, the plaintiffs sought remand through the “home state” exception. The plaintiffs showed that more than 70% of the putative class members in each case had last known addresses in Missouri, the state of the defendants’ citizenship. Given census data showing Missouri’s “out-migration rate” of 8.3% from 1995-2000, the plaintiffs claimed that more than two-thirds of the proposed classes were from Missouri.

The district court accepted the last known addresses as sufficient evidence of the citizenship of the proposed class members when the lawsuits were filed.The district court distinguished Preston v. Tenet Healthsystem Memorial Medical Center, Inc., No. 07-30132 (5th Cir. 2007), in which the Fifth Circuit found that medical records showing treatment at a specific hospital did not reflect residency. (Editors’ Note: See the CAFA Law Blog analysis of Preston posted on June 5, 2007). Unlike Preston, which was limited by a unique set of circumstances following Hurricane Katrina, the defendant here did nothing to rebut the evidence of last known addresses. The opinions suggest that the defendants should have shown a “mass exodus” from Missouri.

In the Redd case, the district court felt it was “too great a leap” to apply the census statistics for a period beginning thirteen years prior to the lawsuit. In the Tonnies case, however, the district court judicially noticed the data and found that it showed that the class members were citizens of Missouri as well as residents of Missouri because it showed that most Missouri residents were also citizens.

Just in case that wasn’t enough to support the remand, the district court, in each opinion, cushioned its decisions by declining jurisdiction under CAFA’s permissive considerations (28 U.S.C. § 1332(d)(3)).

(Editors' Note: See the CAFA Law Blog analysis of the earlier Redd decision posted on September 4, 2009).

CAFA's Uncommon Goodness.

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Wed, 10 Feb 2010 06:30:00 -0600

Brennan v. Rite Aid Corp., No. 08-CV-02970-JF (E.D.Pa. Oct. 7, 2009) –

♪♪♪ Real Litigant of Genius (Sorry Miller Lite for the shameless rip) ♪♪♪

Here’s to you Terri Brennan for truly championing the causes of many of societies most noted unfortunate souls: that guy who ralphed after drinking bad milk; the kid who bit down … strike that … chewed on that soft Butterfinger; and that wild-eyed high school kid who thought … did I feel something burst?

Terri Brennan attempted to champion the cause to which any reader, lawyer, or other professional could relate – vindicating the rights of those consumers who had purchased “expired” products.

Unfortunately for our downtrodden hero, Brennan appeared to bite off more bad meat than the mouth could chew. The trial court rejected Ms. Brennan’s stale (spoiled, sour, chewy?) claim. Quite simply, Terri was a bit too ambitious, trying to fit claims for all products under the same tent, and the trial court held that Ms. Brennan could not establish commonality.

And who could blame the trial court? Can one person truly represent, on the one hand, the small tot who unfortunately received (and then returned) that sour milk and on the other hand ate a piece of stale bread? Different products, different facts, no connection! Can one person truly represent the weekend warrior who had one too many expired [insert cheap beer name] on the one hand and the unfortunate soul that purchased that [insert name brand contraceptive] on the other. No connect … oh wait, bad example.

Let’s just say no commonality, no class action. CAFA prevails.

CAFA Has No Retroactive Effect: Colorado District Court Says It Has No Original Jurisdiction Under CAFA If Post CAFA Amendment Bringing New Class Claims Relate Back To Pre CAFA Action

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Tue, 09 Feb 2010 06:30:00 -0600

In re Am. Family Mut. Ins. Co. Overtime Pay Litig., 638 F. Supp. 2d 1290 (D. Col. 2009).

In this consolidated action, the Colorado District Court dismissed without prejudice the Rule 23 state law class action claims asserted in the amended complaint filed post CAFA ruling that it related back to the original complaint filed pre CAFA, therefore, the commencement date of the state claims was the date of filing of the original complaint notwithstanding the amendments. In doing so, the Court reiterated that it could not exercise original jurisdiction on the action “commenced” prior to CAFA’s effective date.

On October 20, 2004, Rocky Baldozier and three others, on behalf of themselves and on behalf of other claims adjusters, sued their employer, American Family Mutual Insurance Co., in the district court of Colorado, seeking unpaid overtime pay and related damages under federal (FLSA) and Colorado state wage and overtime law. In August 2004, Robert Schultz brought a similar action in the district court of Illinois under FLSA and Illinois state law. On February 13, 2006, the Judicial Panel on Multidistrict Litigation consolidated these cases and transferred to the district court of Colorado as a single case. Before consolidation of these actions, the Courts had dismissed their state claims and ordered notice to putative class members in their FLSA collective action claims.

Desiring to bring other state law claims, the Baldozier Plaintiffs moved for leave to amend the complaint on September 30, 2005, adding four new Rule 23 state law class action claims under the wage and overtime laws of Wisconsin, Ohio, Minnesota, and Illinois. On November 28, 2005, the Baldozier Plaintiffs were granted leave to file a first amended complaint.

After the Baldozier Plaintiffs filed their first amended complaint, American Family moved to dismiss these four new state claims.

The Baldozier Plaintiffs argued that the Court had original jurisdiction over these state claims pursuant to CAFA.

Declining to exercise original jurisdiction, the Court held that the new state claims arose out of the same conduct alleged in the original complaint, thus, they related back to the original action “commenced” prior to CAFA’s effective date—February 18, 2005. As CAFA has no retroactive effect, the Court dismissed these claims.

In doing so, the Court noted the Tenth Circuit’s opinion in Prime Care of Ne. Kan., LLC v. Humana Ins. Co., 447 F.3d 1284, 1285 (10th Cir. 2006) that the addition of new claims sufficiently distinct from a prior pleading may “commence” a new action under CAFA, if the new claims do not “relate back” to the prior pleading. (Editors’ Note: See the CAFA Law Blog analysis of Prime Care posted on August 16, 2006).

As the original complaint in Baldozier was filed prior to CAFA’s effective date, and the first amended complaint was filed after CAFA’s effective date, the Court determined whether the state claims asserted in the first amended complaint “related back” to the original Complaint.

To answer this issue, the Court relied on Rule 15(C)(1)(B), which provides that an amended complaint relates back to the date of the original complaint when the amendment asserts a claim that arose out of the “conduct, transaction, or occurrence set out--or attempted to be set out--in the original pleading.” The Court found that while the new class claims were pled under different states’ overtime statutes, both the state claims and FLSA claim sought payment of unpaid overtime. Thus, the new state claims arose out of the same conduct alleged in the original complaint, namely, the assertion that American Family improperly refused to pay certain of its claims adjusters’ overtime wages. Accordingly, the Court concluded that the state claims merely added alternative theories of relief rather than wholly distinct claims.

As a result, the plaintiffs will have to re-litigate their state law class action claims in the respective state courts.

CAFA Is Not Applicable To A Previously Filed Suit, Even If Class Certification Is Sought Or Claims Revived For Deceased Plaintiffs After Its Commencement, Says Fifth Circuit

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Mon, 08 Feb 2010 10:00:43 -0600

Admiral Ins. Co. v. Abshire, 574 F.3d 267 (5th Cir. 2009)

The U.S. Fifth Circuit recently upheld a district court’s ruling that the plaintiffs did not commence a new suit under CAFA, by seeking class certification in an amended complaint or by reviving claims held by the deceased plaintiffs, in a suit which was filed prior to commencement of CAFA.

Seventeen years back and long before the commencement of CAFA, Abshire and other purchasers of life insurance products, sued the State of Louisiana in the state court alleging that the State’s negligent, intentional, and criminal acts contributed to the failure of the insurance companies. A total of 1,383 plaintiffs were initially named as parties in three petitions, which were later consolidated into a single action.

After CAFA came into effect in 2005, the plaintiffs amended the complaint seeking class certification and attorneys’ fees. In the meantime, the state court also substituted survivors of many deceased plaintiffs.

The State then removed the action to the federal court under CAFA’s subject-matter jurisdiction arguing that the amended complaint and substitution of survivors commenced a new suit for the purpose of CAFA. But the district court remanded the suit back to state court holding that the action was not “commenced” after CAFA’s effective date. The State appealed, but the U.S. Fifth Circuit affirmed the order.

While upholding the district court’s ruling, the Fifth Circuit noted that under Louisiana law, the default rule is that absent special circumstances, a suit is commenced only at the time the original petition is filed in a court of competent jurisdiction. Therefore, the plaintiffs commenced this suit long before CAFA’s effective date, when at least one of the petitions for damages was filed in a Louisiana court competent to hear it. In doing so, the Fifth Circuit, giving effect to the plain meaning of the term “civil action” in § 9 of CAFA, noted that “civil action” is a more extensive and inclusive proceeding which may commence before it becomes a “class action.”

Explaining that special circumstances were absent to hold that the suit commenced post-CAFA, the Fifth Circuitstated that its limited holding in Braud v. Transp. Serv. Co. of Ill., 445 F.3d 801, 803 (5th Cir. 2006) -- that addition of a new defendant commences a new suit as to that defendant for the purpose of CAFA providing a new removal window -- could not be enlarged to the addition of new claims or new plaintiffs to a case when the amendment relates back to the pre-CAFA suit. (Editors’ Note: See the CAFA Law Blog analysis of Braud posted on May 24, 2006). The Fifth Circuit found that amended complaint was not a drastic modification of the case because mere addition of class allegations applied to the class comprising only individuals or successors of individuals who were parties to the suit filed prior to CAFA.

The Fifth Circuit further observed that given CAFA’s non-retroactivity, the relation back doctrine to commencement of a suit was virtually non-existent in this case because the State had notice of all of the plaintiffs’ claims before enforcement of CAFA, except their claims for attorneys’ fees. The Fifth Circuit, however, found that request for attorneys’ fee did not commence a new “civil action” because attorneys’ fees arose out of the same transaction that led to the filing of the original complaint.

Finally, the Fifth Circuit found that even if the relation back test needed to apply, “resurrected” plaintiffs and claims satisfied the test both under Louisiana as well as Federal law. In this regard, the Fifth Circuit observed that the plaintiffs satisfied the Louisiana Supreme Court’s relation back analysis in Giroir v. South Louisiana Medical Center, 475 So. 2d 1040, 1044 (La. 1985), because the amended claims were sufficiently related to old claims and the substituted parties were not wholly new but were survivors of the deceased plaintiffs.

The Fifth Circuit also agreed with the Seventh Circuit’s opinion in Schorsch v. Hewlett-Packard Co., 417 F.3d 748, 750, 752 (7th Cir. 2005), that class members were not new plaintiffs even if they had not previously joined the action as individuals. (Editors’ Note: See the CAFA Law Blog analysis of Schorsch posted on September 4, 2005).

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cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Fri, 05 Feb 2010 13:03:51 -0600

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Domicile, Not Residency, Is The Central Question In Determining Citizenship For Diversity Jurisdiction Under CAFA, Says California District Court

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Thu, 04 Feb 2010 08:56:30 -0600

Beauford v. E.W.H. Group Inc., WL 1808468 (E.D. Cal. Jun. 24, 2009).

In this case, the California District Court remanded the action to state court ruling that in absence of diversity of citizenship, it lacked subject matter jurisdiction under CAFA. No surprise there! No diversity, even minimal diversity; no federal court.

Denise Beauford sued E.W.H. Group, who operated a car dealership known as "Bakerfield Mitsubishi," in California state court asserting breach of sales contract claims on behalf of herself and all buyers of E.W.H. Group who had received similar sales contracts.

According to the plaintiff, the plaintiff and the defendant entered into a sales contract regarding a 2005 Kia Amanti, and, as part of the sales contract, the defendant agreed to pay off the loan on the plaintiff’s trade in. The plaintiff alleged, among other things, that the defendant did not pay off the trade in and misrepresented the true history of the Kia Amanti. All of the plaintiff’s causes of action were brought pursuant to California state law.

The plaintiff is a citizen of California and the defendant is incorporated in and has its principle place of business in California.

Asserting that two of the class members were from the state of Texas, E.W.H. Group removed the case to federal court under CAFA. Holding that E.W.H. Group failed to meet its burden to be able to “affirmatively allege” and provide “competent proof” of the actual citizenship of the relevant parties supporting minimal diversity, the Court remanded the action.

In doing so, the Court noted the Ninth Circuit’s opinion in Kanter v. Warner-Lambert Co. 265 F.3d 853, 857 (9th Cir.2001) (which predates CAFA) that the state citizenship of a natural person is determined by her state of domicile, not her state of residence, because a person’s domicile is her permanent home, where she resides with the intention to remain or to which she intends to return, and a person residing in a given state is not necessarily domiciled there, and thus is not necessarily a citizen of that state.

The Court found that E.W.H. Group’s conclusion that two class members were from Texas rested solely on the declaration by its custodian of record and class members’ Texas drivers licenses which implied they were Texas residents a year to a year and a half before the time in question. The Court observed that E.W.H. Group had not produced competent evidence establishing the permanent homes and intentions of the two class members at the time of removal. The Court, thus, concluded that allegations of residency were insufficient to support diversity jurisdiction, and an allegation of residency cannot be regarded as an allegation of citizenship for the purpose of diversity jurisdiction.

As a result, E.W.H. Group had to drive its Mitsubishi back to state court.

Once There's CAFA, There's Always CAFA: Seventh Circuit Says Jurisdiction Not Ousted By Lack of Class Certification

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Wed, 03 Feb 2010 11:24:53 -0600

Cunningham Charter Corp. v. Learjet, Inc., __ F.3d __, 2010 WL 199627 (7th Cir. Jan. 22, 2010)

We are honored again to bring you another guest column from one of the smartest Chicago lawyers from below the Mason-Dixon line. Our regular, loyal readers know we are referring to none other than Gabriel Crowson, a consumer finance defense attorney of the Howrey firm. Heeeere's, Gabe....

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In a case of first impression, the Seventh Circuit recently reversed a district court’s ruling that the denial of class certification eliminated jurisdiction under CAFA. Cunningham Charter had sued Learjet in Illinois state court, asserting breach of warranty claims, on behalf of itself and all buyers of Learjets who had received the same warranty (not a bad class to be a part of).

Not wanting to litigate in state court, Learjet removed to federal court under CAFA. Once the case was in federal court, Cunningham Charter filed a Rule 23 motion for class certification. The district court denied the class certification motion and then ruled that the denial meant that there was no longer CAFA jurisdiction and thus remanded the suit back to state court. Learjet filed a petition for appeal to the Seventh Circuit.

In reversing the district court’s remand ruling, the Seventh Circuit held that federal jurisdiction under CAFA does not depend on class certification, joining the Eleventh Circuit’s opinion in Vega v. T-Mobile USA, Inc., 564 F.3d 1256, 1268 n.12 (11th Cir. 2009).

In doing so, the Court noted that CAFA applies “to any class action [within the Act’s scope] before or after the entry of a class certification order” and that there is no requirement in CAFA that a class action be certified before the case can be removed. According to the Court, the better interpretation of this language is that jurisdiction does not hinge on class certification. The Court further held that such an interpretation was also a vindication of the general principle that once jurisdiction has been properly invoked, it is not lost by subsequent developments in the suit. As the Court so eloquently put it, a case “should not be shunted between court systems; litigation is not ping-pong.”

The Seventh Circuit’s decision in Cunningham will allow defendants, who have successfully filed CAFA removals, to breathe a sigh of relief. Those defendants can rest assured that the defeat of class certification (or the certification of a smaller class than that originally sought by plaintiffs) will not give plaintiffs the opportunity to seek a remand and re-litigate class certification in state court.