Class Action Fairness Act Blog

Hotel Employees Get Lei'd by Hotel in Hawaii When Hotel Fails to Distribute All of the Hotel Imposed Service Charge to the Hotel Employees.

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Thu, 09 Feb 2012 05:30:00 -0600

Smith v. Kawailoa Dev. LLP, 2011 WL 6749793 (D. Haw. Dec. 22, 2011).

The angry volcano gods caused an eruption that sent this class action back to Hawaii state court.

In this action, a District Court in California agreed with the Magistrate Judge that under Coleman v. Estes Express Lines, Inc., a court cannot look beyond the complaint in deciding whether “significant relief” was sought from a particular defendant and whether its conduct formed “significant basis” for the plaintiffs’ claims. The court held that this holding does not run counter to the “artful pleading doctrine,” which provides that a plaintiff may not defeat removal by omitting to plead necessary federal questions in a complaint.

The plaintiffs, Marti Smith and Jonalen Kelekoma, employed by Kawailoa Development LLP as food servers and/or waitresses at the Grand Hyatt Kauai Resort & Spa on Kauai, Hawaii, brought a class action asserting that the defendants imposed a service charge or gratuity charge in connection with the sales of food and/or beverage at the Hotel, but failed to distribute all the charges to non-managerial employees in violation of Hawaii state law, Haw. Rev. Stat. §§ 388–6, 481B–14, and ch. 480.

The defendants removed this action to the federal court under CAFA.

The plaintiffs moved to remand the action back to state court arguing that the Court lacked jurisdiction under the “local controversy exception” to CAFA, 28 U.S.C. § 1332(d)(4)(A)(i).

The Magistrate Judge recommended granting the motion.

The defendants objected to the Magistrate Judge’s report & recommendation, which the District Court overruled, and adopted the report & recommendation.

Relying on Coleman v. Estes Express Lines, Inc., 631 F.3d 1010, 1015-17 (9th Cir. 2011), the Magistrate Judge looked solely at the allegations of the plaintiffs’ complaint and found that it alleged sufficient facts to establish that the local defendant, Kawailoa, was a defendant from whom the plaintiffs sought “significant relief” and Kawailoa’s conduct formed a “significant basis” for their claims. The defendants objected to this determination, arguing that the Court should consider evidence beyond the complaint and in any event, the allegations in the complaint were insufficient.

The Court stated that as to whether it may consider extrinsic evidence, Coleman answered this question with a decisive “no.” (Editors’ Note: See the CAFA Law Blog analysis of the 9th Circuit's decision in Coleman posted on February 22, 2011).

Coleman held that the court is so limited due to the statutory language of CAFA, which “unambiguously directs the district court to look only to the complaint in deciding whether the criteria set forth in subsection (aa) (“significant relief”) and (bb) (“significant basis”) of § 1332(d)(4)(A)(i)(II) are satisfied.” Coleman further rejected the argument that this interpretation of CAFA ran afoul of the “common practice of considering extrinsic evidence and making factual determinations in resolving questions of a federal court’s subject matter jurisdiction” due to three reasons.

First, the plain language of these sub-sections of CAFA “indicates, through the use of the words “sought” and “alleged,” that the district court is to look to the complaint rather than to extrinsic evidence.”

Second, district courts do not always consider extrinsic evidence in making subject matter jurisdiction determinations. Finally, “factual determinations under subsections (aa) and (bb) are likely to be more expensive and time-consuming than factual determinations of citizenship and amount-in-controversy,” and Congress stressed the need for subject matter jurisdiction determinations under CAFA to be made quickly.

Despite Coleman’s clear explanation that a district court cannot consider extrinsic evidence, the defendants argued that Coleman did not consider the “artful pleading doctrine,” which provides that “a plaintiff may not defeat removal by omitting to plead necessary federal questions in a complaint.” The Court remarked that this doctrine applies, however, in only certain circumstances. Specifically, a state-created cause of action can be deemed to arise under federal law (1) where federal law completely preempts state law, (2) where the claim is necessarily federal in character, or (3) where the right to relief depends on the resolution of a substantial, disputed federal question.

The Court rejected the defendants’ argument that Coleman left room for application of the artful pleading doctrine in this action — Coleman explained that although some questions of subject matter jurisdiction are questions of fact, it did not believe that this practice should apply to determinations under subsections (aa) and (bb).” The Court disagreed with the defendants’ argument that interpreting Coleman to prevent consideration of extrinsic evidence would run counter to Supreme Court cases generally discussing this doctrine. The Court noted that unlike the Supreme Court cases cited by the defendants, Coleman specifically rejected that extrinsic evidence should be considered in determining whether subsections (aa) and (bb) are satisfied.

Further, the Court stated that it was unquestionably bound by the Ninth Circuit law. The Court maintained that where the reasoning or theory of prior circuit authority is clearly irreconcilable with the reasoning or theory of intervening higher authority, a three-judge panel should consider itself bound by the later and controlling authority, and should reject the prior circuit opinion as having been effectively overruled.

Thus, according to Coleman and the plain language of CAFA, the Court concluded that it could not consider extrinsic evidence in determining the applicability of subsections (aa) and (bb).

Turning to the allegations of the complaint, the Court noted that the Complaint alleged that Kawailoa, a Hawaii limited liability partnership, employed the putative class members during the relevant period, owned and operated Hyatt, provided food and lodging in Hawaii. The Complaint also alleged that Kawailoa along with Hyatt charged customers of the Hotel a “service charge” or “gratuity,” of which only a portion was distributed to staff, and that the defendants “failed to clearly disclose to customers that a portion of the service charge was not distributed to the employees and was in fact retained by the Hotel.” The Court found that these allegations—that Kawailoa was the plaintiffs’ employer, that Kawailoa, in conjunction with Hyatt, failed to pay the plaintiffs the full service charges that were due them, and that the plaintiffs sought damages, declaratory relief, and injunctive relief from both the defendants—established that Kawailoa’s conduct formed a significant basis for the plaintiffs’ claim and that significant relief was sought from Kawailoa.

In finding that the complaint adequately alleged these elements, the Court recognized that the complaint lumped Kawailoa and Hyatt together for some allegations. Although the complaint did not specifically explain the relationship between Kawailoa and Hyatt, the Court remarked that this did not change that Kawailoa’s conduct formed a significant basis for the plaintiffs’ claim and that significant relief was sought from Kawailoa, particularly given the allegation that Kawailoa was the plaintiffs’ employer.

Accordingly, the District Court adopted the Magistrate Judge’s report & recommendation, and remanded the case to the state court.

The Local Controversy Exception Rides Again.

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Wed, 08 Feb 2012 06:30:00 -0600

Harris v. ITT Corp., No. CIV.A. 10-331-JJB, CV 10-333, CV 10-328, CV 10-334, CV 10-332, CV 10-335 (M.D. La. Oct. 04, 2010).

On the heels of the local controversy exception, a Louisiana Magistrate Judge recommends remand. The plaintiff voluntarily dismisses the out-of-state defendant and puts the exception in the gun sites of the judge.

United States Magistrate Judge Stephen C. Riedlinger for the Middle District of Louisiana issued a Report and recommended that the District Court remand this action to state court holding that, with the out-of-state defendant dismissed, the action can be remanded under CAFA’s local controversy exception.

The plaintiff filed a class action petition in state court claiming damages for an explosion and fire which occurred on March 30, 2010 at a business located in Livingston Parish, Louisiana.

The defendant, Goulds Pumps, Inc., removed the action to federal court asserting subject matter jurisdiction under CAFA and the plaintiff moved to remand arguing that CAFA’s local controversy exception applied.

The plaintiff defined the proposed class as consisting of all persons who on March 30, 2010, were residents and/or property owners and/or business owners/invitees in the affected vicinity in Livingston Parish. The plaintiffs stated that the members of this class experienced fear and fright, property damage, physical discomfort or injury, evacuation or other damages including damages to animals as a result of the fire at Coco Resources and ITT Pro Services Warehouses.

Magistrate Judge Riedlinger noted that the plaintiff is a Louisiana citizen. The defendant, Goulds Pumps, is a Delaware corporation with its principal place of business in the state of New York.

After removal, the plaintiff stipulated to the dismissal of defendant, Goulds Pumps. The sole remaining defendant, Coco Resources, Inc., is a Louisiana corporation. Coco Resources neither joined in nor consented to the removal.

The Magistrate Judge found that the circumstances described in §1332(d)(4)(B) for local controversy exception existed in this case because the class descriptions showed that more than two-thirds of the members of the proposed classes were Louisiana citizens, and the sole remaining defendant, Coco Resources, was also a Louisiana citizen.

Consequently, the Magistrate Judge recommended that the District Court decline to exercise subject matter jurisdiction in this case.

In the Seventh, Jurisdiction Is Determined at the Time of Removal, and Nothing Filed After Removal Affects Jurisdiction

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Tue, 07 Feb 2012 06:30:00 -0600

Altoum v. Airbus, S.A.S., No. 10-CV-467 (N. D. Ill. Sept. 9, 2010).

If you think you are filing your complaint on behalf of 100 plaintiffs, make sure you have 100 plaintiffs. Your knowledge of your clients is very important. Duh!

In this action, the District Court for the Northern District of Illinois, Judge Charles Ronald Norgle, declined to remand the action to state court holding that including plaintiffs in an action who are already plaintiffs in an earlier related action is not a scrivener’s error.

The plaintiff, Mohamed Makky Altoum, and 101 other plaintiffs brought a product liability and negligence claims in the state court against Airbus S.A.S. concerning an airplane crash that occurred in Khartoum, Sudan on June 10, 2008 (the “Altoum Action”).

Prior to the filing of the Altoum Action, the plaintiffs’ attorney filed a similar complaint in the state court on behalf of over 80 other plaintiffs (the “Mohammad Action”) claiming similar relief against Airbus. According to the plaintiffs’ attorney, he filed the two actions separately because subsequent to the filing of the Mohammad Action, he was retained by other persons who were injured or lost loved ones in the Khartoum air crash through a referring attorney different from the referring attorney in the Mohammed Action. The plaintiffs’ counsel stated that he included 20 plaintiffs in the Altoum Action who already had asserted identical claims in Mohammad Action as a result of his error due to mistaken or variable spellings of the names of these 20 persons provided to him by the referring attorney.

Airbus removed the Altoum Action to the District Court pursuant to CAFA.

The plaintiffs moved to remand and to voluntarily dismiss 20 of the plaintiffs listed in the Altoum Action, which the District Court denied.

The plaintiffs did not dispute that the Altoum Action, when originally filed, satisfied CAFA’s jurisdictional requirements for federal jurisdiction. The plaintiffs did seek remand because they later discovered that the District Court’s jurisdiction was based on a “scriveners’ error” that resulted in the inclusion of 20 plaintiffs whose claims were already pending in the Mohammad Action. The plaintiffs accordingly argued that they should be allowed to voluntarily dismiss these 20 erroneously included persons from the Altoum Action, leaving 82 plaintiffs remaining. Under the plaintiffs’ reasoning, if the Altoum Action would no longer have at least 100 plaintiffs, federal jurisdiction would not exist under CAFA and the Altoum Action would be required to be remanded to state court.

The Court, however, found that the plaintiffs’ argument was not supported by Seventh Circuit’s reasoning in In re Burlington N. Santa Fe Ry. Co., 606 F.3d 379, 380-81 (7th Cir. 2010) and Bullard v. Burlington N. Santa Fe Ry. Co., 535 F.3d 759, 761 (7th Cir. 2008) (Editors’ Note: See the CAFA Law Blog analysis of In re Burlington posted on July 27, 2010 and the analysis of Bullard posted on August 31, 2009) that jurisdiction is determined at the time of removal, and nothing filed after removal affects jurisdiction. In this context, the Burlington Court remarked, “allowing plaintiffs to amend away CAFA jurisdiction after removal would present a significant risk of forum manipulation,” and keeping the case in federal court “minimizes the expense and delay caused by shuttling a case from court to court and furthers CAFA’s purpose of allowing putative class actions to be litigated in federal court.”

The plaintiffs, responding that the present case was an exception to the general rule of Bullard and Burlington, cited Schillinger v. Union Pac. R.R. Co., 425 F.3d 330, 332-34 (7th Cir. 2005), (Editors' Note: See the CAFA Law Blog analysis of Schillnger posted on October 24, 2005) where the Seventh Circuit stated that “a case should not come to federal court if the only ground for jurisdiction is a clerical error.” The Schillinger court agreed with plaintiffs that the inadvertent inclusion of the additional defendant did not support CAFA removal.

The Court remarked that Schillinger did not control the outcome of this matter because the plaintiffs’ counsel did not commit a scrivener’s error when he filed the Altoum Action on behalf of 102 plaintiffs. A scrivener’s error is synonymous with a clerical error and a clerical error is one “resulting from a minor mistake or inadvertence, esp. in writing or copying something on the record, and not from judicial reasoning or determination.”

The Court observed that, here, the plaintiffs’ counsel was not transcribing or copying any document when he drafted the Altoum Action. Moreover, in contrast to Schillinger where plaintiffs’ lawyer inadvertently included a defendant in an amended complaint, here the plaintiffs’ counsel fully intended to include all 102 plaintiffs when he filed the Altoum Action. Based on the information the plaintiffs’ counsel possessed at the time of the filing, he knowingly chose to bring suit on behalf of more than 100 plaintiffs. As a result, his inclusion of 102 plaintiffs in the Altoum Action could not be considered “inadvertent.”

Therefore, the Court concluded that Schillinger was inapplicable and denied the plaintiffs’ motion to remand relying on Bullard and Burlington standard.

Only a Stipulation, Not the Allegations of the Complaint, can Limit the Jurisdictional Amount.

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Mon, 06 Feb 2012 10:33:06 -0600

Stull v. YTB Intern., Inc., No. CIV. 10-600-GPM (S.D. Ill. Oct. 13, 2010).

MEMO TO PLAINTIFFS: If you would like to limit the amount claimed in your complaint, please file a stipulation along with your complaint specifying the limitation. Thank you, Southern District of Illinois.

In this case, the Southern District Court of Illinois, District Judge G. Patrick Murphy, declined to remand the action to state court holding that the language in a complaint that purports to limit recovery below a jurisdictional threshold amount is ineffective to actually to reduce damages below the jurisdictional threshold, unless the plaintiffs file stipulation or affidavit waiving a jurisdictionally-sufficient recovery.

The plaintiffs brought a class action in state court asserting claims under the Illinois Consumer Fraud and Deceptive Business Practices Act, and claims under the consumer protection statutes of Missouri, Georgia, and Utah, together with civil conspiracy claims under the laws of Illinois, Missouri, Georgia, and Utah. The plaintiffs also sought to certify both plaintiff classes and defendant classes under the laws of Illinois, Missouri, Georgia, and Utah.

The plaintiffs purchased online travel agencies from the YTB Defendants, the affiliated persons and entities engaged in selling online agencies to persons interested in starting home businesses. The plaintiffs alleged that the YTB Defendants’ business in fact was in the nature of a pyramid scheme, as the only way purchasers of online agencies actually profit from their agencies was by inducing new persons to purchase agencies. Persons who induce new people to purchase agencies were rewarded with premiums of various kinds by the YTB Defendants.

The YTB Defendants removed the action to federal court under CAFA. The plaintiffs moved to remand the case to state court on the grounds that the YTB Defendants failed to satisfy the $5 million amount in controversy for the purpose of CAFA’s jurisdictional requirement.

The plaintiffs contended that the jurisdictional amount was not satisfied because the complaint pled for only $100,000 for each of the plaintiff classes proposed in the complaint. The Court remarked that the language in a complaint that purports to limit recovery below a jurisdictional threshold amount is ineffective actually to reduce damages below the jurisdictional threshold. Specifically, only a binding stipulation or affidavit that waives a jurisdictionally-sufficient recovery and is filed with a plaintiff’s complaint is effective to reduce the amount in controversy below the jurisdictional threshold. Thus, the Court looked to the actual value of the claims asserted in this case.

The YTB Defendants filed an affidavit of its current chief executive officer averring that the proposed Illinois class in this case contained 17,303 members, and pointed out that the damages of each class member were, at a minimum, $450, which was the price for the initial purchase of an online agency. Thereafter, class members were required to pay a monthly fee of $50 to own and operate their agencies. Thus, the Court observed that the class-wide damages for 17,303 members at the rate of $450 each amounted to $7,786,350, well in excess of CAFA’s jurisdictional minimum amount of $5 million, exclusive of interest and costs.

The Court also found that the punitive damages and the attorneys’ fees could be counted toward the amount in controversy. The Court stated that because punitive damages are available on the fraud act claims, the punitive damages plaintiffs sought could be considered in reasonable multiples of the plaintiffs actual damages. Further, the Court stated that it was well-settled in the Seventh Circuit that only attorneys’ fees incurred before a case is removed can be counted toward the amount in controversy. Consistent with the principle that a statute is presumed not to overrule existing law save to the extent it does so explicitly, the Court assumed that the CAFA does not overrule the Seventh Circuit’s traditional approach to the calculation of attorneys’ fees for purposes of the jurisdictional amount in removed cases.

The Court observed that because the YTB Defendants established that the damages sought by Illinois class alone exceeded the jurisdictional requirement of $5 million, it was not necessary to multiply the damages of the Illinois class by three times to reflect a possible award of punitive damages, or to determine a reasonable amount of pre-removal attorneys’ fees.

Home May Be Where The Heart Is, But For Diversity Purposes Residence Is Prima Facie Proof of Citizenship

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Thu, 15 Dec 2011 11:26:36 -0600

Elsea v. Jackson County, Mo., No. 10-0620-CV-W-ODS, 2010 WL 4386538 (W.D. Mo. Oct 28, 2010).

Missouri may be moving to the SEC (that’s the Southeastern Conference, Home of the Last 5 National Champs and the Home of the 2011 National Champ, for you non-football fans), but this case is staying put in a Missouri state court because a Missouri federal district court granted the plaintiff’s motion for remand for want of diversity holding that a person is a citizen where he resides and intends to stay and that citizenship does not change until both conditions are met in a new state.

The plaintiff filed a class action lawsuit against Jackson County, Missouri and U.S. Engineering Company, alleging that the Jackson County Courthouse was built with materials containing asbestos and people who have been in the courthouse on a regular basis for any period since 1983 may have developed or may develop health problems. The plaintiff’s putative class consisted of all Missouri ‘residents’ who worked in or regularly conducted business in the Jackson County Courthouse.

The defendants removed the case to federal court based on provisions of CAFA, 28 U.S.C. § 1332(d). For support, the law firm representing the County submitted an affidavit from one of its lawyers (Jeffrey Rosen) averring that his primary residence was in Kansas but he had a “second home at the Lake of the Ozarks in Camdenton, Missouri,” where he “periodically” resided. Must be nice to have a lake house.

First, the court found that the defendants had not satisfied their burden of demonstrating that there was diversity of citizenship between some member of the class and the defendants. As the parties argued over the definition of “resident,” the court stated that the question was what did resident mean in the context of the class definition? In that context, the court rejected the defendants’ intimation that the term has a single, fixed meaning that must be imparted to the plaintiff’s use of the term. The court noted that the current class definition was amenable to multiple constructions and for that reason it was insufficiently precise for class definition purposes. Because the plaintiff consistently equated “resident” with “citizenship,” the court decided to resolve the ambiguity in the plaintiff’s proposed definition by interpreting the definition as limiting class membership to people who were Missouri citizens when the suit was filed.

The court remarked that even if a “resident” was something less than a “citizen,” there was no basis for concluding that Rosen was a resident of Missouri. He was a citizen of Kansas who owned property in Missouri and occasionally vacationed in Missouri. A resident means something more than a mere property owner, even if the property owner occasionally sleeps on the property for short periods of time.

The court stated that the defendants had not established that there existed any person who was a member of the class who resided in Missouri and was a citizen elsewhere. They posited there were students attending college in Missouri who had retained citizenship elsewhere by continuing to vote and pay taxes in their home state. The court agreed that common sense dictated that there was at least one such individual. The court, however, remarked that use of logic and common sense on a party’s behalf does not absolve that party of its burdens or constitute providing that party with “the benefit of the doubt.”

The court’s conclusions are supported by the law regarding citizenship that holds that a person is a citizen where they reside and intend to stay and that citizenship does not change until both conditions are met in a new state. While the court could not find a specific number of people who resided in Missouri but were citizens elsewhere, the defendants offered no proof indicating that any such non-citizen resident of Missouri was either employed by the City, State, or County, or otherwise “regularly conducted business” in the Jackson County Courthouse. Therefore, the court concluded that the defendants had not carried their burden of demonstrating that any class member was a citizen of a state other than Missouri.

Next, the court found that even if the defendants had carried their burden of establishing the initial requirements for jurisdiction, the case must be remanded under the Home State Exception, 28 U.S.C. § 1332(d)(4)(B), because the plaintiff had satisfied that two-thirds or more of the members of all proposed plaintiff classes in the aggregate, and the primary defendants, were citizens of Missouri. The defendants, however, argued that it could not be identified that two-thirds of class members were Missouri citizens because residence in Missouri was something less than citizenship.

The court stated that identifying each member of the class and establishing the citizenship for each was an impossible burden. Applying the maxim “residence is prima facie proof of citizenship,” the court found that common sense and logic entitled the Court to conclude that the vast majority of Missouri residents who met the remaining requirements to be in the class were also Missouri citizens. While the court could not find a specific percentage of the class were Missouri citizens, it could find that the vast majority of them were.

Finally, the court observed that even if the citizenship requirements for Home State Exception had not been established, the requirements for the interest of Justice Exception in 28 U.S.C. § 1332(d)(3) had been. The court stated that the claims did not involve matters of national or interstate importance; the suit was filed in Missouri, and Missouri law would govern the dispute; both the defendants were citizens of Missouri; the alleged harms occurred in Missouri; and the acts giving rise to the plaintiff’s claims occurred in Missouri. Regardless of the definition of “resident” that was employed, far more class members would be citizens of Missouri than any other state. Therefore, the court concluded that all of these factors justified remand.

If You Don't Remove Under CAFA, then You Don't Need to Establish $5 Million as the Amount in Controversy

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Tue, 13 Dec 2011 10:18:03 -0600

Murray County, Oklahoma v. Homesales, Inc., 6:11-cv-00084-FHS, 2011 WL 5237307 (E.D. Okla. Oct. 31, 2011).

In this case, a District Court in Oklahoma held that in cases of multiple plaintiffs, each plaintiff must individually satisfy the amount in controversy requirement for diversity jurisdiction under 28 U.S.C. § 1332(a).

Three plaintiffs filed this class action complaint in the state court of Oklahoma against sixteen financial institutions involved in the sale of property, seeking recovery of funds related to documentary stamps which are connected to the sale of property in the three counties.

A defendant, Homesales, Inc., filed a Notice of Removal alleging federal quiestion and diversity. The plaintiffs moved to remand, which the District Court granted.

The defendants alleged diversity jurisdiction was appropriate because the defendants were diverse from the plaintiffs and the requisite amount in controversy had been met. The plaintiffs argued that diversity jurisdiction under 28 U.S.C. § 1332(a) was not appropriate because under CAFA, 28 U.S.C. § 1332(d) defendants must establish that at least $5 million was in controversy.

The Court, however, stated that CAFA was not applicable in this case, and that the defendants did not remove the case under CAFA. Specifically, the defendants removed it under diversity jurisdiction under § 1332(a); thus, the 5 million dollar threshold did not need to be met by defendants.

Next, the Court stated that as there was diversity among the parties, the only question left for determination was whether the requisite amount in controversy had been met. The Tenth Circuit defined “amount in controversy” as “an estimate of the amount that will be put at issue in the course of the litigation.” When the face of the petition does not affirmatively establish that the amount in controversy exceeds $75,000, the removing party undertakes to perform an economic analysis of the alleged damages supported by the underlying facts by a preponderance of the evidence. The Court pointed that in order for jurisdiction to be proper in federal court, the removing party has the burden of showing that the requisite amount in controversy is met as to each plaintiff. Lovell v. State Farm Auto Insurance Co., 466 F.3d 893, 897 (10th Cir.2006) noted that in multiple plaintiff cases, each plaintiff must individually satisfy the amount in controversy requirement.

The Court noted that under § 1332(a), requisite amount in controversy is $75,000.00. The plaintiffs simply alleged in the complaint that it had been damaged by the defendants in excess of $10,000.00. According to the statutory fees, defendant could be liable to plaintiff for at least $1,000.00 for each violation where a documentary stamp tax was not paid. According to the records submitted with the Notice of Removal, the plaintiff alleged at least 60 incidents of possible failure to pay the tax, which amounted to $60,000.00 in damages.

Further, regarding statutory penalties, Oklahoma law provides for at least two. First, under 68 O.S.A. Sec. 217(F), a 50% penalty is imposed on any tax deficiency due to fraud. Because the plaintiff sought more than $10,000.00 in allegedly unpaid taxes, more than $5,000.00 in potential statutory penalties could also be at issue. Second, 68 O.S.A. Sec. 231.1 provides a penalty of up to 10% of the tax, and no more than $200.00 per defendant, on “each tax debtor who neglects, refuses or fails to pay delinquent taxes.” Thus, the statutory penalty was at least another $1,000.00 in penalties at issue. Further, in the Notice of Removal, although the defendants stated that punitive damages would likely exceed $10,000.00 given the amount of actual damages, they failed to provide any economic analysis to justify this amount.

The Court observed that the defendants were required to provide detailed estimates or economic analysis to assist in establishing the potential amount in controversy. The defendants, however, simply failed to do this. Further, the record was completely void of evidence concerning the amount in controversy as to the other plaintiffs.

Accordingly, the Court found that the defendants had not met their burden to establish that the requisite amount in controversy had been met as to any of the three plaintiffs by a preponderance of the evidence. Accordingly, the Court granted the plaintiffs’ motions to remand.

What do Colonoscopies and Michael Jackson Have in Common with CAFA?

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Mon, 12 Dec 2011 14:03:15 -0600

Dunn v. Endoscopy Center of Southern Nevada, No. 2:11–cv–00560–RLH–PAL, 2011 WL 5509004 (D. Nev. Nov. 7, 2011).

Having a colonscopy isn’t bad enough? How about getting Hepatitis C during your colonscopy? That sucks. Oh, and the answer to the question in the headline is Propofol (also now known as the Michael Jackson drug). Read on.

In this consolidated action, a District Court in Nevada held that “mass action” does not include any civil action involving “a single event or occurrence,” such as an environmental accident, that gives rise to the claims of all plaintiffs. Further, use of singular in the statutory language--“an event or occurrence” not “events or occurrences,” would not apply to a product liability case because the sale of a product to different people does not qualify as an event.

This consolidated action arises out of the alleged misuse of syringes and Propofol vials at the Endoscopy Center of Southern Nevada and at Desert Shadow Endoscopy Center.

In December 2007, after the Southern Nevada Health District received several independent reports of Hepatitis C infections from physicians and hospitals, it investigated the situation and eventually determined that the infected patients had been treated at the Endoscopy Centers. During the joint investigation, the Health District and the federal Center for Disease Control found Certified Registered Nurse Anesthetists reusing syringes on a single patient to draw anesthesia form a vial of Propofal and then reusing the vial of Propofol on a subsequent patient. The Health District, based on its investigation, sent out notices to patients who had undergone procedures at the Endoscopy Centers between March 2004 and January 2008, that they should be tested for Hepatitis B, Hepatitis C, and HIV.

These events have led to multiple lawsuits, and this case was brought as 88 separate suits in Nevada State Court on behalf of 3,630 different plaintiffs who did not contract a disease from the Endoscopy Centers. These plaintiffs alleged various causes of action based on exposure to blood borne diseases at the Endoscopy Centers and products liability related claims against the Propofol manufacturers and distributors.

Almost two years after filing their complaints in state court, the plaintiffs moved to consolidate all 88 cases for trial under the basis that the various suits were all based on the same facts. The state court accordingly consolidated cases for trial. Once the cases were consolidated, the defendants removed the case to the federal court asserting jurisdiction under CAFA, specifically claiming “mass action” jurisdiction under 28 U.S.C. § 1332(d)(11)(B)(i).

The plaintiffs moved to remand, which the District Court denied.

First, the plaintiffs argued that the Court lacked subject matter jurisdiction because this action was not a “mass action” as defined by § 1332(d)(11)(B)(ii)(I). The statute states, the term “mass action” shall not include any civil action in which all of the claims in the action arise from an event or occurrence in the State in which the action was filed, and that allegedly resulted in injuries in that State or in States contiguous to that State.

Accordingly, the plaintiffs argued that this action arose out of a single event or occurrence in Nevada, thus excluding it from the definition of a “mass action.”

The Court disagreed, and noted that the courts in Lafalier v. Cinnabar Serv. Co., Inc., No. 10–cv–0005, 2010 WL 1486900, at *4 (N.D. Okla. Apr. 13, 2010) and Galstaldi v. Sunvest Cmtys USA, LLC, 256 F.R.D. 673, 676 (S.D .Fla.2009) interpreting this provision “have consistently construed the ‘event or occurrence’ language to apply only in cases involving a single event or occurrence, such as an environmental accident, that gives rise to the claims of all plaintiffs.” (Editors’ Note: See the CAFA Law Blog analysis of Lafalier posted onAugust 4, 2010 and the CAFA Law Blog analysis of Galstaldi posted on May 27, 2009.)

Further, the Court noted that use of the singular in the statutory language--“an event or occurrence” not “events or occurrences” is important. In addition, the CAFA’s legislative history supports the Courts conclusion. Specifically, Congress expressly contemplated that the event or occurrence exception would not apply to a product liability case because the sale of a product to different people does not qualify as an event, S.Rep. No. 109–14, at 47, reprinted in 2005 U.S.C.C.A .N. 3, 44. Rather, this exception is supposed to apply to a “truly local single event” like “environmental torts such as a chemical spill.” Id.

The Court stated that although the plaintiffs tried to analogize this case to an environmental tort like a chemical spill, it simply wasn’t because this products liability case did not involve a single event or occurrence, but alleged conduct occurring over a period of multiple years. Such allegations simply could not be construed to be a single event or occurrence because the allegations were based both on the various injections and the entirely separate design of the Propofol vials. Thus, the Court concluded that the plaintiffs’ arguments failed.

Second, the Court found that the local controversy exception, § 1332(d)(4)(A)(ii), did not apply because another class action was filed within the preceding three years, specifically, Rader v. Teva Parenteral Medicine, Inc., 2:10–cv–00818–JCM–LRL.

Finally, the Court observed that the defendants met their burden to establish a sufficient amount in controversy -- at least one plaintiff’s claim exceeded $75,000, and aggregate class claims were over $5 million. Specifically, the Court stated that the plaintiffs in the Dunn complaint simply requested more than $75,000. Further, given that there were total 3,630 plaintiffs, each individual plaintiff need only request $1,378 to meet the $5 million requirement. Because each plaintiff asserted exemption from mandatory arbitration, which requires that the “probable jury award” exceed “$50,000 per plaintiff, the Court concluded that each plaintiff sought in excess of $50,000, which was far more than $5 million in aggregate.

Accordingly, the Court denied the plaintiffs’ motion to remand

One More Week for A Good Deal on Great CLE

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Mon, 12 Dec 2011 10:12:30 -0600

The clock is ticking. You have until the end of the week to receive reduced registration for some great CLE, which will include invaluable information on class actions.

Anthony Rollo and H. Hunter Twiford, the co-founders of the CAFA Law Blog, are featured speakers at American Conference Institute’s 13^th National Conference on Consumer Finance Class Actions & Litigation, January 26-27, 2012 at the New York Marriott Downtown Hotel. Click here for the pdf of the agenda.

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"Other Paper" Under 28 U.S.C. § 1446(b) Is Not Every Paper Defendant Receives

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Thu, 08 Dec 2011 05:30:00 -0600

Jones v. J.C. Penney Corp., Inc., No. CV 11–5631 PSG (SHx), 2011 WL 4529406 (C.D. Cal. Sept. 28, 2011).

While you are doing your holiday shopping at J.C. Penneys, check out the sales associates and see if they are sitting down. Let’s see if the plaintiff’s claims are accurate or not.

In this case, a District Court in California held that an order resolving a contested remand motion in which no new facts or pleadings are implicated cannot justify successive removal.

The plaintiff, Alyssa Jones, a former employee of J.C. Penney, filed a representative enforcement action in Los Angeles County Superior Court pursuant to California’s Private Attorneys General Act of 2004 (“PAGA”), Cal. Labor Code § 2698 et seq., alleging that the defendants, J.C. Penney Corporation, Inc. and J.C. Penney Company, Inc., violated (yes, you guessed it) California labor laws by refusing to allow the plaintiff and similarly situated aggrieved employees to sit, even when it would not have interfered with the performance of their duties.

On January 26, 2011, J.C. Penney removed the case to the federal court under CAFA, 28 U.S.C. § 1332(d).

The plaintiff subsequently moved to remand, arguing that the case was not a class action, but rather a representative action under PAGA.

The District Court agreed and, on June 9, 2011, issued an Order remanding the case to state court. In so holding, the Court relied on a declaration from the plaintiff’s counsel stating that he erred by including the language “First Amended Class Action Complaint” on the caption page of the pleading. It further reasoned that, beyond this erroneous statement, the pleading lacked any allegations supporting the defendants’ theory that the case was a class action under Fed. R. Civ. P. 23. Having thus concluded that the case was a representative action under PAGA rather than a class action, the Court accordingly held that removal under CAFA was improper and remanded the case.

Thirty days later, on July 8, 2011, J.C. Penney filed a second notice of removal, this time on grounds of diversity under 28 U.S.C. § 1332(a). According to J.C. Penney, the case was removable because “the existence of basic diversity of citizenship jurisdiction only became apparent through the Court’s prior remand order, which confirmed that the plaintiff was not asserting class claims, but was instead pursuing a non-class, representative PAGA claim.”

The plaintiff, in response, filed her second motion to remand arguing that the Court should once again remand this case because J.C. Penney’s second notice of removal was untimely, and therefore improper.

The Court agreed with the plaintiff, and remanded the case to state court.

The Court noted that under 28 U.S.C. § 1446(b), a defendant must file a notice of removal within 30 days after he objectively learns that the action is removable. A defendant may learn that an action is removable through either the four corners of the applicable pleading, or through receipt of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable. Thus, the law is clear that successive removals must be based on new information. Specifically, successive removals are allowed only where the second notice of removal is based on newly discovered facts not available at the time of the first removal.

J.C. Penney asserted that its second notice of removal was timely because it was filed within thirty days of receipt of a “pleading” or “other paper” from which it could ascertain that removal was proper, namely, the Court’s June 2011 Remand Order. Specifically, it claimed that by reading this Order, it “learned for the first time that the plaintiff’s claims are not subject to CAFA, but that she is instead pursuing individual claims in connection with a representative action under the Private Attorney General Act.”

The Court, however, was not persuaded that its June 2011 Order constituted “a subsequent pleading or event revealing a new and different grounds for removal” as would trigger removeability under § 1446(b).

In its June 2011 Order, the Court had held that the plaintiff’s pleading indicated that the case was a representative action under PAGA; and that PAGA actions are not encompassed by CAFA. Contrary to what J.C. Penney suggested, nothing in the Order transformed the operative pleading so as to effect a substantial change in the nature of the case. Nor had there been any subsequent pleading or paper bringing to light new facts which could provide a basis for a renewed removal petition, the Court remarked.

The Court observed that although the removal statute states that receipt of a “copy of an amended pleading, motion, order or other paper” can trigger removeability, J.C. Penney provided no authority supporting the notion that an order resolving a contested remand motion in which no new facts or pleadings are implicated can justify successive removal.

Thus, the Court found that J.C. Penney failed to demonstrate that the Court’s June 2011 Order effected a substantial change in the case. Consequently, the Court concluded that that the jurisdictional basis asserted in J.C. Penney’s second notice of removal could have been raised in its first removal notice. As J.C. Penney’s second notice of removal was filed over six months after J.C. Penney first received notice that the action was potentially removeable, the Court concluded that its removal on July 8, 2011 was untimely and therefore improper.

Accordingly, the Court remanded the action to state court.

Two Medium Pepperoni Pizzas for $5 May Not Get You $75,000, But It May Get you $5 Million for CAFA Jurisdiction

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Wed, 07 Dec 2011 05:30:00 -0600

Spillman v. RPM Pizza, Inc., Nos. 10-349-BAJ-SCR, 10-592-BAJ-SCR, 2010 WL 4790904 (M.D. La. Oct. 26, 2010).

A Magistrate Judge in Louisiana recommended denying the plaintiffs’ motion to remand holding that CAFA does not require that at least one member of the putative class have a claim with an amount in controversy of at least $75,000.

The plaintiff filed a class action suit in the District Court against the defendant, Domino’s Pizza, alleging claims under the Telephone Consumer Protection Act (“TCPA”). Three months prior to this suit, the plaintiff had filed essentially the same suit in state court styled as a ‘class action petition for damages, statutory penalties, and injunctive relief.’

The defendant promptly removed the state court class action to the District Court, asserting diversity jurisdiction under 28 U.S.C. § 1332 and CAFA--1332(d).

The District Court then consolidated the state court action with this suit. The plaintiff moved to remand the state court action, and the Magistrate Judge denied the motion.

The plaintiff did not contest that the general jurisdictional requirements of CAFA found in § 1332(d)(2) were satisfied at the time of removal, but argued that no individual putative class member’s claim met the $75,000 amount in controversy requirement for subject matter jurisdiction under § 1332(a).

The plaintiff acknowledged that in the Fifth Circuit there is no separate requirement in class action cases brought under the TCPA that at least one member of the proposed class have a claim with an amount in controversy of at least $75,000, the amount in controversy needed when CAFA does not apply, Gene & Gene, L.L.C. v. BioPay, LLC, 541 F.3d 318, 324 (5th Cir.2008), appeal after remand, 2010 WL 4137737 (Oct. 22, 2010). (Editors’ Note: See the CAFA Law Blog analysis of Biopay posted on January 15, 2009).

Relying on the Eleventh Circuit decision in Cappuccitti v. DirecTV, 611 F.3d 1252 (11th Cir.2010) (Cappuccitti I), however, the plaintiff argued that at least one member of the proposed class must meet the $75,000 jurisdictional requirement in § 1332(a). (Editors’ Note: See the CAFA Law Blog analysis of Cappuccitti I posted on July 22, 2010.).

The Court noted that the decision in Cappuccitti I was vacated by the panel which decided it, Cappuccitti v. DirecTV, 2010 WL 4027719, at *2 (11th Cir. Oct. 15,2010) (Cappuccitti II). (Editors’ Note: See the CAFA Law Blog analysis of Cappuccitti II posted on October 18, 2010.).

Cappuccitti II held that subject matter jurisdiction under CAFA in class action cases does not require that a putative class member meet the amount in controversy requirement in § 1332(a). Consequently, the Court found that Cappuccitti I no longer supported the plaintiff’s argument.

The Court, therefore, concluded (as has virtually everyone else in the universe) that there was no basis upon which to grant the plaintiff’s motion to remand.

Mass Actions Cannot Be Removed En-Masse

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Tue, 06 Dec 2011 05:30:00 -0600

Rodriguez v. Monsanto Co., No. 4:11CV01658 AGF, 2011 WL 5245251 (E.D. Mo. Nov. 2, 2011).

Relying on the Seventh and Ninth Circuit’s opinion, a District Court in Missouri held that the mass action provision of CAFA gives plaintiffs the choice to file multiple separate actions that do not each qualify for CAFA jurisdiction.

In August 2010, four individuals brought an action in Missouri state court, alleging that as a result of the defendants’ culpable conduct, they developed non-hodgkin’s lymphoma resulting from their exposure to polychlorinated biphenyls.

From May 2009, through September 2011, ten other similar suits were brought against the defendants by varying numbers of plaintiffs, all under 100 and all represented by the attorneys who represent the plaintiffs herein.

The defendants removed this action to the federal court pursuant to the “mass action” provision of CAFA, 28 U.S.C. § 1332(d)(11)(A) and (B)(i). The plaintiffs sought remand arguing that the case did not fall within the definition of a “mass action.”

The District Court agreed and remanded the action to state court.

The issue before the Court was whether the 11 individual state court actions, each with fewer than 100 plaintiffs, should be treated as one “mass action” eligible for removal to federal court under CAFA. Under § 1332, CAFA extends federal removal jurisdiction to “mass actions,” which are defined as “any civil action (except a class action) in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact.” CAFA further states that the term ‘mass action’ shall not include any civil action in which the claims are joined upon motion of a defendant or the claims have been consolidated or coordinated solely for pretrial proceedings.

Inferring the congressional intent from the plain meaning of the statute, the Court noted that CAFA narrowly defines mass actions. In this case, there are not 100 or more persons who have been proposed to be tried jointly.

The Court pointed that this precise issue has been addressed by the Seventh and Ninth Circuits, which both held that plaintiffs could avoid federal removal jurisdiction under CAFA by carving their filings into separate pleadings, Anderson v. Bayer Corp., 610 F.3d 390, 393-95 (7th Cir. 2010) and Tanoh v. Dow Chem. Co., 561 F.3d 945, 953, 955 (9th Cir. 2009). (Editors’ Note: See the CAFA law blog analysis of Anderson posted on September 8, 2010 and the CAFA Law Blog analysis of Tanoh posted on August 13, 2009.)

The defendants argued that the 11 separate law suits filed by the plaintiffs’ attorneys were a transparent attempt to circumvent CAFA, and cited Freeman v. Blue Ridge Paper Products, Inc., 551 F.3d 405 (6th Cir. 2008), and Westerfeld v. Independent Processing, LLC, 621 F.3d 819 (8th Cir. 2010) for support. (Editors’ Note: See the CAFA law blog analysis of Freeman posted on February 17, 2009 and the CAFA Law Blog analysis of Westerfeld posted onSeptember 13, 2010.

The Court, however, found that those cases address CAFA’s class action provisions and not its mass action provisions, and as the courts in Anderson and Tanoh recognized, Freeman involved a different matter, namely, an attempt by the same class of plaintiffs to split their lawsuits into “completely arbitrary” time periods, with each suit claiming under $5 million, in order to creatively avoid CAFA’s $5 million threshold.

Referencing Freeman and a similar district court case, the Ninth Circuit in Tanoh explained, “Central to the courts’ holdings, however, was the fact that both sets of plaintiffs split their claims in an effort to seek well over $5 million in total damages without triggering federal removal jurisdiction. As the Sixth Circuit in Freeman explained, plaintiffs are generally allowed to plead around federal jurisdiction at a cost: they must limit the damages they seek to less than CAFA’s $5 million threshold. Permitting plaintiffs to split their claims arbitrarily by time period threatened to subvert this rule, enabling plaintiffs to seek well over the $5 million–in Freeman, for example, almost $25 million among the five suits–without subjecting themselves to federal removal jurisdiction. The court rebuffed this end-run around CAFA, holding that “where recovery is expanded, rather than limited, by virtue of splintering of lawsuits for no colorable reason, the total of such identical splintered lawsuits may be aggregated.” The Court, however, remarked that those concerns were not present in this case.

Next, the Court observed that Westerfeld also involved a different issue than raised here. In Westerfeld, while discussing CAFA’s local-controversy exception, the Eighth Circuit found that “whether an in-state defendant is a significant defendant for purposes of the local-controversy exception must be determined by considering the claims of ‘all of the members in the class action’ and not by considering the claims of class members on a class-by-class basis.”

While the courts in Freeman and Westerfeld were concerned not to construe the statute in a manner that permitted the parties to subvert the requirements and the language of the statute, neither case involved the language and provision at issue here, the Court observed. Agreeing with Anderson and Tanoh that the mass action provision of CAFA gives plaintiffs the choice to file multiple separate actions that do not each qualify for CAFA jurisdiction, the Court concluded that the defendants’ argument that these separate lawsuits be treated as one action was tantamount to a request to consolidate them--a request that Congress has explicitly stated cannot become a basis for removal as a mass action.

Accordingly, the Court remanded the action to the Circuit Court for St. Louis County, Missouri

The Plaintiff Is the Lord and Master of His Complaint

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Mon, 05 Dec 2011 05:30:00 -0600

Hampton v. Monsanto Co., No. 4:11–CV–1662 (CEJ), 2011 WL 5307835 (E.D. Mo. Nov. 3, 2011).

In this action, a District Court in Missouri held that Congress appears to have contemplated that the plaintiffs as masters of their complaint may include or omit claims or parties in order to determine the forum.

The plaintiffs, three California residents, brought an action against the defendants, Monsanto Co., Solutia, Inc., Pharmacia Corp., and Pfizer, Inc., alleging that they developed Non–Hodgkins lymphoma after being exposed to polychlorinated biphenyls (PCBs), and asserted claims for strict liability and negligence under California law.

This action is one of eleven lawsuits brought by individuals who claim that they developed Non–Hodgkins lymphoma as a result of exposure to PCBs. The eleven cases were filed in Los Angeles County, California, St. Louis County, Missouri, and St. Louis City, Missouri. The plaintiffs in all eleven cases are represented by the same counsel and bring substantially similar claims of negligence and design defect against the same defendants.

The defendants removed to the Eastern District Court four of the six cases filed in St. Louis County and all three of the cases filed in St. Louis City, contending that the cases were removable as a “mass action” under CAFA because there was no colorable basis for the plaintiffs’ decision to file separate cases other than a desire to remain below the 100–plaintiff threshold.

The plaintiffs moved to remand this action to state court, which the District Court granted.

Like class actions, CAFA also provides federal jurisdiction over a “mass action,” which is defined as “any civil action ... in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact ...,” 28 U.S.C. § 1332(d)(11)(B)(i). Section 1332(d)(11)(B)(ii)(II) and (IV) explicitly excludes from the definition of “mass action” those civil actions in which “the claims are joined upon motion of a defendant” or “the claims have been consolidated or coordinated solely for pretrial proceedings.”

The defendants asserted that this three-plaintiff case satisfied the definition of mass action when combined with the other removed cases. Specifically, the defendants noted that, on September 9, 2011, the plaintiffs’ counsel filed two separate cases in the St. Louis City Circuit Court, one with 95 plaintiffs and one with 96 plaintiffs. They cited this history as evidence that the plaintiffs’ counsel purposefully chose to “splinter” a single case for the purpose of evading federal jurisdiction. The defendants asked the Court to disregard such manipulations and cited Freeman v. Blue Ridge Paper Prods., Inc., 551 F.3d 405 (6th Cir.2008), and Westerfeld v. Independent Processing, LLC, 621 F.3d 819 (8th Cir.2010) for support. (Editors’ Note: See the CAFA Law Blog analysis of Freeman posted on February 17, 2009 and the CAFA Law Blog analysis of Westerfeld posted on September 13, 2010.)

The Court noted that in Freeman, a single class of plaintiffs divided their cause of action into five distinct law suits, each covering a different, sequential, 6–month period, with damages in each suit just under CAFA’s $5 million threshold. Under this circumstance, the Sixth Circuit held that the damages sought in the separate cases “must be aggregated,” thereby satisfying CAFA’s jurisdictional requirement. The Sixth Circuit observed that “the complaints are identical in all respects except for the artificially broken up time periods. Plaintiffs put forth no colorable reason for breaking up the lawsuits in this fashion, other than to avoid federal jurisdiction. In fact, plaintiffs’ counsel admitted at oral argument that avoiding CAFA was the only reason for this structuring.”

The Court, however, declined to rely upon Freeman because it did not address the “mass action” provisions of CAFA that were at issue in this case.

Similarly, the Court refused to rely on Westerfeld. Under the context of ‘local controversy exception,’ the Eighth Circuit had held in Westerfeld, that “whether an in-state defendant is a significant defendant for purposes of the local-controversy exception must be determined by considering the claims of all of the class members in the class action and not by considering the claims of class members on a class-by-class basis.” Westerfeld, however, did not address the mass action provisions.

The Court observed that CAFA was explicit that the defendants could not satisfy the 100 plaintiffs’ requirement by seeking consolidation of the actions. The Court remarked that the defendants’ contention that the plaintiffs had deliberately divided their cases in order to avoid the mass action threshold was irrelevant.

To support its findings, the Court relied on the observations in Anderson v. Bayer Corp., 610 F.3d 390, 393 (7th Cir. 2010), which held that “by excluding cases in which the claims were consolidated on a defendant’s motion, Congress appears to have contemplated that some cases which could have been brought as a mass action would, because of the way in which the plaintiffs chose to structure their claims, remain outside of CAFA’s grant of jurisdiction. This is not necessarily anomalous; after all, the general rule in a diversity case is that ‘plaintiffs as masters of the complaint’ may include (or omit) claims or parties in order to determine the forum.” (Editors’ Note: See CAFA Law Blog analysis of Anderson posted on September 8, 2010.)

Concluding that this case did not satisfy the requirements of a “mass action,” the Court remanded the action to state court.

Plaintiffs' Class Action Sinks on the Shores Of Federal Court

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Fri, 02 Dec 2011 05:30:00 -0600

Borchardt v. Mako Marine Int'l, Inc., No. 08–61199–CIV, 2011 WL 4636799 (S.D. Fla. Oct. 6, 2011).

With the verdant shores of federal court in sight, the plaintiffs’ class action sinks before making land. In this action, a District Court in Florida observed that while CAFA requires at least 100 “class members” to maintain a state law class action in federal court, the Magnuson–Moss Warranty Act requires 100 “named plaintiffs” to maintain a class action directly under Magnuson–Moss.

Three plaintiffs brought an action in the federal court seeking relief under the Florida Deceptive and Unfair Trade Practices Act, state contract law, and the Magnuson–Moss Warranty Act, 15 U.S.C. § 2301 (“Magnuson–Moss”).

The Complaint alleged a putative nationwide class and an alternative Florida statewide sub-class, but did not indicate the estimated number of persons in either class other than to aver generally as to both that the “claims are so numerous that joinder of all individual members is impractical”.

Initially, the plaintiffs sought to certify a nationwide class consisting of all current owners of Mako 272 boats; however, later the plaintiffs narrowed this request, seeking certification of a statewide class consisting of all current owners of Mako 272 boats who purchased their boats in the State of Florida.

As a result, the number of potential statewide class members identified by plaintiffs was approximately eighty-three.

The plaintiffs thus did not seek to certify a class under Magnuson–Moss because it imposes a one hundred named plaintiff requirement for maintaining class actions. Instead, the plaintiffs alleged jurisdiction under CAFA, 28 U.S.C. § 1332(d), contending simply that the aggregate amount of the matter in controversy exceeded $5 million. Because CAFA imposes a minimum one-hundred class member threshold, and in light of the plaintiffs’ voluntary refinement of the putative class to a Florida class consisting of an estimated 83 Florida consumers, the District Court issued an order to show cause why the plaintiffs’ class action complaint should not be dismissed for lack of subject matter jurisdiction in light of this numerical deficiency in the newly refined putative class.

After both parties filed their responses, the Court dismissed the putative statewide class action for lack of subject matter jurisdiction.

In their response, the plaintiffs did not address the jurisdictional bar created by the CAFA’s minimum 100–class member threshold as it applied to the newly defined putative class in this case. Instead, the plaintiffs sought to assert subject matter jurisdiction for their state law-based class action by appending it to their individual Magnuson–Moss claims under the supplemental jurisdiction, 28 U.S.C. § 1367 and sought permission to amend the jurisdictional allegations in their complaint accordingly.

The Court noted that it had federal question subject matter jurisdiction over the named plaintiffs’ individual claims under Magnuson–Moss. However, the plaintiffs clearly could not maintain a class action directly under Magnuson–Moss because they could not satisfy the requirements of 15 U.S.C. § 2310(d)(3)(C) that the number of named plaintiffs equal or exceed one hundred. And the one-hundred plaintiff requirement for maintenance of a class action under Magnuson–Moss is in addition to the requirements of Fed. R. Civ. P. 23. The Court remarked that this specific statutory limitation cannot be avoided by attempting to append state law class action claims as supplemental claims to an individual Magnuson–Moss claim simply because the requirements for original diversity jurisdiction under 28 U.S.C. § 1332 are also satisfied.

The Court noted that the named plaintiffs invoked Magnuson–Moss to pursue individual state warranty claims in federal court. Magnuson–Moss gives plaintiffs the right to pursue these claims in the federal court, where they have satisfied the statute’s express jurisdictional prerequisites set out in 15 U.S.C. § 2310(d) for doing so. They may also present their state law statutory and common law claims under the supplemental jurisdiction statute, 28 U.S.C. § 1367.

The Court, however, stated that invocation of supplemental jurisdiction is only proper when not “expressly provided otherwise by Federal Statute.” Here, a federal statute, specifically Magnuson Moss, does “expressly provide otherwise.” Specifically, it expressly provides that class actions with named plaintiffs numbering less than one hundred are not cognizable in the district courts. The Court observed that because the number of named plaintiffs was three, and the plaintiffs did not assert that there were at least one hundred Florida consumers that they could conceivably join as named plaintiffs in this action, the purported class action was not cognizable in the federal court under Magnuson–Moss and consequently was not cognizable under 28 U.S.C. § 1367.

Finally, the Court stated that even if the supplemental jurisdiction statute was potentially applicable here, it would decline to exercise its discretionary jurisdiction under 28 U.S.C. § 1367(c)(4) on the ground that the one hundred-plaintiff jurisdictional bar to maintaining class actions under Magnuson–Moss constituted “exceptional circumstances” and the expression of Congressional intent which provides a sufficiently “compelling reason” to decline jurisdiction over the state law claims of the putative class.

The plaintiffs, however, cited Allapattah Services, Inc. v. Exxon Corp., 333 F.3d 1248 (11th Cir. 2003), aff'd 545 U.S. 546 (2005)—a pre-CAFA case—for the proposition that the supplemental jurisdiction statute permits exercise of jurisdiction over state law claims of putative class members who do not meet the minimum amount in controversy, as long as the district court has original diversity jurisdiction over the claims of at least one of the named class representatives. The plaintiffs also relied on Shah v. Hyatt Corporation, 425 Fed. Appx. 121 (3d Cir. 2011) as an example of a post-CAFA case recognizing discretionary supplemental jurisdiction under § 1367 as an alternative class action jurisdictional hook where jurisdiction is otherwise lacking under the CAFA.

The defendants argued that the passage of CAFA in 2005 controlled over the holding in Allapattah, essentially suggesting that the holding in Allapattah had been abrogated by statute.

The court did not reach the merits of the defense’s contention because it concluded that Magnuson–Moss plaintiffs suing in federal court cannot, under the express terms of the supplemental jurisdiction statute, rely solely on 28 U.S.C. § 1367 to support a putative class action asserting exclusively state claims.

Accordingly, the Court dismissed the plaintiffs’ putative statewide class action for lack of subject matter jurisdiction, and permitted the named plaintiffs to proceed with their individual claims under the Magnuson–Moss Act, along with their state law claims.

Big CLE in the Big Apple

cafalawblog@mcglinchey.com (McGlinchey Stafford PLLC) — Thu, 01 Dec 2011 16:22:47 -0600

Ready to get a jump on your CLE requirements for 2012? Looking for an outstanding discussion of CAFA, class actions, and consumer finance issue? Want to learn from the giants of the CAFA Law Blog? Then we have just the ticket for you.