CAFA Mass Action Defense Case-Lowery v. Honeywell: Alabama Federal Court Rejects Defense Arguments And Remands Mass Action To State Court Due To Defense Failure To Establish $75,000 Amount In Controversy

Class Action Fairness Act of 2005 (CAFA) did not Shift Burden of Proof of Amount in Controversy Requirements to Plaintiffs in Mass Actions or Class Actions Alabama Court Holds

In 2003, nine property owners filed suit in Alabama state court against eleven defendants asserting various common law based on defendants’ discharge of pollutants and demanding as damages in excess of $1 million each. Lowery v. Honeywell Int’l, Inc., 460 F.Supp.2d 1288, 1290-91 (N.D. Ala. 2006). In an amended complaint filed in October 2005, 533 named plaintiffs sought damages against 12 named defendants seeking damages “in an amount of compensatory and punitive damages to be determined by a jury,” id., at 1291. The complaint was amended against in March 2006 and June 2006; none of the complaints sought class action status, none of the theories of liability changed, and the indefinite prayer remained the same in the first through third amended complaints. Id. The Third Amended Complaint added as a party-defendant Alabama Power and Filler Products Company, and in July 2006 Alabama Power removed the action to federal court based in part on the Class Action Fairness Act of 2005 (CAFA) on the theory that “the action constitutes a ‘mass action’, which, under 28 U.S.C. § 1332(d)(11)(B)(i), is removable.” Id. Plaintiffs moved to remand the case to state court on the grounds that CAFA did not apply and that defendants had not demonstrated the requisite amount in controversy. In an opinion that contains some surprising legal conclusions but in the author’s view reached the correct result, the federal court remanded the action to state court.

The district court noted that the complaint was filed long before CAFA’s February 18, 2005 effective date, but the amendment that precipitated removal post-dated CAFA. Lowery, at 1292. The court explained at page1292, “This procedural fact creates two potentially dispositive removability questions: (1) did the filing of the third amended complaint ‘commence’ a new suit for purposes of CAFA; and (2) if so, did the new suit, by retroactive effect, ‘commence’ as to all defendants, or only as to [those defendants added by the third amended complaint].” CAFA looks to state law for determining when an action is “commenced,” which under Alabama law was the date the original complaint was filed. Id. However, federal law holds that “as to the new defendant, removability is determined as of the date of receipt of service of the amended complaint, not as of the date on which the original suit was filed in state court.” Id. (citations and italics omitted). The question, then, is whether Alabama Power properly removed the action. Id., at 1292-93.

Class Action Court Decisions Class Action Fairness Act (CAFA) Removal & Remand Uncategorized

Class Action Defense Cases-Morgan v. Gay: Third Circuit Holds As Matter Of First Impression That Under CAFA (Class Action Fairness Act Of 2005) Defense Still Bears Burden Of Establishing Amount-In-Controversy

Federal Class Action Fairness Act of 2005 (CAFA) did not Shift Burden of Proving $5 Million Amount in Controversy to Plaintiff and Plaintiff’s “Damages-Limitation Provision” could be used to Avoid Federal Court Provided Plaintiff did not Thereafter Seek to Recover More than $5 Million Third Circuit Holds

Plaintiff filed a putative class action in New Jersey state court based on false advertising claims in the sale of the skin cream StriVectim-SD and asserting various state law claims. Morgan v. Gay, 471 F.3d 469, 471 (3d Cir. 2006). Defense attorneys removed the class action to federal court under the federal Class Action Fairness Act of 2005 (CAFA), and plaintiff moved to remand the class action to state court. Id. The district court granted the motion, concluding that defense attorneys had failed to establish CAFA’s $5,000,000 amount-in-controversy requirement, and the Third Circuit granted the defense leave to appeal. Id., at 471-72. As a matter of first impression in the Third Circuit, the Court of Appeals held that CAFA did not shift to plaintiff the burden of proving the amount in controversy for removal purposes, and affirmed the district court order remanding the class action to state court.

With respect to the amount in controversy, plaintiff’s class action complaint expressly stated that the damages sought in the action, including treble damages and punitive damages, “‘shall not [in total] exceed $5 million in sum or value.'” Morgan, at 471. The district court granted the motion to remand because the defense had not established that the amount in controversy met the $5 million threshold. Id. On appeal, the Third Circuit first addressed whether CAFA shifted the burden of establishing federal court jurisdiction from the defense to the plaintiff. Id., at 472. The Circuit Court agreed with defense attorneys that the legislative history evidenced a willingness to “switch the burden of proof from the party seeking removal to the party seeking remand,” id., but ultimately concluded – as a matter of first impression in the Third Circuit – that CAFA did not alter the time-honored burden of proof and held that “the party seeking to remove the case to federal court bears the burden to establish that the amount in controversy requirement is satisfied,” id., at 473.

Class Action Court Decisions Class Action Fairness Act (CAFA) Removal & Remand Uncategorized

In re Edward Jones Class Action Defense Case: California Federal Court Denies Motion To Remand Securities Class Action And Grants Defense Motion To Dismiss Finding Class Action Complaint Preempted By SLUSA

California Court Holds that Plaintiffs’ Procedural Objections to Removal are Waived as Untimely and that Federal Securities Litigation Uniform Standards Act (SLUSA) Preempted Class Action Claims Requiring Dismissal of Complaint

In 2004, plaintiffs filed a putative class action against Edward D. Jones & Co., one of the largest brokerages in the United States, for violations of California’s unfair competition laws (UCL) and breach of fiduciary duties alleging that it “entered into agreements with certain mutual fund companies whereby Defendant placed the companies on an internal ‘Preferred Funds’ list and received retention ‘kickbacks’ based on the amount of money held by Plaintiff and the Class members in those funds.” In re Edward Jones Holders Litig., 453 F.Supp.2d 1210, 1211 (C.D. Cal. 2006). Defense attorneys removed the action to federal court on the ground that the state law claims were preempted by the federal Securities Litigation Uniform Standards Act (SLUSA), but the district court granted plaintiffs’ motion to remand finding that SLUSA did not apply “because the alleged wrongdoing . . . was not ‘in connection with the purchase or sale of covered securities.'” Id., at 1212. Two years later, after the Supreme Court issued its opinion in Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, 548 U.S. —-, 126 S.Ct. 1503 (2006), defense attorneys removed the class action to federal court anew on the ground that Dabit “compels a finding that Plaintiffs’ claims are in fact preempted by SLUSA.” Id. Plaintiffs again moved to remand the complaint to state court, but the district court denied the motion.

First, the district court held that plaintiffs’ procedural objections to removal were waived because the motion to remand the class action to state court was untimely under 28 U.S.C. § 1447(c). In re Edward Jones, at 1212-13. Plaintiffs had argued that the removal was defective in two ways: (1) as untimely under 28 U.S.C. § 1446(b), and (2) as an improper “successive” notice predicated on the identical legal ground previously raised and rejected by the district court. Id., at 1212. An untimely notice of removal is a procedural defect, not a jurisdictional defect, id., at 1213 n.3 (citation omitted), and Rule 6(e) does not extend the time for filing a motion to remand so the motion – filed 32 days after removal – was untimely, id., at 1213.

Class Action Court Decisions PSLRA/SLUSA Class Actions Removal & Remand Uncategorized

Davis v. Chase Bank Class Action Defense Case: California Court Holds Defense Properly Removed Class Action To Federal Court Under Class Action Fairness Act Of 2005 (CAFA) Because Securities Exception Did Not Apply

Class Action Alleging Improper Credit Card Charges does not Implicate “Securities Exception” to Federal Court Jurisdiction under CAFA (Class Action Fairness Act) so Defense Removal of Class Action was Proper California Court Holds

Plaintiff filed a putative class action against Chase Bank alleging improper finance charges in connection with retail purchases made with a “rewards” credit card arising out of a no-interest promotional offer Chase extended to cardholders. Davis v. Chase Bank U.S.A., N.A, 453 F.Supp.2d 1205, 1207 (C.D. Cal. 2006). Defense attorneys removed the action to federal court under the Class Action Fairness Act (CAFA), and the district court sua sponte issued an order to show cause why the case should not be remanded to state court. Id., at 1206. Following briefing, the district court concluded that the defense properly removed the class action.

Plaintiff made a $2000 purchase at Circuit City using his Chase “Rewards Card,” taking advantage of a no-interest promotional offer whereby no finance charges would be assessed if the balance was paid in full prior to January 2008. Davis, at 1207. At the time of the purchase, plaintiff had an outstanding balance on his credit card account, and the billing statement he received following his Circuit City purchase included a finance charge which, he alleges, included interest on the $2,000 “no-interest” amount as well as his otherwise outstanding balance. Id. Plaintiff filed a class action lawsuit in California state court, and the defense removed the action asserting that it involved more than $5,000,000 and thus fell within the scope of CAFA. Id. In response to the federal court’s OSC on the issue of whether the class action indeed involved more than $5 million, plaintiff’s lawyer argued that even if it did the class action complaint fell within the securities exception to CAFA and therefore remand was appropriate. Id. The district court disagreed.

Class Action Court Decisions Class Action Fairness Act (CAFA) Removal & Remand Uncategorized

Saab v. Home Depot-Class Action Defense Cases: Class Action Fairness Act (CAFA) Does Not Permit Appellate Review Of Federal Court Order Denying Motion To Remand Action Removed On Grounds Of Diversity Jurisdiction Eighth Circuit Holds

Eighth Circuit Holds that CAFA (Class Action Fairness Act) Authorizes Appellate Review of Remand Orders Only Where Removal was Based on CAFA so Circuit Court could not Review Denial of Motion to Remand Class Action Removed on Grounds of Diversity Jurisdiction

Plaintiff filed a putative class action against Home Depot in Missouri state court, and defense attorneys removed the action to federal court on the grounds of diversity jurisdiction under 28 U.S.C. § 1332(a). Plaintiff filed a motion to remand the class action to state court, but the motion was denied. Plaintiff then asked the Eighth Circuit to accept an appeal of the district court’s order, arguing that CAFA (Class Action Fairness Act) authorizes appellate review of remand orders in all class action cases. Saab v. Home Depot U.S.A., Inc., 469 F.3d 758, 759 (8th Cir. 2006). Defense attorneys had not sought to remove the class action under CAFA, and “made no assertion of jurisdiction under CAFA,” id., at 759 n.2. Nonetheless, plaintiff argued that CAFA should be read “expansively” so as “to give federal courts of appeal the jurisdiction to review the grant or denial of a motion to remand any class action.” Id. The Eighth Circuit disagreed.

Class Action Court Decisions Class Action Fairness Act (CAFA) Removal & Remand Uncategorized

Class Action Defense Cases-Lao v. Wickes: California Federal Court Holds As Matter Of First Impression That Defense Must Establish Removal Under CAFA (Class Action Fairness Act) And Must Disprove CAFA Exceptions To Jurisdiction

As Matter of First Impression in Ninth Circuit, California District Court Holds that Defense must not only Establish Prima Facie Case for Removal Under Federal Class Action Fairness Act (CAFA) but must Establish Further that CAFA’s Local Controversy and Home-State Rule Exceptions to Removal Jurisdiction do not Apply

Plaintiffs filed a putative class action against their former employer, Wickes Furniture Company, for violations of California’s state labor code, and defense attorneys removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA). Lao v. Wickes Furniture Co., Inc., 455 F.Supp.2d 1045, 1048 (C.D. Cal. 2006). Plaintiffs filed a motion to remand the class action to state court on the ground that it fell within CAFA’s “local controversy” exception or home-state rule provision to federal court jurisdiction. Id. The federal court agreed with the defense that once it established a prima facie case for removal under CAFA, the burden shifted to plaintiffs to demonstrate the applicability of the local controversy or home-state rule. Id., at 1050 et seq. The district court concluded that plaintiffs had met their burden, and remanded the class action to state court.

Plaintiffs worked as commissioned salespersons for Wickes, and filed a state law employment class action on the grounds that they allegedly “regularly performed non-sales (and, hence uncompensated) work, such as attending meetings . . ., cleaning the stores, and researching the prices charged by Wickes’ competitors” Lao, at 1048. The class action complaint alleged further that Wickes improperly stripped salespersons of earned commissions, id. Defendants removed the action to federal court on the basis of CAFA jurisdiction, and plaintiffs’ lawyers filed a motion to remand the action to state court. Id., at 1048-49. Preliminarily, the federal court concluded that defendant had adequately established the requisite $5 million amount in controversy. Id., at 1049-50. Defendants argued that the amount in controversy was $6,000,000, id., and while the district court was “not unsympathetic” to plaintiffs’ claim that this sum was inflated, it found that “some of the blame lies with how plaintiffs drafted their complaint,” id., at 1050.

Certification of Class Actions Class Action Court Decisions Removal & Remand Uncategorized

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

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

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

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

Class Action Court Decisions Class Action Fairness Act (CAFA) Removal & Remand Uncategorized

Class Action Defense Cases-DiTolla v. Doral Dental: Second Circuit Holds Class Action Fairness Act (CAFA) 60-Day Deadline For Issuing Opinion Runs From Grant Of Permission To Appeal And That Removing Party Bears Burden Of Proving Jurisdiction

Court Holds as Matter of First Impression in Second Circuit that CAFA does not Modify Burden of Proof to Establish Removal Jurisdiction, and Affirms Remand of Class Action to State Court because Defense Failed to Establish Requisite Amount in Controversy

Plaintiff filed a putative class action against the third party administrator of a pool funded by Medicaid and Medicare, seeking ‘”an accounting of all amounts by which the Pool has been funded and reduced”; defense attorneys estimated this amount to be $40 million (though the complaint was silent as to the amount), and argued that plaintiff had placed that entire amount at issue. The defense removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA), but the district court remanded the action to state court. DiTolla v. Doral Dental IPA of New York, LLC, 469 F.3d 271, 272-73 (2d Cir. 2006). On appeal, defense attorneys argued that the $5 million “amount in controversy” test was satisfied. Id., at 273. The Second Circuit disagreed.

Preliminarily, the Second Circuit considered the statutory requirement that, absent an extension of time under 28 U.S.C. § 1453(c)(3), the appellate court issue an opinion within 60 days of the granting of an appeal from an order granting or denying remand. DiTolla, at 274. Under 28 U.S.C. § 1453(c)(4), the appeal is deemed denied if a final judgment is not issued within that 60-day window. In DiTolla, defense attorneys sought permission to appeal in May 2006, and permission was granted in July 2006. The defense team filed their brief on August 17, 2006, and a month later, on September 21, 2006, the parties stipulated to extend time for issuance of a opinion. Id. Plaintiff argued that the appeal was “filed” in May, and that the Circuit Court therefore lacked authority to grant permission to appeal because that order came 66 days after the “filing” of the appeal. Id. The Second Circuit disagreed, holding at page 274: “We reject this interpretation . . . and hold that the ‘filing’ of the appeal for CAFA purposes occurs on the date in which this Court issues an order granting permission to appeal.” The Court observed at page 275 that its interpretation is consistent with case law out of the Fifth, Seventh, Ninth and Eleventh Circuits.

Class Action Court Decisions Class Action Fairness Act (CAFA) Removal & Remand Uncategorized

Main Drug v. Aetna-Class Action Defense Cases: Alabama Federal Court Holds That Burden Of Proving Federal Court Jurisdiction Under Class Action Fairness Act (CAFA) Remains With Defense And That Burden Was Met

CAFA (Class Action Fairness Act) did not Shift Burden of Proving Federal Jurisdiction to Plaintiff but Defense Established Requisite Amount In Controversy so Alabama Federal Court Denies Motion to Remand Class Action to State Court Plaintiff, a pharmacy, filed a putative class action against insurance/pharmacy benefit management companies for misrepresentation, breach of contract, unjust enrichment and conspiracy, alleging that defendants failed to reimburse pharmacies “according to an agreed-upon formula for brand name prescriptions dispensed to Defendants’ insureds.

Class Action Court Decisions Class Action Fairness Act (CAFA) Removal & Remand Uncategorized

Blockbuster v. Galeno-Class Action Defense Cases: Defense Bears Burden Of Establishing Federal Court Jurisdiction Under Class Action Fairness Act (CAFA) Second Circuit Holds

Second Circuit Holds that CAFA (Class Action Fairness Act) did not Shift Burden of Proving Federal Jurisdiction to Plaintiff and Remands Class Action Case to District Court for Further Proceedings

Plaintiffs filed a putative class action against Blockbuster in New York state court challenging the company’s “No Late Fee” program as a deceptive business practice on the grounds that Blockbuster did not adequately inform customers that in order to avoid the late fees the transaction was converted from a video rental to a video sale. Blockbuster, Inc. v. Galeno, 472 F.3d 53, 2006 WL 3775326, *1 (2d Cir. 2006). Defense attorneys removed the action to federal court asserting both general diversity jurisdiction under 28 U.S.C. § 1332(a) and federal court jurisdiction under the Class Action Fairness Act of 2005 (CAFA), 28 U.S.C. § 1332(d). Id., at *2. Plaintiffs moved to remand the class action to state court, arguing that the defense had not established the requisite $5 million amount-in-controversy, id.; defense attorneys countered that “CAFA had reversed the traditional rule that the party seeking removal to federal court bears the burden of establishing federal jurisdiction,” id. The district court agreed with the defense, but its order denying the motion to remand the class action stated not only that “the defendant has met its burden” but also that “the plaintiff has not met [its] burden,” id. The Second Circuit held that the district court should not have assigned any burden to the plaintiff, and remanded the action for further proceedings in light of the ambiguity in the lower court’s order.

After summarizing CAFA and the appropriate standard of review of an order denying a motion to remand, Galeno, at *3, the Circuit Court addressed whether CAFA “shifted the burden of proof to the remand-requesting plaintiff to show that federal jurisdiction does not exist,” id., at *4. The Second Circuit’s analysis led it to the same conclusions reached by “[e]very other circuit court that has considered this issue,” id., at *5 – viz., that CAFA had not affected the defense burden of establishing federal court removal jurisdiction, id.

Class Action Court Decisions Class Action Fairness Act (CAFA) Removal & Remand Uncategorized