1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

DISTRICT OF COLUMBIA ,

Plaintiff , v. JTH TAX LLC, f/k/a JTH TAX, INC d/b/a LIBERTY TAX SERVICE ,

Defendant

. Civil Action No. 22

- 3165 (CKK )

MEMORANDUM OPINI ON ( January 9 , 202 3 ) Plaintiff District of Columbia brought an action in the Superior Court of the District of Columbia (“D.C. Superior Court”) against JTH Tax LLC, doing business as Liberty Tax Service (“Liberty Tax”) , alleging that Liberty Tax’s conduct misleads Di strict
tax

- filers in violation of the District of Columbia Consumer Protection Procedures Act (“CPPA”) , D.C. Code §§ 28

- 3901, et seq

. See Compl., ECF No. 1

- 1 at 1. Liberty Tax removed this action from D.C. Superior Court to federal court based on diversity jurisdiction. See Notice of Removal at 1. Now pending before the Court is Plaintiff’s [10] Motion to Remand to state court

. Plaintiff also seeks attorney’s fees and costs incurred in litigating this Motion . Pl.’s Mot.
at 6. Upon con sideration of the pleadings, 1 the relevant legal authorities, and the record

1 The Court’s consideration has focused on the following documents:
• Def.’s Notice of Removal, ECF No. 1 (“Notice of Removal”);

• Pl.’s Mot. to Remand, ECF No. 10 (“Pl.’s Mot.”);

• Def.’s Opp’n to Pl.’s Mot. to Remand, ECF No. 16 (“Def.’s Opp’n”); and

• Pl.’s Reply in Support of Mot. to Remand, ECF No. 17 (“Pl.’s Reply”). In an exercis e of its discretion, the Court finds that holding oral argument in this action would not be of assistance in rendering a decision. See LCvR 7(f).2

as it currently stands, the Court GRANTS Plaintiff’s Motion to Remand and DENIES Plaintiff fees and costs involved in litigating this M otion

. I. BACKGROUND
Plaintif f filed their Complaint in D.C. Superior Court on September 21, 2022

. See
C ompl., ECF No. 1

- 1

. Plaintiff asserts a claim arising under the District of Columbia Consumer Protection Procedures Act, D.C. Code §§ 28

- 3901, et seq
. Id. at 1. More specifically, Plai ntiff alleges that Defendant Liberty Tax, which offers tax preparation t o consumers through franchisees, employs a “Cash in a Flash” scheme that promises consumers who file returns with Liberty Tax in early filing season fifty dollars in cash. Id. ¶¶ 6, 1 3

– 15. Liberty Tax allegedly instructs its franchisees to raise the prices that it charges to “Cash in a Flash” recipients, id. ¶ 26, such that those consumers end up paying more than similarly situated consumers who did not participate in “Cash in a Flash ,” id. ¶¶ 34

– 42. Plaintiff contends that this deceptive practice affected a large number of D.C. residents, as Liberty Tax provided over 12,000 “Cash in a Flash” payments to D.C. consumers from
2015 to 2021. Id. ¶ 42. Plaintiff seeks injunctive relief, restitution and damages paid to
the affected consumers , civil penalties paid to the District , and costs and attorney’s fees.
Id. at 12

– 13 (citing D.C. Code § 28

- 3909(a) and (b)).
Defendant filed a [1] Notice of Removal in this Court on October 17, 2022 , indicating that there is diversity jurisdiction “[b]ecause the matter alleges a controversy in excess of $75,000.00, and the real parties in interest are citizens of different states.” Notice
of Re moval at 1. Defendant explain s that here, Plaintiff District of Columbia “is merely a nominal party asserting claims on behalf of customers of Liberty franchise locations within the District,” and therefore those customers “are the real parties in interes t whose3

citizenship must be considered.” Id. ¶ 38. Defendant argues that because those customers are citizens of the District, and Liberty is not a citizen of the District, there is complete diversity citizenship. Id. ¶¶ 41

– 44. Defendant then filed a [3] Motion to Dismiss Plaintiff’s Complaint on October 24, 2022. On October 26, 2022, Plaintif f filed a [10] Motion to Remand, arguing that there is no diversity citizenship and therefore remand is rquired because Liberty Tax failed to meet its burden of showing subject matter jurisdiction

. See Pl.’s Mot. at 3. Plaintiff also seek s attorney’s fees and costs. Id. at 3

– 4. This Motion is now ripe for the Court’s consideration.

II. LEGAL STANDARD “Only state

- court actions that originally could have been filed in federal court may be removed to federal court by the defendant.” Caterpillar Inc. v. Williams , 482 U.S. 386, 392 (1987). Upo n filing a notice of removal, the defendant “bears the burden of proving that jurisdiction exists in federal court.” Downey v. Ambassador Dev., LLC , 568 F. Supp. 2d 28, 30 (D.D.C. 2008) (JDB)

. Similarly, “[w]hen a plaintiff seeks to have a case that has been removed to federal court remanded back to state court, the party opposing a motion to remand bears the burden of establishing that subject matter jurisdiction exists in federal court.” Mizell v. SunTrust Bank , 26 F. Supp. 3d 80, 84 (D.D.C. 2014) (KB J) (quotation omitted). Courts in this jurisdiction “construe[ ] removal jurisdiction strictly, favoring remand where the propriety of removal is unclear.” Ballard

v. D.C. , 813 F. Supp. 2d 34, 38 (D.D.C. 2011). III. DISCUSSION Plaintiff first argues tha t Defendant Liberty Tax has failed to meet its burden of establishing subject matter jurisdiction. Pl.’s Mot. at 6. Plaintiff then argue s that the4

Court should award attorney’s fees and costs incurred as a result of the improper removal of this case. Id

. at 9. The Court addresses these arguments in turn.
A. Remand to D.C. Superior Court for Lack of Subject Matter Jurisdiction Federal district courts have original jurisdiction of civil actions where the matter in controversy exceeds $75,000 and the parties are “citizens of different States

. ” 28 U.S.C. § 1332 (a). As for the first requirement

–– amount in controversy exceeding $75 ,000

–– the parties do not dispute that it is satisfied. See Def.’s Opp’n at 3. Plaintiff does not challenge the amount in controversy in its Motion to Remand nor in its R eply. See generally Pl.’s Mot.; Pl.’s Reply. However, the parties do dispute whethe r they are citizens of different states. “[A] State is not a ‘citizen’ for purposes of the diversity jurisdiction ,” Moor v. Alameda Cty. , 411 U.S. 693, 717 (1973) , and t he same is true for the District of Columbia , s ee 28 U.S.C. § 1332(e) (“ The word ‘ State s ’ , as used in this section, includes

... the District of Columbia ....); see also Long v. D.C. , 820 F.2d 409, 414 (D.C. Cir. 1987)

. Therefore, the District is not typically subject to diversity jurisdiction. Long , 820 F.2d at 414

. Defendant Liberty Tax acknow ledge s that ordinarily diversity jurisdiction cannot exist when the District is a party. See Notice of Removal at 6 ; Def.’s Opp’n at 4. However, Defendant then contends that “the District is merely a nominal party asserting claims on behalf of customers of Liberty franchise locations within the District, and those customers of Liberty franchises in the District are the real parties in interest whose citizenship must be considered.” Notice of Removal at 7

. Defendant is correct that if the Distr ict were merely a nominal party rather than a real party in interest , diversity5

jurisdiction could be satisfied

. See Navarro Sav. Ass’n v. Lee , 446 U.S. 458, 461 (1980) ; D.C. ex rel. Am. Combustion, Inc. v. Transamerica Ins. Co. , 797 F.2d 1041, 1047 (D.C. Cir. 1986) ; Hood v. F. Hoffman

-La Roche, Ltd. , 639 F. Supp. 2d 25, 33 (D.D.C. 2009) (TFH) . However, here, the District is a real party in interest and therefore Defendant’s removal to federal court was in error

. To be a real party in interest, a state mu st establish two elements. First, it “must express a quasi

- sovereign interest ” “apart from the interests of particular private parties.” Alfred L. Snapp & Son, Inc. v. Puerto Rico, ex rel., Barez , 458 U.S. 592, 607 (1982). Second , the challenged behavior must have affected a “sufficiently substantial segment of [the state’s] population.” Id. The Court finds that Plaintiff satifies both of these requirements such that it is a real party in interest, defeating diversity jurisdiction.
1. Qu asi
- Sovereign Interest The Supreme Court has explained that a state “has a quasi

- sovereign interest in the health and well

- being

–– both physical and economic

–– of its residents in general.” Id. The D istrict of Columbia Court of Appeals has recognized that this includes a state’s “interest in the continuing prosperity of [its] econom[y],” Pennsylvania v. Kleppe , 533 F.2d 668, 674 (D.C. Cir. 1976), and district courts in this Circuit have found a “quasi

sovereign interest in protecting the economic well

- being of their citizens who were defrauded ,” Commonwealth v. U.S. Dep’t of Educ. , 340 F. Supp. 3d 7, 14 , 16

– 17 (D.D.C. 2018) (TNM). H ere, the District has a quasi

- sovereign interest in the economic well

being of its residents , which it is attempting to vindica te through this action. The Consumer Protection Procedures Act “itself makes clear that the District has a ‘quasi

- sovereign interest’ in prosecuting consumer protection violations.” D.C. v.6

Exxon Mobil Corp. , Civ. Act. No. 20

- 1932, 2022 WL 16901988, at *9 (D.D.C. Nov. 12, 2022) (TJK)

. 2 The CPPA authorizes the District to sue “in the public interest” generally , rather than on behalf of an individual or a discrete group of D.C. residents . D.C. Code § 28

- 3909(a) . As other courts have found with respect to different consumer protection statutes, this grant of authority confers upon the District “a freestanding consumer

protection duty,” entrusting it with “broad powers to implement the [CPPA] and protect and prom ote consumer welfare in the process,” which “thereby advanc[es] a quasi

sovereign interest.” West Virginia ex rel. McGraw v. CVS Pharm., Inc. , 748 F. Supp. 2d 580, 595 (S.D. W. Va. 2010). In addition, t he CPPA authorizes the District to obtain relief distinct from that which a private citizen could seek under the statute . First, the District can seek civil penalties paid to the District’s treasury . D.C. Code § 28

- 3909(b). Plaintiff is seeking such civ il penalties here

. See Compl. at 13. Second, the District can seek an injunction for violations of the Act without proving damages. D.C. Code § 28

- 3909(a). Plaintiff is

2 Defendant Liberty Tax points out tha t t he order remanding the case to D.C. Superior Court was briefly staye d upon the defendants’ emergency motion

. See Minute Order, D.C. v. Exxon Mobil Corp. , Civ. Act. No. 20

- 1932 (D.D.C. Nov. 14, 2022). However, that stay was only granted to permit briefing on d efendants’ m otion

. See Order, D.C. v. Exxon Mobil Corp. , Civ. Act. No. 20

- 1932 (D.D.C. Dec. 20, 2022), ECF No. 126 , at 1

. After briefing, t he court denied defendants’ Motion to Stay Execution of Remand Order Pending Appeal. Id. F urthermore, in no order did the court “recognize[ ] the case presented a novel issue,” as Defendant asserts . Def.’s Opp’n at 16. The Court also notes that Defendant’s additional attempts to cast doubt on Exxon ’s holding hinge on one case: Missour i, K. & T. Ry. Co. of Kansas v. Hickman , 183 U.S. 53 (1 901)

. See Def’s Opp’n at 16

– 17. However, “ lower courts have not strictly construed the language in Missouri ,” instead limiting its principles. Wisconsin v. Abbott Labs. , 341 F. Supp. 2d 1057, 1063 (W.D. Wisc. 2004) . Likewise, various Courts of Appeals have distinguished Missouri

. AU Optronics Corp. v. South Carolina , 699 F.3d 385, 392

– 94 (4th Cir. 2012) (discussing various Circuit opinions).7

seeking injunctive relief as well

. See Compl. at 12. As has been recognized, “[t] hes e distinctions make clear that the District has its own ‘pecuniary interest in this lawsuit’ distinct from the private financial interests of individual citizens.” Exxon Mobil Corp. , 2022 WL 16901988, at *9 (citing Transamerica Ins. Co. , 797 F.2d at 10 47)

. Altogether the statute authorizes the District to sue in the public interest and seek redress of its own injuries , constituting a quasi

- sovereign interest in this litigation. Defendant Liberty Tax argues that because the District seeks relief for individual consumers as well, it is not the real party to the action. See Def.’s Opp’n at 10, 17. Defendant states that the District “seeks to recoup a specific and defined amount of funds that a modest number of Distict residents expended on tax prepar ation services” and that such “limited recoupment effort is insufficient... to qualify as a ‘quasi

- sovereign interest.’” Id. at 10. But the District’s Complaint clearly seeks additional relief , which Defendant first ignores and later downplays

. See Def.’s Opp’n at 10, 12

– 13

. While the District does pursue restitution and damages for the allegedly impacted consumers, it also seeks (as noted above) civil penalties paid to the District as well as injunctive relief that would ensure an honest marketplace, fur ther the economic well

- being of its residents , and protect residents from deceptive business practices

. See Compl. at 12

– 13. The fact that private parties may also benefit from the District’s lawsuit does not negate the District’s substantial interest in this case. This principle has been recognized nationwide. See Nevada v. Bank of America Corp. , 672 F.3d 661, 671 (9th Cir. 2012) (a state’s “ sovereign interest in protecting its citizens and economy from deceptiv e [] practices is not diminished merely b ecause it has tacked on a claim for restitution ”); Hood ex rel. Miss. v. Microsoft Corp. , 428 F. Supp. 2d 537, 546 (S.D. Miss. 2006) (“ The fact that private8

parties may benefit monetarily from a favorable resolution of this case does not minimize nor negat e [the state’s] substantial interest .”); Illinois v. SDS West Corp. , 640 F. Supp. 2d 1047, 1052

– 53 (C.D. Ill. 2009) (relief inuring to the state “qualifies as a ‘substantial interest’ sufficient to render [the state] the real party in interest regardless of its concurrent and subsidiary pursuit of relief on behalf of certain individual citizens”) ; Washington v. CLA Est ate Servs., Inc. , N o . C18

- 480 MJP, 2018 WL 2057903, at *1 & n.2 (W.D. Wash. May 3, 2018) ( holding that the “position that a state cannot claim real party in interest status when it sues for broad prospective relief and also for restitution for a limited se t of consumers has been rejected by the majority of courts ”; collecting cases) ; MyInfoGuard, LLC v. Sorrell , Nos. 2:12

– cv

– 074, 2:12

– cv

– 102 , 2012 WL 5469913, at *5 (D. Vt. Nov. 9, 2012) (“ The fact that the State seeks civil penalties and a statewide injunct ion against cramming

— remedies unavailable to consumers

— leaves no doubt that the State has concrete interests in the litigation; put simply, the benefits of those remedies flow to the State as a whole ” and “[t] he fact that the State also seeks restitution f or [] consumers specifically affected by cramming practices does not undermine the State's broader interest in its case. ”). Altogether the District has a demonstrated a quasi

- sovereign interes t at stake in this litigation. This is in line with the weight o f authority from various Circuits finding that states have quasi

- sovereign interests in the enforcement of consumer protection laws. 3

3 See, e.g. , AU Optronics Corp. v. South Carolina , 699 F.3d 385, 393

– 94 (4th Cir. 2012) (discussing that states possess a quasi

- sovereign interest in pursuing enforcement of consumer protection and antitrust laws); Kelley v. Carr , 442 F. Supp. 346, 356

– 57 (W.D. Mich. 1977) (“S urely some of the most basic of a state ’ s quasi

- sovereign interests include maintenance of the integrity of markets and exchanges operating within its boundaries,9 2. Substantial Segment of Population Affected In addition, f

or the District to be a real party in the action, t he alleged injuries must affect a “sufficiently substantial segment of its population.” Snapp , 458 U.S. at 607. Defendant argues that Plaintiff only seeks relief for a “small subset” of consumers that is insufficient to constitute a substantial segment of i ts population. Def.’s Opp’n at 6. Defendant extrapolate s from Plaintiff’s Complaint that the “Cash in a Flash” scheme impacted 2,000 customers each year over a six

- year period. See Def.’s Opp’n at 6; Compl. ¶ 42 (“Liberty Tax provided over 12,000 CIF pa yments to District consumers from 2015 to 2021.”). According to Defendant, “[t]hat is approximately .2% of the District’s population,” which is “not a ‘substantial segment’... so as to constitute a ‘quasi

- sovereign interest.’” Def.’s Opp’n at 6.

protection of its citizens from fraudulent and deceptive practices, [and] support for the general welfare of its resident s and its economy ....”, af f ’ d in part and rev ’ d in part on other grounds , 691 F.2d 800 (6th Cir. 1980) ; Hood , 428 F. Supp. 2d at 545 (in a n a ction brought under state antitrust and consumer protection laws, holding that “ the State has a quasi

- sovereign inter est in the economic well

- being of its citizens, which includes securing the integrity of the marketplace ”); SDS West Corp. , 640 F. Supp. 2d at 1050 (considering lawsuit brought under state consumer protection statute, holding that “securing an honest marke tplace” is “a well

- established quasi

- sovereign interest ”; collecting cases); State of N.Y. by Abrams v. General Motors Corp. , 547 F. Supp. 703, 705 (S.D.N.Y. 1982) (in action concerning a company’s defrauding of consumers, holding that “[t] he State ’ s goal of securing an honest marketplace in which to transact business is a quasi

- sovereign interest ”); In re Bartel , 403 B.R. 173, 175

– 76 (D. Mass. 2009) (in case involving debtor who defrauded consumers, holding that “[t]he Commonwealth has an interest beyond t hat of each individual in ensuring that those who do business within this state comport with a basic level of fairness in all their dealings ”); In re TFT

- LCD (Flat Panel) Antitrust Litigation , No. C 07

– 1827 SI, 2011 WL 560593, at *5 (N.D. Cal. Feb. 15, 201 1) (“ States have a sovereign interest in the enforcement of their consumer protection and antitrust laws ... [and] in securing an honest marketplace and the economic well

- being of their citizens ”) ; Washington v. CLA Estate Servs., Inc. , NO. C18

- 480 MJP , 2 018 WL 2057903 , at *1 & n.2 (W.D. Wash. May 3, 2018) (noting

“ widespread legal support for the State’s position that its suit to enforce its quasi

sovereign interest in guaranteeing an honest marketplace and the economic welfare of its citizenry bestows ‘ real party in interest ’ status upon it ” ; collecting cases).10 However, t he Supreme Court has held that there are no “definitive limits on the proportion of the population of the State that must be adversely affected by the challenged behavior.” Snapp , 458 U.S. at 607. Defendant even admits this, quoting from a case stating t hat “there is no definitive threshold.” Def.’s Opp’n at 6 (quoting Ohio v. GMAC Mortg., LLC , 760 F. Supp. 2d 741, 749

– 50 (N.D. Ohio 2011)). The Supreme Court has found a state to be the real party in action where only .03% of its population was affected by the challenged behavior, Snapp , 458 U.S

. at 599, 607, which is far less than the percentage allegedly impacted here. Numerous other courts have likewise found that “the raw number of individuals directly” affected is not determinative of whether a
stat e has alleged injury to a substantial segment of its population , People by Vacco v. Mid Hudson Medical Grp., P.C. , 877 F. Supp. 143, 148 (S.D.N.Y. 1995) , therefore finding small portions of the population to suffice, see, e.g. , In re Suwinski , 509 B.R. 568, 574

– 75 (S.D. Ohio 2013) (collecting cases , showing that this requirement has been satisfied in

cases from across the country involving as few as six, twenty, fifty

- one, fifty

- five, and sixty

- four consumers before holding that “the affected 92 consumer s represent a substantial segment of the population” )

. In addition, courts must consider both the direct and indirect effects of an alleged injury when determining if a substantial segment of the population has been injured. Snapp , 458 U.S. at 607. Here, the indirect effects impact a broader portion of the state’s population and the general welfare of the public. Cf. SDS West Corp. , 640 F. Supp. 2d at 1051 (holding that where 250 consumers were directly injured, “[a] lthough the number of persons directly harmed may be small relative to Illinois ’ population, the indirect benefits of barring unscrupulous companies from soliciting further business accrues to the11

population at large ”); In re Trujillo , 135 B.R. 674, 676 (D. Colo. 1992) (in lawsuit brought unde r Colorado Consumer Protection Act, finding indirect effects where “only six individuals are directly affected by this case” because “ allowing a debtor to avoid dischargeability actions brought by the state would subvert the protections of the Colorado Con sumer Protection Act and adversely impact

... all Colorado consumers who may at some future date have claims under the Act. ”). Allowing Defendant to continue deceiving District residents would undermine the integrity of D.C. law, weaken the marketplace, and enable other residents to be harmed in the future. Accordingly, t here is a sufficiently substantial segment of D.C.’s population affected here such that the District is a real party in interest.

* * * Because the District is a real party in interest to th is litigation , there is no diversity jurisdiction. See Moor , 411 U.S. at 717 ; Long , 820 F.2d at 414. Therefore, as Defendant Liberty Tax has alleged no other grounds for subject matter jurisdiction in federal court, this case must be remanded to state court. B. Fees and Costs Plaintiff next requests that Defendant pay the costs, including attorneys’ fees, incurred as a result of the improper removal of this case. Pl.’s Mot. at 9. The Court finds that this argument fails. When granting a motion to r emand, a district court may, in its discretion, award attorney ’s fees pursuant to 28 U.S.C. § 1447(c). “ Absent unusual circumstances, courts may award attorney's fees under § 1447(c) only where the removing party lacked an objectively reasonable basis for seeking removal. Conversely, when an objectively12

reasonable basis exists, fees should be denied. ” Martin v. Franklin Capital Corp. , 546 U.S. 132, 141 (2005). The threshold for objective reasonableness is rather low: Did the defendant’s grounds for remo val contain “at least some logical and precedential force”? Knop v. Mackall , 645 F.3d 381, 383

– 84 (D.C. Cir. 2011). However, when a defendant’s removal action was contrary to well

- settled law, courts regularly impose costs and
expenses. Ballard v. D.C. , 813 F. Supp. 2d 34, 45 (D.D.C. 2011) (citation omitted). Objective reasonableness is evaluated based on the circumstances at the time the case was removed. Id. (citation omitted)

. Plaintiff argues that Defendant’s “flimsy and unsupported arguments that the District is only a nominal party ignore [] extensive precedent” and therefore they “failed to provide any objectively reasonable basis for removal.” Pl.’s Mot. at 9

– 10. However,

w hile the Court finds that Defendant’s removal was in error, it does not find that Defendant lacked an objectively reasonable basis for its arguments. There is extensive case law from numerous courts in other Circuits. However, the D.C. Circuit has not weighed in conclusively on this issue. When Defendant removed this case to federal court in October 2022, see generally Notice of Removal , no court in this Ci rcuit had yet remanded a case to state court on the same grounds

–– that there is no diversity jurisdiction where the District of Columbia brought a suit under the CPPA because the District has a quasi

- sovereign interest in prosecuting consumer protection violations, see generally Exxon Mobil Corp. , 2022 WL 16901988 (dec ided Nov. 12, 2022). Therefore, at the time of removal, an equivalent legal question was still pending before a district court in this Circuit and there was no precisely on

- point case law from the D.C. Circuit.13 Consequently , the Court finds that Defendant h ad an objectively reasonable basis for removal such that they should not be responsible for Plaintiff’s attorney’s fees and
costs. IV. CONCLUSION For the foregoing reasons, the Court GRANTS Plaintiff’s Motion to Remand but
DENIES Plaintiff’s request for a ttorney’s fees and costs incurred under 28 U.S.C. § 1447(c)

. Additionally, because the Court remands this action, the Court DENIES AS
MOOT Defendant’s [3] Motion to Dismiss. An appropriate Order accompanies this Memorandum Opinion.
/s/ COLLE EN KOLLAR

- KOTELLY United States District Judge