United States Court of Appeals

FOR THE EIGHTH CIRCUIT

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No. 10-2635

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Marlene Westerfeld, *

*

Plaintiff - Appellee, *

*

v. *

* Appeal from the United States

Independent Processing, LLC; * District Court for the

* Eastern District of Missouri.

Defendant, *

*

Provident Funding Associates, LP, *

*

Defendant - Appellant. *

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Submitted: September 7, 2010

Filed: September 20, 2010

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Before SMITH, BOWMAN, and GRUENDER, Circuit Judges.

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BOWMAN, Circuit Judge.

Marlene Westerfeld, a Missouri resident, filed this class action in Missouri state

court against Independent Processing, LLC, a Missouri limited liability company that

processed residential mortgage documents, and Provident Funding Associates, LP, a

California limited partnership that provided residential mortgages. Westerfeld alleged

that when Independent and Provident charged her and other Missouri residents a

"broker processing fee" and an "administrative fee," respectively, in residential
mortgage financing transactions, the two entities engaged in the unauthorized practice

of law and violated the Missouri Merchandising Practices Act, Mo. Rev. Stat. §§

407.010–407.1500. Provident removed the case to federal court pursuant to the Class

Action Fairness Act of 2005 (CAFA).1

 Westerfeld then moved to remand the case

based on an exception to CAFA jurisdiction, the local-controversy exception, 28

U.S.C. § 1332(d)(4)(A). The District Court granted Westerfeld's motion, ordering the

case remanded to the Circuit Court of St. Louis County. Provident filed a timely

petition with this Court under 28 U.S.C. § 1453(c)(1) for leave to appeal the District

Court's remand order. We granted Provident's motion, and reviewing the District

Court's interpretation of CAFA de novo, see Iowa 80 Grp., Inc. v. IRS, 406 F.3d 950,

952 (8th Cir. 2005) (standard of review), we now vacate the judgment of the District

Court and remand the case for further consideration consistent with this opinion.

Because of perceived "abuses of the class action device," Congress enacted

CAFA to provide, inter alia, for "Federal court consideration of interstate cases of

national importance." Class Action Fairness Act of 2005, Pub. L. No. 109-2, § 2, 119

Stat. 4. Accordingly, CAFA grants broad federal jurisdiction over class actions and

establishes narrow exceptions to such jurisdiction. See S. Rep. No. 109-14, at 43

(2005), reprinted in 2005 U.S.C.C.A.N. 3, 41 (CAFA "is intended to expand

substantially federal court jurisdiction over class actions. Its provisions should be read

broadly, with a strong preference that interstate class actions should be heard in a

federal court if properly removed by any defendant."). "The language and structure

of CAFA . . . indicate[] that Congress contemplated broad federal court jurisdiction

with only narrow exceptions." Evans v. Walter Indus., 449 F.3d 1159, 1164 (11th Cir.

2006) (citation omitted); see S. Rep. No. 109-14, at 39, reprinted in 2005

U.S.C.C.A.N. 3, 38 (emphasizing that the local-controversy exception to CAFA

1

Pub. L. No. 109-2, 119 Stat. 4 (2005) (codified in scattered sections of 28

U.S.C.). 

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jurisdiction "is a narrow exception that was carefully drafted to ensure that it does not

become a jurisdictional loophole"). 

Under CAFA, federal courts have jurisdiction over class actions in which the

amount in controversy exceeds $5,000,000 in the aggregate; there is minimal (as

opposed to complete) diversity among the parties, i.e., any class member and any

defendant are citizens of different states; and there are at least 100 members in the

class. 28 U.S.C. § 1332(d). Despite this broad grant of jurisdiction, Congress

established two mandatory exceptions to federal jurisdiction under CAFA, only one

of which is relevant here. Under the local-controversy exception, a district court must

decline to exercise jurisdiction over a class action in which more than two-thirds of

the class members in the aggregate are citizens of the state in which the action was

originally filed, at least one defendant "from whom significant relief is sought by

members of the plaintiff class" and "whose alleged conduct forms a significant basis

for the claims asserted by the proposed plaintiff class" is a citizen of the state in which

the class action was originally filed, the principal injuries were incurred in the state

in which the action was filed, and no other class action alleging similar facts was filed

in the three years prior to the commencement of the current class action. 28 U.S.C.

§ 1332(d)(4)(A).

 

Although CAFA expanded federal jurisdiction over class actions, it did not alter

the general rule that the party seeking to remove a case to federal court bears the

burden of establishing federal jurisdiction. Kaufman v. Allstate N.J. Ins. Co., 561

F.3d 144, 151 (3d Cir. 2009); Amoche v. Guarantee Trust Life Ins. Co., 556 F.3d 41,

48 (1st Cir. 2009); Serrano v. 180 Connect, Inc., 478 F.3d 1018, 1021 (9th Cir. 2007);

Evans, 449 F.3d at 1164. Once CAFA's initial jurisdictional requirements have been

established by the party seeking removal, however, the burden shifts to the party

seeking remand to establish that one of CAFA's express jurisdictional exceptions

applies. Serrano, 478 F.3d at 1024 ("[O]nce federal jurisdiction has been established

under [§ 1332(d)(2)], the objecting party bears the burden of proof as to the

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applicability of any express statutory exception . . . ."); Kaufman, 561 F.3d at 154

(same); Hart v. FedEx Ground Package Sys. Inc., 457 F.3d 675, 681 (7th Cir. 2006)

(same); Frazier v. Pioneer Ams. LLC, 455 F.3d 542, 546 (5th Cir. 2006) (same)

(citing Evans); Evans, 449 F.3d at 1164 (same).

Here, Provident bore the initial burden of establishing that CAFA's fundamental

jurisdictional requirements were met, and the District Court so stated, noting correctly

that "[t]he party seeking removal . . . has the burden to establish federal subject matter

jurisdiction." Mem. & Order of June 17, 2010, at 3. After discussing the application

of the local-controversy exception, however, the court stated that "[e]ven if

[application of the exception] was not as clear as it is, any doubt . . . must be resolved

in favor of remand." Id. at 6. Provident argues that this was a misstatement of the

law, and we agree. Once Provident satisfied CAFA's basic jurisdictional requirements

(and Westerfeld does not contend on appeal that Provident failed to do so), the burden

shifted to Westerfeld to establish that CAFA's local-controversy exception applied. 

The District Court erred by resolving any doubt regarding applicability of the localcontroversy exception in favor of remand, i.e., in favor of Westerfeld, the party who

was invoking the exception to federal jurisdiction and the party who was required to

establish that the exception applied. We agree with Provident that the party bearing

the burden of proof is not entitled to the benefit of the doubt. On remand, the District

Court should resolve any doubt about the applicability of CAFA's local-controversy

exception against Westerfeld, the party who seeks remand and the party who bears the

burden of establishing that the exception applies. 

Provident next argues that the District Court erred in concluding that CAFA's

local-controversy exception precluded the court's exercise of federal jurisdiction over

the action. The local-controversy exception requires, as relevant here, that an in-state

defendant—in this case, Independent—be a so-called "significant" defendant, one

"from whom significant relief is sought by members of the plaintiff class" and one

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"whose alleged conduct forms a significant basis for the claims asserted by the

proposed plaintiff class." 28 U.S.C. § 1332(d)(4)(A)(i)(II)(aa) & (bb). 

In her amended complaint, Westerfeld asserted two state-law claims against

Independent and two identical state-law claims against Provident on behalf of two

separate plaintiff classes. Specifically, in Counts I and II of her amended complaint,

Westerfeld asserted state-law claims against Independent and requested certification

of a plaintiff class against Independent. In Counts III and IV, she asserted identical

state-law claims against Provident and requested certification of a separate plaintiff

class against Provident. After Provident removed the action, Westerfeld filed her

motion to remand, arguing that the District Court was prohibited from exercising

jurisdiction over the action by virtue of CAFA's local-controversy exception. 

Provident opposed remand, arguing that the local-controversy exception did not

apply because Independent, the in-state defendant, did not qualify as a significant

defendant under the exception. In support of its argument, Provident submitted the

declaration of Independent's sole proprietor, who stated that Independent provided

services in connection with only 56 loans in Missouri, as well as the declaration of its

own compliance manager, who stated that Provident had originated 3,894 loans in

Missouri. Based on this information and the dollar amount of the contested fees paid

by Westerfeld, Provident estimated that Independent charged $16,800 and Provident

charged $2.7 million in contested fees.2

 Provident urged the District Court to

determine whether Independent was a significant defendant under CAFA by

considering the class action as a whole and not by considering the claims on a classby-class basis. According to Provident's preferred analysis, because Independent

"participated in less than 1.5% of the loans at issue, and generated six tenths of one

2

Westerfeld does not dispute that Provident satisfied its burden to establish

CAFA's $5,000,000 amount-in-controversy requirement—Westerfeld sought actual

damages, treble damages, punitive damages, and statutory attorney fees—and we need

not discuss the issue in further detail. 

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percent of the fees," Br. of Appellant at 15, Westerfeld was not seeking significant

relief from Independent, Independent's conduct did not form a significant basis for

Westerfeld's claims, Independent did not qualify as a significant defendant, and thus

the local-controversy exception did not apply to defeat federal jurisdiction. 

The District Court rejected Provident's arguments, concluding that because

Westerfeld filed her claims against Independent "as an individual class," Independent

was necessarily a significant defendant with respect to the claims asserted against it. 

Mem. & Order of June 17, 2010, at 6. Adopting Westerfeld's argument, the court

concluded that because the plain language of 28 U.S.C. § 1332(d)(4)(A)(i)(II)(aa) and

(bb) refers to the plaintiff class and the proposed plaintiff class, respectively, whether

a defendant is significant for purposes of the exception must be determined by

reference to "only one plaintiff class (rather than an aggregate of all the classes in a

lawsuit)." Id. The court analyzed the significant defendant issue separately for each

class defined by Westerfeld and, not surprisingly, concluded that with respect to

Counts I and II, each of which defined a class and asserted claims against Independent

alone, Independent was a significant defendant. Thus the court ruled that the localcontroversy exception applied and the case had to be remanded. 

While "the starting point for interpreting a statute is the language of the statute

itself," Consumer Prod. Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 108

(1980), federal courts engaging in statutory construction must "interpret the words of

the[] statute[] in light of the purposes Congress sought to serve." Chapman v.

Houston Welfare Rights Org., 441 U.S. 600, 608 (1979), quoted in Norfolk Redev.

& Hous. Auth. v. Chesapeake & Potomac Tel. Co., 464 U.S. 30, 36 (1983). Our task,

therefore, is to avoid interpreting a statute in a manner that renders any section of the

statute superfluous or fails to give effect to all of the words used by Congress. 

Windsor on the River Assocs. v. Balcor Real Estate Fin., Inc., 7 F.3d 127, 130 (8th

Cir. 1993). 

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"Class" is defined under CAFA as "all of the class members in a class action." 

28 U.S.C. § 1332(d)(1)(A) (emphasis added). By definition, therefore, "the plaintiff

class" described in § 1332(d)(4)(A)(i)(II)(aa) (emphasis added) and "the proposed

plaintiff class" described in § 1332(d)(4)(A)(i)(II)(bb) (emphasis added) include all

of the class members in the class action as a whole. It follows, then, 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 classby-class basis. 

In Kaufman, the Third Circuit analyzed the "significant basis" element of the

local-controversy exception and stated, "Whether the [in-state] defendant's alleged

conduct is significant cannot be decided without comparing it to the alleged conduct

of all the Defendants. . . . The local defendant's alleged conduct must be an important

ground for the asserted claims in view of the alleged conduct of all the Defendants." 

561 F.3d at 157. We believe this is the better reading of the statute. The District

Court's construction of the significant defendant requirement essentially strips the

requirement of any substantive meaning—if an in-state defendant's significance is

determined on a class-by-class basis, the in-state defendant will always be significant

with respect to the classes and the claims asserted against it. This reading of the localcontroversy exception would allow class-action plaintiffs to avoid federal jurisdiction

under CAFA simply by pleading their claims against an in-state defendant as separate

counts on behalf of a separate class. We cannot conceive that Congress intended this

result—particularly given its admonition that the local-controversy exception was "a

narrow exception that was carefully drafted to ensure that it does not become a

jurisdictional loophole." S. Rep. No. 109-14, at 39, reprinted in 2005 U.S.C.C.A.N.

3, 38. Accordingly, we conclude that the District Court erred in ruling that CAFA's

local-controversy exception applied in this case to preclude federal jurisdiction. On

remand the court should determine whether Independent is a significant defendant for

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purposes of the local-controversy exception by considering all the claims in the action

and not by considering the claims on a class-by-class basis. 

For the foregoing reasons, the judgment of the District Court is vacated and the

case is remanded for further consideration consistent with this opinion.

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