UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

_________________________________ 

BRIAN LAX; TRACY BURONHAHNLEIN; WERNER HAHNLEIN; 

JEREMY HADER, 

 Plaintiffs - Appellees, 

v. 

APP OF NEW MEXICO ED, PLLC, f/k/a 

AlignMD of New Mexico, PLLC, 

 Defendant - Appellant, 

and 

LOVELACE HEALTH SYSTEM, LLC, 

 Defendant. 

––––––––––––––––––––––––––––––––––– 

BRIAN LAX; TRACY BURONHAHNLEIN; WERNER HAHNLEIN; 

JEREMY HADER, on their own behalf 

and on behalf of others similarly situated, 

 Plaintiffs - Appellees, 

v. 

LOVELACE HEALTH SYSTEM, LLC, 

 Defendant - Appellant, 

and 

APP OF NEW MEXICO ED, PLLC, f/k/a 

AlignMD of New Mexico, PLLC, 

No. 22-2057 

(D.C. No. 1:20-CV-00264-SCY-JFR) 

(D. N.M.) 

No. 22-2058 

(D.C. No. 1:20-CV-00264-SCY-JFR) 

(D. N.M.) 

FILED 

United States Court of Appeals 

Tenth Circuit 

July 13, 2022

Christopher M. Wolpert 

Clerk of Court

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 Defendant. 

_________________________________ 

ORDER AND JUDGMENT*

_________________________________ 

Before MATHESON, BACHARACH, and MORITZ, Circuit Judges. 

_________________________________ 

In these consolidated appeals, APP of New Mexico ED, PLLC (APP) and 

Lovelace Health System, LLC (Lovelace), appeal from the district court’s order 

remanding this putative class-action suit to New Mexico state court. Exercising 

jurisdiction under 28 U.S.C. § 1453(c)(1), we affirm. 

I. 

 Plaintiffs in this suit are former patients who sought treatment at Lovelace 

facilities located in the state of New Mexico. They allege that APP, a company that 

provides emergency room physician and nurse practitioner staffing for Lovelace 

facilities, overbilled them at out-of-network rates even though plaintiffs were 

in-network with Lovelace. Plaintiffs filed this class action against APP and Lovelace 

in New Mexico state court in February 2020. Their complaint included claims for 

violations of the New Mexico Unfair Practices Act, conversion, willful breach of 

* After examining the briefs and appellate record, this panel has determined 

unanimously that oral argument would not materially assist in the determination of 

this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore 

ordered submitted without oral argument. This order and judgment is not binding 

precedent, except under the doctrines of law of the case, res judicata, and collateral 

estoppel. It may be cited, however, for its persuasive value consistent with 

Fed. R. App. P. 32.1 and 10th Cir. R. 32.1. 

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contract, unjust enrichment, and civil conspiracy. They sought certification of a 

proposed class including “all New Mexico residents who, beginning four years prior 

to the filing date of this lawsuit, were billed by APP for amounts greater than the 

in-network amount permitted by their insurance provider for medical services 

provided at Lovelace facilities.” J.A., Vol. I at 40. 

 APP, which is a limited liability company with its principal place of business 

in Tennessee, removed the action to federal court based on the Class Action Fairness 

Act (CAFA). CAFA grants district courts jurisdiction over class actions involving at 

least 100 proposed class members, more than $5,000,000 in controversy, and the 

presence of a plaintiff class member who is a citizen of a state different from any 

defendant. See 28 U.S.C. § 1332(d)(2)(A), (d)(5)(B). Lovelace consented to the 

removal. 

 Plaintiffs later filed a motion to remand the case to state court. They asserted 

the case should be remanded because defendants had failed to establish that more 

than $5,000,000 was in controversy. They further argued that even assuming the 

amount-in-controversy requirements were met, CAFA’s “local controversy 

exception” mandated that the action remain in state court. The local controversy 

exception requires a district court to decline jurisdiction if (1) “greater than twothirds of the members of all proposed plaintiff classes in the aggregate are citizens of 

the State in which the action was originally filed”; (2) the action seeks “significant 

relief” from at least one defendant “whose alleged conduct forms a significant basis 

for the claims asserted by the proposed plaintiff class,” and “who is a citizen of the 

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State in which the action was originally filed”; (3) the plaintiffs’ principal injuries 

“were incurred in the State in which the action was originally filed”; and (4) “during 

the 3-year period preceding the filing of that class action, no other class action has 

been filed asserting the same or similar factual allegations against any of the 

defendants on behalf of the same or other persons.” Id. § 1332(d)(4)(A). 

The district court found that the $5,000,000 jurisdictional threshold was met. 

That determination is not challenged in this appeal. It also initially found that the 

plaintiffs had failed to show that the local controversy exception applied because they 

failed to establish that more than two-thirds of the proposed class members, whom 

the complaint defined as New Mexico residents, were also New Mexico citizens. The 

district court then took plaintiffs’ motion to remand under advisement and provided 

them with the opportunity to conduct limited discovery on the question of class 

citizenship. 

Plaintiffs filed an amended motion to remand. In connection with the amended 

motion, they produced an expert report from Professor James H. Degnan, an 

Associate Professor in the Department of Mathematics and Statistics at the University 

of New Mexico. Based on a statistical sampling Dr. Degnan conducted, plaintiffs 

argued they had proved that more than two-thirds of the class members were citizens 

of New Mexico. 

In his expert report, Dr. Degnan explained that APP had provided plaintiffs 

with information concerning all people who received services from APP during the 

four-year period covered by the lawsuit who were in-network with Lovelace and 

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out-of-network with APP. From that list, plaintiffs’ counsel removed transactions in 

which a customer did not have a New Mexico address, was not billed by APP, or 

received the first bill from APP after APP had already received payment. They also 

removed duplicate entries. This left 29,351 class member records. Professor Degnan 

then created a random sample of 100 class members from the revised list and 

provided the sample to plaintiffs’ counsel. 

Law firm employees contacted the class members on the list by telephone and 

surveyed them using a script format agreed upon by the parties. The telephone 

survey showed that, of the 100 sample class members, 52 affirmed their New Mexico 

citizenship, one stated he was not a citizen, and 47 either would not respond or could 

not be reached. Plaintiffs then retained a service that performed a “skip trace” to 

determine if additional information could be obtained about the 47 non-respondents. 

This skip tracing uncovered information concerning 83 of the 100 class members:1

 

their current residential address, property ownership on February 11, 2020 (the date 

the complaint was filed), and vehicle registration on February 11, 2020.2

 

1

 It is unclear what proportion of these 83 class members were respondents vs. 

non-respondents to the telephone survey. The Director of Operations at the skip 

tracing company filed a declaration stating that 20 of the non-respondents yielded 

New Mexico “data in 0 or 1 of the 3 categories.” See J.A., Vol. I at 231. Id. Data in 

“zero” categories appears to mean no data was found for a particular non-respondent, 

either in New Mexico or elsewhere. This would indicate that a particular nonrespondent was one of the 17 out of 100 class members for whom skip tracing 

yielded no data. 

 

2

 Plaintiffs initially sought vehicle registration and driver’s license information 

from the New Mexico Taxation and Revenue Department (NMTRD), but the 

response they received from NMTRD was redacted, making it impossible to match 

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The skip tracing confirmed the data from the survey respondents. None of the 

class members who had affirmed their New Mexico citizenship were shown to be 

identified with non-New Mexico data in any of the three categories. 

The skip tracing also yielded data concerning the 47 non-respondents. Of 

those non-respondents, 27 were identified with New Mexico data in at least two of 

the three categories and had no non-New Mexico data in any category. The other 20 

non-respondents either were identified with New Mexico data in only zero or one of 

the three categories or were identified with non-New Mexico data in one or more of 

the categories. Dr. Degnan then added the 52 class members who had affirmed their 

New Mexico citizenship to the 27 non-respondents who met at least two of the three 

categories to conclude that “79 of the 100 class members in the random sample were 

identified as citizens of New Mexico as of the date of filing the complaint.” J.A., 

Vol. I at 210.3

 He concluded with “[a] 95% confidence interval for this data . . . that 

the true proportion of New Mexico citizens from the population of 29,351 individuals 

sampled is larger than 2/3.” Id. In other words, the survey results combined with the 

the documents to the class members. See J.A., Vol. II at 436. Plaintiffs also sought 

voter registration information from the New Mexico Secretary of State but received 

no response. See id. 

 

3

 Although Dr. Degnan’s report merely states that the skip trace revealed data 

in two of the three categories—which could be understood to mean any two of 

plaintiffs’ three criteria—the parties later clarified that “the 2 of 3 test [for 

citizenship] meant a finding of continuous residence plus at least one of the two other 

categories (vehicle registration or property ownership).” J.A., Vol. II at 450 n.6 

(internal quotation marks omitted). 

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skip-tracing results showed that the class met the two-thirds requirement for the local 

controversy exception.4

 

Defendants produced their own expert report that criticized the scientific 

reliability of Dr. Degnan’s report. They again opposed plaintiffs’ motion to remand, 

arguing plaintiffs had failed to meet the local controversy requirement because they 

had failed to show that (1) two-thirds of the proposed class were citizens of New 

Mexico, and (2) the New Mexico defendant named in the complaint, Lovelace, was a 

“significant defendant” whose conduct formed a significant basis for plaintiffs’ 

claims and from whom plaintiffs sought significant relief. The district court 

determined that plaintiffs met their burden to show that the local controversy 

requirements were met. It therefore granted their motion to remand. 

APP and Lovelace filed petitions for permission to appeal, see 28 U.S.C. 

§ 1453(c)(1), which we granted. 

II. 

A. 

 “CAFA was enacted to respond to perceived abusive practices by plaintiffs 

and their attorneys in litigating major class actions with interstate features in state 

courts.” Woods v. Standard Ins. Co., 771 F.3d 1257, 1262 (10th Cir. 2014) (internal 

quotation marks omitted). CAFA permits a federal court to assume original 

4

 Dr. Degnan also produced a supplemental report, see J.A., Vol. I at 232-34, 

but the district court struck it and did not consider it in connection with its decision, 

see id., Vol. II at 443 n.3. 

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jurisdiction if certain requirements are met. See id. Congress included several 

exceptions to CAFA’s removal procedure. The party seeking a remand to the state 

court under one of these exceptions bears the burden of showing by a preponderance 

of the evidence that the exercise of federal court jurisdiction is improper. See id.; 

Mondragon v. Cap. One Auto Fin., 736 F.3d 880, 884 (9th Cir. 2013) (stating 

preponderance standard). 

 The local controversy exception “is intended to respond to concerns that class 

actions with a truly local focus should not be moved to federal court under this 

legislation because state courts have a strong interest in adjudicating such disputes.” 

Woods, 771 F.3d at 1262 (internal quotation marks omitted). “Rather than divesting 

a court of jurisdiction, the local controversy exception operates as an abstention 

doctrine” under which the federal court abstains from hearing the case in favor of the 

state’s demonstrated interest in the dispute. Dutcher v. Matheson, 840 F.3d 1183, 

1190 (10th Cir. 2016) (internal quotation marks omitted). It “is a narrow exception 

that was carefully drafted to ensure that it does not become a jurisdictional loophole 

and all doubts are resolved in favor of exercising jurisdiction over the case.” Id.

(brackets and internal quotation marks omitted). “[R]emand is mandatory if the 

plaintiffs can show that they meet the requirements of the local controversy 

exception.” Id. 

B. 

We review de novo the district court’s interpretation of CAFA. See Woods, 

771 F.3d at 1262. We review the district court’s factual findings for clear error. 

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Mondragon, 736 F.3d at 886. “Under that standard, we may reverse only if the 

district court’s finding lacks factual support in the record or if, after reviewing all the 

evidence, we have a definite and firm conviction that the district court erred.” 

Middleton v. Stephenson, 749 F.3d 1197, 1201 (10th Cir. 2014). The district court’s 

findings concerning citizenship are factual findings subject to our clearly erroneous 

review. See id. (diversity jurisdiction case). 

III. 

 Defendants challenge the district court’s finding that plaintiffs showed more 

than two-thirds of class members are New Mexico citizens. See 28 U.S.C. 

§ 1332(d)(4)(A)(i)(I). “[A] person is a citizen of a state if the person is domiciled in 

that state.” Middleton, 749 F.3d at 1200. “[A] person acquires domicile in a state 

when the person resides there and intends to remain there indefinitely,” a status that 

courts typically discern from the “totality of the circumstances.” Id. at 1200-01. 

We have described the citizenship inquiry as “an all-things-considered 

approach” in which “any number of factors might shed light on the subject in any 

given case.” Id. at 1201. Relevant factors include 

the party’s current residence; voter registration and voting practices; situs 

of personal and real property; location of brokerage and bank accounts; 

membership in unions, fraternal organizations, churches, clubs, and other 

associations; place of employment or business; driver’s license and 

automobile registration; payment of taxes; as well as several other aspects 

of human life and activity. 

Id. (internal quotation marks omitted). Although a person’s “place of residence is 

prima facie the domicile,” State Farm Mut. Auto. Ins. Co. v. Dyer, 19 F.3d 514, 520 

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(10th Cir. 1994), something more than residence in a state is required to show the 

intent to remain in the state, see Whitelock v. Leatherman, 460 F.2d 507, 514 

(10th Cir. 1972) (“[A]llegations of mere ‘residence’ may not be equated with 

‘citizenship.’”). 

Defendants contend the district court’s citizenship finding was clearly 

erroneous because plaintiffs’ method of proof, which the district court accepted, was 

unreliable or inadequate. Because it is impracticable to obtain information 

concerning citizenship of all the members of a large class, affidavits or survey 

responses targeting a representative sample of class members is a legitimate means of 

satisfying a plaintiff’s burden under a CAFA exception. See, e.g., In re Sprint Nextel 

Corp., 593 F.3d 669, 675-76 (7th Cir. 2010) (stating that “affidavits or survey 

responses in which putative class members reveal whether they intend to remain in 

Kansas indefinitely” might be sufficient to establish citizenship of those survey 

respondents under CAFA’s home-state exception). Defendants argue, however, that 

plaintiffs’ approach in this case, which involved a survey to which nearly half those 

surveyed failed to respond, coupled with skip tracing that obtained information on 

only a few citizenship-related factors concerning the non-respondents, did not 

produce reliable indicia of citizenship. They claim plaintiffs’ method was flawed 

because it allowed them to count a significant number of non-responding class 

members—for whom there was only skip-trace evidence of current New Mexico 

residency plus either evidence of New Mexico property ownership or vehicle 

registration—as New Mexico citizens. They argue that the district court’s reliance 

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on only these few factors rather than the totality of potentially relevant 

considerations, as discussed in Middleton, was erroneous.5

 

Middleton was a non-class-action case where we were concerned with the 

citizenship of a single defendant who had raised counterclaims and third-party claims 

in reliance on diversity jurisdiction. 749 F.3d at 1198-1200. The determination of 

domicile used in non-class-action cases risks becoming unnecessarily arduous when 

transported to the context of CAFA exceptions. See Preston v. Tenet Healthsystem 

Mem’l Med. Ctr., Inc., 485 F.3d 804, 816 (5th Cir. 2007). A better approach when 

determining CAFA exceptions is to use an evidentiary standard “based on practicality 

and reasonableness.” Id. Under this approach, defendants fail to show that the 

plaintiffs’ method was unreasonable. 

5

 Defendants suggest that plaintiffs cherry-picked the available data. They 

complain, for example, that plaintiffs gathered employment data but chose not to use 

it in the citizenship inquiry. But the district court explained the plaintiffs’ reasons 

for not relying on the employment data: 

Plaintiffs chose not to use this data because they could not draw inferences 

from it, one way or another, due to various problems such as old 

information and that some data lacked corresponding addresses or provided 

an address of a corporate office instead of a local office. In other words, 

the data could not be used to reliably determine whether a person was 

employed in New Mexico. 

J.A., Vol. II at 460. We discern no error in this determination. Also, as we have 

noted, see supra n.2, plaintiffs sought data for the sample on vehicle registration and 

driver’s licenses but were unable to obtain usable information concerning these 

factors. These facts do not suggest that plaintiffs relied on only the available data 

that favored their position. 

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Defendants contend that residency plus property ownership in a state does not 

necessarily equal citizenship. They cite the examples of military members, students, 

or green card holders, who may reside in New Mexico and own property there 

without being New Mexico citizens. It is true that residency in a state does not 

equate to citizenship, see Whitelock, 460 F.2d at 514, and that property ownership in 

a state, without more, does not establish citizenship in that state, see, e.g., Evans v. 

Walter Indus., Inc., 449 F.3d 1159, 1165-66 (11th Cir. 2006). Here, however, two 

additional factors enhanced the reliability of the finding that those non-respondents 

were in fact New Mexico citizens. First, the skip-tracing uncovered no data that they 

resided, owned property, or had registered vehicles in any other state. Second, they 

were residents of New Mexico both when they received the medical service and years 

later, when the skip tracing was performed. Both these factors support the district 

court’s conclusion that these class members were not only residents of New Mexico 

but also were citizens who intended to remain within that state. 

These additional facts also rebut two other arguments the defendants make, 

that (1) even if plaintiffs established New Mexico citizenship by a preponderance of 

the evidence for each of the 27 non-responding class members who met the 

“residency plus one” test, and assuming that each of these class members therefore 

has “a 51% likelihood of citizenship, then it is highly unlikely that every single one 

of these 27 class members would be a citizen”; and that (2) random sampling of a 

class should only be used to determine citizenship when “the surveyed members of 

the sample confirm their citizenship.” Aplt. Opening Br. at 38 (emphasis omitted). 

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First, we see no reason to conclude that the “residency plus one” method, when 

combined with other reasonable inferences to be drawn from the skip-tracing data, 

yielded only a 51 percent likelihood that each non-responding class member was a 

citizen. Second, skip tracing, when properly conducted, is a legitimate means of 

determining citizenship, particularly when a telephone survey yields too few results 

to provide an adequate analysis of the proposed class. “What is in another man’s 

mind must be determined by what he does as well as by what he says.” Smith v. 

Marcus & Millichap, Inc., 991 F.3d 1145, 1157 (11th Cir. 2021) (internal quotation 

marks omitted). Skip tracing provides objective evidence of a party’s intent to be 

domiciled in a particular state, and in the citizenship context. See Preston, 485 F.3d 

at 817 (stating the district court has broad discretion to determine what evidence to 

use in making a jurisdictional determination). 

It is true that in determining citizenship, a court may not rely on guesswork, 

even “[s]ensible guesswork.” Sprint Nextel, 593 F.3d at 674 (stating that although 

the court was “inclined to think that at least two-thirds of those who have Kansas cell 

phone numbers and use Kansas mailing addresses for their cell phone bills are 

probably Kansas citizens,” such a common-sense conclusion based on “[s]ensible 

guesswork” was insufficient to determine citizenship because “a court may not draw 

conclusions about the citizenship of class members based on things like their phone 

numbers and mailing addresses”). But the district court’s determination here was 

based on reasonable inferences drawn from the available data and did not represent 

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mere guesswork. We cannot conclude that its citizenship determination was clearly 

erroneous.6

 

Finally, we note that defendants cite two unpublished cases from this court that 

discuss citizenship in the CAFA context. Each is distinguished on its facts and is not 

inconsistent with our result. 

In Nichols v. Chesapeake Operating, LLC, 718 F. App’x 736 (10th Cir. 2018), 

the district court denied the plaintiff’s motion to remand his putative class-action 

case to state court under the “home state” exception, which requires that two-thirds or 

more of the class members must be citizens of the state where the action was filed. 

See id. at 738. His complaint described a class of “Oklahoma Residents” who had 

received royalty checks from the defendant. Id. (internal quotation marks omitted). 

To establish citizenship of class members for CAFA exception purposes, the plaintiff 

used a statistician, who (as in this case) randomly selected 100 royalty owners out of 

the thousands of potential class members. See id. After successfully surveying 54 of 

those 100 sample members, by asking them “whether they considered themselves to 

be Oklahoma citizens and whether they planned to move from Oklahoma in the near 

future,” and, in the case of businesses, “whether they were organized or 

6

 Defendants suggest that plaintiffs were required not only to prove that twothirds of the members of the representative sample were New Mexico citizens, but 

also to provide prove that they were United States citizens. See Aplt. Opening Br. 

at 33 n.5. Defendants fail to show they made this argument in district court; we 

therefore decline to consider it. See Richison v. Ernest Grp., Inc., 634 F.3d 1123, 

1127-28 (10th Cir. 2011). 

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headquartered in Oklahoma,” plaintiff’s counsel “determined that 95% of the 

sample’s royalty owners were Oklahoma citizens because the data shows indicia of 

Oklahoma citizenship with no conflicting data of citizenship elsewhere.” Id. at 739 

(internal quotation marks omitted).7

 

The district court rejected counsel’s approach, finding significant flaws in the 

evidence and concluding, among other things, that “counsel had an insufficient basis 

for determining that some members of the random sample were Oklahoma citizens.” 

Id. (internal quotation marks omitted). “For instance, the skip-trace reports indicated 

that only 35 of the sample’s class members had Oklahoma driver’s licenses and that 

37 members had non-Oklahoma addresses.” Id. n.2. 

 In upholding the district court’s result, we emphasized the “flawed” nature of the 

sample and counsel’s failure to “dispute these problems or otherwise explain how [the 

expert’s] evidentiary extrapolation remains statistically viable.” Id. at 742. The result in 

Nichols is consistent with this case, given that the survey/skip-trace in Nichols was 

significantly less reliable than those here. 

In Reece v. AES Corp., 638 F. App’x 755 (10th Cir. 2016), the district court 

denied the plaintiffs’ motions to remand their putative class action to state court under 

CAFA’s “local controversy,” “home state,” and “interests of justice” exceptions, and 

ultimately dismissed their complaint. See id. at 756, 759. The class was defined as “all 

7

 Although Nichols mentions a “skip-trace investigation,” see 718 F. App’x at 

739, it is unclear from the decision to what extent the survey results were 

supplemented by skip tracing, or for how many of the 46 unsuccessfully surveyed 

sample class members skip trace data was obtained. 

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citizens and/or residents and/or property owners of the State of Oklahoma” who were in 

defined proximity to certain pollution-creating operations maintained by the defendants. 

Id. at 759. 

 In their renewed motion for remand, plaintiffs relied solely on the “local 

controversy” exception. See id. at 760 & n.8. They provided an affidavit from an expert 

who had analyzed property records within the class area and had concluded that at least 

two-thirds of the proposed class members were Oklahoma residents. See id. at 760-61. 

Plaintiffs did not include the records that underlay the expert’s analysis. See id. at 761. 

The district court denied the renewed motion. 

 On appeal, the Reece court addressed the legal difference between residence and 

citizenship. See id. at 769. It concluded that where a class is defined as “residents” 

rather than “citizens” (as in our case), the plaintiffs seeking remand must “marshal and 

present some persuasive substantive evidence (extrinsic to the amended petition) to 

establish the [state] citizenship of the class members.” Id. The Reece plaintiffs had 

failed to meet this standard because they had failed to “validate the conclusions contained 

in the summary exhibits by, for example, presenting to the court the records upon which 

the exhibits were ostensibly based or offering sworn testimony regarding the analysis 

underlying the conclusions.” Id. at 770. Given that the complaint included plaintiffs 

from a twenty-year period that might not have currently been residents or citizens of 

Oklahoma, and that the plaintiffs’ evidence dealt with residence rather than citizenship, 

the materials submitted with the first motion for remand were insufficient. Id. at 771. 

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 The expert’s affidavit submitted with the renewed motion failed to cure the 

fundamental defects of the first motion, because it was “framed in terms of residency, 

not citizenship.” Id. at 774. In this case, by contrast, the extrinsic proof offered by 

the plaintiffs is framed in terms of citizenship, not mere residency. There is 

sufficient additional evidence on which the district court could rely in determining 

citizenship. 

IV. 

 Defendants also challenge the district court’s determination that Lovelace is a 

“significant” local defendant—that is, one “whose alleged conduct forms a 

significant basis for the claims asserted by the proposed plaintiff class” and from 

whom plaintiffs seek “significant relief.” 28 U.S.C. § 1332(d)(4)(A)(i)(II).8

 “CAFA 

itself does not describe the type or character of conduct that would form a 

‘significant basis’ of plaintiffs’ claims or define the term ‘significant relief.’” 

Woods, 771 F.3d at 1265. But to further CAFA’s statutory purposes, “we interpret 

the significant local defendant requirement strictly so that plaintiffs and their 

attorneys may not defeat CAFA jurisdiction by routinely naming at least one state 

citizen as a defendant, irrespective of whether that defendant is actually a primary 

focus of the litigation.” Id. 

8

 Defendants do not challenge Lovelace’s New Mexico citizenship, so no issue 

concerning that factor is before us. 

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 In Woods, we distilled the following guidelines from CAFA’s legislative 

history for determining whether a defendant named in the complaint meets the 

statute’s significant-local-defendant requirements: 

[F]or the local controversy exception to apply there must be at least one real 

defendant . . . whose alleged conduct is central to the class’s claims and 

from whom the class seeks significant relief. . . . [T]he local defendant must 

be a primary focus of the plaintiffs’ claims—not just a peripheral 

defendant. The defendant must be a target from whom significant relief is 

sought by the class (as opposed to just a subset of the class membership), as 

well as being a defendant whose alleged conduct forms a significant basis 

for the claims asserted by the class. 

Id. at 1266 (citation and internal quotation marks omitted). 

 The district court determined that plaintiffs’ complaint adequately alleged that 

Lovelace’s conduct formed a significant basis for the claims the class asserted. In 

addition to reviewing the complaint, it accepted extrinsic evidence from the 

defendants but found this evidence unconvincing. The district court noted: 

[A]lthough Plaintiffs allege that APP was the party responsible for the 

actual overbilling, they also allege Lovelace was a significant player in an 

alleged overbilling scheme. They allege that Lovelace interacted with all of 

the proposed class members by advertising itself as in-network, failing to 

disclose its relationship with APP and APP’s billing practices, treating the 

Plaintiffs, and then benefitting from APP’s overbilling. Indeed, they allege 

that both Lovelace and APP are agents for the other and ratified each 

other’s misconduct. 

J.A., Vol. II at 464. 

 The district court further determined that plaintiffs sought significant relief 

from Lovelace. It found that “Plaintiffs’ complaint makes clear that Lovelace is a 

primary target of litigation and a defendant from whom the entire class of plaintiffs 

seeks relief”; that the plaintiffs alleged that defendants were “jointly and severally 

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liable for all damages and that each are directly liable; are liable for aiding, abetting, 

participating in, and ratifying the other parties’ conduct; are vicariously liable for 

each other’s misconduct; and are liable as members of a joint enterprise”; and that 

plaintiffs’ five claims for relief were each asserted against both Lovelace and APP 

for their joint overbilling scheme. Id. at 467-68 (internal quotation marks omitted). 

A. 

 To determine whether the “significant basis” element is met, we examine 

whether the local defendant’s conduct “forms a significant basis for the claims 

asserted by the class.” Woods, 771 F.3d at 1266. Defendants argue that “[o]nly 

APP’s alleged conduct,” not Lovelace’s, “forms a significant basis of Plaintiffs’ 

claims.” Aplt. Opening Br. at 17. But we agree with the district court’s conclusion 

that “Lovelace is a real target of the litigation,” based on Lovelace’s conduct 

identified in the complaint. J.A., Vol. II at 465. Although APP allegedly committed 

the overbilling, APP could not have done so “had Lovelace not advertised itself as innetwork, treated the patients, contracted with APP, and failed to disclose to patients 

its relationship with APP.” Id. at 466. 

 The complaint thoroughly describes Lovelace’s role in the alleged scheme, 

which includes alleged misrepresentations and material omissions made by Lovelace. 

It alleges that “Lovelace holds out to the public that it is an in-network provider for 

numerous insurance plans” but that Lovelace does not disclose numerous features of 

its relationship with APP to patients, including the fact that “they may end up paying 

more than the in-network rate for services provided by APP employees.” J.A., Vol. I 

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at 33-34. The complaint further alleges that although “ostensibly, Lovelace takes the 

position that such overbilling should not be taking place,” in reality, “Lovelace 

benefits from APP’s overbilling” and “Lovelace and APP are part of a joint 

enterprise” and “acted as one another’s agents in the conduct described.” Id. at 34. 

In addition, each of the claims for relief asserts that the potential plaintiffs are 

entitled to recover from Lovelace, and that the defendants are liable for each other’s 

alleged misconduct, and the prayer for relief asks that defendants be found jointly 

and severally liable for all damages. We agree with the district court that the 

language in the complaint satisfies the significant basis element. 

 Defendants cite extrinsic evidence that they claim contradicts the complaint 

and undermines plaintiffs’ claims. Assuming this evidence may be considered in 

determining whether Lovelace is a significant local defendant, the extrinsic evidence 

fails to defeat plaintiffs’ showing concerning that element. 

 First, defendants point to the “Consent to Treatment” forms that Lovelace 

provides to patients. See Aplt. Opening Br. at 25-26. These forms require patients to 

acknowledge (1) that Lovelace has not represented or taken actions to induce the 

patient to believe that the physicians, residents, medical students, and nurses 

providing treatment are Lovelace employees, and (2) that the patient will receive a 

separate bill from the provider. But this language does not notify patients of an 

important fact that forms the gist of plaintiffs’ claims: that patients may end up 

paying more than the in-network rate for services provided by APP employees. 

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 Second, defendants cite testimony from APP’s Rule 30(b)(6) representative 

which indicates that Lovelace did not participate in APP’s billing procedures. But 

the mere fact that APP sent the bills does not show that Lovelace’s conduct, 

including alleged omissions and misrepresentations, fails to form a significant basis 

for plaintiffs’ claims. We therefore conclude that neither item of extrinsic evidence 

undermines the district court’s conclusion that Lovelace is a significant local 

defendant. 

B. 

 Defendants argued in district court that plaintiffs did not seek significant relief 

from Lovelace because their complaint did not plausibly state a claim for relief 

against Lovelace. In evaluating this assertion, the district court stated it was not 

considering the merits of the claims, only whether they sought significant relief. The 

district court then rejected defendants’ argument in part because the claims “d[id] not 

appear frivolous on their face.” J.A., Vol. II at 468. Defendants argue the district 

court should have analyzed the claims under the plausibility standard described in 

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) and Bell Atlantic Corp. v. Twombly, 

550 U.S. 554, 555 (2007), not a frivolousness standard. Defendants then supply an 

analysis of each of plaintiffs’ claims, asserting that each fails to state a claim against 

Lovelace under the Iqbal/Twombly analysis. 

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 Assuming the Iqbal/Twombly standard plays a role in assessing whether 

plaintiffs’ claims seek significant relief from Lovelace,9

 we discern no reversible 

error here. Under that standard, plaintiffs’ allegations need only be sufficient to raise 

their “right to relief above the speculative level.” Twombly, 550 U.S. at 555. “A 

claim has facial plausibility when the plaintiff pleads factual content that allows the 

court to draw the reasonable inference that the defendant is liable for the misconduct 

alleged.” Iqbal, 556 U.S. at 678. Defendants have not shown that plaintiffs’ 

complaint fails the plausibility standard for purposes of our threshold jurisdictional 

analysis. 

 Defendants assert that plaintiffs’ first claim, under the New Mexico Unfair 

Practices Act, N.M. Stat. Ann. §§ 57-12-1 to 26, fails because it “does not allege that 

Lovelace was aware of APP’s alleged misconduct, and therefore could not have 

intentionally misled patients”; because it does not allege that Lovelace made some 

other representation that would become misleading in the absence of a disclosure; 

9

 Whether and how the standard applies to this inquiry seems less than clear. 

See Allen v. Boeing Co., 821 F.3d 1111, 1119 n.8 (9th Cir. 2016) (stating that “for 

purposes of assessing the applicability of [CAFA’s] local controversy exception, we 

can ignore a claim against [the local defendant] only if that claim is immaterial, 

insubstantial, or frivolous on its face,” but alternatively applying the Iqbal/Twombly 

standard to the relevant claim (internal quotation marks omitted)). It has also been 

suggested that rather than applying the federally based Iqbal/Twombly standard to 

such inquiries, a federal court should view the pleadings as a state court (in this case, 

New Mexico) would view them. See Arbuckle Mtn. Ranch of Tex., Inc. v. 

Chesapeake Energy Corp., 810 F.3d 335, 343-44 (5th Cir. 2016) (Elrod, J., 

dissenting). We need not definitively resolve this issue, however, because New 

Mexico’s “notice pleading” rules appear to be at least as liberal to a plaintiff’s 

pleadings as the Iqbal/Twombly standard. See Madrid v. Vill. of Chama, 283 P.3d 

871, 875-76 (N.M. Ct. App. 2012). 

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and because it fails to show that any alleged omission was material. Aplt. Opening 

Br. at 19-20. But the complaint alleges that Lovelace “holds out to the public that it 

is an in-network provider for numerous insurance plans” but “does not state to its 

patients that they may end up paying more than the in-network rate for services 

provided by APP employees.” J.A., Vol. I at 33-34. The complaint states that 

“Lovelace takes the position that such overbilling should not be taking place,” id. at 

34, which could lead a court to reasonably infer that Lovelace is aware that “such 

overbilling” is taking place. The complaint also alleges sufficient facts to show 

materiality, given that plaintiffs chose to obtain care at Lovelace facilities because 

they were informed that Lovelace was an in-network provider under their insurance 

coverage, and their damages flowed from overbilling that exceeded the in-network 

rate. These factual allegations are sufficient to show that plaintiffs’ Unfair Practices 

Act claim seeks significant relief from Lovelace. 

 Defendants assert that plaintiffs’ conversion claim fails against Lovelace 

because any alleged overpayments were made to APP, not Lovelace. The complaint 

alleges, however, that Lovelace and APP operated as a “joint enterprise,” “agreed to 

share their money, property, employees, and time in pursuit of their emergency room 

business,” and “share the profits and losses of the business and they are subject to 

mutual control over the business.” Id. Although a threadbare assertion of “joint and 

several liability” cannot make an otherwise insignificant defendant significant, see 

Woods, 771 F.3d at 1269, where the plaintiffs’ damage claim rests on a claim of joint 

and several liability implicating the local defendant’s own conduct, the significant 

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relief requirement may be satisfied, see Coffey v. Freeport McMoran Copper & Gold, 

581 F.3d 1240, 1244 (10th Cir. 2009). That standard is met here. 

 Defendants assert that plaintiffs’ claim for breach of contract fails against 

Lovelace because their complaint fails to identify the terms of the contract with 

Lovelace that were breached or how Lovelace breached them. Although the facts 

underlying the contractual claim are not particularly well articulated, we cannot say 

that it fails the jurisdictional analysis. A court could reasonably infer from the 

complaint that the “contract” referred to involves the patient’s agreement that 

Lovelace will provide medical services at its facilities, including providing medical 

personnel to perform those services, in consideration of payment by the patient or his 

or her insurance company. As part of this contractual understanding with patients, 

Lovelace represented that it was an in-network provider, but it breached the 

“covenant of good faith and fair dealing,” see J.A., Vol. I at 43, by using medical 

personnel that it knew would overbill patients beyond in-network rates. 

 Defendants assert that plaintiffs’ unjust enrichment claim fails against 

Lovelace because the complaint provides no factual basis to conclude that Lovelace 

retained any benefit from APP’s overbilling. For the reasons discussed concerning 

the conversion claim, supra, the allegations that Lovelace benefitted are sufficient, if 

only barely so. 

 Finally, defendants assert that plaintiffs’ civil conspiracy claim fails against 

Lovelace because (1) the complaint alleges that Lovelace did not believe APP should 

be overbilling patients because such overbilling was barred by Lovelace’s contract 

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with APP, and (2) the complaint fails to state any specific acts Lovelace took in 

furtherance of the alleged conspiracy. Taken in context, the cited allegations assert 

that Lovelace does not disclose to patients that they may end up paying more than innetwork rates for APP’s employees’ services, because “ostensibly, Lovelace takes the 

position that such overbilling should not be taking place,” but that Lovelace 

nevertheless “benefits from APP’s overbilling.” Id. at 34. A reasonable inference 

from these provisions, taken as a whole, is that Lovelace has tacitly agreed to 

continue to represent itself as an in-network provider and to pursue its profitable 

arrangement with APP while turning a blind eye to APP’s overbilling practices, 

which are facilitated by Lovelace’s representations and contractual arrangements 

with patients and insurance companies. This conduct by Lovelace, including 

allegedly misleading omissions made to the public and to patients, facilitates the 

alleged conspiracy. 

 In sum, to the extent a merits-based inquiry is appropriate when deciding the 

remand issue, we cannot say at this stage that plaintiffs’ complaint fails to seek 

significant relief from Lovelace. Finally, in considering Lovelace’s significance as a 

defendant, we must compare its conduct with that of the other defendant, APP. See 

Woods, 771 F.3d at 1266. For the reasons we have identified, Lovelace qualifies as a 

significant local defendant under this comparative analysis. Contrary to defendant’s 

contention, it does not appear that plaintiffs named Lovelace to defeat CAFA 

jurisdiction, or that Lovelace is not “actually a primary focus of the litigation.” Id. at 

1265. 

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V. 

 We affirm the district court’s order of remand. 

Entered for the Court 

Nancy L. Moritz 

Circuit Judge 

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