Source: https://www.classactiondefenseblog.com/category/20class-action-articles/30removal-remand/page/2/
Timestamp: 2019-01-18 09:39:38
Document Index: 482288915

Matched Legal Cases: ['§ 1332', '§ 4', '§ 4', '§ 27', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4']

Removal & Remand Category Archives — Page 2 of 10 — Class Action Defense Blog Published by Michael J. Hassen
Articles Posted in Removal & Remand
CAFA Class Action Defense Cases–Marshall v. H & R Block: Seventh Circuit Reverses Remand Of Class Action To State Court Holding Potential Increase In Liability Rendered Class Action Removable Under CAFA
District Court Erred in Remanding Class Action to State Court because Decertification Order and Dismissal of Co-Defendants Substantially Increased Remaining Defendant’s Liability such that Amended Class Action Complaint did not “Relate Back” to Original Class Action Complaint, Rendering Class Action Removable under Class Action Fairness Act of 2005 (CAFA) Seventh Circuit Holds
Plaintiff filed a putative class action in Illinois state court against various H & R Block companies alleging violations of the state’s Consumer Fraud Act; the class action complaint alleged that defendants “had used deceptive practices to sell ‘Peace of Mind’ insurance against mistakes by H & R Block that increased customers’ tax liabilities.” Marshall v. H & R Block Tax Services, Inc., 564 F.3d 826, 827 (7th Cir. 2009). The state court granted plaintiff’s motion to certify the litigation as a nationwide class action, identifying three classes and defining the defendant class (which it also certified) as “any entity with the names ‘H & R Block’ or ‘HRB’ in its name, or otherwise affiliated or associated with [TSI], and which sold or sells the [Peace of Mind] product.” Id. Eventually all of the defendants were dismissed from the class action except H & R Block Tax Services (TSI), id. “Subsequently, however, the court decertified the defendant class at TSI’s request, leaving TSI, which already was the only defendant, with no class-representative status since there was no longer a defendant class. TSI had asked the court to decertify the plaintiff classes as well, and while the court refused to do so, it did narrow the classes to residents of 13 states.” Id. Defense attorneys removed the class action to federal court under CAFA (Class Action Fairness Act of 2005), id. TSI argued that “decertification of the defendant class had made the case removable under the Class Action Fairness Act because the decertification occurred after the Act’s effective date, and had increased TSI’s potential liability notwithstanding the elimination of claims by residents of 37 states.” Id., at 828. Plaintiff argued that TSI’s liability had not increased because it had been jointly and severally liable for the misconduct of the other H & R Block defendants, id. The district court found that CAFA did not apply and remanded the class action to state court. Id. TSI sought and received leave to appeal the remand order, and the Seventh Circuit reversed.
The Seventh Circuit explained that TSI is the franchisor of the H & R Block retail tax offices – it does not operate them. Marshall, at 828. TSI claimed that, based on the decertification order, its potential liability has increased by $60 million, and argued that “a ruling that increases a defendant’s potential liability may make a case originally filed before the effective date of the Class Action Fairness Act removable if the ruling comes after that date, unless the alteration in the scope of the plaintiff’s claim ‘relates back’ to the original claim.” Id. (citations omitted). The district court remanded the class action to state court because it believed that “only a formal amendment of the complaint could commence a new action for CAFA purposes”; the Circuit Court disagreed, noting that such an interpretation would elevate form over substance. Id. Turning to whether the class action complaint adequately alleged joint and several liability, the Circuit Court concluded that the class action did not meet this test and that plaintiff now sought to “pin the entire liability of all the former members of the defendant class on TSI.” Id., at 829. The Seventh Circuit concluded at page 829, “They may, for all we know, be able to do so, but that will, so far as appears, enlarge TSI’s liability; the plaintiffs have presented no evidence to the contrary.” This significant change in potential liability did not “relate back” to the original class action complaint – “the expansion of potential liability was a surprise.” Id. Accordingly, the district court erred in remanding the class action to state court, id.
CAFA Class Action Defense Cases–Rynearson v. Motricity: Washington Federal Court Remands Class Action Complaint To State Court Holding Defense Failed To Establish Amount In Controversy Under CAFA
Motion to Remand Class Action to State Court Granted because $5 Million Amount in Controversy Required by Class Action Fairness Act (CAFA) not Established because “Cost” of Complying with Possible Injunction not Sufficient to Support Removal Jurisdiction Washington Federal Court Holds
Plaintiff, a citizen of Florida, filed a class action in Washington state court against Motricity, a Delaware corporation with its principle place of business in Washington; the class action complaint alleged that Motricity, which “represents providers of mobile content in dealing with wireless carriers whose networks and billing services the providers use” and “receives a fee per content transaction billed to cellular telephone users,” violated the Washington Consumer Protection Act by “placing unauthorized charges for mobile content on customers’ bills.” Rynearson v. Motricity, Inc., 601 F.Supp.2d 1238, 1239 (W.D.Wash. 2009). The class action sought damages, treble damages, restitution, interest, attorney fees and costs, as well as injunctive and declaratory relief. Id., at 1239-40. Defense attorneys removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA), id., at 1240. Plaintiff moved to remand the class action to state court, arguing that the amount in controversy did not exceed $5 million. Id. The district court granted plaintiff’s motion
The district court noted that plaintiff did not contest that numerosity and minimal diversity existed under CAFA; rather, plaintiff focused on the CAFA requirement that the amount in controversy exceed $5 million. Rynearson, at 1240. The federal court explained at page 1240, “The burden of proving the amount in controversy depends on what the plaintiff has pleaded: (1) when the complaint does not specify an amount of damages, the party seeking removal must prove the amount in controversy by a preponderance of the evidence; (2) when the complaint alleges damages in excess of the jurisdictional requirement, the requirement is presumptively satisfied unless it appears to a ‘legal certainty’ that the claim is actually for less than the amount in controversy requirement; and, (3) when the complaint alleges damages less than the jurisdictional requirement, the party seeking removal must prove the amount in controversy with legal certainty.” (Citation omitted.) In this case, the class action complaint did not seek a specific amount of damages so defendant was required to prove that the amount in controversy had been met, id. The thrust of the defense argument was that the cost of developing an “access code” system to comply with a possible injunction the district court may issue would exceed $5 million, thereby satisfying the amount in controversy requirement. Id. The district court disagreed, holding that the defendant’s interpretation of the class action complaint was flawed because “[t]he plain language of the complaint does not request Defendant to implement its own access code system.” Id. Accordingly, the federal court lacked subject matter jurisdiction over the class action warranting remand of the class action to state court. Id., at 1240-41.
CAFA Class Action Defense Cases–In re Hannaford Bros.: First Circuit Affirms Remand Of Class Action Holding Home State Exception To CAFA (Class Action Fairness Act) Jurisdiction Applies
Class Action on Behalf of Florida Citizens Against Florida Corporation, Removed to Federal Court under Class Action Fairness Act (CAFA), Properly Remanded to State Court because Home State Exception to CAFA Jurisdiction Applies First Circuit Holds
Plaintiff filed a class action in Florida state court against Kash N’ Karry Food Stores (a chain of grocery stores in Florida) alleging “alleging that Kash N’ Karry had failed to adopt adequate security measures to protect its customers’ credit card information.” In re Hannaford Bros. Co. Customer Data Security Breach Litig., 564 F.3d 75 (1st Cir. 2009) [Slip Opn., at 3]. According to the allegations underlying the class action, a computer hacker stole from defendant the credit and debit card information of approximately 1.6 million Kash N’ Karry customers, and limited the class action’s definition to Florida residents, id., at 3-4. Defense attorneys removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA), and the Judicial Panel on Multidistrict Litigation coordinated plaintiff’s class action for pretrial purposes with two dozen other class actions in the District of Maine. Id., at 4. The other 24 class actions had been filed against entities that were related to Kash N’ Karry; specifically, its sister corporation Hannaford Brothers, and their common parent company, Delhaize America. Id. Plaintiff moved to remand his class action to state court under the home state exception to CAFA jurisdiction; the district court granted plaintiff’s motion and the First Circuit gave defendant leave to appeal. Id. The Circuit Court stated that this case “presents an issue of first impression for this circuit regarding the application of the home state exception to federal jurisdiction under [CAFA].” Id., at 2. Defense attorneys argued that the class action complaint had been drafted to defeat CAFA jurisdiction “in violation of congressional intent”; plaintiff responded that the home state exception to CAFA jurisdiction applied and, accordingly, that the district court order remanding the class action to state court was correct. Id. The Circuit Court affirmed the remand of the class action to state court, holding that the class action complaint fell squarely within the home state exception to CAFA jurisdiction.
CAFA’s home state exception “requires a federal court to decline to exercise jurisdiction if at least two-thirds of the members of all proposed plaintiff classes in the aggregate and the primary defendants are citizens of the state where the action was originally filed.” In re Hannaford, at 2 (citing 28 U.S.C. § 1332(d)(4)(B)). The First Circuit observed that plaintiff’s class action complaint limits the scope of the class to Florida citizens, and is brought against a single corporation, Kash N’ Karry, which also is a Florida citizen. Id. The district court remanded the class action to state court on the basis of the home state exception, and the Circuit Court affirmed, rejecting defense attorney claims that “the application of CAFA’s home state exception depends on a broader assessment of the claims brought by others who do not fall within the complaint’s class definition or of the claims available to the class against other possible defendants.” Id.
Posted in: Class Action Court Decisions, Class Action Fairness Act (CAFA), Multidistrict Litigation, Removal & Remand and Uncategorized
Arbitration Class Action Defense Cases–Vaden v. Discover Bank: Supreme Court Reverses District Court Order Under Federal Arbitration Act (FAA) Compelling Arbitration Of Class Action Counterclaims On Individual Basis
FAA does not Enlarge Federal Court Jurisdiction but Simply Permits District Court to Entertain Petition to Compel Arbitration where Jurisdiction Exists but for Arbitration Clause, and while District Courts may “Look Through” Pleadings to Decide Petition under FAA Section 4, Counterclaims are not Removable if Complaint is not Subject to Federal Court Jurisdiction Supreme Court Holds
Discover Card filed a “garden-variety, state-law-based contract action” against a cardholder in Maryland state court to collect $10,610.74, plus interest and attorney fees; the cardholder agreement provided for arbitration of “any claim or dispute” between Discover and the cardholder, and included a class action waiver in that it prohibited “any claims as a representative or member of a class.” Vaden v. Discover Bank, 129 S.Ct. 1262, 1268-69 and n.2 (2009). The cardholder answered and filed a putative class action counterclaim that also asserted only state law claims, id., at 1268. According to the allegations underlying the class action counterclaim, “Discover’s demands for finance charges, interest, and late fees violated Maryland’s credit laws.” Id. Neither Discover nor the cardholder invoked the arbitration clause in the cardholder agreement. Id., at 1268-69. In response to the class action counterclaim, Discover petitioned the federal court for an order compelling arbitration under § 4 of the Federal Arbitration Act (FAA), id., at 1269 (9 U.S.C. § 4). Though the class action claims were brought under state law, Discover argued that the counterclaims were governed by § 27(a) of the Federal Deposit Insurance Act (FDIA), which “prescribes the interest rates state-chartered, federally insured banks like Discover can charge, ‘notwithstanding any State constitution or statute which is hereby preempted.’” Id. Discover’s argument was that the cardholder’s state law claims were preempted by the FDIA and, accordingly, the federal court had jurisdiction to rule on Discover’s petition under the FAA. Id. The district court granted Discover’s petition and ordered arbitration of the cardholder’s individual claims. Id. The cardholder appealed: the Fourth Circuit questioned whether the district court had federal question jurisdiction over Discover’s FAA petition; the Circuit Court remanded the case to the district court with instructions to “‘look through’ the § 4 petition to the substantive controversy between the parties” and to make “an express determination whether that controversy presented ‘a properly invoked federal question.’” Id. (citations omitted). On remand, the cardholder conceded that his state law claims were completely preempted by the FDIA because Discover was a federally insured bank; based on this concession, the district court held it had federal-question jurisdiction and again granted the petition compelling arbitration. Id. This time, the Fourth Circuit affirmed. Id. The Supreme Court reversed.
Under Section 4 of the FAA, a district court may consider a petition to compel arbitration “if the court would have jurisdiction, ‘save for [the arbitration] agreement,’ over ‘a suit arising out of the controversy between the parties.’” Vaden, at 1267-68. The petition for certiorari presented the Supreme Court with two questions “concerning a district court’s subject-matter jurisdiction over a § 4 petition”: First, “Should a district court, if asked to compel arbitration pursuant to § 4, ‘look through’ the petition and grant the requested relief if the court would have federal-question jurisdiction over the underlying controversy?” And second, “[I]f the answer to that question is yes, may a district court exercise jurisdiction over a § 4 petition when the petitioner’s complaint rests on state law but an actual or potential counterclaim rests on federal law?” Id., at 1268. The High Court summarized its holding at page 1268 as follows, “A federal court may ‘look through’ a § 4 petition and order arbitration if, ‘save for [the arbitration] agreement,’ the court would have jurisdiction over ‘the [substantive] controversy between the parties.’” But the Supreme Court reversed the Fourth Circuit’s decision because it had “misidentified the dimensions of ‘the controversy between the parties’ by ignoring that the lawsuit originated with “Discover’s claim for the balance due on Vaden’s account” – “Given that entirely state-based plea and the established rule that federal-court jurisdiction cannot be invoked on the basis of a defense or counterclaim, the whole ‘controversy between the parties’ does not qualify for federal-court adjudication.” Id. Accordingly, the Supreme Court reversed.
Posted in: Arbitration, Class Action Court Decisions, Removal & Remand and Uncategorized
Class Action Premised on Violations of “Best Execution” Duty Fell within Scope of SLUSA (Securities Litigation Uniform Standards Act of 1998) so Properly Removed and then Properly Dismissed because Time-Barred and no Proof of Injury Seventh Circuit Holds
Plaintiffs, former investors in portfolio managed by Fidelity Management & Research and FMR Co. (collectively “Fidelity”), filed a class action in state court against Fidelity alleging violations of state law and breach of contract based on the allegation that “some of [Fidelity’s] employees placed trades through Jeffries & Co.” because “Jeffries bribed the employees to send business its way.” Kurz v. Fidelity Management & Research Co., ___ F.3d ___ (7th Cir. February 23, 2009) [Slip Opn., at 1-2]. The rules of the National Association of Securities Dealers (NASD) prohibit trading through a broker “paid under the table” as violative of the duty of “best execution,” that is, failing to get “the optimal combination of price, speed, and liquidity for a securities trade.” Id., at 2 (citation omitted). The conduct underlying the class action is covered by regulations under the Securities and Exchange Act of 1934, the Investment Advisers Act of 1940 (IAA) and the Investment Company Act of 1940 (ICA). Id. The SEC commenced proceedings against Fidelity under the IAA and the ICA, and Fidelity entered into a consent decree governing “how future trades will be placed and executed.” Id. In response to plaintiffs’ class action, Fidelity argued that the employee misconduct involved securities laws and, accordingly, removed the class action to federal court under the Securities Litigation Uniform Standards Act of 1998 (SLUSA). Id., at 2-3. In essence, defense attorneys argued that, according to the allegations in the class action, Fidelity “had either misrepresented that best execution would be achieved, or failed to disclose that best execution was not being achieved,” and that under either scenario “the wrong took place ‘in connection with the purchase or sale’ of covered securities because it affected trades in those securities (and potentially the net price obtained).” Id., at 3-4. Plaintiffs moved to remand the class action to state court; the district court agreed with Fidelity that the class action fell within the scope of SLUSA and denied the motion. Id., at 4. The district court subsequently entered judgment in favor of Fidelity on the class action complaint on the grounds that plaintiffs “filed suit after the federal statute of limitations had run and also was unable to show injury.” Id. The Seventh Circuit affirmed.
The Seventh Circuit first held that removal was proper. Plaintiffs argued that the class action was based on contract law, and that further the duty of “best execution” is not one “in connection with the purchase or sale” of securities; accordingly, plaintiffs insisted that the class action did not fall within the scope of SLUSA. Kurz, at 4. The Circuit Court concluded “[t]hat argument is frivolous,” id., at 4-5 (citations omitted). The Seventh Circuit recognized that a true contract claim would fall outside of SLUSA, but no contract existed in this case. Id., at 5. The class action complaint did not allege that Fidelity breached any promise to plaintiffs; rather, the class action asserted that plaintiffs were third-party beneficiaries of a contract between Fidelity and Jeffries. Id. Moreover, plaintiffs could not produce that contract, and the Circuit Court observed at page 5 that “for all we know none exists.” On the other hand, a securities law violation would support plaintiffs’ class action claims. Id., at 6. Put simply, “How Fidelity discharges its duties toward investors is a subject requiring disclosure under federal law.” Id. And even though Fidelity’s top managers and board did not know about the misconduct, and therefore could not have acted with the necessary scienter to support a securities liabilities claim, the individual employees did act with scienter and Fidelity may be derivatively liable for their misconduct. Id., at 6-7. In sum, the Seventh Circuit held that the district court correctly determined that plaintiffs had either a federal securities claim or nothing. Id., at 7. Assuming it was the former, plaintiffs’ class action advanced “a bad securities claim, given the expiration of the federal statute of limitations and the class’s inability to show loss causation.” Id. (citation omitted). Accordingly, the Circuit Court affirmed the judgment.
Posted in: Class Action Court Decisions, PSLRA/SLUSA Class Actions, Removal & Remand and Uncategorized
CAFA Class Action Defense Cases–McLoughlin v. People’s United: Connecticut Federal Court Denies Motion To Remand Class Action To State Court Holding Removal Jurisdiction Exists Under Class Action Fairness Act (CAFA)
Class Action Properly Removed to Federal Court under CAFA (Class Action Fairness Act of 2005) because Defendants Established by Preponderance of the Evidence that Class Action Placed more than $5 Million in Controversy Connecticut Federal Court Holds
Plaintiffs filed a class action in Connecticut state court against Bank of New York Mellon (“Mellon”) and People’s United Bank (“Bank”) alleging negligence, invasion of privacy, breach of fiduciary duty, and violations of Connecticut’s Unfair Trade Practices Act (CUTPA); the class action complaint asserted that Mellon lost electronic data belong to Bank customers. McLoughlin v. People’s United Bank, Inc., 586 F.Supp.2d 70, 71 (D.Conn. 2008). According to the allegations underlying the class action, the Bank entered into a contract with Mellon to store customer data and records electronically, and Mellon created backup tapes of this information which were later lost. Id. The class action “alleged damages [that] include ‘improperly charged account fees,’ ‘the costs of remedying the [data] breach through the purchase of identity theft protection and monitoring of accounts to ensure against identity theft,’ damages for ‘unnecessary and illegal intrusion into their privacy rights,’ and ‘mental and emotional distress’ as well as punitive damages and attorney’s fees.” Id., at 71-72. Defense attorneys removed the class action to federal court pursuant to the Class Action Fairness Act of 2005 (CAFA); plaintiffs moved to remand the class action to state court. Id., at 72. Plaintiffs argued that the $5 million amount in controversy had not been met because the class may consist of only 450,000 people (whereas defendants asserted up to 10 million people may have been affected). Id. The district court refused to remand the class action to state court.
After summarizing removal jurisdiction under CAFA, the and defendants’ burden of establishing that removal jurisdiction exists, the district court observed that, because the class action complaint failed to specify the amount of damages sought, Mellon and the Bank were required to show by a preponderance of the evidence that the amount in controversy exceeds $5 million. McLoughlin, at 72. The federal court observed that this was “the only point of dispute,” id., at 72, and the parties were entitled to introduce evidence to establish the amount in controversy, id., at 72-73. Defendants introduced the only evidence on this issue, which showed that 556,000 Bank customers and a total of 10 million people were affected. Id., at 73. Also, plaintiffs’ counsel had stated that he was seeking “seeking seven years of credit monitoring, credit insurance, and other damages for his clients.” Id. Defendants also introduced evidence that Experian charges $14.95 per month for credit monitoring services, id. Plaintiffs did not challenge these figures, and the district court explained that “at $14.95 a month, for seven years, the amount in controversy for each class member would be $1,255.80.” Id. The amount in controversy for 10 million class members, then, would be more than $12 billion, id. Accordingly, defendants had adequately established removal jurisdiction under CAFA, and the district court denied plaintiffs’ motion to remand the class action to state court. Id., at 74.
CAFA Class Action Defense Cases–Ava Acupuncture v. State Farm: New York Federal Court Denies Motion To Remand Class Action To State Court Holding “Reasonably Probable” $5,000,000 Was At Stake And Plaintiffs Failed To Establish Local Controversy Exception
Class Action Properly Removed to Federal Court under CAFA (Class Action Fairness Act) because State Farm Declaration Established “Reasonable Probability” that Amount in Controversy Exceeded $5 Million and Plaintiffs Failed to Establish Relief Sought Against “Significant” Local Defendant New York Federal Court Holds
Plaintiffs, medical providers who had “been assigned No-Fault medical reimbursement claims by eligible injured persons (‘EIPs’),” filed a class action in New York state court against various defendants, including State Farm, alleging “that defendant insurers have fraudulently failed to pay statutorily mandated medical benefits under New York’s No-Fault Insurance Law” and that, together with “their legal counsel and special investigation units (‘SIUs’),” violated various New York state laws. Ava Acupuncture P.C. v. State Farm Mutual Auto. Ins. Co., ___ F.Supp.2d ___, 2008 WL 5170186, *1 (S.D.N.Y. December 9, 2008). According to the allegations underlying the class action, the defendants engaged in “harassing, abusive verification and litigation tactics” and used “preset numeric targets to limit claim payouts,” and allegedly bribed individuals at the Suffolk County District Attorney’s office. Id. Defense attorneys for State Farm and two other defendants removed the class action to federal court, asserting removal jurisdiction existed under the Class Action Fairness Act of 2005 (CAFA), id. In response, plaintiffs voluntarily dismissed their class action claims against the two other removing defendants, leaving State Farm as “the only remaining removing defendant,” and then filed a motion to remand the class action back to state court. Id. The district court denied the motion.
Plaintiffs argued that the class action should be remanded to state court for two reasons: (1) because State Farm failed to establish that the amount in controversy exceeded $5,000,000, and (2) because the class action falls within the scope of CAFA’s “local controversy” exception. Ava Acupuncture, at *1. After summarizing New York’s no-fault insurance law and federal subject matter jurisdiction requirements of CAFA, see id., at *2, as well as the general rules for calculating the amount in controversy and summarizing the “local controversy” exception to CAFA removal jurisdiction and the burden of the party opposing removal to establish the applicability of exceptions to CAFA removal, see id., at *3, the district court turned to whether the removing parties had met their burden of establishing federal court jurisdiction within a “reasonable probability,” id., at *2. While the class action complaint outlined damages “in only the most general terms, indicating that the exact number of class members will be ascertained through discovery and review of defendants’ records.,” and while the class action failed to “plac[e] a value on the object of the litigation,” the complaint did allege that “thousands” of individuals would be covered by the class action and attacked every denial of insurance coverage by State Farm over a 6-year period. Id., at *4. To meet its burden, State Farm submitted as evidence a declaration stating that “over the last six years State Farm has denied $40,265,558 worth of claims arising out of investigations conducted by its SIU investigators” and that “the amount of unpaid denied claims since 2003 far exceeds $5,000,000.” Id. The district court rejected plaintiffs’ objections to this declaration and concluded that the $5 million threshold was “easily” met. Id., at *4-*5. The federal court therefore turned to the local controversy exception.