Opinion ID: 2828940
Heading Depth: 3
Heading Rank: 2

Heading: CAFA’s Local Controversy Exception

Text: CAFA contains several exceptions to its grant of removal jurisdiction, one of which is the local controversy exception. See Serrano, 478 F.3d at 1022–23. The purpose of the local controversy exception is “to respond to concerns that class actions with a truly local focus should not be moved to federal court under [CAFA] because state courts have a strong interest in adjudicating such disputes. At the same time, this is a narrow exception that was carefully drafted to ensure that it does not become a jurisdictional loophole.” S. Rep. No. 109-14, at 39 (2005), reprinted in 2005 12 BRIDEWELL-SLEDGE V. BLUE CROSS OF CAL. U.S.C.C.A.N. 3; see also Benko v. Quality Loan Serv. Corp., 789 F.3d 1111, 1116 (9th Cir. 2015) (“We recognize that the ‘local controversy exception’ is a narrow one.”); Coleman v. Estes Express Lines, Inc., 627 F.3d 1096, 1100 (9th Cir. 2010) (per curiam) (“[CAFA’s local controversy exception] is intended to ‘identify . . . a controversy that uniquely affects a particular locality’ and to ensure that it is decided by a state rather than a federal court.” (quoting Evans v. Walter Indus., 449 F.3d 1159, 1163–64 (11th Cir. 2006))). CAFA’s local controversy exception, 28 U.S.C. § 1332(d)(4), is as follows: A district court shall decline to exercise jurisdiction under [CAFA] . . . (A)(i) over a class action in which– (I) greater than two-thirds of the members of all proposed plaintiff classes in the aggregate are citizens of the State in which the action was originally filed; (II) at least 1 defendant is a defendant– (aa) from whom significant relief is sought by members of the plaintiff class; (bb) whose alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class; and BRIDEWELL-SLEDGE V. BLUE CROSS OF CAL. 13 (cc) who is a citizen of the State in which the action was originally filed; and (III) principal injuries resulting from the alleged conduct or any related conduct of each defendant were incurred in the State in which the action was originally filed; and (ii) 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[.] If the above conditions are met, a district court is required to remand the class action back to the originating state court. See Benko, 789 F.3d at 1116; Serrano, 478 F.3d at 1022. “[T]he burden of proof for establishing the applicability of an exception to CAFA jurisdiction rests on the party seeking remand, which in this case, as in most cases, is the plaintiff.” Mondragon v. Capital One Auto Fin., 736 F.3d 880, 883 (9th Cir. 2013). Moreover, “no antiremoval presumption attends cases invoking CAFA, which Congress enacted to facilitate adjudication of certain class actions in federal court.” Dart Cherokee Basin Operating Co. v. Owens, 135 S. Ct. 547, 554 (2014). To the contrary, “CAFA should be read ‘with a strong preference that interstate class actions should be heard in a federal court if properly removed by any defendant.’” Allen, 784 F.3d at 633 (quoting Dart Cherokee, 135 S. Ct. at 554). 14 BRIDEWELL-SLEDGE V. BLUE CROSS OF CAL. The district court erred in its remand orders by applying a “strong presumption against removal jurisdiction.” Because we review the district court’s remand orders de novo, see Corber, 771 F.3d at 1222, we do not apply this presumption in our analysis below. C. Applicability of the Local Controversy Exception Defendants conceded below and do not challenge on appeal that both Bridewell-Sledge and Crowder satisfy the first three requirements of CAFA’s local controversy exception: (1) that more than two-thirds of the plaintiffs are citizens of California; (2) that at least one defendant from whom significant relief is sought and whose alleged conduct forms a significant basis for the claims is a California citizen; and (3) that the principal injuries about which Plaintiffs complain were suffered in California. Therefore, only the fourth prong of CAFA’s local controversy exception – that no similar class action has been filed against any of the defendants in the preceding three years – is at issue in this appeal. Defendants argue that the local controversy exception should not apply to either Bridewell-Sledge or Crowder, and, therefore, both should remain in federal court. For their part, Plaintiffs argue that both Bridewell-Sledge and Crowder should be remanded to state court pursuant to the local controversy exception. Specifically, Plaintiffs argue that the state court’s consolidation of Bridewell-Sledge and Crowder prior to removal resulted in a single consolidated class action, and, as such, no “other class action” had been filed during the three-year period preceding the filing of the consolidated class action. We agree with Plaintiffs. BRIDEWELL-SLEDGE V. BLUE CROSS OF CAL. 15 Although there does not appear to be any circuit court case on this issue, several district courts have held that “under certain circumstances, where two actions are consolidated into a single action, state-ordered consolidation may affect jurisdiction and removability.” In re MTBE Prods. Liab. Litig., 399 F. Supp. 2d 340, 353 (S.D.N.Y. 2005); accord City of Oakland v. Abend, No. C-07-2142 EMC, 2007 WL 2023506, at  (N.D. Cal. July 12, 2007); Lakewood Prairie, LLC v. Ibarra Concrete Co., No. CIV.A. 08 C 1200, 2008 WL 3982510, at  (N.D. Ill. May 27, 2008); see also, e.g., Cottman Transmission Sys., LLC v. Bence, No. CIV.A. 03-5467, 2004 WL 98594, at  (E.D. Pa. Jan. 15, 2004) (collecting cases). In particular, these courts have found that state court consolidation will affect the district court’s analysis of removal jurisdiction where the state court’s consolidation order “destroys the identity of each suit and merges them into one.” Abend, 2007 WL 2023506, at ; see also Bence, 2004 WL 98594, at  (determining that state court consolidation affected the district court’s removal jurisdiction analysis where the consolidation order “makes clear that the combined actions are to be treated as if they had been originally commenced as a single action” (internal quotation marks and citation omitted)). Defendants argue that these cases are distinguishable from the present appeal because in each of these cases, the effect of the state court’s consolidation was to create federal jurisdiction, not to destroy it. We do not find Defendants’ distinction meaningful. State court consolidation should not be treated as a one-way street where it only affects federal jurisdiction if it creates federal jurisdiction as opposed to nullifying federal jurisdiction. Prior to removal, the state trial court consolidated Bridewell-Sledge and Crowder “for all purposes.” Under California law, when two actions are consolidated “for all 16 BRIDEWELL-SLEDGE V. BLUE CROSS OF CAL. purposes,” “the two actions are merged into a single proceeding under one case number and result in only one verdict or set of findings and one judgment.” Hamilton, 998 P.2d at 415; accord Sanchez v. Superior Court, 250 Cal. Rptr. 787, 789 (Cal. Ct. App. 1988) (“[T]he pleadings are regarded as merged, one set of findings is made, and one judgment is rendered.”). And “the cases are to be treated as if the causes had been united originally.” McClure, 205 P.2d at 20 (internal quotation marks and citation omitted). This California law controls because “we look to state law to determine when an action has been commenced under CAFA.” McAtee v. Capital One, F.S.B., 479 F.3d 1143, 1145 (9th Cir. 2007). Accordingly, we conclude that under these circumstances, when examining whether we have federal jurisdiction over Bridewell-Sledge and Crowder under CAFA, it is necessary to view Bridewell-Sledge and Crowder as a single consolidated class action that was united originally, rather than as two separate class actions filed at different times. Once it is recognized that we’re dealing with one consolidated case, the applicability of CAFA’s local controversy exception becomes clear. When viewed as a single consolidated class action that was filed on October 20, 2011, it is undisputed that no other similar class action was filed against any of the defendants during the preceding threeyear period.2 Accordingly, CAFA’s local controversy 2 In their briefing, Defendants refer to Strong v. Blue Cross of California – a similar class action involving the same named plaintiffs, defendants, and lawyers that was pending in state court at the time the complaints in Bridewell-Sledge and Crowder were filed. Defendants conceded below that the Strong action was filed on December 28, 2007, which is more than three years prior to October 20, 2011 – the date that the Bridewell-Sledge and Crowder complaints were filed. Therefore, the Strong action does not BRIDEWELL-SLEDGE V. BLUE CROSS OF CAL. 17 exception applies to the Bridewell-Sledge/Crowder consolidated class action, and the district court was required to remand the entire consolidated class action to state court. See 28 U.S.C. § 1332(d)(4)(A); Benko, 789 F.3d at 1116; Serrano, 478 F.3d at 1022. Defendants argue that the state court’s consolidation of Bridewell-Sledge and Crowder for all purposes does not affect the court’s CAFA analysis because, they contend, the relevant inquiry under the fourth prong of the local controversy exception looks to the filing dates of the original complaints, and at that time the complaints were two separate actions. We agree with Defendants that the relevant date under the fourth prong is the date when the actions were originally filed, and not some later date, such as the date when the two actions were consolidated. See McAtee, 479 F.3d at 1146 (“[F]or the purpose of determining CAFA’s effective date, an action is commenced under California law when the original complaint in the action is filed . . . .”). However, Defendants’ argument fails to consider that when two actions are consolidated “for all purposes” under California law, “the cases are to be treated as if the causes had been united originally.” McClure, 205 P.2d at 20 (internal quotation marks and citation omitted); accord Kropp v. Sterling Sav. & Loan Ass’n, 88 Cal. Rptr. 878, 885 (Cal. Ct. App. 1970) (“[T]he actions are viewed as if the same plaintiff or plaintiffs had filed a single complaint on joined causes of action against the same defendant or defendants.” (internal quotation marks and citation omitted)); see also McAtee, 479 F.3d at 1145 (“[W]e look to state law to determine when an action has been commenced under affect the applicability of the local controversy exception to the BridewellSledge/Crowder consolidated class action. 18 BRIDEWELL-SLEDGE V. BLUE CROSS OF CAL. CAFA.”). Thus, when we examine the relevant filing dates under the fourth prong of CAFA’s local controversy exception, we should treat the Bridewell-Sledge and Crowder complaints as if one single complaint had been filed on October 20, 2011. In addition, we do not find persuasive Defendants’ reliance on Marple v. T-Mobile Cent., LLC, No. 10-cv-00954NKL, 2011 WL 300162 (W.D. Mo. Jan. 27, 2011) and Gibo v. U.S. Nat’l Ass’n, No. 12-00514 SOM-RLP, 2013 WL 363140 (D. Haw. Jan. 29, 2013). Neither case involved the consolidation of multiple class actions into a single action by a state court prior to removal. Marple merely involved a consolidation by a federal district court after removal for the purposes of “‘pretrial proceedings.’” 2011 WL 300162, at . Gibo did not involve any consolidation at all, either by the state court or the federal court.3 See 2013 WL 363140, at –7; Lima, 2013 WL 1296757, at . Further, in discounting the effect of the state court’s consolidation of Bridewell-Sledge and Crowder prior to removal, the district court below relied on Sherman v. Mantle Oil & Gas, LLC, No. CIV.A. 10-2774, 2011 WL 130240 (E.D. La. Jan. 14, 2011). We also find Sherman inapt because it involved a different factual scenario – not as here, the consolidation for all purposes of two state actions prior to removal. 3 In addition, Gibo is a findings and recommendations issued by a magistrate judge. See 2013 WL 363140 at . When the district court adopted the magistrate judge’s recommendations, it declined to adopt the magistrate’s recommendations regarding the fourth prong of CAFA’s local controversy exception. See Lima v. Deutsche Bank Nat. Trust Co., No. 12-00509 SOM RLP, 2013 WL 1296757, at  (D. Haw. Mar. 29, 2013). BRIDEWELL-SLEDGE V. BLUE CROSS OF CAL. 19 D. CAFA’s Legislative History Defendants argue that we should consult CAFA’s legislative history in determining whether there is federal jurisdiction over the Bridewell-Sledge/Crowder consolidated class action. Even assuming it were necessary to consult the legislative history, CAFA’s legislative history supports remanding the consolidated class action pursuant to the local controversy exception, and not the position taken by Defendants. The legislative history shows that the purpose of the local controversy exception is “to ensure that state courts can continue to adjudicate truly local controversies in which some of the defendants are out-of-state corporations.” S. Rep. 109-14, at 28. Defendants concede that Bridewell-Sledge and Crowder satisfy the first three requirements of the local controversy exception, meaning that (1) more than two-thirds of the plaintiffs are citizens of California;4 (2) at least one defendant from whom significant relief is sought and whose alleged conduct forms a significant basis for the claims is a California citizen; and (3) the principal injuries about which plaintiffs complain were suffered in California. A consolidated class action involving primarily California plaintiffs and California defendants, with only one defendant being an out-of-state corporation, and involving injuries suffered in California constitutes a controversy local to California. Therefore, allowing a California state court to continue to adjudicate that consolidated class action would be entirely in accordance with the purpose of CAFA’s local controversy exception. 4 Indeed, Defendants concede that all of the plaintiffs are California citizens. 20 BRIDEWELL-SLEDGE V. BLUE CROSS OF CAL. We recognize that the Senate Report provides: “[I]f a controversy results in the filing of multiple class actions, it is a strong signal that those cases may not be of the variety that th[e local controversy] exception is intended to address.” S. Rep. 109-14, at 40. But, the Senate Report goes on to explain that the purpose of the fourth prong of the local controversy exception is “to ensure that overlapping or competing class actions or class actions making similar factual allegations against the same defendant that would benefit from coordination are not excluded from federal court by the Local Controversy Exception and thus placed beyond the coordinating authority of the Judicial Panel on Multidistrict Litigation.” Id. at 41 (emphasis added). Elsewhere the Senate Report explains: When . . . similar, overlapping class actions are filed in State courts of different jurisdictions, there is no way to consolidate or coordinate the cases. The “competing” class actions must be litigated separately in an uncoordinated, redundant fashion because there is no state court mechanism for consolidating state court cases. The result is enormous waste–multiple judges of different courts must spend considerable time adjudicating precisely the same claims asserted on behalf of precisely the same people. As a result, state courts and class counsel may “compete” to control the cases, often harming all the parties involved. In contrast, when overlapping cases are pending in different federal courts, they can be consolidated under one single judge to promote judicial efficiency and ensure BRIDEWELL-SLEDGE V. BLUE CROSS OF CAL. 21 consistent treatment of the legal issues involved. Id. at 23 (footnote omitted); see also id. at 3 (“Multiple class action cases purporting to assert the same claims on behalf of the same people often proceed simultaneously in different state courts, causing judicial inefficiencies and promoting collusive activity.”). The above language shows that the purpose of the fourth prong of the local controversy exception and an overall purpose of CAFA is to ensure that similar, overlapping class actions do not proceed before different state courts in an uncoordinated, redundant fashion resulting in inefficiencies. Thus, CAFA sought to create a federal forum where these cases could be coordinated and consolidated before one judge to promote judicial efficiency. Bridewell- Sledge and Crowder are similar, overlapping class actions. However, prior to removal, they had been consolidated into a single class action proceeding before one judge that would result in a single verdict and a single judgment. Allowing that consolidated class action to proceed in state court is entirely consistent with CAFA’s goal of ensuring that overlapping class actions “be consolidated under one single judge to promote judicial efficiency and ensure consistent treatment of the legal issues involved.” Id. at 23. Defendants fail to provide any further judicial efficiency that could be obtained by removal to federal court. Finally, Defendants note that the primary purpose of CAFA is ensuring “‘[f]ederal court consideration of interstate cases of national importance.’” Standard Fire Ins. Co. v. Knowles, 133 S. Ct. 1345, 1350 (2013) (quoting Class Action Fairness Act of 2005, Pub. L. No. 109–2, 119 Stat. 5). This is true. However, Defendants fail to explain how the present consolidated class action is a case of national importance. To 22 BRIDEWELL-SLEDGE V. BLUE CROSS OF CAL. the contrary, the present consolidated class action appears to be largely a local California controversy involving routine employment discrimination claims arising solely under California law. In sum, CAFA’s legislative history supports the conclusion that the local controversy exception applies to the present consolidated class action, and that the BridewellSledge/Crowder consolidated class action should be remanded to state court.