Court Opinion

ID: 985422
Source: CourtListenerOpinion
Date Created: 2013-07-01 19:51:29.577677+00
Date Added: 2024-06-11T13:06:05.792036
License: Public Domain

PRECEDENTIAL

   IN THE UNITED STATES COURT OF APPEALS
            FOR THE THIRD CIRCUIT
                 _____________

                    No. 13-1415
                   _____________

           ERIE INSURANCE EXCHANGE,
 an unincorporated association; JOSEPH S. SULLIVAN;
      ANITA SULLIVAN; PATRICIA R. BELTZ;
                 JENNA L. DEBORD

                          v.

           ERIE INDEMNITY COMPANY,
                                Appellant
                  _____________

            On Appeal from the District Court
        for the Western District of Pennsylvania
                   (No. 2:12-cv-1205)
     District Judge: Honorable Terrence F. McVerry
                     _____________

                Argued March 18, 2013

Before: FUENTES, CHAGARES and ROTH, Circuit Judges

            (Opinion Filed: June 28, 2013)
Steven B. Feirson [ARGUED]
Michael L. Kichline
Donald C. Le Gower
Dechert LLP
2929 Arch Street
18th Floor, Cira Centre
Philadelphia, PA 19104-2808

Ira L. Podheiser
Burns White LLC
Four Northshore Center
106 Isabella Street
Pittsburg, PA 15212

      Counsel for Appellant, Erie Indemnity Company

William M. Radcliffe, III [ARGUED]
William M. Martin
Radcliffe & DeHaas LLP
2 West Main Street, Suite 700
Uniontown, PA 15401

      Counsel for Appellees, Erie Insurance Exchange,
      Joseph S. Sullivan, Patricia R. Beltz, Jenna L. Debord,
      and Anita Sullivan

               OPINION OF THE COURT

FUENTES, Circuit Judge:

                             2
       We are asked to determine whether this case is a class
action that belongs in federal court under the Class Action
Fairness Act of 2005, Pub. L. No. 109-2, 119 Stat. 4
(“CAFA”). Erie Insurance Exchange (“Exchange”) filed suit
against its attorney-in-fact, Erie Indemnity Co. (“Indemnity”),
in Pennsylvania state court, alleging that Indemnity
misappropriated over $300 million in fees that belonged to
Exchange. The complaint was filed for Exchange “by”
certain of its members as trustees ad litem, and by those
members “on behalf of” all other members. Contending that
the words “on behalf of” convert this case into a class action,
Indemnity removed the case to federal court but the District
Court remanded the case to state court on Exchange‟s motion.
Because this case was brought under state rules that bear no
resemblance to Rule 23 in that they allow for suits by entities,
not a conglomerate of individuals, we conclude that it does
not meet the statutory definition of “class action.” We
therefore affirm the District Court‟s order.

                               I.

A.     Factual Background

       The parties do not dispute that Exchange is a
reciprocal insurance exchange organized under Pennsylvania
law. Since at least 1921, Pennsylvania has authorized the
aggregation of resources for the purpose of covering most
losses that may otherwise be insured against under
Pennsylvania‟s laws. See 40 PA. STAT. ANN. § 961 (2012).
Thus, Exchange‟s members purchase insurance policies and
receive indemnification for losses out of Exchange‟s pool of
funds. The pool is comprised of fees, including insurance
premiums and other charges, paid by Exchange‟s members.

                               3
Importantly, the legal association of these individuals exists
independent of this suit.

        The original complaint, filed in the Court of Common
Pleas of Fayette County, Pennsylvania on August 1, 2012 (the
“Complaint”), alleges that Exchange is owned by its
subscribers and has no independent officers or governing
body. It also alleges that Indemnity is a public corporation
organized under Pennsylvania law, and that it serves as
attorney-in-fact for Exchange. According to the Complaint,
to receive insurance, each Exchange member is required to
sign an identical agreement appointing Indemnity as attorney-
in-fact on behalf of Exchange (the “Subscriber‟s
Agreement”). The Subscriber‟s Agreement gives Indemnity
broad powers to “manage and conduct the business and
affairs of” Exchange, including the ability to issue policies for
Exchange, collect premiums, and invest Exchange‟s funds.
Joint Appendix (“J.A.”) 35. In exchange for these services,
Indemnity is permitted to retain up to 25% of all premiums
written or assumed by Exchange. The balance of the
premiums is to be used for insurance losses and other
operational costs of Exchange and may be distributed to its
members as dividends at the discretion of Indemnity.

       The Complaint alleges that members of Exchange who
pay their insurance premiums in installments must also pay
service charges, and that members are also subject to late
payment and policy reinstatement fees. The Complaint also
claims that, beginning in 1997, Indemnity began to retain for
itself the service charges that certain members paid to
Exchange, which monies belonged to Exchange, and that,
beginning in 2008, Indemnity misappropriated the late

                               4
payment and policy reinstatement fees, totaling over $300
million dollars.

      B.     Procedural History

       The Complaint names Exchange as plaintiff, and states
that Exchange brings the suit “by” four of its individual
members as “trustees ad litem” (“Individual Members”). J.A.
28. Further, each Individual Member is said to bring the suit
“on behalf of all members of Exchange.” Compl. ¶¶ 1-4.
The action was purportedly brought “pursuant to Pa. R. Civ.
P. 2152,” id. ¶ 4, which provides that “[a]n action prosecuted
by an association shall be prosecuted in the name of a
member or members thereof as trustees ad litem for such
association. An action so prosecuted shall be entitled „X
Association by A and B, Trustees ad Litem‟ against the party
defendant.” Pa. R. Civ. P. 2152.

       The Complaint pleads three counts under state law: (1)
breach of contract, alleging that the “plaintiffs herein
sustained damages” as a result of Indemnity‟s breach of the
Subscriber‟s Agreement in retaining services charges, and
seeking relief “on behalf of all members of” Exchange; (2)
breach of fiduciary duty, also seeking relief on behalf of the
members of Exchange; and (3) “equity,” requesting relief in
the amount of misappropriated funds “on behalf of
Exchange.” Id. ¶¶ 30-47.

       Indemnity filed a notice of removal, arguing that this
case constitutes a “class action within the meaning of the
Class Action Fairness Act.” J.A. 21. After the case was
transferred to the District Court for the Western District of

                              5
Pennsylvania, plaintiffs moved to remand, arguing that this
case does not constitute a “class action” as that term is used in
CAFA, and that, in the alternative, CAFA‟s diversity of
citizenship requirement is not met. Indemnity responded that,
among other arguments, the suit was improperly brought
under Rule 2152 of the Pennsylvania Rules of Civil
Procedure. As noted, Rule 2152 sets forth how suits on
behalf of “associations” are to be prosecuted under
Pennsylvania law. However, the Pennsylvania rules define
“associations” to exclude entities that are “corporations or
similar entit[ies],” such as “insurance association[s] or
exchange[s].” Pa. R. Civ. P. 2176; see also Pa. R. Civ. P.
2151. Pennsylvania law provides that actions on behalf of
such “a corporation or similar entity” instead “shall be
prosecuted . . . in its corporate name.” Pa. R. Civ. P. 2177.
Thus, the Original Complaint would not seem to fit under
Rule 2152.

       An amended complaint was filed while the motion for
remand was pending (the “Amended Complaint”). The
Amended Complaint contains no references to Rule 2152, no
longer requests relief “on behalf of” individual members of
Exchange, and asserts that it is brought by individual
members “on behalf of Exchange.” J.A. 72, ¶¶ 1-4.

       In October 2012, the District Court granted plaintiffs‟
motion to remand the case, concluding that it does not
constitute a “class action” under CAFA. Indemnity filed a
timely petition for leave to appeal, which we granted on
February 14, 2013.

       While the petition for appeal was pending, three of the
four Individual Members filed a lawsuit in the District Court

                               6
for the Western District of Pennsylvania (the “Federal
Lawsuit”). The complaint in that case stated two alternative
causes of action—one styled as a class action by the
individual members on behalf of all the members of
Exchange, and the other a non-class action on behalf of
Exchange by its members. See Compl. at 2, Erie Ins. Exch. v.
Stover, No. 1:13-cv-37 (W.D. Pa. Feb. 6, 2013). The Federal
Lawsuit names as defendants certain trustees of Exchange,
allegedly appointed by Indemnity and responsible for
permitting Indemnity to take funds from Exchange, the same
funds that are at issue in this lawsuit.

                              II.

       CAFA grants us appellate jurisdiction to review the
District Court‟s remand order. 28 U.S.C. § 1453(c). But the
basic question we must resolve is whether a federal court has
subject matter jurisdiction to hear this case in the first
instance. Indemnity, as the party seeking removal, bears the
burden of establishing that federal subject matter jurisdiction
exists. Kaufman v. Allstate New Jersey Ins. Co., 561 F.3d
144, 151 (3d Cir. 2009). To evaluate whether removal is
proper, we generally focus on the allegations in the
Complaint and the notice of removal. Id.1

                              A.

      CAFA gives federal courts subject matter jurisdiction
over “class actions” if the suit meets certain requirements,

1
  We review issues of subject matter jurisdiction, and the
statutory interpretation issues raised in this case, de novo.
Morgan v. Gay, 471 F.3d 469, 472 (3d Cir. 2006).

                              7
such as involving an amount in controversy over $5 million in
the aggregate and involving at least one plaintiff who is a
resident of a jurisdiction different than that of at least one
defendant. 28 U.S.C. § 1332(d)(2)(A). The principal dispute
here, however, is whether this case even constitutes a “class
action.”

        We begin, of course, with CAFA‟s language, which
defines a “class action” as “any civil action filed under rule
23 of the Federal Rules of Civil Procedure or similar State
statute or rule of judicial procedure authorizing an action to
be brought by 1 or more representative persons as a class
action.” 28 U.S.C. § 1332(d)(1)(B). Like the other Courts of
Appeals to have construed CAFA‟s definition of “class
action,” we find “no ambiguity” in the text of the law and
Indemnity points to none. Washington v. Chimei Innolux
Corp., 659 F.3d 842, 848 (9th Cir. 2011). The statute directs
us to inquire whether this action was brought under a “state
statute or rule” that is “similar” to Rule 23 or, in other words,
“whether the state statute authorizes the suit „as a class
action.‟” Id.2

       Indemnity has made no attempt to argue that this
dispute meets the statutory definition of class action.
Notably, Indemnity does not contend that the Complaint was

2
 The relevant portions of Rule 23 provide that “[o]ne or more
members of a class may sue or be sued as representative
parties on behalf of all members only if” numerosity,
commonality, typicality, and adequacy of representation are
met, and if the class meets other requirements and is certified
by the court as a class after following certain notice
procedures. Fed. R. Civ. P. 23(a)-(c).

                               8
filed pursuant to Rule 23 of the Federal Rules of Civil
Procedure, or under any state statute or rule that is “similar”
to Rule 23 or that otherwise authorizes an action to be
brought by a representative as a class action. Nor could it.
As noted, this action was originally brought pursuant to Rule
2152 of the Pennsylvania Rules of Civil Procedure (“Rule
2152”), which allows suits on behalf of an unincorporated
association to be prosecuted by its members.3 But Rule 2152
contains none of the defining characteristics of Rule 23 of the
Federal Rules of Civil Procedure (“Rule 23”). It does not, for
example, provide for class certification mechanisms, Fed. R.
Civ. P. 23(c)(1), list requirements such as numerosity or
commonality that a suit must meet to constitute a class action,
Fed. R. Civ. P. 23(a)-(b),4 or specify the form and substance
of notice that must be given to absent class members, Fed. R.
Civ. P. 23(c)(2). Nor does Rule 2152 permit individual class
members to opt-out or provide for the appointment of a lead
plaintiff or class counsel. Far from “authorizing an action to
be brought by [a] representative person[] as a class,” 28

3
  As noted, the Amended Complaint removed references to
Rule 2152 and purported to be brought under Rule 2177. But,
as Indemnity points out, jurisdiction is analyzed “as of the
time [the case] was filed in state court.” Standard Fire Ins.
Co. v. Knowles, 133 S. Ct. 1345, 1349 (2013); see also
Kaufman, 561 F.3d at 152. We therefore consider the
jurisdictional inquiry by reference to the Original Complaint,
and do not consider the Amended Complaint.
4
 Rather than contain a numerosity requirement, Rule 2152 is
not limited to suits involving associations of a certain size. It
appears that an action by an association with, say, two
members, may be instituted under Rule 2152.

                               9
U.S.C. § 1332(d)(1)(B), Rule 2152 merely authorizes suits by
representatives on behalf of an unincorporated association.
See Pa. R. Civ. P. 2152. Indeed, to the extent we have
interpreted Pennsylvania law on the matter, we have held that
suits by members of an unincorporated association (such as
those contemplated by Rule 2152) may not be brought as a
class action. See Underwood v. Maloney, 256 F.2d 334, 337
(3d Cir. 1958) (“Pennsylvania has forbidden a suit by or
against an unincorporated association to be maintained as a
class action.”).

       Indemnity and the District Court noted that, under
Pennsylvania law, Rule 2152 is not the proper vehicle for a
lawsuit by an insurance exchange. The District Court
explained that a suit by such entity must be prosecuted under
Rule 2177 of the Pennsylvania Rules of Civil Procedure
(“Rule 2177”), which requires suits by insurance exchanges
to be filed “in [their] corporate name.” Pa. R. Civ. P. 2177.
This may be so, but despite Rule 2176‟s exclusion of
insurance exchanges from “unincorporated associations,”
there is Pennsylvania authority permitting a suit by an
insurance exchange to be prosecuted in the same way suits by
other unincorporated associations are prosecuted under Rule
2152, i.e. “by some of the members in their own names on
behalf of or as representing all.” Barford v. Beaner Elec. Co.,
11 Pa. D. & C. 51, 55 (Pa. Ct. Common Pleas 1927). Thus,
under either Rule, a suit by Exchange is properly understood
as a suit by one entity, not by “a conglomerate of
individuals.” Long v. Sakleson, 195 A. 416, 420 (Pa. 1937).
Moreover, Rule 2177 is even less like Rule 23 in that it
contains none of Rule 23‟s class-related requirements, and,
unlike Rule 2152, does not even explicitly contemplate a suit
filed by a member “on behalf of” an association.

                              10
        In any event, we need not resolve the state-law
question of whether Rule 2152 or Rule 2177 provides the
proper basis for filing a suit by an insurance exchange, a
question “we only see through Erie‟s glass darkly.” Purdue
Pharma L.P. v. Kentucky, 704 F.3d 208, 220 (2d Cir. 2013).
Plaintiffs are the masters of their complaints and are “free to
choose the statutory provisions under which they will bring
their claims.” Id. at 216 n.7; see also Standard Fire Ins. Co.
v. Knowles, 133 S. Ct. 1345, 1350 (2013). If the case is
procedurally unsound under Pennsylvania‟s rules, the
Commonwealth‟s courts are best suited to correct the
problem. We will not rewrite the Complaint to create
jurisdiction under the pretense of correcting a state-law error.

       By contrast to these rules, Rules 1701 through 1704 of
the Pennsylvania Rules of Civil Procedure contain specific
requirements for a lawsuit to be brought as a class action,
many of which mirror the requirements of Rule 23. See Pa.
R. Civ. P. 1702 (listing numerosity, commonality, and
typicality requirements of Pennsylvania class actions); Pa. R.
Civ. P. 1704 (requiring separate heading for “Class Action
allegations”). There is no contention that this case was
brought under such rules, other than Indemnity‟s attempt to
equate, without citation to any authority, a suit filed “on
behalf of all members of Exchange” to a class suit under Rule
1701. See Appellant‟s Br. at 10 n.4. Our own precedent
belies Indemnity‟s attempt to characterize a suit brought “on
behalf of” members of an association as a class action. See

                              11
Underwood, 256 F.2d at 337.5 Plain and simple, this is a suit
by an entity, not a class of individuals.

       Our holding does not require “a formalistic search
through the pages of the complaint for magic words,” as
Indemnity suggests. Appellant‟s Br. at 14 n.7 (citing Segal v.
Fifth Third Bank, N.A., 581 F.3d 305, 310 (6th Cir. 2009)).
Instead, as per Congress‟s command, we reach our holding by
looking to the rule under which a case was filed. “[N]o
amount of piercing the pleadings will change the statute or
rule under which the case is filed. If this is a formalistic
outcome, it is a formalism dictated by Congress.” In re Vioxx
Prods. Liab. Litig., 843 F. Supp. 2d 654, 664 (E.D. La. 2012).

                             B.

       Unable to meet the clear statutory definition of “class
action,” Indemnity resorts to a series of extra-textual
arguments and to a complicated analysis of the Complaint, in
an attempt to meet its burden of establishing removal by
convincing us that “there is more to this case than meets the
eye.” Purdue, 704 F.3d at 217. We are not persuaded.

       Indemnity points to CAFA‟s legislative history, which
it contends dictates that CAFA‟s application of class action
“should not be confined solely to lawsuits that are labeled
„class actions.‟” Appellant‟s Br. at 12 (citing S. Rep. No.

5
   Indemnity‟s only attempt to come to terms with the
language of the statute is in a footnote, where Indemnity
labels as “restrictive” an analysis focused on CAFA‟s textual
definition of “class action.” See Appellant‟s Br. at 10 n.4.
We disagree with that characterization.

                             12
109-14, at 35 (2005)). But this general legislative statement
does nothing to tip the scales in Indemnity‟s favor. It neither
modifies the statutory command of which suits are to be
considered class actions, nor provides a test by which to
answer the question of whether a suit constitutes a “class
action.” We do not quarrel with the view that “class actions”
are not only cases labeled as such, but our holding does not
turn on the fact that that label is missing from the Complaint.
Rather, it turns on the fact that this case was not brought
pursuant to any rule sufficiently similar to Rule 23, and that
Indemnity has not pointed to any rule that would even permit
a suit by an exchange through its members to be brought as a
class action under Pennsylvania law. Cf. Chimei, 659 F.3d at
849-50 (rejecting the argument that “liberally” defining “class
action” required finding that a suit that had some resemblance
to a class action was a CAFA “class action”).6

       In a related argument, Indemnity asks that we look at
the “substance” of the allegations in the Complaint and ignore
“formalistic” labels to determine whether removal is proper.
Appellant‟s Br. at 9-10. This argument is most curious, as
with its very next argument Indemnity urges that we focus

6
  Our dissenting colleague similarly relies extensively on
CAFA‟s legislative history and suggests that our decision
“contravenes Congress‟s intent” in enacting that law. Dissent
at 1, 2, 7, 9. But CAFA‟s legislative history is particularly
suspect given that it represents the views of only a handful of
the legislators voting for the law. See Brill v. Countrywide
Home Loans, 427 F.3d 446, 448 (7th Cir. 2005) (explaining
that Senate Report was signed by only thirteen of 82 senators
voting for CAFA and thus has less “force than an opinion poll
of legislators”).

                              13
narrowly on Complaint‟s use of the words “on behalf of,” and
on the differences between the prayer for relief in Counts One
and Two compared to that in Count Three to conclude that
this case really is a class action. Id. at 10-11. Indemnity even
suggests that the use of the plural of “plaintiff” means that
this is a representative suit. Id. at 11. But Indemnity cannot
invoke subject matter jurisdiction by cherry-picking key
words from a complaint any more than a plaintiff can
artificially deprive a federal court of subject matter
jurisdiction by artful pleading or labeling. Failing to affix
“class action” to a pleading can no more deprive us of
jurisdiction than using the words “on behalf of,” or the plural
of “plaintiff,” can magically confer it.

       Finally, Indemnity notes that “Exchange . . . is not a
party to” the Subscriber‟s Agreements that form the basis of
the claims in the Complaint. Id. at 10. Presumably, the thrust
of this argument is that Exchange‟s members are the “real
party in interest” to this suit. But, this confuses the state-law
question of who may properly bring this case with the
question of whether this case was filed pursuant to a rule
sufficiently similar to Rule 23. And, in any event, this
argument proves too much. As noted, Exchange is an
unincorporated entity with no management or directors. Its
only ability to contract, or otherwise perform legal acts, is
either through Indemnity itself or through its members. In
other words, the fact that each individual member had to sign
a Subscriber‟s Agreement is inherent in the nature of an entity
such as Exchange. If Indemnity‟s arguments were accepted,
all suits by an insurance exchange against its attorney-in-
fact—necessarily prosecuted by individual members—will
always be treated as class actions. We know of nothing in
Pennsylvania‟s rules that evince any intent to reach this

                               14
strange result. To the contrary, Pennsylvania law suggests
that such suits should not be considered to be class actions.
See, e.g., Pa. R. Civ. P. 2177; Long, 195 A. at 421 (suit
against an insurance exchange is not against “a conglomerate
of individuals”).7

       Far from helping Indemnity, its “substance of the
claims” arguments convince us that this case is not properly
viewed as a class action. Even if this case were viewed as a
suit by all of Exchange‟s members against Indemnity on
Exchange‟s behalf, it would still bear little resemblance to a
Rule 23 action. The group of individuals that comprise
Exchange exists to pool resources and buy insurance and will
continue to exist beyond the life of this suit. By contrast, a
“class” in a class action is a group of individuals whose legal
association normally begins and ends with the lawsuit, which
is not the case here. Nor do we see any indication that
members of Exchange can opt in or out of the suit (which will
bind Exchange), or that they are entitled to notice, an
opportunity to object, or to be appointed lead plaintiff.

       As for whatever recovery may be obtained at the
conclusion of this litigation, Indemnity does not contend that
it belongs to Exchange‟s individual members. To the
contrary, the Complaint alleges that the misappropriated

7
  CAFA itself evinces an intent that suits by unincorporated
associations be treated like suits by corporations in that the
citizenship of the association for diversity purposes is
determined by the entity‟s principal place of business and not
by the citizenship of its members.            See 28 U.S.C.
§ 1332(d)(10).

                              15
funds were paid to Exchange. See Compl. ¶¶ 24, 25 (alleging
that Indemnity retained moneys “previously received by
Exchange”). It is true that Exchange‟s members will
indirectly benefit from any recovery that goes to Exchange‟s
pool of assets. But that fact does not make this case a class
action any more than a lawsuit by, say, a regular corporation
is a class action simply because its shareholders indirectly
benefit from the corporation‟s recovery in the suit.

        Accordingly, Indemnity‟s additional arguments, which
have already taken us far afield from a straightforward
application of the unambiguous definition of class action to
this case, must be rejected.8

                              C.

       Finally, Indemnity invokes a general notion of
estoppel and argues that because the subsequently-filed
Federal Lawsuit arises “out of the same nucleus of operative
fact” as this action, we should conclude that it constitutes an
attempt at “forum manipulation,” Appellant‟s Br. at 17, and
therefore keep this case in federal court. There are two
fundamental problems with this argument.

        First, it ignores the axiomatic principle that in
deciding a motion for remand the proper inquiry is whether

8
  In light of our conclusion that Indemnity has failed to meet
its threshold burden of establishing that this case is a “class
action,” we need not reach Exchange‟s argument that minimal
diversity of citizenship is defeated.         See 28 U.S.C.
§ 1332(d)(2). However, as stated, CAFA itself suggests that
this argument is correct. See supra n.6.

                              16
jurisdiction existed “as of the time [the case] was filed in state
court.” Knowles, 133 S. Ct. at 1349. Indemnity itself
recognizes this principle in the context of attacking the
District Court‟s analysis of the Amended Complaint. See
Appellant‟s Br. at 15. We are not permitted, by CAFA or
otherwise, to hold that the subsequent filing of a lawsuit may
create subject matter jurisdiction over a previously filed suit,
where no jurisdiction existed in the first place.

       Second, Indemnity‟s argument confuses questions
regarding Exchange‟s capacity to sue with questions of
subject matter jurisdiction. “[I]ssues pertaining to the
capacity to sue . . . are deserving of consideration only after
the jurisdiction of the federal court has been firmly
established.” Carlsberg Res. Corp. v. Cambria Sav. & Loan
Ass’n., 554 F.2d 1254, 1260 (3d Cir. 1977). The effect of
allegedly adopting differing positions regarding capacity to
sue will be addressed, if necessary, by either the state court
handling this case or the federal court handling the Federal
Lawsuit, as the case may be.

        The cases that Indemnity relies on demonstrate that
doctrines such as judicial estoppel and res judicata equip
courts to address situations in which plaintiffs file multiple
lawsuits or adopt contradictory litigation postures. See, e.g.,
Turner v. Crawford Square Apartments III, L.P., 449 F.3d
542, 551 (3d Cir. 2006). But federal courts are courts of
limited powers, and those remedies do not permit us to create
subject matter jurisdiction. See, e.g., Ins. Corp. of Ireland,
Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702
(1982) (explaining that “no action of the parties can confer”
jurisdiction because “principles of estoppel do not apply” to
the question of whether jurisdiction exists). We therefore

                               17
decline to apply equitable principles in a way that would
impermissibly expand federal judicial power in violation of
Article III.9

                              III.

        This case was not filed under any rule that
contemplates class proceedings, and Indemnity does not
contend otherwise. It therefore fails to meet the statutory
definition of “class action” and may not properly be removed
under CAFA. Even after accepting Indemnity‟s invitation to
perform an analysis beyond what CAFA‟s text requires, and
to wade through the complaint in hopes of concluding that
something else is afoot, we have failed to uncover any
evidence that this case is really a class action wolf dressed in
sheep‟s clothing.

       The District Court‟s judgment is AFFIRMED.

9
  Nor will we “fashion a rule” that directs consolidation of
this case with the Federal Lawsuit. See Appellant‟s Br. at 19.
Aside from the fact that such remedy would result in our
exercising jurisdiction contrary to the state court‟s authority,
this case is nothing like Freeman v. Blue Ridge Paper Prods.,
Inc., 551 F.3d 405 (6th Cir. 2008), on which Indemnity relies
for its proposed consolidation rule. In Freeman, the Court
found that the lawsuit was artificially separated into several
state court cases for the explicit purposes of avoiding “federal
jurisdiction.” Id. at 407. Here, by contrast, the separate
action was brought not in state court but in federal court,
undermining any contention that it was brought to avoid
“federal jurisdiction.”

                              18
    Erie Insurance Exchange et al. v. Erie Indemnity Co.

                         No. 13-1415

ROTH, Circuit Judge, dissenting:

        I respectfully dissent because I believe that the
Complaint is a class action for purposes of CAFA
jurisdiction.   CAFA‟s primary objective is to ensure
“[f]ederal court consideration of interstate cases of national
importance.” Standard Fire Ins. Co. v. Knowles, --- U.S. ----,
133 S. Ct. 1345, 1350 (2013) (quoting Class Action Fairness
Act of 2005, Pub. L. No. 109-2, § 2(b)(2), 119 Stat. 4). The
majority‟s requirement that a class action must be brought
under Rule 23 or a similar state statute or rule that explicitly
authorizes a class action goes too far and contravenes
Congress‟s intent that “lawsuits that resemble a purported
class action should be considered class actions.” S. Rep. No.
109-14, at 35 (2005).

        I would hold that a civil suit is a class action for
purposes of CAFA jurisdiction when it pleads facts that
would fulfill the essential elements of a class action –
numerosity, commonality, typicality, and adequacy of
representation. Simply put, if it quacks like a class action, it
is a class action. The Complaint here quacks. It pleads facts
that would satisfy the elements of a class action; therefore, it
is a class action under CAFA. The District Court erred in
remanding this case back to state court.

                               1
        The basis for my conviction that the District Court
erred goes back to Congress‟s reason for enacting CAFA.
Congress wanted to “expand substantially federal court
jurisdiction over class actions.” S. Rep. No. 109-14, at 43
(2005); see also Kaufman v. Allstate New Jersey Ins. Co., 561
F.3d 144, 148-49 (3d Cir. 2009). The Senate Committee
Report on CAFA explains that Congress was concerned that
class actions were too often excluded from federal court. S.
Rep. No. 109-14, at 4 (2005). This led to the adjudication of
these cases in state courts, which inconsistently applied the
rules governing class actions and inadequately supervised
litigation procedures and proposed settlements. Id. Congress
was frustrated that lawyers could “„game‟ the procedural
rules and keep nationwide or multi-state class actions in state
courts.” Id. This was especially troubling since class actions
strongly implicate concerns about judicial integrity and
interstate commerce. See id. at 8.

       Consequently, CAFA “places the determination of
more interstate class action lawsuits in the proper forum – the
federal courts.” Id. at 4. Class actions “usually involve the
most people, most money, and most interstate commerce
issues” and “also usually involve issues [with] nationwide
implications,” so they are “precisely the kind of cases that
should be heard in federal court.” Id. at 53. CAFA lists as
one of its purposes to “restore the intent of the framers of the
United States Constitution by providing for Federal court
consideration of interstate cases of national importance under
diversity jurisdiction,” § 2(b)(2), and “the overall intent of
[CAFA‟s] provisions is to strongly favor the exercise of
federal diversity jurisdiction over class actions with interstate
ramifications.” S. Rep. No. 109-14, at 35 (2005). Congress‟s
desire that federal courts have broad jurisdictional power to

                               2
hear class actions cannot be ignored when interpreting the
plain language of CAFA.
                            A.

       While the majority accuses Indemnity of cherry-
picking words to show that this is a class action, see Majority
at 14, a close reading of the whole Complaint reveals that it
seeks relief for individuals and pleads facts that would
support the four prerequisites of a class action under Rule 23.1
First of all, as the Complaint indicates, this is an interstate
case of national importance. Exchange‟s more than two
million subscribers hail from ten states and the District of
Columbia and, pursuant to their membership, enter into
contracts for insurance with and receive dividends from
Exchange throughout that geographic territory. Indemnity, a
public corporation, manages and conducts Exchange‟s
business affairs by, inter alia, issuing policies, collecting
premiums, and investing Exchange‟s funds, activities which
certainly occur across several states. This lawsuit, which
challenges Indemnity‟s conduct in managing Exchange, thus
implicates interstate commerce.

       Moving to the particulars of the Complaint, its first
page states that it is filed on behalf of “All members of Erie
Insurance Exchange[,]” and under the description of the
parties, each identified subscriber “is filing this complaint on

1
  I agree with the majority that jurisdiction is analyzed “as of
the time [the case] was filed in state court.” Knowles, 133 S.
Ct. at 1349; see Majority at 9 n.3. As a result, whether there
is jurisdiction under CAFA in this case is based solely on the
Complaint that was originally filed in the Court of Common
Pleas.

                               3
behalf of all members of Exchange.” The first count, for
breach of contract, is necessarily brought on behalf of all of
the subscribers because the Subscriber‟s Agreements are
between each individual subscriber and Indemnity. Exchange
would not have standing to bring a breach of contract claim
related to the Subscriber‟s Agreements because Exchange is
not a party to the Subscriber‟s Agreements.

       The second count, for breach of fiduciary duty, also
must be brought on behalf of the subscribers because the
Complaint alleges that Indemnity is a “fiduciary for Exchange
and its Subscribers” and “breached those duties.” Even if
Indemnity breached a duty owed to Exchange, the Complaint
also alleges that Indemnity breached duties it owed to all of
the subscribers, which only they can vindicate. Both of these
counts conclude by seeking relief for individuals by stating
that “the plaintiffs, on behalf of all members of Exchange,
request a sum . . ..” In contrast, the third count states that the
claim is brought “on behalf of Exchange,” rather than on
behalf of “all members of Exchange,” further indicating that
the first two counts seek individual relief for all of the
subscribers. The language in the Complaint, as well as the
nature of the claims, indicates it was filed on behalf of all of
the subscribers and seeks individual relief for all of the
subscribers.

       Also significant is the fact that the complaint in the
Federal Lawsuit asserts it is a class action and alleges nearly
identical facts to those alleged in the Complaint here.2 Both

2
  As the majority acknowledges, while this appeal has been
pending, three of the plaintiffs have brought a class action in
federal court on behalf of all members of Exchange. See

                                4
complaints describe Exchange as an unincorporated
association comprised of subscribers and Indemnity‟s role as
managing the operation of Exchange‟s insurance business.
Both complaints allege that Indemnity improperly retained
over $300 million worth of services charges, itemized by
year, and the Federal Lawsuit, much like the Complaint here,
“requests damages . . .” for a named subscriber “on behalf of
herself and others similarly situate[d].” Moreover, the
Federal Lawsuit, also pleading in the alternative a derivative
action, states that “a formal demand in this matter would be
fruitless,” in part, because the Complaint at issue here was
filed against Indemnity in the Court of Common Pleas. The
Federal Lawsuit seeks the same relief for the same people for
the same alleged wrong as the Complaint here. While the
majority is correct that this later-filed complaint does not
“create” federal jurisdiction, see Majority at 17, it does
demonstrate that the facts that were pled – in both complaints
– support the elements of a class action. Both complaints are
quacking like ducks – whether or not the words “class action”
are used or Rule 23 and its particulars are explicitly listed.

        Moreover, as my review indicates, the Complaint
pleads facts that would satisfy the four prerequisites of a class
action – numerosity, commonality, typicality, and adequacy
of representation. Beginning with the first requirement,
Exchange has over two million subscribers that reside in ten
states and the District of Columbia, and the Complaint seeks
individual relief for all of these subscribers. These facts
satisfy the numerosity requirement because it would be
impracticable to join all of these plaintiffs in one lawsuit that

Complaint, Erie Ins. Exchange v. Stover, No. 1:13-cv-37
(W.D. Pa. Feb. 6, 2013).

                               5
is not a class action. The second class action requirement,
commonality, is met because the Complaint alleges that
Indemnity breached a contract that it had entered into with
each subscriber and breached the fiduciary duty it owed to
each subscriber. As a result, the questions of law and fact are
common to the class of individual subscribers on whose
behalf relief is sought. Additionally, the allegations that each
subscriber has the same claims against Indemnity that the four
named subscribers have satisfies the third class action
requirement of typicality. Finally, the fourth requirement,
adequacy of representation, is satisfied by the factual
allegations in the Complaint that each subscriber has an
identical relationship with Exchange. Thus, the four named
plaintiffs would fairly and adequately protect the interests of
the class because all of the subscribers have identical interests
vis-à-vis Indemnity.
        A close reading of the Complaint reveals that it pleads
facts that would satisfy the four essential requirements of a
class action. For purposes of jurisdiction under CAFA, this
Complaint then is a class action. Because this case meets the
other requirements for CAFA jurisdiction, a federal court
should exercise its jurisdiction over it and deal later with any
deficiencies in the Complaint as pled.3

3
  CAFA provides for federal jurisdiction over class actions
that also have (1) minimal diversity; (2) an amount in
controversy over $5 million; and (3) a proposed class that
consists of at least 100 members. 28 U.S.C. § 1332(d)(2); 20
U.S.C. § 1332(d)(5). The Complaint also meets these
requirements. Subscribers are citizens of ten different states
and the District of Columbia while Indemnity is a
Pennsylvania citizen, creating minimal diversity.         The
Complaint alleges that Indemnity improperly retained over

                               6
                               B.

        When the defendants moved for removal under CAFA,
the District Court should have reviewed the Complaint – as
we do above – to determine whether the requirements of a
class action were present. In doing so, it should have kept in
mind what Congress intended in creating CAFA. The
Committee Report instructs that “the definition of „class
action‟ is to be interpreted liberally.” S. Rep. No. 109-14, at
35 (2005). I agree with the majority that determining whether
a civil suit is a class action begins with the definition of class
action in § 1332(d)(1)(B). However, the role of the court in a
CAFA case does not end there. The court must also
determine, based on a close reading of the entire complaint,
whether the complaint pleads facts that would satisfy the
essential elements of a class action, namely numerosity,
commonality, typicality, and adequacy of representation. If a
complaint, on its face, satisfies these requirements, under
CAFA it is properly removed to federal court. It is then the
function of the district court to inquire whether there are any
deficiencies in the complaint. If so, the court should either

$300 million worth of fees, and neither party has alleged that
the amount in controversy is less than the required $5 million.
Finally, the proposed class consists of at least 100 members
because the class consists of all members of Exchange, of
which there are over two million. This lawsuit meets the
requirements for federal jurisdiction under CAFA, and the
District Court erred in remanding the case.

                                7
have them corrected or dismiss the complaint.4 This
approach ensures that interstate class action lawsuits are
litigated in federal court, as CAFA intended.

        A putative class must demonstrate numerosity,
commonality, typicality, and adequacy of representation
when bringing a class action, so it logically follows that to
qualify as a class action for purposes of CAFA jurisdiction, a
complaint should plead facts that would fulfill these
requirements. Marcus v. BMW of N. Am., LLC, 687 F.3d 583,
591 (3d Cir. 2012); Fed. R. Civ. P. 23(a); see also, e.g., Pa. R.
Civ. P. 1702. These requirements are the essence of Rule 23
and similar state rules so that even a complaint that does not
identify itself as “filed under” this type of rule can
nonetheless be “filed under” these rules for purposes of
CAFA jurisdiction. Stated another way, a complaint that
pleads facts that would fulfill the four essential requirements
of a class action is “filed under rule 23 . . . or a similar state
statute or rule . . . authorizing an action to be brought . . . as a
class action” even if the complaint fails to name or exactly
mirror the applicable rule. See Majority at 8 (citing 28 U.S.C.
§ 1332(d)(1)(B)).

      Moreover, we cannot require that a class action
complaint include specific words or refer to specific
procedural rules because, as the Supreme Court has
admonished, courts should not “exalt form over substance”
when determining jurisdiction under CAFA. Knowles, 133 S.

4
  For example, if a complaint lacks mechanisms for notifying
potential class members or allowing them to opt-out – but
otherwise pleads a class action – the district court may
remedy this deficiency once jurisdiction is established.

                                 8
Ct. at 1350; see S. Rep. No. 109-14, at 35 (2005) (“[CAFA‟s]
application should not be confined solely to lawsuits that are
labeled „class actions‟ by the named plaintiff or the state
rulemaking authority.”). “A complaint that contains class-
type allegations historically has been assumed to assert a class
action before formal class certification.” Coll. of Dental
Surgeons of P.R. v. Conn. Gen. Ins. Co., 585 F.3d 33, 40 (1st
Cir. 2009).

        Indeed, this Court has held in other contexts that when
determining jurisdiction, courts “are not bound by the label
attached by a party to characterize a claim and will look
beyond the label to analyze the substance of the claim.”
Jarbough v. Att’y Gen., 483 F.3d 184, 189 (3d Cir. 2007);
Centifanti v. Nix, 865 F.2d 1422, 1429 n.8 (3d Cir. 1989); see
also La. ex rel. Caldwell v. Allstate Ins. Co., 536 F.3d 418,
424 (5th Cir. 2008) (noting in a case dealing with CAFA that
federal courts look to the substance of an action, not how it is
labeled, when determining whether there is jurisdiction).
Under this approach, a court will look beyond the rule a
plaintiff may use to characterize the claim and instead look to
the specific facts pled. If these facts would satisfy the four
class action prerequisites, the complaint pleads a class action
for purposes of CAFA jurisdiction.

        The majority‟s holding that CAFA requires that a class
action be “filed pursuant to Rule 23 . . . or under any state
statute or rule that is similar to Rule 23,” see Majority at 8,
entails too formalistic an inquiry. CAFA does not require that
a complaint methodically apply Rule 23 or a state law
analogue, and the majority‟s implicit requirement that this
Complaint do so is just a small step away from requiring a
lawsuit to contain specific words to be a class action. It

                               9
should be of no moment that a litigant failed to explicitly
mention a class action rule or deficiently pled a complaint
under that rule because, “like the rest of the Federal Rules of
Civil Procedure, Rule 23 automatically applies „in all civil
actions and proceedings in United States district courts.‟”
Shady Grove Orthopedic Assoc. v. Allstate Ins. Co., 559 U.S.
393, 130 S. Ct. 1431, 1438 (2010) (quoting Fed. R. Civ. P. 1);
see Fed. R. Civ. P. 81. The substance of a complaint
determines which procedural rules apply.5 Even parties that
agree a complaint pleads a class action may use discovery to
bolster the complaint‟s compliance with Rule 23. Much like
an improperly pled federal cause of action, deficiencies in a
complaint that pleads facts satisfying the essential elements of
a class action do not deprive a federal district court of subject
matter jurisdiction, though the complaint may ultimately fail.

       Moreover, application of the majority‟s approach to
the Complaint further demonstrates that their emphasis on the
particular rules referred to in the Complaint is misplaced.
The fact that Pennsylvania Rule of Civil Procedure 2152
contains “none of the defining characteristics of Rule 23,” see
Majority at 9, does not mean that the facts alleged in the
Complaint do not require the District Court to apply Rule 23

5
  As a result, if this case were to remain in federal court, as I
believe it should, the District Court could ensure that the
requisite procedural rules are followed with respect to class
certification, notice to absent class members, opt-out
provisions, and the appointment of lead plaintiff and class
counsel, despite the absence of any explicit mention of these
procedural details in the Complaint.

                               10
to correct any deficiencies in the pleading or dismiss the
case.6, 7

6
 And as the majority itself notes, the fact that the Complaint
states that the plaintiffs “bring this action pursuant to
Pa.R.Civ.P. 2152” may be an incorrect application of the law
because Exchange is a corporate entity, not an unincorporated
association. See Majority at 10; Pa. R. Civ. P. 2176 (“[A]
corporation or similar entity includes any . . . insurance
association or exchange.”). Thus, relying on the facts
actually pled, rather than the plaintiffs‟ assessment of their
own claims, is more likely to identify cases that are truly class
actions and that involve the interstate ramifications about
which Congress was concerned when it enacted CAFA.
7
  To the extent that the majority relies on Pennsylvania‟s
prohibition of class actions by unincorporated associations,
they are also misguided. The majority cites Underwood v.
Maloney, 256 F.3d 334, 337 (3d Cir. 1958), for the
proposition that “suits by members of an unincorporated
association (such as those contemplated by Rule 2152) may
not be brought as a class action.” See Majority at 10
(emphasis in original). Underwood cites as support for this
proposition, inter alia, the Note to Pennsylvania Rule
2230(a), which explicitly states that “suits by or against
unincorporated associations are not to be brought as class
suits under this Rule.” Note to Pa. R. Civ. P. 2230(a)
(rescinded 1977). Since the decision in Underwood, Rule
2230, which addressed class actions, has been rescinded and
Rules 1701-04 have been enacted in its place. These new
class action rules neither include a similar note nor explicitly
address whether class actions may be brought by
unincorporated associations. Moreover, as described in Part

                               11
       Finally, the majority‟s approach is also inconsistent
with Congress‟s intent that CAFA broadly confer jurisdiction
on federal district courts to hear class actions.          The
majority‟s approach makes it easier for plaintiffs to forum
shop and “game” the system. As a result of the requirement
in Knowles that CAFA jurisdiction be determined based on
only the original complaint, 133 S. Ct. at 1349-50, a
strategically-pled complaint could remain banished to state
court if the plaintiffs adequately disguise any class claims by
inaccurately filing them under a non-class action procedural
rule. This cannot be what Congress intended.

        I would hold today that a civil complaint which pleads
facts that could satisfy the four prerequisites of a class action
– numerosity, commonality, typicality, and adequacy of
representation – is a class action for purposes of CAFA
jurisdiction. A close reading of the Complaint here reveals
that it pleads facts which would meet this standard, and, as a
result, the District Court erred in remanding this case back to
state court.

       Because I would hold that the Complaint here pleads a
class action for purposes of CAFA jurisdiction, I respectfully
dissent.

A, the Complaint here seeks relief for individual subscribers,
and Pennsylvania law allows subscribers, in their individual
capacity, to bring a class action. See, e.g., Nye v. Erie Ins.
Exchange, 470 A.2d 98, 99-100 (Pa. 1983) (finding that
subscribers of Exchange had standing to bring a class action).

                               12