Court Opinion

ID: 2644472
Source: CourtListenerOpinion
Date Created: 2013-11-28 00:15:06.078611+00
Date Added: 2024-06-11T12:35:19.652434
License: Public Domain

FILED
                               FOR PUBLICATION                       NOV 27 2013

                                                                  MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                 U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

JOSE MONDRAGON, individually and               No. 13-56699
on behalf of all others similarly situated,
                                               D.C. No. 3:13-cv-00363-H-RBB
              Plaintiff - Appellee,

  v.                                           OPINION

CAPITAL ONE AUTO FINANCE,
a Division of Capital One, N.A.,

              Defendant - Appellant,

  and

RON BAKER CHEVROLET,
a California Corporation,

              Defendant.

                   Appeal from the United States District Court
                     for the Southern District of California
                    Marilyn L. Huff, District Judge, Presiding

                     Argued and Submitted November 5, 2013
                              Pasadena, California

Before: GOODWIN, FISHER, and CLIFTON, Circuit Judges.

                              Opinion by Judge Clifton

CLIFTON, Circuit Judge:
         This case presents another issue under the Class Action Fairness Act of 2005

(“CAFA”), Pub. L. No. 109-2, 119 Stat. 4. Defendant-Appellant Capital One Auto

Finance appeals the district court’s order remanding a putative class action lawsuit

to California state court under CAFA’s “local controversy” exception to federal

jurisdiction, 28 U.S.C. § 1332(d)(4)(A). Plaintiff Jose Mondragon, as the party

seeking remand to state court, bears the burden of proving that the exception

applies. Plaintiff submitted no evidence regarding the disputed issue, the

citizenship of prospective class members. Nevertheless, the district court held that

Plaintiff had satisfied his burden based solely on an inference from the class

definition that the requirements for the local controversy exception were satisfied.

We disagree, vacate the remand order and remand for further proceedings.

         We conclude that there must ordinarily be facts in evidence to support a

finding that two-thirds of putative class members are local state citizens, which is

one of the local controversy exception’s requirements, if that question is disputed

before the district court. A pure inference regarding the citizenship of prospective

class members may be sufficient if the class is defined as limited to citizens of the

state in question, but otherwise such a finding should not be based on guesswork.

In reaching this conclusion, we join the other circuits that have considered the

issue.

                                            2
I.    BACKGROUND

      Plaintiff Jose Mondragon filed this putative class action against defendants

Capital One Auto Finance and Ron Baker Chevrolet in the San Diego County

Superior Court, alleging violations of various provisions of California state law1

related to automobile finance contract disclosures. Capital One removed the case to

the U.S. District Court for the Southern District of California based on CAFA, 28

U.S.C. §§ 1332(d), 1453(b).

      Through CAFA, Congress broadened federal diversity jurisdiction over class

actions by, among other things, replacing the typical requirement of complete

diversity with one of only minimal diversity, see id. § 1332(d)(2), and allowing

aggregation of class members’ claims to satisfy a minimum amount in controversy

of $5 million, see id. § 1332(d)(6). However, Congress also provided exceptions

allowing certain class actions that would otherwise satisfy CAFA’s jurisdictional

requirements to be remanded to state court. Among these is the exception

commonly referred to as the local controversy exception, set forth in 28 U.S.C.

      1
        The operative complaint alleged violations of the Consumers Legal
Remedies Act, Cal. Civ. Code § 1750, et seq., the Automobile Sales Finance Act,
Cal. Civ. Code § 2981, et seq., and the Unfair Competition Law, Cal. Bus. & Prof.
Code § 17200, et seq.

                                          3
§ 1332(d)(4)(A).2 One of the requirements of the local controversy exception is

that “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.” Id.

§ 1332(d)(4)(A)(i)(I).

      Shortly after the case was removed to federal court, Mondragon moved to

remand it to state court under the local controversy exception. Mondragon did not

      2
       In its entirety, the local controversy exception reads:
      A district court shall decline to exercise jurisdiction under paragraph
      (2)—
       (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
             (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 . . . .
28 U.S.C. § 1332(d)(4).

                                           4
present any evidence of the citizenship of the putative class members. Instead, he

sought to rely entirely on his proposed class definitions, arguing that the court

should infer from those definitions that more than two-thirds of the class members

were citizens of California.

      Mondragon’s putative class action complaint alleged violations of California

law against three classes, only two of which remain in the case. The Second

Amended Complaint defined the two remaining classes as:

      “CLASS 1:” All persons who, in the four years prior to the filing of
      this complaint, (1) purchased a vehicle from Ron Baker for personal
      use to be registered in the State of California, and (2) signed a [Retail
      Installment Sale Contract (RISC)] that failed to separately disclose, on
      the RISC, the amounts paid for license fees and/or the amounts paid
      for registration, transfer, and/or titling fees.
      ...
      “CLASS 3:” All persons who, in the four years prior to the filing of
      this complaint, (1) purchased a vehicle in California for personal use
      to be registered in the State of California, (2) signed a RISC that failed
      to separately disclose on the RISC the amounts paid for
      registration/transfer/titling fees, and (3) whose RISC was assigned to
      Capital One.

Mondragon argued that these definitions, limiting putative class members to those

consumers who purchased and registered cars in California, were sufficient to

establish that this action fell within CAFA’s local controversy exception. The

district court agreed, concluding that the “class allegations sufficiently show that at

least two-thirds of the potential class members will be California citizens. As such,

                                           5
Plaintiff has satisfied his burden of proving that CAFA’s local controversy

exception applies.” The district court thus granted Mondragon’s motion to remand

the case to state court.

       Capital One filed in this court a petition for permission to appeal the district

court’s remand order, pursuant to 28 U.S.C. § 1453(c). This court granted the

petition for permission to appeal.3

II.    DISCUSSION

       We review a district court’s remand order de novo. Abrego Abrego v. Dow

Chem. Co., 443 F.3d 676, 679 (9th Cir. 2006) (per curiam).

       We have previously held that the 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. See Serrano v. 180

Connect, Inc., 478 F.3d 1018, 1024 (9th Cir. 2007). Mondragon must thus establish

that greater than two-thirds of prospective class members were citizens of

California as of the date the case became removable, which the district court

determined was January 15, 2013. See 28 U.S.C. § 1332(d)(4)(A)(i)(I) (two-thirds

requirement); id. § 1332(d)(7) (“Citizenship of the members of the proposed

       3
       Capital One also filed a motion for a stay of the ongoing state proceedings,
which was also granted by this court.

                                           6
plaintiff classes shall be determined for purposes of paragraphs (2) through (6) as

of the date of the filing of the complaint or amended complaint, or, if the case

stated by the initial pleading is not subject to Federal jurisdiction, as of the date of

service by plaintiffs of an amended pleading, motion, or other paper, indicating the

existence of Federal jurisdiction.”).

      Mondragon argues that more than two-thirds of the members of a class

defined to be limited to persons who “purchased a vehicle in California for

personal use to be registered in the State of California” will necessarily be

California citizens. Mondragon presented no evidence to the district court to

support that proposition, however, even after Capital One challenged it.

      Where facts are in dispute, the statute requires district courts to make factual

findings before granting a motion to remand a matter to state court. The statute in

question provides that a case shall be remanded if, among other things, greater than

two-thirds of the prospective class members are citizens of the state where the

action was filed. 28 U.S.C. § 1332(d)(4)(A)(i)(I). The statute does not say that

remand can be based simply on a plaintiff’s allegations, when they are challenged

by the defendant. Cf. Coleman v. Estes Express Lines, Inc., 631 F.3d 1010, 1015

(9th Cir. 2011) (holding that a court may look beyond the allegations of the

complaint when deciding a defendant’s citizenship under

                                            7
§ 1332(d)(4)(A)(i)(II)(cc)). A district court makes factual findings regarding

jurisdiction under a preponderance of the evidence standard. See, e.g., Valdez v.

Allstate Ins. Co., 372 F.3d 1115, 1117 (9th Cir. 2004). A complete lack of evidence

does not satisfy this standard.

      Joining the other three circuits that have considered the issue, we conclude

that there must ordinarily be at least some facts in evidence from which the district

court may make findings regarding class members’ citizenship for purposes of

CAFA’s local controversy exception. See In re Sprint Nextel Corp., 593 F.3d 669,

673–76 (7th Cir. 2010); Preston v. Tenet Healthsystem Mem’l Med. Ctr., Inc., 485
F.3d 793, 798–802 (5th Cir. 2007); Evans v. Walter Indus., Inc., 449 F.3d 1159,

1165–66 (11th Cir. 2006). By failing to produce any evidence regarding citizenship

in the face of Capital One’s challenge to his jurisdictional allegations, Mondragon

has failed to satisfy his burden of proof.

      As recognized by the other circuits, a burden of proof usually requires the

party bearing the burden to present evidence upon which the district court may rely

to find that the party has met its burden. Mondragon’s arguments for allowing a

district court to make the required factual finding where no evidence has been

presented are unpersuasive. As the Seventh Circuit noted, such freewheeling

discretion amounts to no more than “guesswork. Sensible guesswork, based on a

                                             8
sense of how the world works, but guesswork nonetheless.” Sprint, 593 F.3d at

674. A jurisdictional finding of fact should be based on more than guesswork.

      We acknowledge that our holding may result in some degree of inefficiency

by requiring evidentiary proof of propositions that appear likely on their face. The

inference drawn by the district court in this case was understandable. It is likely

that most of the prospective class members—we would guess more than two-thirds

of them—were California citizens at the time the lawsuit was filed. But it is also

likely that some of them were not. We imagine that some automobiles were

purchased and registered in California by members of the military, by out-of-state

students, by owners of second homes, by other temporary residents who

maintained legal citizenship in other states, and by persons who live in California

but are not U.S. citizens. That a purchaser may have a residential address in

California does not mean that person is a citizen of California. See, e.g., Kanter v.

Warner-Lambert Co., 265 F.3d 853, 857 (9th Cir. 2001). In addition, the proposed

class reaches back to cover purchases made as long as four years before the filing

of the complaint, which could mean five years or more prior to the date on which

the case became removable, and we imagine that at least some purchasers who

were California citizens at the time of purchase subsequently moved to other states,

such that they were not California citizens as of January 15, 2013. There is simply

                                           9
no evidence in the record to support a finding that the group of citizens outnumbers

the group of non-citizens by more than two to one.

      The Seventh Circuit acknowledged a similar circumstance in Sprint. In that

case, it was probably even more likely that the proposed class consisted

overwhelmingly of Kansas citizens, for the class as defined included only people

who had a Kansas cell phone number, a Kansas billing address, and paid a Kansas

fee. 593 F.3d at 671. Nonetheless, the court vacated a remand order and sent that

case back to the district court for further proceedings because the plaintiffs had not

submitted any evidence of citizenship. Id. at 673, 676.4

      Similarly, in this case, we suspect that, if he decides to expend the effort,

Mondragon will be able to gather and submit evidence to support his contention

that more than two-thirds of prospective class members were citizens of California

at the time the case became removable, thereby justifying a remand to state court

and landing the case back in the same place it was before this appeal. Any such

inefficiency is largely of the parties’ own making, though. Mondragon could have

      4
        The subsequent history of the case illustrated the inefficiency of the
holding. After jurisdictional discovery (including surveys of the class and expert
testimony) that lasted almost one year, the district court again remanded the case to
state court. See In re Text Messaging Antitrust Litig., Nos. 08 C 7082, 09 C 2192,
2011 WL 305385, at *3 (N.D. Ill. Jan. 21, 2011).

                                          10
limited the class by defining it to consist only of California citizens,5 or he could

have proceeded in federal court once Capital One chose to remove the case.

Likewise, Capital One could have allowed the case to proceed in state court

initially or once the district court had entered its remand order. Instead, both parties

chose to assert their rights to the utmost, and that is their prerogative.

      Perhaps recognizing that Mondragon will probably be able to prove that this

class action is subject to remand under the local controversy exception, Capital

One argues that we should remand the case to the district court with instructions to

deny the motion to remand, requiring the case to continue in federal court without

giving Mondragon another opportunity to establish the facts that would require

remand. Capital One contends that we should preclude Mondragon from what it

calls “another bite at the apple” because of the inefficiency and delay that will

result from permitting the district court to revisit the issue. But that inefficiency

and delay is at least equally attributable to Capital One for insisting that

Mondragon affirmatively prove with evidence a proposition that seems likely to be

true. Moreover, at the time that Mondragon presented its motion to remand to the

      5
         The Seventh Circuit suggested that the class in Sprint could be defined as
limited to Kansas citizens. 593 F.3d at 676. Capital One argues that this alternative
was available to Mondragon, accepting that it would be appropriate to remand an
action with a class so defined to state court even without additional evidence as to
the citizenship of prospective class members. We agree.

                                           11
district court, there was no guidance from this court on the relevant issue, and there

were district court rulings that supported Mondragon’s position. We instruct the

district court to allow Mondragon an opportunity, if he chooses to do so, to renew

his motion to remand and to take jurisdictional discovery tailored to proving that

more than two-thirds of the putative class are citizens of California.

      As a final note, we observe that a party with the burden of proving

citizenship may rely on the presumption of continuing domicile, which provides

that, once established, a person’s state of domicile continues unless rebutted with

sufficient evidence of change. This presumption has been widely accepted,

including by this circuit. See Lew v. Moss, 797 F.2d 747, 751 (9th Cir. 1986); see

also, e.g., Anderson v. Watts, 138 U.S.694, 706 (1891); Hollinger v. Home State

Mut. Ins. Co., 654 F.3d 564, 571 (5th Cir. 2011) (per curiam); 13E Charles Alan

Wright & Arthur R. Miller, Federal Practice and Procedure § 3612 & nn. 32–33

(3d ed. 2013). In addition, numerous courts treat a person’s residence as prima

facie evidence of the person’s domicile. See, e.g., Anderson, 138 U.S. at 706 (“The

place where a person lives is taken to be his domicile until facts adduced establish

the contrary . . . .”); Hollinger, 654 F.3d at 571 (“Evidence of a person’s place of

residence . . . is prima facie proof of his domicile.”); 13E Wright & Miller, supra,

§ 3612 & n.28 (“It is assumed . . . that a person’s current residence is also his

                                          12
domicile . . . .”). It does not appear that this circuit has yet adopted this

presumption. Because the issue is not squarely presented by this appeal, we decline

to reach that issue here.

       The burden of proof placed upon a plaintiff should not be exceptionally

difficult to bear. We do not think, as the Seventh Circuit suggested, that evidence

of residency can never establish citizenship. We agree with the observation of the

Fifth Circuit that a court should consider “the entire record” to determine whether

evidence of residency can properly establish citizenship. Preston, 485 F.3d at 800.

Factual findings made by a district court after considering the entire record will be,

as usual, subject to clear error review. See, e.g., Chapman v. Deutsche Bank Nat’l

Trust Co., 651 F.3d 1039, 1043 (9th Cir. 2011) (per curiam). As a general

proposition, district courts are permitted to make reasonable inferences from facts

in evidence, and that is true in applying the local controversy exception under

CAFA, as well. And, even under CAFA, the jurisdictional allegations in the

complaint can be taken as a sufficient basis, on their own, to resolve questions of

jurisdiction where no party challenges the allegations. See, e.g., Uston v. Grand

Resorts, Inc., 564 F.2d 1217, 1218 (9th Cir. 1977) (per curiam).

III.   CONCLUSION

                                            13
      We vacate the district court’s remand order and remand the case with

instructions to allow Mondragon an opportunity, if he so chooses, to renew his

motion to remand and to gather evidence to prove that more than two-thirds of

putative class members are citizens of California.

      VACATED and REMANDED.

                                         14
                                  COUNSEL

Hunter R. Eley (argued), William H. Edmonson, and Johari N. Townes, Doll Amir
& Eley LLP, Los Angeles, California; David N. Anthony, Alan D. Wingfield, and
Nicholas R. Klaiber, Troutman Sanders LLP, Richmond, Virginia, for Defendant-
Appellant.

Christopher P. Barry (argued) and Lacee B. Smith, Rosner, Barry & Babbitt, LLP,
San Diego, California, for Plaintiff-Appellee.

                                       15