Court Opinion

ID: 2646814
Source: CourtListenerOpinion
Date Created: 2013-12-20 01:00:50.687983+00
Date Added: 2024-06-11T12:50:54.649745
License: Public Domain

PUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                               No. 12-342

QUICKEN LOANS INCORPORATED,

                Petitioner,

          v.

PHILLIP ALIG; SARA J. ALIG; ROXANNE SHEA; DANIEL V. SHEA,
Individually and on behalf of a class of persons,

                Respondents.

On Petition for Permission to Appeal from the United States
District Court for the Northern District of West Virginia, at
Wheeling. John Preston Bailey, Chief District Judge. (5:12-cv-
00114-JPB; 5:12-cv-00115-JPB)

                          _______________

                               No. 13-1073

PHILLIP ALIG; SARA J. ALIG; ROXANNE SHEA; DANIEL V. SHEA,
Individually and on behalf of a class of persons,

                Plaintiffs - Appellees,

          v.

QUICKEN LOANS INCORPORATED,

                Defendant – Appellant,

          and
TITLE SOURCE, INCORPORATED, Title Source Inc. of West
Virginia,   Incorporated;   DEWEY   V.  GUIDA; APPRAISALS
UNLIMITED, INCORPORATED; RICHARD HYETT,

                 Defendants.

                               No. 13-1077

PHILLIP ALIG; SARA J. ALIG; ROXANNE SHEA; DANIEL V. SHEA,
Individually and on behalf of a class of persons,

                 Plaintiffs - Appellees,

           v.

QUICKEN LOANS INCORPORATED,

                 Defendant – Appellant,

           and

TITLE SOURCE, INCORPORATED, Title Source Inc. of West
Virginia,   Incorporated;   DEWEY   V.  GUIDA; APPRAISALS
UNLIMITED, INCORPORATED; RICHARD HYETT,

                 Defendants.

Appeals from the United States District Court for the Northern
District of West Virginia, at Wheeling.    John Preston Bailey,
Chief District Judge. (5:12-cv-00114-JPB; 5:12-cv-00115-JPB)
                        _______________

Argued:   September 17, 2013                 Decided:   December 19, 2013

Before NIEMEYER, WYNN, and FLOYD, Circuit Judges.

Vacated and remanded by published opinion.     Judge Floyd wrote
the opinion, in which Judge Niemeyer and Judge Wynn joined.

                                    2
ARGUED: Meir Feder, JONES DAY, New York, New York, for Quicken
Loans Incorporated.    John William Barrett, BAILEY & GLASSER,
LLP, Charleston, West Virginia, for Phillip Alig, Sara J. Alig,
Roxanne Shea, and Daniel V. Shea.    ON BRIEF: Carte P. Goodwin,
GOODWIN & GOODWIN, LLP, Charleston, West Virginia; Tracy K.
Stratford, P. Nikhil Rao, JONES DAY, New York, New York, for
Quicken Loans Incorporated.     Jonathan R. Marshall, BAILEY &
GLASSER, LLP, Charleston, West Virginia, for Phillip Alig, Sara
J. Alig, Roxanne Shea, and Daniel V. Shea.

                               3
FLOYD, Circuit Judge:

      In this appeal, Defendant-Appellant challenges the district

court’s granting of Plaintiffs-Appellees’ motion to remand this

case to state court.         After Defendant-Appellant removed the case

to   federal   court    pursuant      to    the    Class      Action    Fairness     Act

(CAFA),   codified     in    relevant       part    at   28     U.S.C.    §    1332(d),

Plaintiffs-Appellees filed a motion to remand under 28 U.S.C.

§ 1332(d)(4)(A),       or    the    local       controversy      exception.          The

district court granted Plaintiffs-Appellees’ motion, after which

Defendant-Appellant         petitioned      this    Court       for    permission     to

appeal the remand order pursuant to 28 U.S.C. § 1453(c).                              We

deferred ruling on the petition pending formal briefing of the

appeal and assignment of the petition and appeal to a merits

panel.    We hereby grant the petition and, for the reasons that

follow, vacate the district court’s decision remanding the case

to state court and remand the case to the district court to

determine whether Plaintiffs-Appellees satisfy the “at least 1

defendant”     requirement     of    the    local    controversy         exception    as

interpreted herein.

                                           I.

      Plaintiffs-Appellees          Phillip     Alig,    Sara    J.    Alig,   Roxanne

Shea, and Daniel V. Shea (Plaintiffs) filed this lawsuit in West

Virginia state court, both individually and on behalf of a class

                                           4
of West Virginia citizens.          They subsequently filed an amended

complaint.     In the amended complaint, the plaintiff class is

defined as follows:

       All West Virginia citizens at the time of the filing
       of this action who, within the applicable statute of
       limitations preceding the filing of this action
       through the date of class certification, obtained
       mortgage loans from Defendant Quicken, and (a) were
       provided unsigned loan documents at closing, (b) were
       assessed loan discount, courier, or notary fees, or
       (c) for whom Quicken obtained appraisals through an
       appraisal request form that included an estimate of
       value of the subject property.

       Plaintiffs     brought     their      lawsuit         against       Defendant-

Appellant Quicken Loans and defendants Title Source, Inc., d/b/a

Title Source Inc. of West Virginia, and a class of defendant

appraisers.    The class of defendant appraisers was represented

by    Appraisals    Unlimited,    Inc.,      Dewey     V.    Guida,       and   Richard

Hyett.    In their amended complaint, Plaintiffs define the class

of defendant appraisers in the following manner:

       All real estate appraisers who are citizens of the
       State of West Virginia at the time of the filing of
       this action and who performed appraisals in connection
       with home-secured loans [i]n West Virginia on behalf
       of Quicken after receiving an appraisal request form
       with an estimate of value on it.

       Plaintiffs brought eight claims for relief on behalf of all

of the plaintiffs, named and unnamed: civil conspiracy against

all    defendants;    violation    of       the    West      Virginia      Unfair   or

Deceptive    Acts    or   Practices     Act,      W.   Va.    Code    §    46A-6-104,

against all defendants; violation of the Residential Mortgage

                                        5
Lender, Broker and Services Act, W. Va. Code § 31-17-8(c), (g),

and   (m)(1),      against        Quicken   Loans;         unconscionable        contract

against Quicken Loans; violation of the Real Estate Appraiser

Licensing and Certification Act, W. Va. Code §§ 30-38-12(3) and

30-38-17,    against       the    defendant      appraiser     class;      unauthorized

charges, pursuant to West Virginia Code § 46-3-109(a) and § 46A-

1-102(7) and (28); breach of contract against Quicken Loans; and

negligence      and    negligence        per     se    against       all   defendants.

Plaintiffs      also       make    two   claims       on    behalf    of    the    named

plaintiffs    only:         fraud/intentional          misrepresentation          against

all defendants and illegal loans in excess of fair market value,

in violation of West Virginia Code § 31-17-8(m)(8).

      In    essence,        Plaintiffs         complain      that     Quicken       Loans

originated unlawful loans in West Virginia and that Defendant

Appraisers, which includes both the named appraisers and the

unnamed    class      of    appraisers,     were      complicit      in    the    scheme.

Plaintiffs allege that, before Defendant Appraisers conducted an

appraisal, Quicken Loans would furnish them with a suggested

appraisal    value.           Then,      after    purportedly         conducting     the

appraisal, Defendant Appraisers arrived at the same appraisal

value as the suggested appraisal value.                      The problem with that

scheme, according to Plaintiffs, is that the borrower would then

close on a loan that was underwater from the beginning.

                                            6
     After Plaintiffs filed the amended complaint, Quicken Loans

filed a notice of removal in the United States District Court

for the Northern District of West Virginia, claiming that the

district court had jurisdiction pursuant to CAFA.                    Thereafter,

Plaintiffs   filed   a   motion   to    remand,    arguing    that    the   local

controversy exception applied.              The district court agreed with

Plaintiffs and remanded the case to state court.                   Quicken Loans

then filed a petition for permission to appeal with this Court.

                                       II.

     Our review of the district court’s grant of a motion to

remand to state court is de novo.             Francis v. Allstate Ins. Co.,

709 F.3d 362, 366 (4th Cir. 2013).

     Removal   pursuant    to   CAFA    is    allowed   in   any    civil   class

action as long as the following mandates are satisfied:

     (1) “the matter in controversy exceeds the sum or
     value of $5,000,000, exclusive of interest and costs,”
     28 U.S.C. § 1332(d)(2); (2) “any member of a class of
     plaintiffs is a citizen of a State different from any
     defendant,” id. § 1332(d)(2)(A); and (3) there are 100
     or more plaintiff class members, id. § 1332(d)(5)(B).

W. Va. ex rel. McGraw v. CVS Pharmacy, Inc., 646 F.3d 169, 174

(4th Cir. 2011) (emphasis omitted).            The statute     defines “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. § 1332(d)(1)(B).”

                                        7
Id. (emphasis omitted).                    The party removing an action to federal

court    bears       the    burden          of   establishing         that   jurisdiction         is

appropriate.          Strawn v. AT&T Mobility LLC, 530 F.3d 293, 296-97

(4th Cir. 2008).

       There     is        no    debate          between       the    parties       that     these

requirements were met.                      Hence, the district court had subject

matter    jurisdiction               over    this       case   pursuant      to    CAFA.         The

dispute      arises,       however,          over       whether      the   local    controversy

exception       to    CAFA      applies.            If    it   is     applicable,        then    the

district court was required to decline to exercise jurisdiction

over the action and remand it to state court.                                  See 28 U.S.C.

§ 1332(d)(4).

       The   elements           of    the     local      controversy       exception       are    as

follows: (1) more than two-thirds of the members of the proposed

plaintiff class are citizens of the state where the suit was

filed originally; (2) at least one defendant (a) is a defendant

from     whom        members          of     the        plaintiff      class       are     seeking

“significant relief,” (b) is a defendant whose conduct “forms a

significant basis” for the proposed plaintiff class’s claims,

and (c) is a citizen of the state in which the action originally

was filed; (3) the principal injuries stemming from the conduct

alleged in the complaint occurred in the state where the action

was filed originally; and (4) in the three years before the

filing of the class action complaint, no other similar class

                                                    8
action was filed against any of the defendants on behalf of the

same or other class.            28 U.S.C. § 1332(d)(4)(A).

       The parties agree that factors one, three, and four of the

local controversy exception are satisfied.                              It is the second

element—the “at least 1 defendant” rule—on which the parties are

unable    to     agree.         There        is   no     dispute      that   at    least       one

defendant      is    a    citizen       of    West       Virginia,      where     the    action

originally was filed.                Thus, the sole issue before us is whether

Defendant Appraisers qualify as a significant local defendant

(i.e. whether at least one defendant is a defendant from whom

members of the plaintiff class are seeking significant relief

and is a defendant whose conduct “forms a significant basis” for

the proposed plaintiff class’s claims).

       According         to    Quicken       Loans,       it    was    improper        for     the

district court to aggregate Defendant Appraisers for the purpose

of satisfying the “at least 1 defendant” portion of the local

controversy exception.                In response, Plaintiffs state that this

argument    is      waived      because       Quicken      Loans      failed      to    make    it

below.      There can be no doubt that Quicken Loans vigorously

argued before the district court that the second element of the

local controversy exception was not met.                               We certainly agree

with     Plaintiffs           that     Quicken          Loans    did     not      “pellucidly

articulate this theory” below.                         Harris Trust & Sav. Bank v.

Salomon    Smith         Barney,      Inc.,       530    U.S.    238,    245      n.2    (2000)

                                                  9
(addressing theory not previously “pellucidly articulate[d]”).

But because the “at least 1 defendant” issue is “encompassed in

[Quicken Loans’] more general [argument that the second element

of   the    local     controversy        exception         was     not   met]    and     no   new

evidence is presented,” PCTV Gold, Inc. v. SpeedNet, LLC., 508

F.3d    1137,      1145   n.5     (8th    Cir.       2007),        under   the     facts      and

circumstances of this case we reach the argument.

       Quicken       Loans     asserts    that       the     district      court    erred      in

finding the “at least 1 defendant” requirement was satisfied by

relying on Defendant Appraisers as a group, not one significant

named      local     defendant.          The        plain    language       of     the    local

controversy exception specifies that “at least 1 defendant” must

satisfy     the      requirements.         28       U.S.C.    §    1332(d)(4)(A)(i)(II).

Thus,      according      to    Quicken     Loans,          this    language       cannot     be

satisfied       by    aggregating     claims         against       multiple      defendants.

And, even if it could, unidentified members of an uncertified

purported class are not “defendants.”

        As to the contention that the “at least 1 defendant” factor

must be read literally such that the exception applies only if a

single defendant satisfies the other requirements of the local

controversy exception, Plaintiffs make no argument other than to

rest on their general assertion of waiver.                          Nevertheless, we are

unable     to   agree     with    Quicken       Loans’       suggestion      that      the    “at

least 1 defendant” factor must mean only one defendant.                                   Under

                                               10
common parlance, the term “at least” permits a reading that more

than one defendant could satisfy the stated criteria.                             Moreover,

to conclude otherwise would lead to an absurd result.

       To   highlight    the    absurdity          of    interpreting       “at    least      1

defendant”       to   mean   only      one        defendant,       we   set    forth      the

following     example    that    explicates             our    concern:       There      is   a

putative      class   action    wherein           all    twenty     named     defendants,

except one, reside in the same state.                         There is no dispute that

the one out-of-state defendant is an insignificant defendant for

purposes of relief and the basis of the suit.                             The remaining

nineteen in-state defendants are 99.99 percent liable and meet

the “significant relief” and “significant basis” factors as a

group and in equal proportion to each other–5.26 percent each.

The other factors of the local controversy exception are met.

       With Quicken Loans’ reading of the “at least 1 defendant”

requirement, the local controversy exception would not apply,

even though 99.99 percent of the harm alleged was caused by the

local   named     defendants.        This         is    an     absurd   reading     of    the

statute and one that we are unable to countenance.

       Quicken    Loans’     reading     would         also     “produce[]    an    outcome

that     is      demonstrably       at       odds        with      clearly        expressed

congressional intent.”          In re Sunterra Corp., 361 F.3d 257, 265

(4th Cir. 2004).        The legislative history demonstrates that the

purpose of the local controversy exception is to permit class

                                             11
actions with a truly local focus to remain in state court.                                  See

S. Rep. No. 109-14, at 38 (2005) (stating that a federal court

should apply this exception to a case identified as “a truly

local      controversy—a            controversy       that           uniquely     affects     a

particular locality to the exclusion of all others”).                              A court’s

analysis for jurisdictional purposes should focus on whether the

case is a “truly local controversy” warranting remand or whether

it    is   an    “interstate        class    action[]       .    .    .   involv[ing]     more

people, more money, and more interstate commerce” that Congress

intended to place in federal court.                         Id. at 5, 38.              As this

Court noted in McGraw:

       CAFA does protect important federal interests in
       addressing state abuses in interstate class actions.
       It was enacted to prevent States from keeping cases of
       national importance out of Federal court” and making
       “judgments that impose their view of the law on other
       States and bind the rights of the residents of those
       states.    It thus assures that federal courts decide
       interstate cases of national importance.   But CAFA is
       also    sensitive  to   deeply-rooted  principles   of
       federalism, reserving to the States primarily local
       matters.

646 F.3d at 178 (citations omitted) (quotation marks omitted).

       Thus, here, where there is no question that all of the

named defendant appraisers are citizens of the same state where

the    action        originally      was    filed,    all       of    the   plaintiffs      are

citizens        of    the    same   state    where    the       action      originally      was

filed,     and       the    principal      injuries   stemming            from   the   conduct

alleged in the complaint occurred in the state where the action

                                              12
originally was filed, we are convinced that this is “a truly

local       controversy—a         controversy         that     uniquely        affects      a

particular locality to the exclusion of all others.”                                S. Rep.

No. 109-14, at 38.               As such, it was proper for the district

court to aggregate the named defendant appraisers for purposes

of the local controversy exception.                      But, the district court

went further than that: it also combined the absent members of

the   putative         class.     Therein      lies    the    problem.         An   unnamed

member of a proposed but uncertified class is not a party to the

litigation.        Smith v. Bayer Corp., 131 S. Ct. 2368, 2379 (2011).

Consequently, because the class of unnamed defendant appraisers

is not a party to this lawsuit, it was improper for the district

court       to   consider       them   in    deciding     whether    Plaintiffs          had

satisfied        the   “at   least     1    defendant”       requisite    of    the   local

controversy exception.

       As such, we are left with the question as to whether the

named defendant appraisers—Appraisals Unlimited, Inc., Dewey V.

Guida, and Richard Hyett—meet the “at least 1 defendant” portion

of the local controversy exception.                    But, we are unable to make

that determination on the record before us.                          Accordingly, we

remand this action to the district court to make that decision.

If    the    named      defendant      appraisers      satisfy     the    “at       least   1

defendant” criteria, then the district court should remand the

                                              13
case to state court.     But, if not, then the case shall proceed

in the district court.

                             III.

     For the foregoing reasons, the decision of the district

court remanding this case to state court is vacated and this

action is remanded for a determination by the district court as

to whether the named defendant appraisers satisfy the “at least

1 defendant” requirement of the local controversy exception.

                                             VACATED AND REMANDED

                                14