Court Opinion

ID: 3003977
Source: CourtListenerOpinion
Date Created: 2015-09-24 22:34:09.649519+00
Date Added: 2024-06-11T11:45:54.860855
License: Public Domain

In the

United States Court of Appeals
              For the Seventh Circuit

No. 09-8038

IN RE:

    S PRINT N EXTEL C ORPORATION,
                                                              Petitioner.

                Petition for Permission to Appeal
           from the United States District Court for the
           Northern District of Illinois, Eastern Division.
           No. 09 C 2192—Matthew F. Kennelly, Judge.

  S UBMITTED O CTOBER 16, 2009—D ECIDED JANUARY 28, 2010

  Before F LAUM, E VANS, and SYKES, Circuit Judges.
  E VANS, Circuit Judge.   Sprint Nextel has petitioned
for leave to appeal the district court’s remand to state
court of a class action against it. The complaint alleged
violations of the Kansas Unfair Trade and Consumer
Protection Act. The district court declined to exercise
jurisdiction on the ground that the suit fell within the
home-state exception to the Class Action Fairness Act
(CAFA). See 28 U.S.C. § 1332(d)(4)(B).
  The complaint, filed in Kansas state court, alleges that
Sprint Nextel, a Kansas corporation, conspired with
2                                             No. 09-8038

other cell phone providers to impose artificially high
prices for text-message service. The plaintiffs declared
that they were bringing the suit on behalf of themselves
and “all Kansas residents” who purchased text
messaging from Sprint Nextel or one of its alleged
coconspirators between January 2005 and October 2008,
when the suit was initiated. But they also specified
that their class was limited only to those who (1) had a
Kansas cell phone number, (2) received their cell phone
bill at a Kansas mailing address, and (3) paid a Kansas
“USF fee,” which is applied to all long-distance calls
within Kansas. It’s not clear what the third factor adds
to the first two. Regardless, the plaintiffs asserted that
these three factors showed that all the class members
were Kansas citizens.
  Sprint Nextel removed the case to the United States
District Court for the District of Kansas pursuant to
CAFA, 28 U.S.C. § 1332(d)(2), (d)(5), contending, as
required, that over $5 million was in controversy, the
class contained more than 100 members, and at least
one member of the putative class, though meeting the
three criteria outlined above, was not a Kansas citizen.
Sprint Nextel in fact came up with five non-Kansan
putative class members, all of them national corpora-
tions that subscribed to Kansas cell phone service as
part of their Kansas presence and received bills at a
Kansas office. The panel on Multi-District Litigation
transferred this case, along with over a dozen other
similar suits against cell phone companies, to the
Northern District of Illinois. The district court agreed
with the plaintiffs that the home-state exception
required it to remand the case.
No. 09-8038                                                 3

  The requirements of the home-state exception are
simple: if “two-thirds or more of the members of all
proposed plaintiff classes in the aggregate, and the
primary defendants, are citizens of the State in which
the action was originally filed,” the district court
should decline jurisdiction. 28 U.S.C. § 1332(d)(4)(B). In
resisting remand, Sprint Nextel argued first that the
plaintiffs had presented no evidence that two-thirds of
their proposed class members were in fact Kansas
citizens, as opposed to, say, local offices of national corpo-
rations or out-of-state students at Kansas colleges, each
of whom might have Kansas cell phones and Kansas
mailing addresses. Second, Sprint Nextel argued that
even if the plaintiffs had documented the Kansas citizen-
ship of the members of the proposed class, CAFA
required more. Sprint Nextel contended that when the
statutory exception specifies that “two-thirds or more
of the members of all proposed plaintiff classes in the
aggregate” must be from the home state, it means two-
thirds of the members of the proposed classes in all
lawsuits alleging similar conduct, not just the proposed
class in this suit. And there was no way, Sprint Nextel
continued, that Kansas citizens constituted at least two-
thirds of the members across the proposed plaintiff
classes in all text-messaging antitrust cases.
  The district court rejected both arguments. First, it
ruled that even though the plaintiffs presented no
evidence to counter Sprint Nextel’s attacks on the com-
position of their class, they “have defined the
putative class in such a way as to leave little doubt that
at least two-thirds of the class members are Kansas citi-
4                                                No. 09-8038

zens.” The court rejected the second argument on the
ground that while the local-controversy exception
requires district courts to inquire whether there have
been other class actions with similar allegations in the
past three years, 28 U.S.C. § 1332(d)(4)(A)(ii), the home-
state exception does not. The district court concluded
from this distinction that the home-state exception
does not, as a rule, require consideration of other law-
suits; consequently, the defendant’s reading of the two-
thirds provision, which would require the court to look
beyond the four corners of the complaint, was untenable.
In its petition, Sprint Nextel renews its arguments, which
present issues of first impression for this court. Sprint
Nextel also contends, in light of the other related suits
and the fact that it is a nationwide cell phone provider,
that this is a national controversy, and just the sort of
dispute that CAFA was designed to keep in federal court.
  We first address whether the denominator of the two-
thirds provision is the total number of potential class
members in this suit or in all suits with similar allega-
tions. Sprint Nextel makes much of the language, “pro-
posed plaintiff classes in the aggregate,” suggesting that
the only possible reason for Congress’s reference to
plural “classes in the aggregate” is to require a district
court to search out similar cases. We join the First
Circuit, the only appellate court to confront this issue,
in rejecting that reading. See In re Hannaford Bros. Co.
Customer Data Sec. Breach Litig., 564 F.3d 75, 78-79 (1st Cir.
2009). The First Circuit’s response to this argument was
that there can be more than one class in a single class
action, and the plural language is meant to address that
No. 09-8038                                              5

scenario. Id. at 79. We agree. For example, in a toxic tort
case there could be both a medical monitoring class and
a property remediation class. Without the requirement
that the district court evaluate the citizenship of “the
proposed classes in the aggregate,” one might think that
so long as at least two-thirds of the members of one of
those classes were from the home state, the exception
would apply. Preventing that misconception seems
purpose enough for CAFA’s reference to “classes in
the aggregate.”
  Moreover, identical language is used in the local-contro-
versy exception, and in that context it can’t mean
what Sprint Nextel says it does. The local-controversy
exception is more intricate than the home-state
exception, but for our purposes only two elements are
important. First, as with the home-state exception,
“greater than two-thirds of the members of all proposed
plaintiff classes in the aggregate [must be] citizens of
the State in which the action was originally filed.” 28
U.S.C. § 1332(d)(4)(A)(i). Second, the exception applies
only if “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 . . . .” Id. at 1332(d)(4)(A)(ii).
Under Sprint Nextel’s reading, the first provision
would require the district court to evaluate the fraction
of home-state plaintiffs involved in all similar class
actions. But, says the second provision, if there are
similar actions, it’s ipso facto not a local controversy.
Thus, for purposes of the local-controversy exception,
the composition of proposed plaintiff classes in other
6                                               No. 09-8038

similar suits can never matter. If there aren’t any other
similar suits, the district court would of course
evaluate only those in the current case, and if there
are similar suits, the fact of their existence controls, re-
gardless of the composition of the proposed classes in
those suits. It would be surprising if the same language
meant something different in the home-state exception.
See Atlantic Cleaners & Dyers v. United States, 286 U.S. 427,
433 (1932).
  We also reject Sprint Nextel’s insinuation that federal
jurisdiction is proper, regardless of the rules set forth
in CAFA, because, it says, CAFA was enacted to ensure
that national controversies, which it asserts this is, are
decided in federal court. That may have been Congress’s
general goal, but it also provided for exceptions, and
plaintiffs are free to “circumscribe their class definitions”
so that they can fit within one of those exceptions
and avoid federal jurisdiction. Johnson v. Advance Am., 549
F.3d 932, 937 (4th Cir. 2008); see also Palisades Collections
LLC v. Shorts, 552 F.3d 327, 336 n. 5 (4th Cir. 2008) (col-
lecting cases to the effect that any general policy
embodied in CAFA in favor of removal jurisdiction
gives way to canons of strict statutory construction).
  Furthermore, because the home-state exception, unlike
the local-controversy exception, is framed entirely in
terms of the parties’ citizenship, the fact that this
suit may be but a slice of a bigger controversy is irrele-
vant. The First Circuit case, In re Hannaford Bros. Co.
Customer Data Sec. Breach Litig., 564 F.3d 75, provides a
good illustration of this point. That appeal involved one
No. 09-8038                                                  7

of 25 different suits that were filed in various district
courts against a grocery chain based in Florida, another
that operates in the Northeast, and their common
Belgian parent company. Id. at 77. Despite the national,
and even international, flavor of the controversy as a
whole, the First Circuit looked only at the case before
it and applied the citizenship requirements of the home-
state exception. Because the primary defendant was a
Florida corporation and at least two-thirds of the plain-
tiffs were citizens of Florida, the state in which the
action was brought, the First Circuit affirmed the
remand order. Id. at 80-81.
   It’s more difficult to say whether the district court’s
ruling on the evidentiary issue was correct. Once Sprint
Nextel established that CAFA jurisdiction exists, the
burden fell on the plaintiffs, who were seeking remand,
to show that the home-state exception applies. See Hart
v. FedEx Ground Package System, Inc., 457 F.3d 675, 680
(7th Cir. 2006). And to do that, the plaintiffs had to estab-
lish by a preponderance of the evidence that two-
thirds of their proposed class members are Kansas
citizens, that is, either individuals domiciled in Kansas
or corporations organized there (or other business
entities meeting the relevant tests). 28 U.S.C. § 1332(a), (c);
Preston v. Tenet Healthsystem Mem’l Med. Ctr., Inc., 485
F.3d 804, 813-14 (5th Cir. 2007). The plaintiffs didn’t
submit any evidence about citizenship, but the district
court thought that the class definition itself, keyed as it
is to Kansas cell phone numbers and mailing addresses,
made it more likely than not that two-thirds of the
putative class members are Kansas citizens.
8                                                No. 09-8038

  This approach has some appeal. People with Kansas cell
phones presumably have them because they lived or
worked in the state at some time, and the current
Kansas mailing addresses suggest that they still do.
Granted, being a resident isn’t the same thing as being
a citizen, that is to say, a domiciliary, Mississippi Band of
Choctaw Indians v. Holyfield, 490 U.S. 30, 48 (1989); Meyerson
v. Harrah’s East Chicago Casino, 299 F.3d 616, 617 (7th Cir.
2002), and people who work in Kansas but don’t live
there—such as commuters from Kansas City, Mis-
souri—aren’t Kansas citizens. Yet, one would think that
the vast majority of individual Kansas cell phone users
do in fact live in that state and that the vast majority
of them view it as their true home. True, some of those
residents are college students from other states or
others, such as soldiers, who come to Kansas without
the intent to remain indefinitely. But it’s hard to
believe that those nondomiciliaries are collectively
more than a drop in the bucket when it comes to class
composition. The population of Kansas is approxi-
mately 2.8 million people, http://quickfacts.census.gov/
qfd/states/20000.html, but the state’s biggest military
base, Fort Leavenworth, is home to only 10,000 soldiers
and family members, http://usmilitary.about.com/od/
armybaseprofiles/ss/leavenworth_3.htm, and the out-of-
state population of the University of Kansas, the
state’s biggest school, is under 10,000, http://colleges.
collegetoolkit.com/colleges/studentprofile/university_of_
kansas/155317.aspx.
  The same view seems equally applicable to cell phones
belonging to businesses. On the one hand, any out-of-
No. 09-8038                                                 9

state companies that purchase text messaging for
Kansas cell phones used by their local employees and
receive bills at a Kansas mailing address would be part
of the class, but not Kansas citizens. On the other hand,
we imagine that only a fraction of businesses that use
Kansas cell phone service are not Kansas citizens. All in
all, we’re inclined to think that at least two-thirds of
those who have Kansas cell phone numbers and use
Kansas mailing addresses for their cell phone bills
are probably Kansas citizens. Cf. Kitson v. Bank of
Edwardsville, No. 06-528-GPM, 2006 WL 3392752, at *6 (S.D.
Ill. Nov. 22, 2006) (holding court “entitled to assume” that
class members were Illinois citizens on basis of Illinois
mailing addresses because, in its view, mailing addresses
are evidence of residence, which is evidence of domicile);
Caruso v. Allstate Ins. Co., 469 F. Supp. 2d 364, 367-68 (E.D.
La. 2007) (“Although there well may be proposed classes
where detailed proof of the two-thirds citizenship re-
quirement is required, the Court finds that common
sense should prevail in this closed-end class involving
people who, as noted, hold an asset that is a measure
of domicile, their home.”); Bennett v. Bd. of Comm’rs for E.
Jefferson Levee Dist., Nos. 07-3130, 07-3131, 2007 WL
2571942, at *5 (E.D. La. Aug. 31, 2007) (holding it was
“reasonable to infer” that two-thirds of all class
members were Louisiana citizens, where class was
open to all “residents, domiciliaries, business entities,
property owners, and other persons and entities residing
or present” in a certain parish in August 2005); see also
Joseph v. Unitrin, Inc., No. 1:08-CV-077, 2008 WL 3822938,
at *6 (E.D. Tex. Aug. 12, 2008).
10                                                No. 09-8038

  But that’s all guesswork. Sensible guesswork, based on
a sense of how the world works, but guesswork none-
theless. There are any number of ways in which our
assumptions about the citizenship of this vast class
might differ from reality. For example, we may have
grossly underestimated the presence of out-of-state
businesses or the number of Kansas residents who
don’t intend to stay indefinitely. Or perhaps a far
greater percentage of nondomiciliary residents use text
messaging than their domiciled neighbors. Ultimately,
we agree with the majority of district courts that a
court may not draw conclusions about the citizenship
of class members based on things like their phone
numbers and mailing addresses.
  In Gerstenecker v. Terminix Int’l, Inc., No. 07-CV-0164-MJR,
2007 WL 2746847 (S.D. Ill. Sept. 19, 2007), the district
court refused to remand a case where the class was
defined as all individuals and entities that own property
in Illinois and purchased extermination contracts from
the defendant. The court was troubled both by the fact
that the class could include absentee landlords from
other states and also by the lack of proof that any Illinois-
resident owners were indeed Illinois citizens. “In
essence, plaintiffs ask this Court to conclude that
because the real property at issue is located in Illinois, two-
thirds of the members of the proposed class in the ag-
gregate are citizens of Illinois. That may or may not be
true but either conclusion requires a leap of faith this
Court cannot make.” Id. at *2. The plaintiff in Phillips v.
Severn Trent Envtl. Serv., Inc., No. 07-3889, 2007 WL 2757131
(E.D. La. Sept. 19, 2007), sought remand under the local-
No. 09-8038                                            11

controversy exception for a putative class that was
defined as all persons who were living in a particular
Louisiana county during a one-week period in 2007 and
used contaminated water. Id. at *1-*2. The district court
acknowledged that “there is some intuitive appeal to the
claim” that two-thirds of the people who lived in the
county during that week were citizens of Louisiana at
the time the complaint was filed only two months later,
but held such intuition did not establish by a preponder-
ance of the evidence that the citizenship requirement
was satisfied. Id. at *3.
  A similar struggle played out in Anthony v. Small Tube
Mfg. Corp., 535 F. Supp. 2d 506 (E.D. Pa. 2007), where the
district court rejected the argument that two-thirds of
the class members were bound to be Pennsylvania
citizens, given a class defined as everyone who
worked at a particular Pennsylvania factory over a 35-
year period. The court said that even though satisfaction
of the citizenship requirement “may be a reasonable
inference, it does not satisfy the plaintiff’s burden of
proof,” because some of the employees may have moved
when they left their jobs, or may not have been citizens
even when they were working at the factory. Id. at 517.
And in Schwartz v. Comcast Corp., No. Civ.A. 05-2340, 2006
WL 487915 (E.D. Pa. Feb. 28, 2006), the court ruled that
the plaintiffs had not established the Pennsylvania citi-
zenship of two-thirds of a class they defined as “[a]ll
persons and entities residing or doing business in the
Commonwealth of Pennsylvania who subscribed
to Comcast’s high-speed internet service” during a
given one-year period. Id. at *3; see also Evans v. Walter
12                                                 No. 09-8038

Indus., Inc., 449 F.3d 1159, 1165-66 (11th Cir. 2006) (rejecting
assertion that two-thirds of plaintiff class were Alabama
citizens, where class was defined as “[a]ll property
owners, lessees, [and] licensees of properties” on which
the defendants released toxins 85 years earlier, as well as
“all individuals who have come into contact” with those
toxins; court found no evidence that two-thirds of those
harmed during lengthy period were still, or indeed ever,
Alabama citizens).
   This would have been a much simpler case if the plain-
tiffs had followed either of two approaches. For starters,
rather than relying on the fact that per the class definition
each class member has a Kansas cell phone number and
billing address (and paid the Kansas USF fee, whatever
that is), they might have submitted evidence that two-
thirds of the class members were indeed Kansas
domiciliaries or businesses. Given that there are probably
hundreds of thousands of putative class members, if
not more, it would be infeasible to document each
class member’s citizenship individually, but the district
court could have relied on evidence going to the citizen-
ship of a representative sample. This evidence might
have included affidavits or survey responses in which
putative class members reveal whether they intend to
remain in Kansas indefinitely, see Preston v. Tenet
Healthsystem Mem’l Med. Ctr., Inc., 485 F.3d 804, 817 (5th
Cir. 2007); Martin v. Lafon Nursing Facility of the Holy
Family, Inc., 548 F. Supp. 2d 268, 273-74 (E.D. La. 2008), or,
if they are businesses, their citizenship under the
relevant test. Given those results and the size of the
No. 09-8038                                               13

sample and the estimated size of the proposed class, the
district court could then have used statistical principles
to reach a conclusion as to the likelihood that two-thirds
or more of the proposed class members are citizens of
Kansas. Statisticians and scientists usually want at least
95 percent certainty, see Michael O. Finkelstein & Bruce
Levin, Statistics for Lawyers 120, (2d ed. 2001), but any
number greater than 50 percent would have allowed
the district court to conclude that the plaintiffs had estab-
lished the citizenship requirement by a preponderance
of the evidence. See Ethyl Corp. v. EPA, 541 F.2d 1, 28 n. 58
(D.C. Cir. 1976) (en banc).
   Alternatively, the plaintiffs might have defined their
class as all Kansas citizens who purchased text
m essaging from Sprint N ex tel or an alleged
coconspirator. By using that definition, the plaintiffs
could have guaranteed that the suit would remain in
state court. There would have been no concern that out-of-
state businesses, college students, soldiers, and the like
comprised greater than one-third of the class, and it
doesn’t take any evidence to establish that Kansas
citizens make up at least two-thirds of the members of
a class that is open only to Kansas citizens. See Johnson
v. Advance Am., 549 F.3d 932, 937-38 (4th Cir. 2008). The
tradeoff is that this definition would have limited the
pool of potential class members, something that plain-
tiffs and their lawyers are apparently unwilling to do.
  Accordingly, we G RANT the petition for leave to appeal
and V ACATE the order remanding the case to state court.
On remand, the district court should give the plaintiffs
14                                          No. 09-8038

another opportunity to prove that the proposed class
satisfies the requirements of the home-state exception.

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