Court Opinion

ID: 2750315
Source: CourtListenerOpinion
Date Created: 2014-11-11 00:01:01.89243+00
Date Added: 2024-06-11T10:17:32.460325
License: Public Domain

FILED
                                                                       United States Court of Appeals
                                       PUBLISH                                 Tenth Circuit

                      UNITED STATES COURT OF APPEALS                        November 10, 2014

                                                                           Elisabeth A. Shumaker
                                   TENTH CIRCUIT                               Clerk of Court

 BRETT F. WOODS and KATHLEEN
 VALDES, for themselves and all others
 similarly situated,

        Plaintiffs - Appellees,

 v.                                                          No. 13-2160

 STANDARD INSURANCE COMPANY,
 an Oregon insurance company; MARTHA
 QUINTANA, a New Mexico resident,

        Defendants - Appellants.

                     Appeal from the United States District Court
                           for the District of New Mexico
                       (D.C. No. 1:12-CV-01327-KBM-LAM)

Jill B. Davenport (Keith R. Verges with her on the briefs), Figari & Davenport, L.L.P.,
Dallas, Texas, for the Appellants

Elizabeth Radosevich, Peifer, Hanson & Mullins, P.A., Albuquerque, New Mexico
(Robert E. Hanson and Matthew E. Jackson, Peifer, Hanson & Mullins, P.A., and
William H. Carpenter, William H. Carpenter Law Office, Ltd., Albuquerque, New
Mexico, with her on the briefs) for the Appellees.

Before BACHARACH, McKAY, and McHUGH, Circuit Judges.

McHUGH, Circuit Judge.
         This appeal requires us to evaluate whether remand to the state court pursuant to

the Class Action Fairness Act (CAFA) is required under either of two CAFA provisions:

the state action provision, which excludes from federal jurisdiction cases in which the

primary defendants are states; or the local controversy exception, which requires federal

courts to decline jurisdiction where, among other things, there is a local defendant whose

alleged conduct forms a significant basis for the claims asserted by plaintiffs and from

whom plaintiffs seek significant relief. See 28 U.S.C. 1332(d)(4), (5).

         Exercising jurisdiction pursuant to 28 U.S.C. § 1453(c)(1),1 we conclude that

neither provision provides a basis for remand, and therefore we reverse the decision of

the magistrate judge2 remanding the case to state court. But because we cannot determine

whether Defendants have established the amount in controversy required to confer

federal jurisdiction, we remand to the district court for the resolution of that issue.

                                       I.   BACKGROUND

                                        A. Factual History

         Plaintiffs Brett Woods and Kathleen Valdes are state employees who are

representatives of the class of New Mexico state and local government employees

         1
         In general, an order remanding a case to state court is not appealable. See 28
U.S.C. § 1447(d). However, CAFA permits this court to review an order remanding a
case “if application is made to the court of appeals not more than 10 days after entry of
the order.” Id. § 1453(c)(1). Defendants filed a timely application to appeal, which we
granted. We therefore have appellate jurisdiction.
         2
             The parties consented to proceed before a United States Magistrate in the district
court.
                                                     2
(collectively, Plaintiffs) who allege they paid for insurance coverage through payroll

deductions and premiums pursuant to a policy issued by Standard Insurance Company

(Standard), but did not receive the coverage for which they paid and, in some cases, were

denied coverage entirely. Plaintiffs filed suit in New Mexico state court against three

defendants: Standard, an Oregon company that agreed to provide the subject insurance

coverage; the Risk Management Division of the New Mexico General Services

Department (the Division), the state agency that contracted with Standard and is

responsible for administering benefits under the policy; and Standard employee Martha

Quintana, who Plaintiffs allege is responsible for managing the Division’s account with

Standard and for providing account management and customer service to the Division

and state employees. We sometimes refer to Standard and Ms. Quintana, collectively, as

Defendants.3

       Plaintiffs filed a ninety-one-paragraph complaint, stating causes of action against

Standard and the Division for breach of contract and unjust enrichment; against Standard

for breach of fiduciary duty, breach of the implied duty of good faith and fair dealing, and

Unfair Practices Act violations; and against Standard and Ms. Quintana for breach of the

New Mexico Trade Practices and Fraud Act. As factual support for these claims,

Plaintiffs allege the Division wrongfully deducted premiums from some state employees’

wages and remitted them to Standard without first obtaining the evidence of insurability

necessary to obtain term life insurance and accidental death and dismemberment

insurance. Plaintiffs further assert Standard retained those premiums without actually

       3
           The Division did not seek removal below and is not a party on appeal.
                                                 3
providing the paid-for coverage or reflecting in their records that Plaintiffs and other

class members were insured. As a result, Plaintiffs claim Standard denied some state

employees’ coverage on the erroneous basis that they were not insured. Plaintiffs also

allege Standard and the Division breached the terms of the insurance policy by failing to

provide the promised coverage or to inform state employees of their obligation to submit

evidence of insurability. In addition, they claim Standard created and the Division

approved a misleading employee handbook that failed to notify state employees they

were required to submit evidence of insurability as a prerequisite to obtaining coverage.

       Plaintiffs mention Ms. Quintana only briefly in their complaint, describing in one

paragraph Ms. Quintana’s allegedly unlawful conduct. Specifically, Plaintiffs allege

Ms. Quintana did not require state employees to submit evidence of insurability in

exchange for Standard’s acceptance and retention of premiums paid, and she “knew or

should have known” that Standard was accepting premiums from the state employees

without providing coverage. Aplt. Appx. 264. As the factual basis for this allegation,

Plaintiffs generally allege Ms. Quintana “is Standard’s locally based employee . . . who is

responsible for providing account management and customer service” to the Division and

state employees. Aplt. Appx. 257.

       Plaintiffs claim all defendants are jointly and severally liable for actual, punitive,

treble, and statutory damages, as well as for fees, costs, and interest. In addition, they

seek declaratory judgment, enjoining the Division and Standard to provide coverage to

the class members who wish to remain insured and to provide coverage for other class

members until Standard and the Division have refunded those class members’ premium

                                                  4
payments in full. Plaintiffs also seek general injunctive relief “as may be proper to

require the Defendants to remedy any acts or practices which the Court may find to

violate the rights of Plaintiffs and the Class,” but specifically request that Standard be

enjoined from denying Plaintiffs the insurance coverage for which they paid premiums.

                                   B. Procedural History

       After Plaintiffs filed suit in New Mexico state court, Defendants filed a notice of

removal, claiming the United States District Court for the District of New Mexico had

federal jurisdiction under CAFA, which authorizes the removal of certain class actions

from state to federal court, so long as the amount in controversy exceeds $5 million and

the plaintiffs have established minimal diversity. See Standard Fire Ins. Co. v. Knowles,

___ U.S. ___, 133 S. Ct. 1345, 1348 (2013). Before a federal magistrate, Plaintiffs sought

remand to state court, claiming that CAFA’s state action and local controversy provisions

precluded federal jurisdiction. Plaintiffs also sought remand on the alternate ground that

Defendants had failed to establish the amount in controversy exceeded $5 million as

required by CAFA. In response to Plaintiffs’ challenge to the amount in controversy,

Defendants pointed to an affidavit attached to their notice of removal, which they claimed

established Plaintiffs’ alleged damages exceeded $5 million.

       The magistrate judge ordered the case remanded to state court. She held the state

action exception did not apply because Standard is a primary defendant who is not a state

entity, and the state action provision requires all primary defendants to be state entities.

However, the magistrate judge concluded remand was proper pursuant to the local

controversy exception because Ms. Quintana is a local defendant from whom Plaintiffs

                                                  5
sought “significant relief” and her conduct formed a “significant basis” for Plaintiffs’

claims. The judge reasoned Ms. Quintana was significant because, as the sole New

Mexico customer service representative, she could be the “key and ultimately solely

responsible for the alleged mismanagement of the policy.” Aplt. Appx. 614.

       Because she ordered remand to the state court under the local controversy

exception, the magistrate judge did not reach the issue of whether Defendants had

established the requisite amount in controversy for federal CAFA jurisdiction.

Defendants appeal the magistrate judge’s order of remand.

                                    II.   DISCUSSION

       Defendants assert the magistrate judge erred by concluding Ms. Quintana is a

significant local defendant. Defendants also urge this court to determine in the first

instance that they have established the amount in controversy threshold for CAFA

jurisdiction by showing Plaintiffs’ alleged damages exceed $5 million. In turn, Plaintiffs

ask us to affirm the decision of the magistrate judge under either CAFA’s state action or

significant local defendant provisions. They also claim Defendants have failed to

demonstrate the damages at issue exceed $5 million. Accordingly, we examine three

main issues to resolve this appeal. To begin, we consider whether the magistrate judge

correctly rejected the state action provision as inapplicable. Second, we review the

magistrate judge’s determination that remand is appropriate under the local controversy

exception. Because we conclude that neither provision requires remand to the state court,

we finally consider whether Defendants have established that the amount in controversy

exceeds $5 million.

                                                 6
                                   A. Standard of Review

       Our review of the magistrate judge’s interpretation of CAFA is de novo. See

Parson v. Johnson & Johnson, 749 F.3d 879, 886 (10th Cir. 2014) (“We review the

district court’s ruling on the propriety of removal de novo.” (internal quotation marks

omitted)); Coffey v. Freeport McMoran Copper & Gold, 581 F.3d 1240, 1245 (10th Cir.

2009) (per curiam) (reviewing district court’s interpretation of the local controversy

exception de novo).

                B. Remand Pursuant to CAFA’s Exclusionary Provisions

       “CAFA was enacted to respond to perceived abusive practices by plaintiffs and

their attorneys in litigating major class actions with interstate features in state courts.”

Coffey v. Freeport McMoran Copper & Gold, 581 F.3d 1240, 1243 (10th Cir. 2009) (per

curiam). Accordingly, CAFA allows a federal court to assume original jurisdiction “if the

class has more than 100 members, the parties are minimally diverse, and the ‘matter in

controversy exceeds the sum or value of $5,000,000.’” Standard Fire Ins. Co. v.

Knowles, ___ U.S. ___, 133 S. Ct. 1345, 1348 (2013) (quoting 28 U.S.C. § 1332(d)(2),

(d)(5)(B)).

       In enacting CAFA, Congress intended to “expand substantially federal court

jurisdiction over class actions.” S. Rep. No. 109-14, at 43 (2005). Thus, “its provisions

should be read broadly, with a strong preference that interstate class actions should be

heard in a federal court if properly removed by any defendant.” Id. But mindful of

principles of federalism, CAFA reserved to the state courts jurisdiction over primarily

local matters. See Coffey, 581 F.3d at 1243. Of relevance to this case, the state action

                                                   7
provision excludes from federal jurisdiction cases in which the primary defendants are

states against which the district court may be foreclosed from ordering relief. See 28

U.S.C. § 1332(d)(5). CAFA also includes the local controversy exception, which “‘is

intended to respond to concerns that class actions with a truly local focus should not be

moved to federal court under this legislation because state courts have a strong interest in

adjudicating such disputes.’” Coffey, 581 F.3d at 1243 (quoting S. Rep. No. 109-14, at

39).

       CAFA places the burden on removing parties to establish that its basic

requirements are met. However, once a defendant establishes removal is proper, a party

seeking remand to the state court bears the burden of showing jurisdiction in federal court

is improper under one of CAFA’s exclusionary provisions. Id. (stating plaintiffs must

show the elements of the significant local defendant exception are applicable); Coleman

v. Estes Exp. Lines, Inc., 631 F.3d 1010, 1013 (9th Cir. 2011) (placing the burden on the

plaintiffs to establish that remand is proper under CAFA); Greenwich Fin. Servs.

Distressed Mortg. Fund 3 LLC v. Countrywide Fin. Corp., 603 F.3d 23, 26 (2d Cir. 2010)

(same); Westerfeld v. Indep. Processing, LLC, 621 F.3d 819, 823 (8th Cir. 2010) (same);

Kaufman v. Allstate N.J. Ins. Co., 561 F.3d 144, 153 (3d Cir. 2009) (same); Hart v.

FedEx Ground Package Sys. Inc., 457 F.3d 675, 680 (7th Cir. 2006) (same); Evans v.

Walter Indus., Inc., 449 F.3d 1159, 1165 (11th Cir. 2006) (same).

       Here, Plaintiffs bear the burden of establishing that remand is required under

CAFA’s state action provision or local controversy exception. For the reasons stated

below, we conclude Plaintiffs have failed to meet that burden under either provision.

                                                 8
         1. The State Action Provision

         The state action provision excludes from federal jurisdiction “any class action in

which . . . the primary defendants are States, State officials, or other governmental

entities against whom the district court may be foreclosed from ordering relief.” 28

U.S.C. § 1332(d)(5). Plaintiffs argue this provision presents an alternate ground on which

we may affirm the magistrate judge’s order of remand. They interpret the state action

provision more broadly than the magistrate judge—who thought the provision required

all primary defendants to be states, state officials, or state entities—and urge us to

interpret it as precluding federal CAFA jurisdiction if any primary defendant is a state or

state entity.4 According to Plaintiffs, a contrary interpretation is inconsistent with the

purpose of CAFA because it could allow a primary defendant—like the Division—to

wholly escape liability under principles of Eleventh Amendment immunity. In contrast,

Defendants advance an interpretation consistent with the magistrate judge’s holding,

contending the state action provision requires all primary defendants to be state entities

from whom the district court may be precluded from ordering relief under the Eleventh

Amendment. Defendants further argue Eleventh Amendment concerns are not relevant

here because, although the Division is a primary defendant and a state entity, Standard is

also a primary defendant, is not a state entity, and is thus subject to liability in the federal

court.

         4
        Although Plaintiffs challenge the magistrate judge’s interpretation of the
provision, they do not dispute that Standard is a primary defendant and is not a state
entity.
                                                   9
       In interpreting this provision, our analysis must begin and end with the language

of the statute itself, “for where . . . the statute’s language is plain, the sole function of the

courts is to enforce it according to its terms.” United States v. Ron Pair Enters., Inc., 489
U.S. 235, 241 (1989) (internal quotation marks omitted); Coffey, 581 F.3d at 1245 (“[I]t

is our primary task in interpreting statutes to determine congressional intent, using

traditional tools of statutory construction. In ascertaining such congressional intent, we

begin by examining the statute’s plain language, and if the statutory language is clear, our

analysis ordinarily ends.” (internal quotation marks and alterations omitted)). Based on

the plain language of the state action exception, we conclude it requires all primary

defendants to be state entities.

       The state action provision provides that CAFA jurisdiction “shall not apply to any

class action in which—(A) the primary defendants are States, State officials, or other

governmental entities against whom the district court may be foreclosed from ordering

relief.” 28 U.S.C. § 1332(d)(5)(A). The use of the definite article, “the,” before the plural

noun, “primary defendants,” and the use of the plural verb, “are,” leaves no doubt

Congress intended the state action provision to preclude CAFA jurisdiction only when all

of the primary defendants are states, state officials, or state entities. If Congress had

intended otherwise, it could have expressly stated that federal CAFA jurisdiction shall

not apply to any class action in which “a primary defendant is” a state, state official, or

state entity. See Mississippi ex rel. Hood v. AU Optronics Corp., ___ U.S. ___, 134 S. Ct.
736, 742 (2014) (determining CAFA’s mass action provision—which allows removal of

cases where “100 or more persons” are to be tried jointly—requires there be 100 or more

                                                   10
named plaintiffs, not 100 or more unnamed real parties in interest because if Congress

had intended the latter, it could have easily drafted language to that effect).

       This interpretation is also consistent with that of the United States Court of

Appeals for the Fifth Circuit, which is the only federal circuit to have considered this

precise issue. See Frazier v. Pioneer Ams. LLC, 455 F.3d 542, 546 (5th Cir. 2006)

(holding the state action provision requires all primary defendants to be states, state

officials, or state entities). And Plaintiffs have directed us to no court that has reached a

contrary conclusion.5 In light of CAFA’s plain language, we see no reason to part

company with the Fifth Circuit on this issue. See Chrysler Credit Corp. v. Country

Chrysler, Inc., 928 F.2d 1509, 1521 (10th Cir. 1991) (“Splitting the circuits always is

something we approach with trepidation.”); United States v. Philip Morris USA, Inc., 396
F.3d 1190, 1201 (D.C. Cir. 2005) (noting that “we avoid creating circuit splits when

possible”).

       Finally, although we are not unsympathetic to Plaintiff’s argument that under our

interpretation the Division may be shielded from liability under Eleventh Amendment

immunity principles, we are bound by the statute’s clear and unambiguous language. See

Frazier, 455 F.3d at 546 (recognizing the possibility that its interpretation of the statute

       5
         Rather, Plaintiffs cite Hangarter v. Paul Revere Life Ins. Co., No. C 05-04558
WHA, 2006 WL 213834 (N.D. Cal. Jan. 26, 2006), a case in which the court did not
interpret the statutory language, but instead examined only whether a party was actually a
primary defendant, and Gatti v. Louisiana, No. CIV.A. 10-329-JJB, 2011 WL 1827437
(M.D. La. Feb. 25, 2011) report and recommendation adopted, CIV.A. 10-329-JJB, 2011
WL 1827356 (M.D. La. May 12, 2011), a case in which the court recognized that the law
of the Fifth Circuit requires that all primary defendants must be state entities, but
examined whether a state was, in fact, a primary defendant. Neither case supports
Plaintiffs’ interpretation of the state action provision of CAFA.
                                                  11
could preclude relief from one defendant, but concluding “that is the price of sovereign

immunity, and in any event § 1332(d)(5)(A) is clear—all primary defendants must be

states”). The statute plainly provides that a federal court lacks jurisdiction under the state

action provision only if all primary defendants are state entities. Because it is undisputed

Standard is a primary defendant and is not a state entity, the magistrate judge correctly

determined the state action provision does not require remand of this class action to the

state court.

       2. The Local Controversy Exception

       We next examine whether the magistrate judge correctly remanded this action to

the state court under CAFA’s local controversy exception. There are three requirements

of the local controversy exception to federal CAFA jurisdiction:

       (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 . . . 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 . . . .

                                                 12
28 U.S.C. §1332(d)(4)(A). A federal district court must decline to exercise jurisdiction

under CAFA if the plaintiffs can satisfy all three of these requirements. Coffey, 581 F.3d

at 1243. The parties agree Plaintiffs have met the first and third requirements—all of the

members of the plaintiff class are New Mexico citizens, the principal injuries occurred in

New Mexico, and no other class action has been filed in the preceding three-year period.

See 28 U.S.C. § 1332(d)(4)(A)(i)(I), (III). Instead, the parties dispute whether Plaintiffs

have established the second requirement, identified by this court as the significant “‘local

defendant’” requirement. Coffey, 581 F.3d at 1242 (quoting S. Rep. No. 109-14, at 40).

       With respect to the significant local defendant requirement, Plaintiffs concede

neither Standard nor the Division qualifies as a local defendant. And Defendants do not

challenge Ms. Quintana’s New Mexico citizenship. Thus, the narrow issue we must

decide is whether Ms. Quintana satisfies prongs (aa) and (bb); in other words, whether

her conduct forms a significant basis for the claims asserted by Plaintiffs, and whether

Plaintiffs seek significant relief from her.

       “[I]t is our primary task in interpreting statutes to determine congressional intent,

using traditional tools of statutory construction.” Id. at 1245 (internal quotation marks

omitted). We begin our analysis by examining the statute’s plain language and if the

meaning of that language is clear, our inquiry is at an end. See Ron Pair Enters., Inc., 489
U.S. at 241. “If the statute’s plain language is ambiguous as to Congressional intent, ‘we

look to the legislative history and the underlying public policy of the statute.’” United

States v. Manning, 526 F.3d 611, 614 (10th Cir. 2008) (quoting United States v. LaHue,

170 F.3d 1026, 1028 (10th Cir. 1999)); see also Parson v. Johnson & Johnson, 749 F.3d
13
879, 889 (10th Cir. 2014) (finding CAFA’s legislative history relevant to an

interpretation of a CAFA provision that permits “mass actions” to be tried jointly, even

where the language was unambiguous).

       CAFA itself does not describe the type or character of conduct that would form a

“significant basis” of plaintiffs’ claims or define the term “significant relief.” And the

scope of those terms is not apparent from the plain language of the statute, even when

read in context. Cf. Coffey, 581 F.3d at 1245 (concluding the phrase “defendant from

whom significant relief is sought” was not ambiguous such that it could be interpreted to

mean “defendant from whom significant relief may be obtained,” but not otherwise

addressing the meaning of the phrase “significant relief”). Accordingly, we must turn to

other sources to find its meaning. As discussed, Congress enacted CAFA to prevent

abuse by plaintiffs and their attorneys litigating in state court class actions with interstate

implications. Coffey, 581 F.3d at 1243. To further that purpose, we interpret the

significant local defendant requirement strictly so that plaintiffs and their attorneys may

not defeat CAFA jurisdiction by routinely naming at least one state citizen as a

defendant, irrespective of whether that defendant is actually a primary focus of the

litigation.

       This approach is consistent with CAFA’s legislative history, which indicates

Congress intended the local controversy exception to be “narrow,” with all doubts

resolved “in favor of exercising jurisdiction over the case.” S. Rep. No. 109-14 at 39, 42.

The Senate Judiciary Committee report on CAFA explains that for the local controversy

exception to apply there must be “at least one real defendant . . . whose alleged conduct is

                                                  14
central to the class’s claims and from whom the class seeks significant relief.” Id. at 28

(emphasis added). It further explains, “the Committee intends that the local defendant

must be a primary focus of the plaintiffs’ claims—not just a peripheral defendant.” Id. at

38 (emphasis added). “The defendant must be a target from whom significant relief is

sought by the class (as opposed to just a subset of the class membership), as well as being

a defendant whose alleged conduct forms a significant basis for the claims asserted by the

class.” Id. (emphasis added); accord Kaufman, 561 F.3d at 157 (recognizing that the

statute requires defendant’s conduct to be “significant” and the word “significant” is

defined as “important, notable” (quoting Oxford English Dictionary (2nd ed. 1989)).

       Of particular interest to the present case, the Senate Judiciary Committee report

provides the following example to illustrate the bounds of the significant local defendant

requirement:

       [I]n a consumer fraud case alleging that an insurance company incorporated
       and based in another state misrepresented its policies, a local agent of the
       company named as a defendant presumably would not fit this criteria. He
       or she probably would have had contact with only some of the purported
       class members and thus would not be a person from whom significant relief
       would be sought by the plaintiff class viewed as a whole. Obviously, from a
       relief standpoint, the real demand of the full class in terms of seeking
       significant relief would be on the insurance company itself. Similarly, the
       agent presumably would not be a person whose alleged conduct forms a
       significant basis for the claims asserted. At most, that agent would have
       been an isolated role player in the alleged scheme implemented by the
       insurance company. In this instance, the real target in this action (both in
       terms of relief and alleged conduct) is the insurance company, and if that
       company is not local, this criterion would not be met.

S. Rep. 109-14, at 38 (footnote omitted) (emphasis added). As in this example,

Ms. Quintana’s status as Standard’s local agent is not enough, standing alone, to meet the

                                                15
significant defendant requirement. Instead, Ms. Quintana must also be a real target of the

litigation, rather than an isolated role player in the alleged scheme implemented by

Standard and the Division. See Coffey, 581 F.3d 1242–45 (holding a company that had

operated a smelter for many years on a property subsequently declared a superfund site,

and against which all plaintiffs had asserted claims for joint and several liability, was a

significant defendant for purposes of CAFA’s local controversy exception).

       Furthermore, in considering Ms. Quintana’s significance as a defendant, we must

compare her conduct with that of the other named defendants. See id. at 1244 (“[C]ourts

generally have required that the local defendant’s conduct be significant when compared

to the alleged conduct of the other defendants and the relief sought against that defendant

is a significant portion of the entire relief sought by the class.” (internal quotation marks

omitted)); Westerfeld v. Indep. Processing, LLC, 621 F.3d 819, 825 (8th Cir. 2010)

(holding that the local defendant’s conduct must be significant when compared to that of

the class); Kaufman, 561 F.3d at 157 (same). When viewed under this lens, we have little

difficulty concluding Ms. Quintana is not a significant local defendant because Plaintiffs

have failed to carry their burden of establishing that her conduct forms a significant basis

for their claims and they seek significant relief from her.6

       6
         Plaintiffs urge us to limit our inquiry into whether Ms. Quintana is a significant
local defendant to the allegations contained in the complaint. Because we conclude
Plaintiffs have failed to carry their burden of establishing Ms. Quintana is a significant
local defendant even if we so limit our inquiry, we need not determine whether
consideration of extrinsic evidence would be appropriate. But see Coleman v. Estes Exp.
Lines, Inc., 631 F.3d 1010, 1019 (9th Cir. 2011) (recognizing that “Federal courts have
disagreed on the question whether a district court may look only to the complaint in
determining whether the criteria of subsections (aa) and (bb) have been satisfied” but
                                                 16
   a. Ms. Quintana’s conduct does not form a significant basis for Plaintiffs’ claims.

       Plaintiffs assert on appeal that because Ms. Quintana is alleged to be the sole

person Standard employs to provide customer service for the Division’s New Mexico

accounts, her actions—or more specifically her failure to act—form a significant basis for

Plaintiffs’ claims. But Plaintiffs do not allege it was part of Ms. Quintana’s job to collect

evidence of insurability, make coverage determinations, record who had purchased

insurance coverage, or verify that employees were in fact receiving coverage. Likewise,

the complaint contains nothing to suggest Ms. Quintana ever collected or retained

premiums, solicited any employee to purchase insurance, enrolled state employees, or

had any actual contact with Plaintiffs or class members. And Plaintiffs do not allege Ms.

Quintana made any false or misleading statements or disseminated any false or

misleading information. Cf. Vodenichar v. Halon Energy Props., Inc., 733 F.3d 497, 507

(3d Cir. 2013) (concluding two companies were significant local defendants where they,

as agents for the class members, entered into an agreement with another defendant, but

failed to ensure the agreement conformed to that defendant’s requirements and made

concluding that courts should look only to the allegations in the complaint). Compare 28
U.S.C. §1332 (d)(4)(A)(i)(II)(aa), (bb) (stating that at least one defendant must be a
defendant whose “alleged conduct forms a significant basis for the claims asserted,” and
from whom “significant relief is sought” (emphasis added)), Coffey v. Freeport McMoran
Copper & Gold, 581 F.3d 1240, 1245 (10th Cir. 2009) (focusing on the allegations in the
complaint in determining whether a company was a significant local defendant under
prong (aa), but considering extrinsic evidence under (cc)’s citizenship prong), and
Kaufman v. Allstate N.J. Ins. Co., 561 F.3d 144, 157 (3d Cir. 2009) (directing lower court
to focus on allegations in complaint, not extrinsic evidence in evaluating whether a party
is a significant local defendant), with Evans v. Walter Indus., Inc., 449 F.3d 1159, 1167–
68 (11th Cir. 2006) (considering extrinsic evidence when addressing the significant
conduct prong).
                                                 17
negligent misrepresentations to plaintiffs regarding the agreement). Rather, the sole basis

of Plaintiffs’ claim against Ms. Quintana is that she violated the New Mexico Trade

Practices and Fraud Act by failing to disclose the Division’s and Standard’s allegedly

unlawful practices to the state employees. This is inadequate to make her a significant

defendant.

       Our decision in Coffey supports this conclusion. There, we examined whether a

defendant, Blackwell Zinc Company, which had operated a smelter in a town the

Environmental Protection Agency later declared a Superfund site, was a significant local

defendant for the purposes of the local controversy exception of CAFA. Coffey, 581 F.3d

at 1242–43. Although we agreed with the district court that it was, our analysis supports a

contrary result in the present case. In Coffey, we noted all class members had claims

against the company—as opposed to a mere subset of class members; all class members

were seeking to hold the company jointly and severally liable for all of plaintiffs’

damages, and, given the fact that the company was the operator of the smelter for a

significant period of time, it was reasonably likely it would be held at least equally

responsible for plaintiffs’ damages as the other defendants, if not more so. Id. at 1244–45.

       Unlike the allegations against the smelter operator in Coffey, the allegations

against Ms. Quintana do not support the conclusion that she is a significant defendant.

From both a quantitative and qualitative perspective, Plaintiffs’ complaint makes clear

Standard and the Division, not Ms. Quintana, are the primary focus and targets of

Plaintiffs’ claims. Plaintiffs allege only one cause of action against Ms. Quintana—that

she and Standard violated the New Mexico Trade Practices and Frauds Act. In

                                                 18
comparison, they allege claims for breach of contract and unjust enrichment against

Standard and the Division, as well as claims for breach of fiduciary duty, breach of the

duty of good faith and fair dealing, and violations of the Unfair Practices Act against

Standard alone. And Plaintiffs refer to Ms. Quintana only briefly throughout the ninety-

one-paragraph complaint. Instead, the majority of the factual allegations relate to

Standard’s and the Division’s breach of the insurance contract, the allegedly misleading

information contained in the employee benefit handbook, and the Division’s and

Standard’s allegedly wrongful conduct in accepting and retaining premiums without

providing the paid-for coverage or listing employees as insured.

       Furthermore, even when we examine the complaint’s brief references to

Ms. Quintana, her alleged actions do not form a significant basis for Plaintiffs’ claims.

The complaint describes Ms. Quintana’s allegedly unlawful conduct in only one

paragraph, which alleges she did not require state employees to submit evidence of

insurability in exchange for Standard’s acceptance and retention of premiums paid, and

she “knew or should have known” Standard was accepting premiums from the state

employees without providing coverage. However, absent from the complaint is any

allegation of conduct by Ms. Quintana illustrating she played a significant role in the

Division’s and Standard’s alleged scheme. Plaintiffs do not allege Ms. Quintana’s

participation in any discussions about the scheme, her knowledge that the Division and

Standard were not keeping records of employees who had paid premiums, or any

obligation she had to collect evidence of insurability, make coverage determinations,

record who had purchased insurance coverage, or verify employees were in fact receiving

                                                19
coverage. The complaint simply identifies Ms. Quintana as an account manager and

customer service representative. Moreover, although the complaint alleges Ms. Quintana

“knew or should have known” Standard retained the premiums without providing

coverage, it makes no factual allegations as to why Ms. Quintana knew or should have

known about Standard’s and the Division’s allegedly unlawful conduct, apart from the

fact that she is the account manager and customer service representative.

       Thus, our holistic review of the complaint reveals Plaintiffs’ primary focus is the

Division’s and Standard’s creation and implementation of a scheme to accept and retain

premiums without providing the paid-for coverage, not Ms. Quintana’s failure to discover

and disclose to Plaintiffs this alleged scheme. For this reason, Plaintiffs have failed to

carry their burden of establishing Ms. Quintana’s conduct forms a significant basis of

their claims for the purposes of the local controversy exception.

   b. Ms. Quintana is not a defendant from whom Plaintiffs seek significant relief.

       Plaintiffs’ failure to carry their burden of establishing that Ms. Quintana’s conduct

forms a significant basis for Plaintiffs’ claims precludes application of the local

controversy exception. See 28 U.S.C. § 1332(d)(4)(A)(i)(II) (listing the significant relief

and significant conduct prongs as required elements); Evans, 449 F.3d at 1167 n.7

(concluding that even if plaintiffs established that they sought significant relief from a

defendant, remand was improper because they failed to establish the defendant’s

significant conduct). For reasons we now discuss, we also conclude Ms. Quintana is not a

defendant from whom Plaintiffs seek significant relief.

                                                 20
       The fact that Ms. Quintana may not have financial resources at the same level as

Standard or the Division is not dispositive of whether she is a defendant from whom

Plaintiffs seek significant relief. See Coffey, 581 F.3d at 1245. But irrespective of

Ms. Quintana’s financial ability to pay damages, Plaintiffs have primarily targeted the

Division and Standard as the parties from whom they seek significant relief.

       As discussed, of the six causes of action asserted in Plaintiffs’ complaint, only one

is asserted against Ms. Quintana—that both she and Standard violated the New Mexico

Trade Practices Act. In contrast, Plaintiffs seek damages for breach of contract and unjust

enrichment from the Division and Standard. Plaintiffs seek declaratory relief against

Standard and the Division, and only the Division and Standard can refund premiums to

Plaintiffs, provide the paid-for coverage, or allow members of the class to remain insured.

Although Plaintiffs also seek injunctive relief “as may be proper to require the

Defendants to remedy any acts or practices which the Court may find to violate the rights

of Plaintiffs and the Class,” the specific injunctive relief they seek is that Standard be

enjoined from denying Plaintiffs the insurance coverage for which they paid premiums,

relief Ms. Quintana is in no position to provide. Furthermore, Plaintiffs’ assertion that the

defendants are jointly and severally liable cannot alter Ms. Quintana’s actual significance

as a defendant. Cf. id. at 1242–45 (company was a significant local defendant where

Plaintiffs sought to hold it jointly and severally liable for all damages and it was

reasonably likely that it would be held at least equally responsible for plaintiffs’ damages

as the other defendants, if not more so). As compared to the Division and Standard,

Plaintiffs simply do not seek significant relief from Ms. Quintana.

                                                 21
       In sum, Plaintiffs have failed to meet their burden of establishing Ms. Quintana is

a local defendant whose alleged conduct forms a significant basis for Plaintiffs’ claims or

that she is a defendant from whom they seek significant relief. Therefore, the local

controversy exception to CAFA jurisdiction does not apply and the magistrate judge’s

remand to the state court on this basis was improper.7

                                C. Amount in Controversy

       Although remand is not mandated by the state action or local controversy

provisions, to establish federal jurisdiction under CAFA, Defendants bear the burden of

establishing by a preponderance of the evidence that the amount in controversy exceeds

$5 million. See Frederick v. Hartford Underwriters Ins. Co., 683 F.3d 1242, 1246–47

(10th Cir. 2012). The parties dispute whether Defendants have met this burden and the

magistrate judge declined to decide this factual issue. The parties disagree on the number

of state employees who make up the class, the value of the premiums paid, and the

admissibility of Defendants’ evidence related to the amount in controversy. Therefore,

calculation of the amount in controversy is impossible without resolution of those

disputes.8 We therefore remand to the district court to determine in the first instance

       7
         Defendants claim the magistrate erred by declining to consider the weakness of
Plaintiffs’ claims against Ms. Quintana under the New Mexico Trade Practices and Fraud
Act. But see Coffey, 581 F.3d at 1245 (cautioning against holding mini trials to evaluate
whether the local controversy exception applies). We do not decide this issue because,
even if we assume Ms. Quintana could be personally liable under the New Mexico Trade
Practices and Fraud Act, we would conclude Plaintiffs failed to carry their burden of
establishing she is a significant local defendant for the reasons already explained.
       8
        Plaintiffs have not challenged the sufficiency of Defendants’ notice of removal,
which alleged the amount in controversy exceeded $5 million and also included extrinsic
                                                22
whether the amount in controversy exceeds $5 million. See Dutcher v. Matheson, 733
F.3d 980, 989–90 (10th Cir. 2013) (whether CAFA’s requirements “have been met is a

question that is best left to the district court to decide in the first instance on remand.”). If

the district court finds it does, Defendants have established federal jurisdiction under

CAFA and the action should proceed. But if the amount in controversy does not exceed

$5 million, federal CAFA jurisdiction will not lie and the action must be remanded to the

state court.

                                   III.    CONCLUSION

       For the foregoing reasons, neither the state action nor local controversy provisions

of CAFA require remand of this action to the state court. But until the factual disputes

concerning the amount in controversy are resolved, we are unable to determine whether

Defendants have established jurisdiction under CAFA. Accordingly, we REVERSE the

decision of the magistrate judge and REMAND for further proceedings consistent with

this decision.

evidence Defendants assert establishes the amount in controversy. Therefore, we assume
for the purposes of this appeal that the notice of removal is sufficient, and express no
opinion regarding whether extrinsic evidence of federal jurisdiction was required at the
removal stage. Whether such extrinsic evidence can be required at the removal stage is an
open question currently before the Supreme Court. See Owens v. Dart Cherokee Basin
Operating Co., No. 12-4157-JAR-JPO, 2013 WL 2237740 (D. Kan. May 21, 2013)
(granting motion to remand on the basis that a notice of removal was insufficient as a
matter of law where it failed to provide evidentiary support “such as an economic
analysis . . . or settlement estimates” establishing the amount in controversy), appeal
denied, No. 13-603, 2013 WL 8609250 (10th Cir. June 20, 2013), reh’g denied, 730 F.3d
1234 (10th Cir. 2013), cert. granted, 134 S. Ct. 1788 (2014).
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