Court Opinion

ID: 4350490
Source: CourtListenerOpinion
Date Created: 2018-12-14 01:00:36.874904+00
Date Added: 2024-06-11T14:31:06.773713
License: Public Domain

FILED
                           FOR PUBLICATION
                                                                    DEC 13 2018
                 UNITED STATES COURT OF APPEALS                  MOLLY C. DWYER, CLERK
                                                                  U.S. COURT OF APPEALS

                         FOR THE NINTH CIRCUIT

SUMATRA KENDRICK, an individual,             No.   18-16988

           Plaintiff-Appellee,               D.C. No. 3:18-cv-00213-RS

v.
                                             OPINION
CONDUENT STATE AND LOCAL
SOLUTIONS, INC., FKA Xerox State and
Local Solutions, Inc.,

           Defendant-Appellant,

and

BAY AREA TOLL AUTHORITY, a
California public corporation; GOLDEN
GATE BRIDGE, HIGHWAY AND
TRANSPORTATION DISTRICT, a
California public corporation,

           Defendants.

                 Appeal from the United States District Court
                    for the Northern District of California
                  Richard Seeborg, District Judge, Presiding

                 Argued and Submitted November 14, 2018
                         San Francisco, California
Before: Mary M. Schroeder and Paul J. Watford, Circuit Judges, and David A.
Ezra,* District Judge.

                             Opinion by Judge Schroeder

             This is an appeal under the Class Action Fairness Act (“CAFA”), 28

U.S.C. § 1332(d), from an order granting plaintiffs’ motion to remand to the state

court. The plaintiffs seek to maintain this action in state court on behalf of a class

of users of the Golden Gate Bridge. They brought the action against the Bay Area

Toll Authority (“BATA”) and the Golden Gate Bridge Highway and

Transportation District (“GGB”), both entities of the state of California, and

against Conduent State and Local Solutions, Inc. (“Conduent”), a private company

that has contracted with the state entities to operate the bridge’s toll system.

Plaintiffs’ principle claims allege defendants are in violation of California privacy

statutes prohibiting the collection of personal data. Conduent appeals the remand.

While remand orders generally are not reviewable, 28 U.S.C. § 1447(d), we have

discretion to review actions removed under CAFA, 28 U.S.C. § 1453(c). We

granted Conduent’s petition to appeal.

      Although the district court found that most of the requirements for

maintaining the case in federal court under CAFA were met, including the size of

      *
             The Honorable David A. Ezra, United States District Judge for the
District of Hawaii, sitting by designation.
                                            2
the class and the amount in controversy, it ruled that the principal defendants were

not subject to CAFA jurisdiction. The defendants included two state entities and

Conduent, which the district court held was acting for the state. Conduent appeals

and BATA and GGB, while agreeing they belong in state court, have filed an

amicus brief in support of Conduent’s remaining in federal court.

      Conduent argues that the case against it belongs in federal court because the

district court’s conclusion that Conduent is a state actor was flawed. Conduent

points to the language of a CAFA exception that provides CAFA does not apply to

proposed classes where “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). Although the other two defendants

are clearly governmental entities within the meaning of the statutory exception,

Conduent contends it is not such an entity. Conduent therefore argues that the

district court erred and the case against Conduent must stay in federal court, even

though this results in the case being litigated simultaneously in both state and

federal court. There is no dispute that the plaintiffs’ case against the public

entities, BATA and GGB, is now properly in state court on claims similar to those

against Conduent, nor is there any dispute that Conduent is a “primary defendant.”

                                           3
       The elements of CAFA jurisdiction are established in 28 U.S.C.

§ 1332(d)(2). A district court shall have jurisdiction over a class action when: (1)

the amount in controversy exceeds five million, and (2) any class member is a

citizen of a state different from any defendant. Id. CAFA creates an exception

from federal court jurisdiction for cases targeting state, local, and other

government entities that may claim immunity. Id. § 1332(d)(5)(A); see

Bridewell-Sledge v. Blue Cross of California, 798 F.3d 923, 927-928 (9th Cir.

2015). The exception is aimed at entities that may try to take advantage of

Eleventh Amendment immunity by removing to federal court. S. Rep. No.

109–14, at 41-42 (2005). The Senate Report describes what Congress intended to

do:

       [P]revent states, state officials, or other governmental entities from
       dodging legitimate claims by removing class actions to federal court
       and then arguing that the federal courts are constitutionally prohibited
       from granting the requested relief. This provision will ensure that
       cases in which such entities are the primary targets will be heard in
       state courts that do not face the same constitutional impediments to
       granting relief.

Id. at 42.

       This case began in state court. Plaintiffs/Appellees Sumatra Kendrick and

Michelle Kelly filed this putative class action in San Francisco Superior Court on

                                           4
November 21, 2017. They alleged Defendants invaded their privacy and collected

their personally identifiable information when they drove over bay area toll bridges

and then shared this information with various unauthorized third parties including

car rental companies, banks, credit bureaus, and law enforcement agencies, in

violation of California Streets and Highway Code § 31490, and they asserted other

related California claims. Section 31490 states in relevant part that “a

transportation agency may not sell or otherwise provide to any other person or

entity personally identifiable information of any person who subscribes to an

electronic toll or electronic transit fare collection system or who uses a toll bridge,

toll lane, or toll highway that employs an electronic toll collection system.” Id. §

31490(a).

      Conduent removed the entire case from San Francisco Superior Court to the

Northern District of California under CAFA, 28 U.S.C. § 1332(d).

Plaintiffs/Appellees moved to remand, arguing, among other things, that removal is

precluded under 28 U.S.C. § 1332(d)(5)(A) because Conduent is acting on behalf

of the state even though it is a private company. The California agencies, BATA

and GGB, were undisputedly state entities, and the district court concluded that

Conduent was as well, because it was exercising the authority of the state with

respect to the alleged violation of plaintiffs’ privacy rights:

                                            5
      [P]laintiffs allege that Conduent, BATA, and GGB are inextricably
      intertwined such that the actions of one entity can be imputed to the
      others. As the assessment of tolls on state-owned bridges arguably
      exercises the coercive power of the state, to the extent plaintiffs
      accuse Conduent of acting in concert with government agencies to
      violate class members’ rights, they have alleged state action on the
      face of the complaint.

The district court stated that Conduent had the burden of satisfying

§ 1332(d)(5)(A) and because that burden was not met, removal was improper.

Accordingly, the district court remanded the case to state court, where it has been

assigned to the same judge presiding over related actions. The state court

proceedings have been stayed pending this appeal.

      In this appeal Conduent argues the district court erred because it relied on 42

U.S.C. § 1983 case law to determine that Conduent was a state actor, and that the

district court failed to address the language of CAFA’s statutory exception relating

to “other governmental entities against whom the District Court may be foreclosed

from ordering relief.”

      Conduent’s position is that as a private entity it is outside the scope of §

1332(d)(5)(A). It accurately points out that Section 1983 cases are not controlling

because the § 1983 state actor analysis looks to an actor’s role and conduct while

the CAFA inquiry goes to the nature of the entity itself. The district court’s

                                           6
exclusive reliance on § 1983 case law was not appropriate. The issue is whether

Conduent may be considered an instrumentality of the state.

      The district court’s analysis, however, also focused to some extent on the

relationship between Conduent and the state entities ultimately responsible under

California law for collecting bridge tolls. Conduent is an entity acting on behalf of

the state to perform toll related functions required by state statute. California law

expressly establishes civil penalties for the evasion of bridge tolls, California

Vehicle Code § 40250, recognizes the existence of contractual arrangements for

processing toll delinquencies with entities which it describes as “issuing

agenc[ies],” § 40252, and defines an “issuing agency” as “an entity, public or

private, authorized to collect tolls.” Id. § 40250(e)(1).

      The Eleventh Amendment of the United States Constitution provides that

“[t]he Judicial power of the United States shall not be construed to extend to any

suit in law or equity, commenced or prosecuted against one of the United States by

Citizens of another State, or by Citizens or Subjects of any Foreign State.” U.S.

Const. amend. XI. This means that private individuals may not sue non-consenting

state entities in federal court. Bd. of Trs. of Univ. of Ala. v. Garrett, 531 U.S. 356,

363 (2001). The state need not be named as a defendant. The Supreme Court has

held that “the reference to actions ‘against one of the United States’ encompasses

not only actions in which a State is actually named as the defendant, but also

                                           7
certain actions against state agents and state instrumentalities.” Regents of the

Univ. of Cal. v. Doe, 519 U.S. 425, 429 (1997).

      To determine whether an entity is able to invoke such immunity our Court

has said we generally look to a number of factors:

      (1) whether a money judgment would be satisfied out of state funds,
      (2) whether the entity performs central governmental functions, (3)
      whether the entity may sue or be sued, (4) whether the entity has the
      power to take property in its own name or only the name of the state,
      and (5) the corporate status of the entity.

Beentjes v. Placer County Air Pollution Control Dist., 397 F.3d 775, 778 (9th Cir.

2005) (quoting Mitchell v. Los Angeles Community College Dist., 861 F.2d 198,

201 (9th Cir. 1988)). We examine these factors by looking at the way state law

treats the entity. Mitchell, 861 F.2d at 201.

      On this record, Conduent satisfies the second factor of performing a central

government function and it has not asserted that it lacks any of the other

characteristics. Conduent performs the government function of processing bridge

tolls, collecting fines and imposing penalties in the name of the state. This record

does not reflect whether it may satisfy the other factors. We have observed,

however, that the Mitchell factors are not particularly useful when applied to a

private entity because a private entity cannot be an arm of the state when the

relationship to the sovereign is only by contract. See Del Campo v. Kennedy, 517
F.3d 1070, 1077 (9th Cir. 2008). Here Plaintiffs contend the relationship is more

                                           8
than contractual because the state has enacted a special statutory scheme for the

collection of bridge tolls and has recognized the entities with whom the state

contracts for such purposes as “an issuing agency.” Our case law provides no

clear answer as to whether Conduent qualifies as a governmental entity within the

meaning of CAFA.

      Conduent contends that even if it is a government entity, it waived any

immunity it might have had by removing the case to federal court. See Lapides v.

Bd. of Regents of Univ. System, 535 U.S. 613, 624 (2002). In deciding whether the

governmental entity exception applies, however, the existence or waiver of

immunity is not the issue; the only issue is whether the entity is such that a claim

of immunity may be made. Moreover the Supreme Court’s holding in Lapides’

was limited. A state waives Eleventh Amendment immunity by removal only for

state-law claims “in respect to which the State has explicitly waived immunity

from state-court proceedings.” Id. at 617. Here, the record does not reflect that

Conduent waived immunity in state court. Accordingly, Lapides is not dispositive.

See id. at 617-618 (“[n]or do we address the scope of waiver by removal in a

situation where the State’s underlying sovereign immunity from suit has not been

waived or abrogated in state court.”)

      We need not decide whether the district court erred in remanding on the

“other governmental entit[y]” ground pursuant to § 1332(d)(5)(A) because there is

                                           9
a further justification for the remand. The plaintiffs correctly contend that the

result is required by provisions of CAFA calling for local actions to be heard in

state court. The local controversy exception is one of several exceptions to CAFA

removal jurisdiction. See Bridewell-Sledge, 798 F.3d at 928. It is defined at 28

U.S.C. § 1332(d)(4). The provision instructs that a district court is required to

decline jurisdiction over a class action when: (1) more than two-thirds of the

proposed plaintiff class(es) are citizens of the state in which the action was

originally filed, (2) there is at least one in-state defendant against whom

“significant relief” is sought and “whose alleged conduct forms a significant basis

for the claims asserted” by the proposed class, (3) the “principal injuries” resulting

from the alleged conduct of each defendant were incurred in the state of filing, and

(4) no other class action “asserting the same or similar factual allegations against

any of the defendants” has been filed within three years prior to the present action.

Id. § 1332(d)(4)(A). The exception’s purpose is to ensure that class actions with a

local focus remain in state court rather than being removed to federal court because

state courts have a strong interest in resolving local disputes. Bridewell-Sledge,
798 F.3d at 928.

      Most of these requirements are met. Plaintiffs submitted evidence indicating

that more than two thirds of the traffic on the Golden Gate Bridge during rush hour

is comprised of California citizen motorists. 28 U.S.C. § 1332(d)(4)(A)(i). They

                                          10
seek relief from two in-state defendants, BATA and GGB, for injuries incurred in

California. Id. The district court refused to remand under this exception, however,

because it held the fourth requirement was not met. One of the plaintiffs in this

case, Michelle Kelly, had previously filed a class action in state court on

September 7, 2016, and removed to federal court on November 28, 2016, alleging

similar theories. The district court viewed that filing as disqualifying. We

conclude it is not because that case never proceeded independently and essentially

became part of this case. This is reflected in a close examination of the

proceedings in both state and federal court.

      Shortly after Kelly filed her case in state court as a putative class action, it

was removed to federal court, where Kelly voluntarily dismissed the case as to her

claims only. When this, the Kendrick case, was filed in state court, Kelly became a

plaintiff in it. When the Kendrick case in turn was removed to federal court, the

district court ordered it joined with the remainder of the Kelly case as a related

case. See N.D. Cal. Civ. L.R. 3.12; see also Fed. R. Civ. P. 42. So when the

district court remanded this case to state court, it remanded one case that included

all the parties and potential parties to both the Kelly and Kendrick actions.

      As we pointed out in Bridewell-Sledge, the reason for the no prior class

action prerequisite to remand is to ensure that controversies giving rise to multiple

class actions be heard in federal court in one proceeding. Id. at 932. In Bridewell-

                                           11
Sledge there was no “other class action” because the prior action and the pending

action had been consolidated. There can be no “other class actions” in this case

either, since the earlier Kelly action has been effectively succeeded by this one, in

which Kelly is a named party. There is here, as in Bridewell-Sledge, every

practical reason why the local action rule should apply, and it supports the district

court’s remand order. As in Bridewell-Sledge, we are dealing with a single case,

not two different class actions proceeding on different tracks before different

judges. Therefore, no “other class action” has been filed within the meaning of the

statute. See 28 U.S.C. § 1332(d)(4)(A)(ii); Bridewell-Sledge, 798 F.3d at 928-931.

      The history, language, and purpose of CAFA reflects it is to provide a

federal forum for national issues, but keep smaller and more local issues in state

court. The Golden Gate Bridge may be a national treasure, but whether collection

of its tolls is a controversy that belongs in federal court is a different question.

Congress has provided that when the controversy is localized, the case belongs in

state court. See Bridewell-Sledge, 798 F.3d at 933. This is essentially a dispute

between those who use the bridge to travel between Marin County, California and

San Francisco, California, and defendants who are charged with operating the

bridge on behalf of the State of California. The district court properly ruled that

the case against Conduent, the toll collector, belongs in state court with the

California entities that manage the bridge’s maintenance and operation.

      AFFIRMED.
                                            12
                                                                              FILED
Kendrick v. Conduent State and Local Solutions, Inc., No. 18-16988
                                                                              DEC 13 2018
WATFORD, Circuit Judge, dissenting:                                        MOLLY C. DWYER, CLERK
                                                                            U.S. COURT OF APPEALS

      I agree with my colleagues that this class action belongs in state court. But

in my view the plain text of the Class Action Fairness Act (CAFA) requires that

the case remain in federal court, as nonsensical as that result may seem.

      In remanding this case to state court, the district court relied on a provision

that says CAFA jurisdiction shall not extend to 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)(A). Although the majority does not squarely resolve the issue,

I think it’s clear that this provision does not divest the court of jurisdiction.

Everyone agrees that there are three primary defendants in this action: Bay Area

Toll Authority; Golden Gate Bridge, Highway and Transportation District; and

Conduent State and Local Solutions, Inc. The first two defendants are indisputably

entities of the State of California against whom the district court may be foreclosed

from ordering relief, as they might be entitled to assert Eleventh Amendment

immunity in federal court. Conduent, however, is not a state entity. It is a private

corporation that contracts with the State to collect tolls on public bridges in the

Bay Area. We have held that Eleventh Amendment immunity does not extend to

private corporations, even when they contract with the State to perform central
                                                                           Page 2 of 5

governmental functions. Del Campo v. Kennedy, 517 F.3d 1070, 1076–79 (9th

Cir. 2008). As a result, Conduent does not qualify as a governmental entity

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

U.S.C. § 1332(d)(5)(A).

      The plaintiffs contend that § 1332(d)(5)(A) should be interpreted to preclude

CAFA jurisdiction even if just one of the primary defendants is a governmental

entity that may be immune from suit in federal court. That reading certainly seems

better suited to carrying out the purpose of this provision, which is to ensure that

class actions targeting defendants who would be entitled to Eleventh Amendment

immunity will remain in state court, where the claims against all of the defendants

can be resolved in a single forum. When a class action will have to proceed

against one or more of the primary defendants in state court anyway (because those

defendants can’t be sued in federal court), it makes little sense for the same claims

to be litigated simultaneously against the remaining defendants in a parallel federal

court proceeding. But, for reasons that remain a mystery, Congress used the

phrase “the primary defendants” in § 1332(d)(5)(A), rather than “a primary

defendant.” Courts have rightly held that in this context “the primary defendants”

must be read to mean all primary defendants. Woods v. Standard Insurance Co.,

771 F.3d 1257, 1263–64 (10th Cir. 2014); Frazier v. Pioneer Americas LLC, 455
F.3d 542, 546–47 (5th Cir. 2006). Since Conduent is a primary defendant but not
                                                                            Page 3 of 5

one “against whom the district court may be foreclosed from ordering relief,”

§ 1332(d)(5)(A) does not preclude CAFA jurisdiction.

      To uphold the district court’s remand order, the majority relies instead on a

different provision of CAFA, known as the local controversy exception. 28 U.S.C.

§ 1332(d)(4)(A). That provision is designed to ensure that class actions involving

residents predominantly of a single State will be litigated in the courts of that State.

Everyone agrees that the first three requirements of the local controversy exception

are met. The only issue is whether the last condition is satisfied. Remand is

required under that condition only if, during the three-year period preceding the

filing of this 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.” § 1332(d)(4)(A)(ii).

      The phrase “other class action” is not defined. But the phrase does not seem

to contemplate some esoteric concept, so I assume it means simply a class action

other than the one that is now in federal court. My colleagues appear to accept that

reading. We disagree only on how to characterize the relationship between this

action and the earlier class action filed by named plaintiff Michelle Kelly.

      In my view, if this action were merely a continuation of Kelly’s earlier-filed

action, we could fairly say that Kelly’s earlier action shouldn’t count as an “other

class action.” See Vodenichar v. Halcón Energy Properties, Inc., 733 F.3d 497,
                                                                           Page 4 of 5

506–10 (3d Cir. 2013). But Kelly’s earlier action and this action strike me as

entirely distinct. Kelly voluntarily dismissed the earlier action shortly after the

defendants removed it to federal court. At that point the action was effectively

terminated.

      Roughly a year later, Kelly and a new named plaintiff, Sumatra Kendrick,

filed this action in state court. The claims they assert undoubtedly arise out of the

same factual allegations that formed the basis for Kelly’s earlier action. But

neither Kendrick nor Kelly have claimed that Kelly’s earlier action “essentially

became part of this case.” Maj. op. at 11. In fact, they have stated basically the

opposite. When the defendants removed this action to federal court and asked that

it be assigned to the same judge who presided over Kelly’s earlier action, Kendrick

and Kelly asserted that the two actions were not even “related” for purposes of the

local court rule allowing such reassignment. They stressed that the two actions “do

not involve the same claims” and that “the earlier filed action has been

administratively closed.” The district court ultimately disagreed with that view

and found the cases to be related, but it did not order this action “joined with the

remainder of the Kelly case as a related case.” Maj. op. at 11. This action could

not be joined with any aspect of Kelly’s earlier action because that action had been

voluntarily dismissed.
                                                                          Page 5 of 5

      I am not saying that the result reached by my colleagues is an imprudent

one. It seems silly to hold that Kelly’s filing of the earlier action precludes remand

under the local controversy exception, given the decidedly local nature of the

claims at issue. For whatever reason, though, Congress dictated that remand is

required only if “no other class action” has been filed in the preceding three years,

and here another class action was filed during that period. I would therefore hold

that the district court erred by remanding this case to state court.