In a decision that may broaden application of the “local controversy” exception to removal under the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d)(4), the Third Circuit recently affirmed the remand of a putative class action to New Jersey state court holding a corporate defendant with New Jersey citizenship could be considered a “local defendant” because it did not fully divest itself of liability after previously transferring its potential liabilities to a Delaware entity and, thus, remained a real party in interest. In Walsh v. Defenders, Inc., putative class members filed their complaint in New Jersey Superior Court alleging that the contracts they entered into with Defendants related to the class members’ purchase of home security equipment and monitoring services violated New Jersey’s Truth-in-Consumer Contract, Warranty, and Notice Act (“TCCWNA”) and the New Jersey Consumer Fraud Act (“NJCFA”). Defendants removed the matter to federal court asserting CAFA jurisdiction, and Plaintiff moved to remand under CAFA’s local controversy exception. After initially denying Plaintiff’s motion to remand, the District Court granted Plaintiff’s motion for reconsideration when additional discovery showed that the only defendant with New Jersey citizenship, ADT SSI-Tyco, had contracted with 35.3% of the putative class members. Defendants appealed and...
Tagged: Class Action Fairness Act (“CAFA”)
Doomed CFA and TCCWNA Claims for Proposed Health Club Class Action Lead District Court to Question CAFA Jurisdiction
The District of New Jersey’s recent decision in Truglio v. Planet Fitness, Inc. provides valuable lessons on pleading claims under the New Jersey Consumer Fraud Act (“CFA”), Truth-in-Consumer Contract, Warranty, and Notice Act (“TCCWNA”), and Health Club Services Act (“HCSA”). Not only does the district court’s opinion reinforce the requirement of an ascertainable loss to sustain a CFA claim, but it also confirms that omissions are not actionable under the TCCWNA. Moreover, the district court’s conclusion that the plaintiff in this putative class action did not plead an ascertainable loss directly called into question the subject matter jurisdiction of the court: is there $5 million in controversy under the Class Action Fairness Act (“CAFA”) if the plaintiff has not alleged an ascertainable loss? Read below for more on this case, and stay tuned for additional developments after supplemental briefing on the CAFA issue.
Third Circuit Finds Proposed Dual Service as Class Counsel and Class Representative Does Not Preclude CAFA Removal
The Third Circuit recently considered whether the District Court properly denied a motion for remand brought by a pro se plaintiff, an attorney also seeking to serve as class counsel, who argued that since his “dual service” precluded class certification in federal court, the defendant could not aggregate the proposed class’s claims to satisfy the $5 million amount in controversy under the Class Action Fairness Act (“CAFA”). In affirming the denial of the plaintiff’s remand motion, the Third Circuit built upon recent Supreme Court precedent confirming that a plaintiff cannot stipulate to less than $5 million in damages to avoid the federal court’s subject matter jurisdiction under CAFA.
Supreme Court to Address Evidentiary Requirements for Determining Removal Jurisdiction in Class Actions
The Supreme Court of the United States granted certiorari in Dart Cherokee Basin Operating Company, LLC v. Owens, to resolve a circuit split over the evidentiary standard for determining removal jurisdiction pursuant to the Class Action Fairness Act (“CAFA”). Specifically, the Court will consider “[w]hether a defendant seeking removal to federal court is required to include evidence supporting federal jurisdiction in the notice of removal, or is alleging the required ‘short and plain statement of the grounds for removal’ enough?”
Eleventh Circuit Holds That Complaint for Declaratory Relief is “Up to the Task” of Satisfying the $5 Million Jurisdictional Amount for CAFA Removal
Recently, in South Florida Wellness, Inc. v. Allstate Insurance Co., the Court of Appeals for the Eleventh Circuit held that a class action complaint seeking only declaratory relief may be removed to federal court under the Class Action Fairness Act (“CAFA”), because the class members would be eligible to recover more than $5 million — the “amount in controversy” threshold for federal jurisdiction under CAFA — if such relief were granted. Central to the court’s holding was that the “amount in controversy” is an estimate of the value of what is at stake in the litigation, and not a precise measurement of plaintiffs’ likely recovery. In affirming the removal of a complaint seeking only declaratory relief under CAFA, the Eleventh Circuit offered useful insight on the burden of proof for “amount in controversy” purposes.
Supreme Court Says Unnamed Interested Parties Insufficient for Mass Action Removal Under Class Action Fairness Act
In Mississippi v. AU Optronics, the United States Supreme Court recently held that consumer actions filed in state court by an attorney general on behalf of the state’s citizens cannot be removed to federal court as “mass actions” under the Class Action Fairness Act (“CAFA”). In the unanimous opinion, authored by Justice Sotomayor, the Supreme Court held that even though the State of Mississippi was suing in a representative capacity, the Mississippi attorney general was only one person and therefore did not satisfy the 100-person requirement for removal to federal court under CAFA. While AU Optronics involved an action by the state attorney general, the Supreme Court’s ruling is instructive on the standards for removal of a mass action under CAFA and is applicable to public and private actions alike.
In a precedential opinion, the Third Circuit in Vodenichar v. Halcón Energy Properties, Inc., clarified the “home state” and “local controversy” exceptions to federal subject matter jurisdiction under the Class Action Fairness Act (“CAFA”). The decision provides guidance on two undefined terms within CAFA, adopting broader interpretations for what makes a defendant a “primary defendant” for purposes of the home state exception and what constitutes an “other class action” for purposes of the local controversy exception.
Class Action Defendants Seeking to Eliminate Removal Uncertainty Get Assistance from Seventh Circuit Decision
In an opinion beneficial to class action defendants, the Seventh Circuit has taken some of the guesswork out of removal by holding that the 30-day period for removing a case to federal court only begins once the defendant has received a pleading or other litigation paper that includes a specific, unequivocal statement that the damages sought meet the jurisdictional amount.
Following the rule announced in Standard Fire Ins. Co. v. Knowles, the Ninth Circuit has reversed course on the burden borne by defendants seeking to remove under the Class Action Fairness Act (“CAFA”). Now, defendants need only establish the amount in controversy by a preponderance of the evidence. In Rodriguez v. AT&T Mobility Services, the Ninth Circuit was faced with a putative class representative’s waiver of all damages above $5 million. The waiver was designed to avoid removal under the Class Action Fairness Act (“CAFA”), but earlier this year, the Supreme Court held in Standard Fire that such waivers are ineffective. Therefore, the Ninth Circuit vacated the District Court’s order remanding the case to state court and remanded to the District Court for further proceedings.
Ninth Circuit Rules that Redemption Value of Coupons Cannot be Ignored in Calculating Attorneys’ Fees in Coupon Settlements
In In re HP Inkjet Printer Litigation, the Ninth Circuit reversed a District Court’s approval of a class action settlement providing “e-credits,” or coupons, to class members, on the ground that the class counsel fee award violated § 1712 of the Class Action Fairness Act (“CAFA”). The parties’ settlement agreement had provided for $5 million in coupons, as well as injunctive relief in the form of additional product disclosures. The District Court, recognizing that the coupons were worth significantly less than their face value, estimated that the “ultimate value” of the combined coupon and injunctive relief to the class was approximately $1.5 million, and awarded fees of $1.5 million based solely on the lodestar method, without calculating the actual redemption value of the coupons.