The UCL Practitioner

A true appellate unicorn: City of Warren Police and Fire Retirement Sys. v. Natera Inc. (Updated)

There has been a unicorn sighting in San Mateo County.  The Court of Appeal (First Appellate District, Division Two) filed an opinion in a securities class action asserting claims under federal law that was not removed to federal court!  City of Warren Police and Fire Retirement System v. Natera Inc., ___ Cal.App.5th ___ (Feb. 28, 2020; pub. ord. Mar. 23, 2020). 

In other news, the Chief Justice issued a statewide order continuing all jury trials for 60 days, with a concomitant extension of the 5-year rule for all civil matters (and the 3-year rule for post-new trial and post-appeal cases).  She has also authorized all six appellate districts to extend filing deadlines as they see fit.  (At some point, it would be very helpful to law firm operations if the appellate courts moved to all-electronic systems for both filing and service copies of documents.)  See this post (evening of March 23) and this post (morning of March 24) from At the Lectern. As of this writing, the latest emergency order of the Los Angeles County Superior Court is available here.  Essentially, all courthouses are closed to the public until further notice.

UPDATE:  SCOCAblog has a very interesting post on the Chief Justice's authority (statutory, constitutional, and inherent) to issue a statewide order continuing all jury trials. 

New Ninth Circuit CAFA opinion: Chan Healthcare Group, PS v. Liberty Mut. Fire Ins. Co.

In Chan Healthcare Group, PS v. Liberty Mutual Fire Insurance Co., ___ F.3d ___ (Jan. 3, 2017), the Ninth Circuit construed the CAFA provision governing appealability of remand orders. 

The opinion's first paragraph reads:

This consolidated appeal presents an issue of first impression in our circuit, namely the scope of appellate jurisdiction to review a district court’s remand order in a class action case founded on federal question jurisdiction. Remand orders are not appealable as a matter of course. 28 U.S.C. § 1447(d). Nonetheless, as part of the Class Action Fairness Act of 2005 (“CAFA”), Congress created an exception under 28 U.S.C. § 1453(c)(1) that permits courts of appeals to accept appeals from remand orders in cases that are removed “under this section.” Joining our sister circuits, we conclude that this interlocutory review provision is limited to orders granting or denying remand of diversity class actions brought and removed under CAFA.

Slip op. at 3.

Ninth Circuit addresses "local controversy" exception to CAFA: Allen v. Boeing Co.

In Allen v. Boeing Co., 821 F.3d 1111 (9th Cir. May 5, 2016), the Ninth Circuit held that the district court had correctly applied the "local controversy" exception to CAFA jurisdiction, and that the case, a mass tort class action, was correctly remanded to state court. 

Urging the inapplicability of the "local controversy" exception put the out-of-state defendant in the odd position of arguing that it bore greater responsibility for the alleged harm than its co-defendant, who was local.  See id. at 1116-21.  The Ninth Circuit concluded that the plaintiffs did, in fact, seek "significant relief" from the local defendant, and that the local defendant's conduct formed a "significant basis" for the plaintiff's claims.  Id.  The out-of-state defendant also argued that the plaintiffs failed to state a valid claim against the local defendant -- another very strange thing to hear a defendant asserting.  See id. at 1121-23.  The court disagreed, without addressing the threshold question of whether a defendant can escape application of the "local controversy" exception by attacking the merits of the underlying claim.  Id.

It seems like this case has a long history, even though it is just getting started.  This is the second CAFA-related appeal heard by the Ninth Circuit. I reported on the earlier Ninth Circuit opinion here. 

New Ninth Circuit opinion on CAFA and standing: Polo v. Innoventions International, LLC

In Polo v. Innoventions International, LLC, ___ F.3d ___ (9th Cir. Aug. 18, 2016), the plaintiff brought UCL, CLRA, and other claims, alleging that she purchased the defendant's allegedly mislabeled diabetes medication, and that taking the medication made her diabetes worse.   The district court held that Article III standing was lacking, and dismissed the case.  The plaintiff appealed as to the CLRA class claim only, arguing that instead of being dismissed, the case should have been remanded back to state court, where it was initially filed before the defendant removed it under CAFA.  Slip op. at 4.  The Ninth Circuit agreed:

The rule that a removed case in which the plaintiff lacks Article III standing must be remanded to state court under § 1447(c) applies as well to a case removed pursuant to CAFA as to any other type of removed case.

Slip op at 7. The court then explained that the CLRA class claim might be viable in state court even if the plaintiff did not suffer "injury in fact" for Article III purposes: 

A plaintiff who purchased goods in light of deceptive practices has standing to sue pursuant to the CLRA if she alleges (a) that she purchased a product from the defendant, and (b) that “the purchase would not have been made but for the misrepresentation.” Kwikset Corp. v. Superior Court, 246 P.3d 877, 890 (Cal. 2011); see also Hinojos v. Kohl’s Corp., 718 F.3d 1098, 1108 (9th Cir. 2013). The injury Polo asserts with respect to her CLRA claim fits these requirements:

Plaintiff and California Class members suffered injuries caused by Defendants’ misrepresentations about DiabeStevia because: (a) Plaintiff and the California Class members would not have purchased DiabeStevia on the same terms had they known the true facts; (b) Plaintiff and the California Class paid a premium price due to the false and misleading advertising of DiabeStevia; and (c) DiabeStevia did not have the level of safety, quality, effectiveness or value as promised.

Polo’s standing to bring her CLRA claim does not depend upon her allegation that taking DiabeStevia made her diabetes worse. Indeed, with respect to Polo’s CLRA claim, when Polo ceased taking her diabetes medication—or whether she had diabetes at all—is irrelevant. What matters are her allegations that she thought she had diabetes; that Innoventions marketed DiabeStevia as a treatment for diabetes; and that but for that marketing, she would not have bought DiabeStevia.

Were that the end of the allegations, Polo would likely have standing under Article III. See Hinojos, 718 F.3d at 1104 n.3. But the district court held that because Innoventions fully compensated Polo for “her entire purchase price,” her CLRA claim is moot.⁵ Under California law, however, that sort of “picking off” of class plaintiffs is ineffective: “[O]nce a person has been the victim of a proscribed practice under the CLRA and makes a demand on behalf of a class, remedying the plaintiff’s individual complaint does not disqualify her as class representative.” Meyer v. Sprint Spectrum, L.P., 200 P.3d 295, 300 (Cal. 2009). Instead, to defeat a class action based on practices proscribed under the CLRA, the defendant “must adequately notify the members of the class and provide an opportunity for an appropriate remedy for the defective goods or services.” Id. (citing Cal. Civ. Code § 1782(c)).

Polo made a demand on behalf of a class on April 6, 2012. Innoventions refunded Polo’s purchase price on May 11, 2012, but does not contend that it provided the notice and remedy to class members required by the CLRA. See Cal. Civ. Code § 1782(c); Meyer, 200 P.3d at 300. Thus, Polo likely retains standing under California law. At a minimum, we cannot say with “absolute certainty” that remand would be futile. Therefore, the district court should have remanded this case to state court pursuant to 28 U.S.C. § 1447(c).

⁵ This conclusion is questionable, see Chen v. Allstate Ins. Co., 819 F.3d 1136, 1141–43 (2016), but Polo expressly waived any argument to the contrary on appeal. ....

Slip op. at 10-12 (footnote 4 omitted). 

It seems to me that the district court erred by dismissing the action in the first place. The "no-pickoff" rule applies in federal court, too.  See Gomez v. Campbell-Ewald Co., 768 F.3d 871, 874-75 (9th Cir. 2014) (discussed here); Diaz v. First American Home Buyers Protection Corp., 732 F.3d 948 (9th Cir. 2013) (discussed here); Pitts v. Terrible Herbst, Inc., 653 F.3d 1081 (9th Cir. 2011) (discussed here).  Even if the medication did not worsen plaintiff's diabetes, if she purchased the mislabeled product, she probably has a viable CLRA claim, and if she doesn't, the defendant can't eliminate the case by picking her off, regardless of whether the case is in federal or state court.  The good news is the plaintiff can now proceed with the case in state court, which is where she wanted to be in the first place. It's too bad about all the wasted time and effort in federal court, though. 

New Ninth Circuit CAFA "amount in controversy" opinion: Yocupicio v. PAE Group, LLC

In Yocupicio v. PAE Group, Inc., ___ F.3d ___ (9th Cir. Jul. 30, 2015), the Ninth Circuit held that the amounts sought in plaintiff's non-class PAGA claim could not be added to the amounts sought in plaintiff's class claims in order to meet the $5 million threshold for CAFA jurisdiction.  Slip op. at 6-9, 11.  The Court determined that "in enacting CAFA, Congress was focused on class actions rather than on all representative actions or on cases where a class claim was only a part, perhaps a small part, of a civil action."  Id. at 7.

The opinion also has this interesting footnote distinguishing between representative and class claims:

No doubt all class claims are representative in nature. However, not all representative claims are class claims; to say that they are would be a logical fallacy. See Washington v. Chimei Innolux Corp., 659 F.3d 842, 848 (9th Cir. 2011).

Id. at 6 n.6. 

The concluding paragraph of the opinion makes clear that the analysis and holdings are not limited to representative PAGA claims: 

Where a plaintiff files an action containing class claims as well as non-class claims, and the class claims do not meet the CAFA amount-in-controversy requirement while the nonclass claims, standing alone, do not meet diversity of citizenship jurisdiction requirements, the amount involved in the non-class claims cannot be used to satisfy the CAFA jurisdictional amount, and the CAFA diversity provisions cannot be invoked to give the district court jurisdiction over the non-class claims.

Id. at 11.

Many thanks to the blog reader who forwarded this opinion. 

Recent Ninth Circuit CAFA opinions: Allen v. The Boeing Co., Eminence v. Bank of New York Mellon, Jordan v. Nationstar, and Reyes v. Dollar Tree Stores

The Ninth Circuit has construed CAFA in four new opinions this month, including one handed down yesterday:

• Allen v. The Boeing Co., ___ F.3d ___ (9th Cir. Apr. 27, 2015) (construing CAFA's "local single event" exception for mass actions)

• Eminence Investors, L.L.L.P. v. Bank of New York Mellon, ___ F.3d ___ (9th Cir. Apr. 2, 2015) (construing CAFA's securities exception)

• Jordan v. Nationstar Mortgage LLC, 781 F.3d 1178 (9th Cir. Apr. 1, 2015) (addressing timeliness of removal under CAFA and types of post-filing events "from which it may first be ascertained that the case is ... removable")

• Reyes v. Dollar Tree Stores., Inc., 781 F.3d 1185 (9th Cir. Apr. 1, 2015) (holding that superior court's order granting class certification of expanded class definition created new removal opportunity under CAFA)

U.S. Supreme Court takes up another CAFA case: Dart Cherokee Basin Operating Co. v. Owens

On Monday, the U.S. Supreme Court granted cert. in a CAFA case, Dart Cherokee Basin Operating Co. v. Owens, No. 13-719.  This is the question presented, according to the cert. petition:

Whether 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?

The defendant's removal petition was predicated on CAFA, but the district court remanded because the petition contained only allegations, and not evidence, that the requirements for federal removal jurisdiction -- namely, the $5 million amount-in-controversy requirement -- had been satisfied.  Owens v. Dart Cherokee Basin Operating Co., 2013 WL 2237740 (D. Kan. May 21, 2013).  The Tenth Circuit denied permission to appeal. 

Four judges dissented from the ensuing order denying en banc rehearing.  Dart Cherokee Basin Operating Co. v. Owens, 730 F.3d 1234 (10th Cir. 2013).  The dissenting opinion by Judge Hartz begins:

This court owes a duty to the bench and bar to provide guidance regarding the procedural requirements of the Class Action Fairness Act of 2005 (CAFA). Yet it has let stand a district-court decision that will in effect impose in this circuit requirements for notices of removal that are even more onerous than the code pleading requirements that I had thought the federal courts abandoned long ago.

Id. at 1234.

SCOTUSblog's case page has links to the cert. petition and other filings.

New Ninth Circuit CAFA opinion: Baumann v. Chase Investment Services

In Baumann v. Chase Investment Services, ___ F.3d ___ (9th Cir. Mar. 14, 2014), the Ninth Circuit held that a representative action under PAGA (the Labor Code Private Attorneys General Act of 2004)  is not a "class action" subject to removal under CAFA.

New Ninth Circuit CAFA opinion: Mondragon v. Capital One Auto Finance

In Mondragon v. Capital One Auto Finance, ___ F.3d ___ (9th Cir. Nov. 27, 2013), the Ninth Circuit considered the "local controversy" exception to federal jurisdiction under CAFA, and reversed the district court's remand order.

This passage is from the introduction:

We conclude that there must ordinarily be facts in evidence to support a finding that two-thirds of putative class members are local state citizens, which is one of the local controversy exception’s requirements, if that question is disputed before the district court. A pure inference regarding the citizenship of prospective class members may be sufficient if the class is defined as limited to citizens of the state in question, but otherwise such a finding should not be based on guesswork. In reaching this conclusion, we join the other circuits that have considered the issue.

Slip op. at 4 (emphasis added).  The court held that defining the class as all persons who "purchased a vehicle in California for personal use to be registered in the State of California" was not enough to support an evidentiary inference that two-thirds of the class members were California citizens, as the "local controversy" exception requires. Id. at 8-12.  The panel remanded to allow the plaintiff an opportunity to prove, as an evidentiary matter, that the exception applied.  Id. at 12-14.

The opinion did not address whether the plaintiff could simply opt to amend the class definition to include only California citizens. 

New Ninth Circuit CAFA opinion construes Standard Fire: Rodriguez v. AT&T Mobility Services LLC

In Rodriguez v. AT&T Mobility Services LLC, ___ F.3d ___ (9th Cir. Aug. 27, 2013), the Ninth Circuit construed the U.S. Supreme Court's first, and so far only, CAFA decision, Standard Fire Ins. Co. v. Knowles, 133 S.Ct. 1345 (2013) (discussed in this blog post).

Standard Fire addressed whether the plaintiff could avoid federal jurisdiction under CAFA by stipulating that classwide damages did not exceed $5 million or by attempting to waive damages above that figure.  The answer was no, although this did not relieve the defendant (as the removing party) of its burden to prove that the amount-in-controversy requirement was met. 

In Rodriguez, the parties agreed that Standard Fire required reversal of the district court's remand order, which was issued before the opinion in Standard Fire.  The Ninth Circuit directed the district court to reconsider the remand motion. Slip op. at 7. 

Regarding the burden of proof, the panel determined that Standard Fire overruled Lowdermilk v. U.S. Bank National Association, 479 F.3d 994 (9th Cir. 2007) (discussed here), which had imposed a "legal certainty" standard, instead of an ordinary preponderance of the evidence standard, for countering the complaint's amount-in-controversy allegations:

The reasoning behind Lowdermilk's imposition of the legal certainty standard is clearly irreconcilable with Standard Fire. We hold that Standard Fire has so undermined the reasoning of our decision in Lowdermilk that the latter has been effectively overruled. A defendant seeking removal of a putative class action must demonstrate, by a preponderance of evidence, that the aggregate amount in controversy exceeds the jurisdictional minimum. This standard conforms with a defendant's burden of proof when the plaintiff does not plead a specific amount in controversy.

....

A lead plaintiff of a putative class cannot reduce the amount in controversy on behalf of absent class members, so there is no justification for assigning to the allegation weight so significant that it affects a defendant's right to a federal forum under § 1332(d)(2). Our reasons for applying a legal certainty standard are now clearly irreconcilable with intervening Supreme Court authority. Accordingly, Lowdermilk has been effectively overruled by Standard Fire.

Slip op. at 14, 15. 

Back when Standard Fire was first handed down, a blog reader emailed me to suggest that it overruled Lowdermilk.  It turns out this reader was right on according to Rodriguez.

Another Ninth Circuit CAFA opinion: Watkins v. Vital Pharmaceuticals, Inc.

In Watkins v. Vital Pharmaceuticals, Inc., ___ F.3d ___ (9th Cir. Jul. 2, 2013) (per curiam), the Ninth Circuit reversed another remand order after holding that the district court had jurisdiction under CAFA.  This time, the opinion addresses the $5 million amount-in-controversy requirement and how it is established. 

Judge Fisher filed a separate opinion concurring and dissenting in part. 

New Ninth Circuit CAFA opinion: Roth v. CHA Hollywood Medical Center

In Roth v. CHA Hollywood Medical Center L.P., ___ F.3d ___ (9th Cir. Jun. 27, 2013), the Ninth Circuit reversed the district court's remand order, finding that the federal courts had jurisdiction under CAFA and that the defendants' removal petition was not untimely.

Recent U.S. Supreme Court activity of interest: Sears, Roebuck & Co. v. Butler and Mississippi ex rel. Hood v. AU Optronics Corp.

On June 3, 2013, the U.S. Supreme Court granted cert., vacated the opinion, and remanded for reconsideration in a third post-Comcast case:  Sears, Roebuck & Co. v. Butler, no. 12-1067.

Butler is a consumer case in which the Seventh Circuit reversed the district court's order denying class certification of a breach of warranty claim involving mold growth in front-load washing machines.  Butler v. Sears, Roebuck & Co., 702 F.3d 359 (7th Cir. 2012) (Posner, J.).  My original post on the opinion is here. 

This is the third case that I'm aware of in which the Supreme Court directed reconsideration in light of Comcast.  The other two cases are Whirlpool Corp. v. Glazer, no. 12-322 (also involving front-load washers; see this blog post), and RBS Citizens, N.A. v. Ross, no. 12-165 (involving unpaid overtime wages; see this blog post).

It will be interesting to see what the Sixth and Seventh Circuits do in these cases on remand.

In the meantime, it is now June, which means that the Supreme Court will soon be handing down its opinions in the rest of the cases argued this Term.  I'm following these cases, among others: 

• Oxford Health Plans LLC v. Sutter, No. 12-135 (involving class arbitration; argued 03/25/13)
• American Express Co. v. Italian Colors Restaurant, No. 12-133 (involving class arbitration; argued 02/27/13)

In another development of interest, on May 28, 2013, the Supreme Court granted cert. in another case involving CAFA, Mississippi ex rel. Hood v. AU Optronics Corp., no. 12-0136.  This is the question presented according to the cert. petition:

Whether a state's parens patriae action is removable as a "mass action" under the Class Action Fairness Act when the state is the sole plaintiff, the claims arise under state law, and the state attorney general possesses statutory and common-law authority to assert all claims in the complaint.

The case arose out of the LCDs price-fixing litigation.  The Fifth Circuit reversed the remand order, finding the public prosecutor action removable under CAFA.  Mississippi ex rel. Hood v. AU Optronics Corp., 701 F.3d 796 (5th Cir. 2012). 

The Supreme Court's only other CAFA-related case to date is The Standard Fire Ins. Co. v. Knowles, 133 S.Ct. 1345 (2013), discussed in this blog post.

U.S. Supreme Court considers CAFA for the first time: The Standard Fire Insurance Co. v. Knowles

On Tuesday, the U.S. Supreme Court handed down an opinion in which it considered CAFA for the first time. The Standard Fire Ins. Co. v. Knowles, ___ S.Ct. ___ (Mar. 19, 2013). 

The Court held that a pre-certification stipulation not to seek damages exceeding $5 million (CAFA's jurisdictional minimum) was not binding on absent class members; therefore, the district court should have disregarded the stipulation when it ruled on the remand motion:

As applied here, the statute tells the District Court to determine whether it has jurisdiction by adding up the value of the claim of each person who falls within the definition of Knowles’ proposed class and determine whether the resulting sum exceeds $5 million. If so, there is jurisdiction and the court may proceed with the case. The District Court in this case found that resulting sum would have exceeded $5 million but for the stipulation.

And we must decide whether the stipulation makes a critical difference. In our view, it does not. Our reason is a simple one: Stipulations must be binding.  [Citations.]  The stipulation Knowles proffered to the District Court, however, does not speak for those he purports to represent.

That is because a plaintiff who files a proposed class action cannot legally bind members of the proposed class before the class is certified. See Smith v. Bayer Corp., 564 U. S. ___, ___ (2011) ....

Because his precertification stipulation does not bind anyone but himself, Knowles has not reduced the value of the putative class members’ claims. For jurisdictional purposes, our inquiry is limited to examining the case “as of the time it was filed in state court,” Wisconsin Dept. of Corrections v. Schacht, 524 U. S. 381, 390 (1998). At that point, Knowles lacked the authority to concede the amount-in-controversy issue for the absent class members. The Federal District Court, therefore, wrongly concluded that Knowles’ precertification stipulation could overcome its finding that the CAFA jurisdictional threshold hadbeen met.

Slip op. at 3-4. 

The opinion suggests that no pre-certification stipulations or concessions can ever bind absent class members.  Such a holding could have ramifications that extend far beyond the context of CAFA jurisdiction.

The opinion also contains this paragraph:

Knowles argues in the alternative that a stipulation is binding to the extent it limits attorney’s fees so that the amount in controversy remains below the CAFA threshold.  We do not consider this issue because Knowles’ stipulation did not provide for that option.

Slip op. at 7.  Although not mentioned in the opinion, apparently the $5 million threshold was reached in this case only by adding a potential attorneys' fees award to the potential class members' potential damages.  The district court will have to consider on remand whether the attorneys' fees should be counted in the calculation (and if so, what amount should be assumed).  In other words, even disregarding the stipulation, the defendant will still have to establish as a factual matter that the amount in controversy exceeds $5 million. 

A blog reader emailed me to suggest that Knowles overruled the Ninth Circuit's opinion in Lowdermilk v. United States Bank, N.A., 479 F.3d 994 (9th Cir. 2007) (discussed in this blog post).  I have not had an opportunity to go back to the Lowdermilk opinion and consider that idea.  

SCOTUSblog had a very interesting post on the opinion by Professor Debra Lyn Bassett of Southwestern Law School.

U.S. Supreme Court hands down CAFA opinion: The Standard Fire Ins. Co. v. Knowles

This morning, the U.S. Supreme Court handed down its opinion in a CAFA case, The Standard Fire Ins. Co. v. Knowles, ___ S.Ct. ___ (Mar. 19, 2013). 

The case was argued on January 7, 2013.  The argument transcript is available at this link.  The last paragraph of the unanimous opinion reads:

In sum, the stipulation at issue here can tie Knowles’ hands, but it does not resolve the amount-in-controversy question in light of his inability to bind the rest of the class. For this reason, we believe the District Court, when following the statute to aggregate the proposed class members’ claims, should have ignored that stipulation. Because it did not, we vacate the judgment below and remand the case or further proceedings consistent with this opinion.

As I explained in this post, the question was whether the plaintiff could defeat CAFA removal by "stipulating" that the amount in controversy did not exceed $5 million.  Based on the paragraph quoted above, it sounds like the Supreme Court's answer is no. 

I will have more on the opinion in a later post. 

[via]

New Ninth Circuit CAFA opinion: Kuxhausen v. BMW Financial Services NA LLC

In Kuxhausen v. BMW Financial Services NA LLC, ___ F.3d ___ (9th Cir. Feb. 25, 2013), the Ninth Circuit held that the defendant's removal petition was timely filed under CAFA.  The Complex Litigator has a detailed post on the opinion.

U.S. Supreme Court hears oral argument today in CAFA case: The Standard Fire Ins. Co. v. Knowles

Today at 10:00 a.m. Eastern, the U.S. Supreme Court is scheduled to hear oral argument in The Standard Fire Ins. Co. v. Knowles, No. 11-1450.  In Standard Fire, the Court will consider whether a class action plaintiff can avoid removal under CAFA by stipulating that the action does not seek to recover more than $5 million, which is the minimum amount in controversy required for federal diversity jurisdiction. 

Ordinarily, oral argument transcripts are posted to the Court's website later the same day.  When the Standard Fire argument transcript is posted online, it should be available at this link.

My original post on this case is here.  The Supreme Court's statement of the issue reads as follows: 

Last Term, this Court held that in a putative class action "the mere proposal of a class ... could not bind persons who were not parties." Smith v. Bayer Corp., 131 S. Ct. 2368, 2382 (2011). In light of that holding, the question presented is:

When a named plaintiff attempts to defeat a defendant's right of removal under the Class Action Fairness Act of 2005 by filing with a class action complaint a "stipulation" that attempts to limit the damages he "seeks" for the absent putative class members to less than the $5 million threshold for federal jurisdiction, and the defendant establishes that the actual amount in controversy, absent the "stipulation," exceeds $5 million, is the "stipulation" binding on absent class members so as to destroy federal jurisdiction?

UPDATE:  The oral argument transcript is now available at the link above.  Also, SCOTUSblog had this argument preview last Friday. 

U.S. Supreme Court grants cert. in CAFA case: The Standard Fire Ins. Co. v. Knowles

On Friday, August 31, 2012, the U.S. Supreme Court granted cert. in a CAFA case involving the $5 million amount-in-controversy requirement for federal diversity jurisdiction over putative class actions.  The Standard Fire Ins. Co. v. Knowles, No. 11-1450. 

According to the defendant's cert. petition, the case presents the following question:

Last Term, this Court held that in a putative class action "the mere proposal of a class ... could not bind persons who were not parties." Smith v. Bayer Corp., 131 S. Ct. 2368, 2382 (2011). In light of that holding, the question presented is:

When a named plaintiff attempts to defeat a defendant's right of removal under the Class Action Fairness Act of 2005 by filing with a class action complaint a "stipulation" that attempts to limit the damages he "seeks" for the absent putative class members to less than the $5 million threshold for federal jurisdiction, and the defendant establishes that the actual amount in controversy, absent the "stipulation," exceeds $5 million, is the "stipulation" binding on absent class members so as to destroy federal jurisdiction?

In an unpublished order, District Judge P.K. Holmes, III, of the Western District of Arkansas accepted the stipulation and remanded the case back to state court.  Knowles v. Standard Fire Ins. Co., 2011 WL 6013024 (W.D. Ark. Dec. 1, 2011).  According to that order,

Exhibit A attached to the Complaint [was] a “Sworn and Binding Stipulation,” signed by Plaintiff, affirming that he will not at any time during the pendency of the case “seek damages for myself or any other individual class member in excess of $75,000 (inclusive of costs and attorneys' fees) or seek damages for the class as alleged in the complaint to which this stipulation is attached in excess of $5,000,000 in the aggregate (inclusive of costs and attorneys' fees).”

Id. at *2.   In the face of that stipulation, the defendant presented evidence that the actual amount in controversy exceeded $5 million by approximately $24,000.  As a result,

the burden shifts to Plaintiff to prove to a legal certainty that his claim falls under the $5 million threshold for remand to state court. The question is whether a plaintiff may meet his burden of proof by stipulating at the time the complaint is filed that he will not seek more than the federal jurisdictional minimum for himself and the putative class. Even though the Bell court did not specifically reference the legal certainty burden, it did conclude that a clear stipulation would meet the requirements for defeating removal. It follows, therefore, that if a stipulation is legally binding and made in good faith, it can satisfy the plaintiff's legal certainty burden and defeat removal. Bell [v. Hershey Co.], 557 F.3d [953,] 956 [(8th Cir. 2009)]; see also Tuberville v. New Balance Athletic Shoe, Inc., 2011 WL 1527716, *3 (W.D. Ark., April 21, 2011).

Id. at *4 (emphasis added).  The court evaluated the stipulation and found it sufficient.  On the specific issue that has caught the U.S. Supreme Court's attention, the court stated: 

Defendant believes Plaintiff has exhibited bad faith in seeking to limit the as-yet-unknown class members to damages over a two-year period, rather than the full five years of damages potentially recoverable under the statute of limitations. See Doc. 9, p. 13. As the master of his complaint, Plaintiff may choose what claims to bring and what claims to leave out. “[A] removing defendant can't make the plaintiff's claim for him; as master of the case, the plaintiff may limit his claims (either substantive or financial) to keep the amount in controversy below the threshold.” Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 449 (7th Cir.2005). Defendant fails to cite any authority which states that a plaintiff may not seek to recover damages for a period of time shorter than the statute of limitations provides. Nor is the Court persuaded that Plaintiff's temporal limitation on recovery evidences his bad faith.

Defendant cites to the case of Bass v. Carmax Auto Superstores, Inc., 2008 WL 441962 (W.D. Mo., Feb. 14, 2008), for the proposition that a class plaintiff has no right to limit recovery for a class without court approval. However, the Bass case was decided before Bell, and the holding in Bass contradicts both the plain language and the spirit of the Eighth Circuit's holding in Bell. Furthermore, putative class members may simply opt out of the class and pursue their own remedies if they feel that the limitations placed on the class by Plaintiff are too restrictive. See Murphy, 2011 WL 1559234 at *3 (“... the plaintiffs in state court who choose not to opt out of the class must live with it,” quoting Morgan v. Gay, 471 F.3d 469, 477-78 (3rd Cir.2006), cert. denied, 128 S.Ct. 66 (2007)).

Id. at *6. 

According to the cert. petition, the Eighth Circuit denied the defendant's petition for permission to appeal, and then denied both panel and en banc rehearing. 

Consumer Law & Policy Blog has a post on the case. 

The following links to materials from the case are courtesy of SCOTUSblog:

• Opinion below (W.D. Ark.)
• Petition for certiorari
• Brief in opposition
• Amicus brief of Chamber of Commerce of the United States of America
• Amicus brief of Center for Class Action Fairness
• Reply of petitioner

Ninth Circuit holds again that parens patriae actions are not removable under CAFA: Nevada v. Bank of America

In State of Nevada v. Bank of America Corp., ___ F.3d ___ (9th Cir. Mar. 2, 2012), the Ninth Circuit confirmed again that parens patriae actions brought by the government are neither "class actions" nor "mass actions" and therefore are not removable under CAFA. 

In October, it reached the same conclusion in Washington v. Chimei Innolux Corp., 659 F.3d 843 (9th Cir. 2011), discussed in this blog post. 

More on the Ninth Circuit's recent CAFA decision: Washington v. Chimei Innolux Corp.

A new blog sponsored by Thompson Reuters called On The Case has an interesting post on the ramifications of the Ninth Circuit's CAFA decision handed down last week, Washington v. Chimei Innolux Corp., ___ F.3d ___ (Oct. 3, 2011). 

Here's an excerpt:

What's important about the ruling isn't just that the Washington and California LCD [antitrust] cases will remain in state court. The Ninth Circuit panel's decision endorses the power of state AGs to bring their own cases even when private class actions cover the exact same conduct. AGs, in other words, can pre-empt private cases--which is just what plaintiffs lawyers in the municipal bond derivatives class action before Manhattan federal judge Victor Marrero assert has happened in their case. Many of the muni bond derivative defendants have reached settlements with state AGs, rather than settling in the class action. The plaintiffs lawyers assert that it's an easy out for defendants, whose regulatory settlements aren't subject to a federal judge's oversight, as real class actions are.

My post mentioned the ramifications for PAGA actions, but these further ramifications are worth considering as well if you are handling a case in which the state enforcement agencies have expressed interest. 

New Ninth Circuit CAFA decision: Washington v. Chimei Innolux Corp.

In Washington v. Chimei Innolux Corp., ___ F.3d ___ (Oct. 3, 2011), the Ninth Circuit held that parens patriae actions filed by the state are not "class actions" within the meaning of CAFA. 

Unlike private litigants, the Attorneys General have statutory authority to sue in parens patriae and need not demonstrate standing through a representative injury nor obtain certification of a class in order to recover on behalf of individuals. See Wash. Rev. Code § 19.86.080; Cal. Bus. & Prof. Code § 16760. ....  

....

Put another way, class actions are always representative actions, but representative actions are not necessarily class actions.

Slip op. at 9, 10.  A similar analysis likely applies to PAGA cases post-Arias.

[via]

Another new Ninth Circuit CAFA opinion: Coleman v. Estes Express Lines, Inc.

In Coleman v. Estes Express Lines, Inc., ___ F.3d ___ (9th Cir. Nov. 30, 2010), the Ninth Circuit addressed the "criteria to determine when it is appropriate to hear discretionary appeals under CAFA." Slip op. at 19022.

New Ninth Circuit CAFA opinion: Lewis v. Verizon Communications, Inc.

In Lewis v. Verizon Communications, Inc., ___ F.3d ___ (9th Cir. Nov. 18, 2010), the Ninth Circuit addressed CAFA's $5 million amount in controversy requirement.

BREAKING NEWS: Eleventh Circuit issues new opinion on rehearing in Cappuccitti v. DirecTV

Today the Eleventh Circuit handed down a new opinion on rehearing in the Cappuccitti case.  Cappuccitti v. DirecTV, ___ F.3d ___ (11th Cir. Oct. 15, 2010).  More on this new opinion later.

UPDATE:  Here is the introductory paragraph of the three-judge, per curiam opinion, which neatly summarizes the new decision and its holding:

On July 19, 2010, we issued an opinion in this case. Cappuccitti v. DirecTV, Inc., No. 09-14107, slip op. (11th Cir. July 19, 2010). We based our decision on our interpretation of the jurisdictional requirements of the Class Action Fairness Act of 2005 (“CAFA”), Pub. L. No. 109-2, 119 Stat. 4 (codified in scattered sections of 28 U.S.C.), which we have elsewhere called a “statutory labyrinth.” Lowery v. Ala. Power Co., 483 F.3d 1184, 1199 (11th Cir. 2007). Subsequent reflection has led us to conclude that our interpretation was incorrect. Specifically, CAFA’s text does not require at least one plaintiff in a class action to meet the amount in controversy requirement of 28 U.S.C. § 1332(a). Accordingly, we construe both parties’ petitions for rehearing en banc to include petitions for panel rehearing, vacate our earlier opinion, and replace it with this one.

Slip op. at 2 (footnote omitted) (emphasis added). 

The opinion's ensuing discussion of the jurisdiction question is very short, simple and straightforward; nothing surprising about it, this time.  Id. at 4-7.  The opinion then goes on to address the substantive issue on appeal.  It reverses the district court's order denying the defendant's motion to compel arbitration, and remands the case for further proceedings.  Id. at 7-17.

Another federal judge in California declines to follow Cappuccitti: In re DirecTV Early Cancellation Litigation

In In re DirecTV Early Cancellation Litig., ___ F.Supp.2d ___, 2010 WL 3633079, *9-*10 (C.D. Cal. Sept. 7, 2010), Judge Guilford of the Central District joined Judge Alsup of the Northern District in declining to follow Cappuccitti v. DirecTV, Inc., 611 F.3d 1252 (11th Cir. 2010), calling the decision "misguided in both the reasoning and result."

Two petitions for en banc rehearing have been filed in Cappuccitti.  The defendant's rehearing petition is here and the plaintiffs' petition is here (both links via CAFA Law Blog). 

Three new federal decisions on class action issues: Wolin v. Jaguar Land Rover, Avritt v. Reliastar Life Ins. Co., and Cappuccitti v. DirecTV, Inc.

The Eighth, Ninth and Eleventh Circuits have handed down three decisions of interest in recent weeks: 

• In Wolin v. Jaguar Land Rover North America LLC, ___ F.3d ___ (9th Cir. Aug. 17, 2010), the Ninth Circuit reversed an order denying class certification of vehicle defect claims brought under Michigan and Florida consumer protection laws.
  
  
• In Avritt v. Reliastar Life Ins. Co., ___ F.3d ___ (8th Cir. Aug. 12, 2010), the Eighth Circuit affirmed an order denying class certification of UCL and other consumer protection claims. 
  
  
• In Cappuccitti v. DirecTV, Inc., ___ F.3d ___ (11th Cir. Jul. 19, 2010), the Eleventh Circuit dismissed a putative class action for lack of jurisdiction under CAFA. This opinion (which I think badly misinterprets CAFA and probably won't be followed in other Circuits) has generated a lot of buzz.  Judge Alsup has already declined to follow it in one CAFA case, Gutierrez v. Wells Fargo Bank, N.A., ___ F.Supp.2d ___, 2010 WL 3155934 (N.D. Cal. Aug. 10, 2010) (slip op. at 82). The CAFA Law Blog reported last Friday that a petition for panel or en banc rehearing was filed on August 9, 2010.  

By the way, the extended deadline for the cert. petition in Dukes v. Wal-Mart is this coming Thursday, August 26.  I will post about that and link to the petition as soon as it becomes available online.

[HT to South Florida Lawyers for the link to the Cappuccitti opinion and to The Complex Litigator for the link to Gutierrez.]

New Ninth Circuit CAFA opinion: United Steel v. Shell Oil Co.

On April 21, 2010, the Ninth Circuit handed down a new CAFA opinion, United Steel, Paper & Forestry, Rubber, Manufacturing, Energy, Allied Industrial & Service Workers International Union, AFL-CIO, CLC v. Shell Oil Co., ___ F.3d ___ (9th Cir. Apr. 21, 2010).  The court held that once a case is properly removed under CAFA, the federal courts continue to have jurisdiction even if class certification is ultimately denied: 

Defendants removed this putative class action from state court pursuant to the Class Action Fairness Act of 2005 (CAFA), 28 U.S.C. §§ 1332(d), 1453. After denying class certification, the district court concluded that it no longer had jurisdiction and remanded the case to state court. We accepted defendants’ appeal to consider whether the denial of class certification divests federal courts of jurisdiction over cases removed under § 1332(d). Today we join the Seventh and Eleventh Circuits in holding that it does not. If the putative class action was properly removed to begin with, the subsequent denial of Rule 23 class certification does not divest the district court of jurisdiction. The case remains removed and is not to be remanded to state court.

Slip op. at 6025-26 (footnote omitted).   In so holding, the court followed the lead of two sister circuits: 

Only the Seventh and Eleventh Circuits have squarely considered this issue, and both have held that the post-removal denial of class certification does not divest federal courts of jurisdiction. See Cunningham Charter Corp. v. Learjet, Inc., 592 F.3d 805, 806-07 (7th Cir. 2010); Vega v. T-Mobile USA, Inc., 564 F.3d 1256, 1268 n.12 (11th Cir. 2009).

Id. at 6029-30.

More on Hertz Corp. v. Friend and diversity jursidiction under CAFA

The Supreme Court's opinion in Hertz Corp. v. Friend, 599 U.S. ___ (Feb. 23, 2010), does not mention the Class Action Fairness Act by name, although the action was removed to federal court under CAFA, and the remand order reached the Supreme Court only because 28 U.S.C. section 1453(c) permits appeals from remand orders in CAFA cases. (Generally speaking, post-removal remand orders are not appealable.) 

For purposes of CAFA, and the diversity statute generally, a corporation is deemed a "citizen" of its state of incorporation and "the State where it has its principal place of business." 28 U.S.C. § 1332(c)(1). A corporate defendant's citizenship is key to whether diversity (complete or minimal) exists and whether CAFA's "local controversy" or "home state" exceptions apply. See id. § 1332(d)(2)(A), (d)(3), (d)(4).

In Hertz, the Supreme Court construed the phrase "principal place of business" and adopted the so-called "nerve center test":

We conclude that “principal place of business” is best read as referring to the place where a corporation's officers direct, control, and coordinate the corporation’s activities. It is the place that Courts of Appeals have called the corporation’s “nerve center.” And in practice it should normally be the place where the corporation maintains its headquarters—provided that the headquarters is the actual center of direction, control, and coordination, i.e., the “nerve center,” and not simply an office where the corporation holds its board meetings (for example, attended by directors and officers who have traveled there for the occasion).

Slip op. at 14. As the Court points out, this test does have the benefit, with many potential corporate defendants, of simplicity and predictability. Id. at 15-16. The Court also observes, however, that "under the 'nerve center' test we adopt today, there will be hard cases." Id. at 17. The opinion remands the action for further consideration of whether, applying the "nerve center" test, Hertz is a citizen of New Jersey rather than California. Id. at 19.

My original post on the Ninth Circuit's opinion in Hertz is here.

BREAKING NEWS: Two new cases handed down today and yesterday

Yesterday, the Supreme Court handed down its opinion in the CAFA case, Hertz Corp. v. Friend, ___ U.S. ___ (Feb. 23, 2010).

Today, the Court of Appeal (Third Appellate District) handed down its opinion in McAdams v. Monier, Inc., ___ Cal.App.4th ___ (Feb. 24, 2010), once again reversing the order denying class certification of the CLRA and UCL claims.

I will have more on these opinions later.

U.S. Supreme Court hears argument in CAFA case: Hertz Corp. v. Friend

Yesterday, the U.S. Supreme Court heard oral argument in a CAFA case, Hertz Corp. v. Friend, no. 08-1107.  Here is my earlier blog post discussing that case.  The plaintiffs' position was argued by none other than fellow SFTLA and CAOC Board member Todd M. Schneider of Schneider Wallace in San Francisco.  The transcript is already available online (via SCOTUSblog), and press coverage appears in articles from the National Law Journal, CNNMoney.com, and Courthouse News Service, as well as in today's Daily Journal (no link available).

Being more accustomed to California Supreme Court practice, it's amazing to me how quickly the federal Supreme Court hears cases.  Cert. was granted in June 2009, and argument was heard in November 2009, just five months later.  In the California Supreme Court it takes years to get to the same point.