Press "Enter" to skip to content

11th Cir. Reverses Remand on Incorrect CAFA ‘Local Controversy’ Ruling

class actionThe U.S. Court of Appeals for the Eleventh Circuit recently reversed a trial court’s ruling remanding the case to state court based on the federal Class Action Fairness Act’s “local controversy” exception, finding the trial court erroneously applied the exception.

A copy of the opinion in Simring v. GreenSky, LLC is available at:  Link to Opinion.

A medical patient (“Patient”) filed a putative class action in state court “individually and on behalf of all other Floridians similarly situated” against numerous defendants, including a practitioner (“Practitioner”) and his financer (“Financer”). The putative class was defined by Patient as “[a]ll persons over 64 years of age who visited [Practitioner] after reading [a specified advertisement] and who received ‘stem cell’ treatments financed by [Financer].”

Financer removed the case to federal court under CAFA.  Patient moved to remand back to state court arguing Financer had not proven the amount in controversy was in excess of $5 million. Patient further argued that the trial court was required to decline jurisdiction under both CAFA’s “home state” and “local controversy” exceptions. See. id. § 1332(d)(2), (3), (4).

The trial court granted the motion for remand based solely on the local controversy exception which applies if “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.” Id. § 1332(d)(4)(A)(i)(I). The court relied on the complaint’s statement that it was filed “individually and on behalf of all other Floridians similarly situated” and “on behalf of Florida senior citizens.”

Financer appealed the order arguing that Patient had failed to establish the local controversy exception’s two-third’s requirement. Patient moved to dismiss the appeal on the basis of lack of jurisdiction arguing review was barred by 28 U.S.C. § 1447(d) and that the appeal was not properly filed under Federal Rule of Appellate Procedure 5, as required by U.S.C. § 1453(c).

The Eleventh Circuit first determined whether it had jurisdiction over the appeal under 28 U.S.C. § 1447(d) and 28 U.S.C. § 1453(c).  The Court noted, “[a]s a general matter, remand orders are reviewable as final decisions under 28 U.S.C. § 1291.” Hunter v. City of Montgomery, 859 F.3d 1329, 1333 (11th Cir. 2017).

However, under 28 U.S.C. § 1447(c) and (d), the Appellate Court lacks jurisdiction to review a trial court’s remand order if it “(1) followed a timely motion for a defect other than lack of subject matter jurisdiction, or (2) was based on lack of subject matter jurisdiction.” Id.

The Eleventh Circuit found that 28 U.S.C. § 1447(c) and (d) did not apply as the trial court did not remand for a procedural “defect” or for “lack of subject matter jurisdiction,” as the local controversy exception applied by the trial court does not implicate subject matter jurisdiction under the second part of Section 1447(c). Hunter, 859 F.3d at 1334.

The Appellate Court noted that its precedent has further established that the local controversy exception is not a procedural “defect” under the first Section of 1447(c). The Court previously held that in Section 1447(c), “defect” refers only to “defect[s]’ in the removal itself,” and not grounds which are “external to the removal process. Snapper, Inc. v. Redan, 171 F.3d 1249, 1253 (11th Cir. 1999).  The Court found that “a remand order based on CAFA’s local controversy exception…does not fall within either of § 1447(d)’s categories.” Hunter, 859 F.3d at 1334.

The Court next addressed whether the court lacked jurisdiction because the amount in controversy did not exceed $5 million. 

Where, as here, the plaintiff has not pled a specific amount of damages, the removing defendant must prove by a preponderance of the evidence that the amount in controversy exceeds the jurisdictional requirement.” Pretka v. Kolter City Plaza II, Inc., 608 F.3d 744, 752 (11th Cir. 2010) (quoting Williams v. Best Buy Co., Inc., 269 F.3d 1316, 1319 (11th Cir.2001)).

Patient argued the $5 million amount in controversy was not met as she stipulated to accept no more than $4,999,999 in damages. See 28 U.S.C. § 1332(d)(2). However, the Court noted that a named plaintiff in a putative class action does not have authority to bind other class members through such a stipulation. Standard Fire Ins. Co. v. Knowles, 568 U.S. 588, 592-93 (2013).

As Financer offered evidence that the relief requested would exceed $5 million when multiplied across the entire class, the Court agreed with the trial court’s implicit finding that the amount in controversy exceeded the requirements of CAFA.

The Eleventh Circuit also addressed whether the trial court correctly remanded because the local controversy exception was satisfied.

“[P]laintiffs bear the burden of establishing that they fall within CAFA’s local controversy exception.” Evans v. Walter Indus., Inc., 449 F.3d 1159, 1162, 1164 (11th Cir. 2006). That exception is a “narrow one, with all doubts resolved ‘in favor of exercising jurisdiction over the case.’” Id. at 1163 (quoting S. Rep. No. 109-14 at 42, 2005 U.S.C.C.A.N. 3, 40).  The exception applies only if, among other things, “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.” 28 U.S.C. § 1332(d)(4)(A)(i)(I).

The Appellate Court recently held that “[c]lass action plaintiffs can prove that two-thirds of the putative class are citizens of a certain state in two ways.” Smith v. Marcus & Millichap, Inc., 991 F.3d 1156, 1157 (11th Cir. 2021). A plaintiff can (1) “limit the class definition to citizens of a certain state” or (2) “provide evidence of the class members’ state of residence as well as evidence showing their intent to remain in that state.” Id. at 1156-57.

Patient argued and the trial court concluded that this case fell into the first category. However, the Eleventh Circuit disagreed finding the complaint did not restrict class membership to Florida citizens.

The trial court recognized the class definition did not explicitly state it was limited to Florida citizens and instead relied on other portions of the complaint to conclude that the two-thirds requirement was met. However, the Eleventh Circuit ruled that under Smith only the class definition itself can restrict the scope of the class for purposes of establishing the two-thirds requirement under the first method. See id. 1156-57.

The Appellate Court also found, that even if this were not the case, the complaint’s other language did not support the trial court’s decision.

First, the Eleventh Circuit reasoned that an action brought “on behalf of all other Floridians similarly situated” did not necessitate that those Floridians compromised more than two-thirds of the class. In addition, the Court found it was not clear whether “Floridians” referred to citizens who intended to remain there.

Finally, the Court held that Patient failed to establish that more than two-thirds of the class were Florida citizens. Patient introduced no evidence to support her contention that two-thirds of the class were citizens, though the burden of proving so was hers. See Evans, 449 F.3d at 1164; see also Smith, 991 F.3d at 1157.

Noting that the local controversy exception is a narrow one, and any doubts must be resolved against the exception (Evans, 449 F.3d at 1163; cf. Smith, 991 F.3d at 1159), the Eleventh Circuit held that the trial court erred by applying the local controversy exception as a basis for remand and reversed and remanded for further proceedings.

Print Friendly, PDF & Email

The attorneys of Maurice Wutscher are seasoned business lawyers with substantial experience in business law, financial services litigation and regulatory compliance. They represent consumer and commercial financial services companies, including depository and non-depository mortgage lenders and servicers, as well as mortgage loan investors, financial asset buyers and sellers, loss mitigation companies, third-party debt collectors, and other financial services providers. They have defended scores of putative class actions, have substantial experience in federal appellate court litigation and bring substantial trial and complex bankruptcy experience. They are leaders and influencers in their highly specialized area of law. They serve in leadership positions in industry associations and regularly publish and speak before national audiences.

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.