Primary Defendants Tied to Liability for Damages in Class Actions Seeking Monetary Relief

In an opinion published June 14, 2017, Hunter v. City of Montgomery, 2017 WL 2634162, the Eleventh Circuit affirmed the lower court’s remand order under the home state exception to the Class Action Fairness Act (“CAFA”). The central issue was the classification of a party as one of the “primary defendants” within the meaning of CAFA.

The case centered on a red-light camera program operated by Montgomery, Alabama and American Traffic Solutions, Inc. (“Traffic Solutions”). The original plaintiff, Charles Hunter, sued Montgomery and Traffic Solutions in Alabama state court, alleging violations of the Alabama Constitution, state law, and 42 U.S.C. § 1983 and seeking damages (refunded fines) from Montgomery and declaratory and injunctive relief against both Montgomery and Traffic Solutions. Traffic Solutions removed the action to federal court based on both the federal claims and diversity jurisdiction under CAFA. Hunter then amended his complaint, adding a second plaintiff, Mike Henderson, and dropping the claims and requested relief based in federal law. Ten months after the removal, the court requested supplemental briefing on the issue of its subject matter jurisdiction. The plaintiffs then claimed that both CAFA’s local controversy and home state exceptions applied and required the court to remand the case to the Alabama state court. The district court agreed that both exceptions applied and remanded the case.

The Eleventh Circuit began by assessing its own jurisdiction to review the lower court’s remand order. It determined that 28 U.S.C. § 1447(d) did not bar it from reviewing the remand order because the order (1) had not been based on a timely motion—it was on the court’s own initiative—and (2) had not been based on a lack of subject matter jurisdiction—it was rather a CAFA bar to the exercise of otherwise legitimate subject matter jurisdiction.

After determining that it had appellate jurisdiction, the Eleventh Circuit concluded that the home state exception applied and did not reach the issue of the local controversy exception. The home state exception applies when the action is filed where both two-thirds of the proposed plaintiff class and the “primary defendants” are citizens. The parties agreed that two-thirds of the plaintiff class and the city of Montgomery were both citizens of Alabama and that Traffic Solutions was not. So the dispositive issue was whether Traffic Solutions was a “primary defendant” under CAFA. The court held that, where the class action seeks monetary relief, the “primary defendants” are those that have “substantial exposure” or would “incur most of the loss” if damages are awarded. Because the plaintiffs only sought damages from Montgomery, Traffic Solutions was not a “primary defendant” under CAFA, and remand was proper.

Posted by Danny Wells.

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