“Local Controversy” CAFA Exception Not Established by Proof of Class Citizenship

An inartfully pleaded class definition coupled with a failure of proof was enough to prevent a class-action plaintiff from invoking the Class Action Fairness Act’s “local controversy” exception to avoid removal from the sheltering arms of a Florida circuit court, according to the Eleventh Circuit in Simring v. GreenSky, LLC, 2022 U.S. App. LEXIS 8002 (11th Cir. Mar. 28, 2022).

The plaintiff filed a putative false-advertising class action in Florida state court against a physician who advertised stem cell treatments for neuropathy and against his finance source, GreenSky. GreenSky removed the case to federal district court, invoking the Class Action Fairness Act, 28 U. S. C. § 1332(d), which authorizes removal from state court where a class action is alleged, the matter in controversy exceeds $5 million, and certain other requirements are met.

The class definition failed to state explicitly that it was limited to citizens of Florida. But the district court thought that other language elsewhere in the complaint, referring to the action’s being brought on behalf of “Floridians” and “Florida senior citizens,” was sufficient to qualify for CAFA’s local controversy exception, and remanded the case to state court. That exception applies where, among other things, greater than two-thirds of the members of all proposed plaintiff classes are citizens of the state in which the action was originally filed. Id. § 1332(d)(4)(A)(i)(I). GreenSky appealed.

In his opinion for the court, Judge Andrew Brasher began by rejecting a challenge to the Eleventh Circuit’s appellate jurisdiction. The plaintiff contended that 28 U. S. C. § 1447(d) precluded review of the remand order, because it was predicated on a procedural “defect.” Not so, held Judge Brasher’s opinion for court, because the local controversy exception is akin to abstention and was an appealable final order under 28 U. S. C. § 1291.

Turning to the district court’s jurisdiction, the court noted that CAFA’s minimal diversity and numerosity requirements were not in issue. The plaintiff argued that she limited the class’s damages to $4.99 million, just short of CAFA’s jurisdictional amount. But the court pointed out that she had no authority to limit the class’s damages, and that GreenSky had presented substantial evidence that the class’s alleged damages would exceed $5 million. With jurisdiction thus established, the remaining question was the applicability of the local controversy exception. The court held that the plaintiff had not carried her burden of proof to establish the exception. First, the class definition did not restrict membership to Florida citizens, and only the class definition can restrict membership for purposes of meeting the two-thirds-of-the-class requirement. Second, the plaintiff had failed, alternatively, to submit evidence that could establish the requirement. Finally, the court noted that the local controversy exception was “a narrow one” and the court “must resolve any doubts against this exception to CAFA.” The court’s exacting analysis vacating the remand order stands as a reminder that the class definition is typically the most important paragraph in a class-action complaint.

Posted by Tom Byrne.

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