Federal Courts Are Reluctant to Invoke CAFA’s Local Controversy Exception
The Class Action Fairness Act (“CAFA”) streamlines removal of cases to federal court if certain requirements are met. A court acquires federal jurisdiction over a class action with at least 100 class members, an amount in controversy in excess of $5,000,000 in the aggregate, and at least minimal diversity of citizenship—i.e. any class member with citizenship diverse from any defendant. Although a plaintiff bears a large burden to establish them given their narrow construction by courts, there are exceptions to CAFA’s broad jurisdictional grant. One such exception is the local-controversy exception.
In Walters v. Flag Credit Union, 2014 WL 129055 (N.D. Fla. Jan. 13, 2014), the United States District Court for the Northern District of Florida explained the applicability of the local controversy exception. In that case, the defendants removed the case under CAFA and Plaintiff moved to remand the case based on the local controversy exception. The local-controversy exception applies if six conditions are met. First, more than two-thirds of the class members must be citizens of the forum state. Second, at least one defendant must be a citizen of the forum state. Third, significant relief must be sought from that defendant. Fourth, that defendant’s conduct must form a significant basis for the claims. Fifth, principal injuries resulting from each defendant’s conduct must have been incurred in the forum state. And sixth, in the three years before the class action was filed, there must not have been another class action filed against any of the defendants asserting the same or similar allegations.
The Walters Court found that while the plaintiff clearly met the second, third, fifth, and sixth requirements, further discussion was necessary to determine the applicability of the first and fourth requirements. With respect to the first requirement, the Court explained that although Plaintiff’s “good guess” was that more than two-thirds of the Class were, in fact, Florida citizens, “sensible guesswork, based on a sense of how the world works, is insufficient to establish that more than two-thirds of a proposed class are citizens of the forum state.”
The Court went on to explain that the plaintiff also failed to satisfy the fourth requirement because the in-state defendant’s conduct did not form a significant basis for the plaintiff’s claims. Significant relief is sought from a defendant when the relief sought against that defendant is a significant portion of the entire relief sought by the class. Thus, while the sum of $144,503 may be significant in itself, it was not significant when compared to the $10.3 million sought against the non-resident defendant.
CAFA’s exceptions are narrowly construed by federal courts. Indeed, the Eleventh Circuit has emphasized that “CAFA’s language favors federal jurisdiction over class actions and CAFA’s legislative history suggests that Congress intended the local controversy exception to be a narrow one, with all doubts resolved in favor of exercising jurisdiction over the case.”