C.D.Cal. Interprets “Significant Relief” and “Significant Basis” in Determining Whether CAFA’s “Local Controversy Exception” Applies

Per Kearns v. Ford Motor Co., Not Reported in F.Supp.2d, 2005 WL 3967998 (C.D.Cal. Nov. 21, 2005) [case just published]:


Ford asserts removal jurisdiction based on the Class Action Fairness Act of 2005 (“CAFA,” or “the Act”). Plaintiff has filed a Motion to Remand, arguing that this suit falls under the so-called “Local Controversy Exception” to CAFA jurisdiction.

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While Congress was intent on significantly expanding the jurisdiction of the federal courts over class action suits, it conceded that certain “truly local” actions could be reasonably heard in state courts without the risk of undue bias against the defendants, since they too were local. Three exceptions were provided to CAFA jurisdiction to deal with such situations...

[CAFA's "local controversy exception" allows a federal court to decline removal where at least one defendant is a defendant from whom significant relief is sought by members of the plaintiff class, whose conduct forms a significant basis for the claims asserted, and is a citizen of the State in which the action was originally filed. 28 U.S.C. § 1332(d)(4)(A)(II).]

Defendant Ford argues that it is the “real” defendant, that Claremont Ford is not a party from whom significant relief is sought, and that no such California party exists. In particular, Ford asserts that once all relevant parties are joined (presumably all dealers that participated in the CPO [“Certified Pre-Owned”] program), the relief sought from Ford will dwarf the relief sought from each individual dealer. Therefore, Ford argues, it is the only party from whom significant relief is sought, and, since it is not a citizen of California, clause (II) does not apply, and removal should be allowed...This Court [ ]agrees.

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The term “significant relief” is not used in any statute aside from CAFA... One common usage seems closer to the meaning urged on the court by Plaintiff. Without great specificity, Kearns argues that significant relief is sought from Claremont Ford because the relief sought is not inconsequential. The other common usage seems closer to the interpretation advocated by Ford. It argues that the relief sought from Claremont Ford must be viewed relative to the overall relief “ ‘sought by the class ( [as opposed to] just a subset of the class membership).” ’ (quoting S.Rep. No. 109-14 at 40). That is to say, Claremont Ford's share of damages would not largely satisfy the claims of the entire class.

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As with “significant relief,” the term “significant basis” is new in CAFA....Because the term “significant basis” is ambiguous, an appeal to the legislative history is appropriate. While Kearns is likely correct that the conduct of dealers as a group forms a significant basis for the claims, this is not true of any single dealer like Claremont Ford. Its involvement is no different from that of the imagined insurance agent in the Committee Report, who presumably markets the program to clients, accepts and processes their applications, and handles billing. It is Ford, like the insurance company, that promulgates and oversees the overall alleged fraud. As such, if the Committee Report [S.Rep. No. 109-14] discounts the insurance agents' conduct as not forming a “significant basis” for the claims of the class members, the definition of that term must similarly exclude the conduct of Claremont Ford and other dealers...

...Ford has demonstrated that the case meets the diversity and amount-in-controversy requirements of CAFA jurisdiction and that none of the exceptions to CAFA jurisdiction applies. Therefore, the case was properly removed to this Court, and the Motion to Remand is DENIED.