E.D. Louisiana Analyzes Local Controversy Exception to CAFA; Determines Plaintiff Failed to Meet Burden of Proving the Exception

Per Gauntt v. Louisiana Citizens Property Insurance Corp., 2007 WL 128801 (E.D. La. Jan. 16, 2007):

This matter comes before the Court on a motion to remand filed by the plaintiffs. In their motion to remand, the plaintiffs assert that this Court lacks jurisdiction to hear this case due to the "local controversy" exception of the Class Action Fairness Act ("CAFA"), 28 U.S.C. § 1332(d) (Rec.Doc.18). . . . Having considered the memoranda of counsel, the record and the applicable law, the Court finds that it has jurisdiction to hear this matter under the CAFA, 28 U.S.C. § 1332(d). In this case, the putative class consists of Louisiana citizens who purchased valued policy homeowners insurance from one of four defendants, State Farm, Allstate, Lafayette or Louisiana Citizens Property Insurance Corp. ("Citizens"). Insurance policies are deemed "valued policies" when the premiums charged are calculated in relation to the value of the property. Here, the plaintiffs allege that their property values declined as a result of damage caused by Hurricanes Katrina and/or Rita, but their insurers continued to charge premiums based on the pre-storm values of their properties. The plaintiffs brought this putative class action suit seeking a refund of the amounts that they were allegedly overcharged in state court. State Farm removed the action to this Court asserting jurisdiction under the CAFA and other statutes. The facts outlined above show, and it is undisputed that, the basic elements of CAFA federal subject matter jurisdiction are satisfied. . . . Thus, this Court has jurisdiction to hear this action, unless one of the CAFA exceptions applies.

The plaintiffs claim that the "local controversy" exception to the CAFA applies to this case. Under the "local controversy" exception, a district court must decline jurisdiction when: (1) greater than two thirds of the members of the putative class are citizens of the state in which the action was filed; (2) at least one defendant is a defendant from whom members of the putative class seek significant relief, whose alleged conduct forms a significant basis of the asserted claims, and who is a citizen of the state in which the action was filed; (3) the principal injuries resulting from the alleged conduct of each defendant were incurred in the state in which the action was filed; and (4) no other class action asserting the same or similar factual allegations has been filed against any of the defendants within the last three years preceding the filing of the instant class action. 28 U.S.C. § 1332(d)(4). The language of the CAFA favors federal jurisdiction over class actions. Evans v. Walter Industries, Inc., 449 F.3d 1159, 1163 (11th Cir.2006). Furthermore, the legislative history suggest that Congress intended the local controversy exception to be narrow, with all doubts resolved "in favor of exercising jurisdiction over the case." Id. (citing, S.Rep. No. 109-14 at 42, U.S.Code Cong. & Admin. News 3, 40). Thus, the party opposing removal bears burden of proving the application of an exception to the CAFA. See, Robinson v. Cheetah Transp., 2005 WL 468820, *4 (W.D.La.) (citing, S.Rep. No. 109-14 at 44 (2005), as reprinted in 2005 U.S.C.C.A.N. 3, 41; Berry v. American Express Pub. Corp, 381 F.Supp.2d 1118, 1122 (C.D.Cal 2005)).

The dispute here involves the requirement that at least one defendant from whom members of the putative class seek significant relief, whose alleged conduct forms a significant basis of the asserted claims, and is a citizen of the sate in which the action was filed. The defendants contend that the plaintiffs do not seek significant relief from the Louisiana defendants, Lafayette and Citizens, and that the that their conduct did not from a significant basis of the asserted claims. . . . The plaintiffs, on the other hand, contend that they do seek significant relief from Lafayette and Citizens and that the Louisiana defendants' actions form a significant basis of the alleged claims. . . . The term "significant" is not defined in the CAFA, however other Courts have examined the legislative history and arrived a definition. The case law concludes that a putative class seeks "significant relief" against the defendant when the relief sought against that defendant is a significant portion of the relief sought by the class. See, Evans, 449 F.3d at 1167 (citing, Robinson, 2006 WL 468820, *4 and Kearns v. Ford Motor Co., 2005 WL 3967998 (C.D.Cal.)). This involves an assessment of how many member of the putative class were allegedly harmed by the in-state defendants and a comparison of the relief sought between all defendants and each defendant's ability to pay a potential judgment. Id. (citing, Robinson, 2006 WL 468820, *4).

The plaintiffs are correct that all of the defendants have the ability to pay a judgment and that millions of dollars is "significant" according to the dictionary definition of the word. However, the test for "significant relief" requires an assessment of the number of potential class members that were harmed by the in-state defendants and a comparison of the relief sought from all of the defendants. The market share statistics cited above show that it is likely that only a small portion of the members of the putative class were harmed by the Louisiana defendants and, as a result, the relief sought from them is relatively small as compared to the relief sought from the out-of-state defendants.

The "local controversy" exception is narrowly construed and the party seeking removal bears the burden of proving that it is met. The plaintiffs have failed to meet their burden.