N.D. Ohio Holds Less Than Two-Thirds of a Class are Ohio Residents; Denies Diversity Jurisdiction Under CAFA

Per Ford Motor Credit Co. v. Jones, Slip Copy, 2007 WL 2236618 (N.D.Ohio Jul 31, 2007) (NO. 1:07 CV 728):

The Class Action Fairness Act ("the CAFA"), enacted February 18, 2005, gives federal courts jurisdiction to hear class action lawsuits involving minimally diverse parties and more than five-million dollars in controversy. 28 U.S.C. § 1332(d) . The CAFA grants original jurisdiction to the federal courts in class actions in which "any member of the class of plaintiffs" possesses the requisite diversity with respect to "any defendant." 28 U.S.C. § 1332(d). With regard to the requisite amount in controversy, CAFA eliminates the general rule of nonaggregation for purposes of determining the amount in controversy. While the general rule of nonaggregation holds that the $ 75,000 amount in controversy must be established for each individual plaintiff, the amount in controversy under CAFA can be satisfied by aggregating the individual class members' claims. 28 U.S.C. 1332(d)(6). The CAFA also provides special provisions regarding removal of class actions to federal court. 28 U.S.C. 1453(b). A class action may now be removed to federal court without regard to whether any defendant is a citizen of the state in which the action is brought, and any defendant can remove the action without the consent of the other defendants. Id. Further, the one-year bar to removal from the time a case has been commenced, see U.S.C. 1446(b), no longer applies to class actions. 28 U.S.C. 1453(b). Id.

As stated above, Mullinax was brought into this lawsuit through a cross-claim filed by Defendant Moore. In First National Bank of Pulaski v. Curry, 301 F.3d 456 (6th Cir.2002), the Sixth Circuit held that neither 28 U.S.C. § 1441(a) or § 1441(c) provide third-party defendants with the right to remove a case to Federal court. Id. at 460. Mullinax attempts to draw a distinction between the phrase "the defendant" as it is used in 28 U.S.C. § 1441(a), and the language of the CAFA, which provides that class actions "may be removed by any defendant without the consent of all defendants." 28 U.S.C. 1453(b). Mullinax discusses that the intent of Congress in enacting the CAFA was to expand federal jurisdiction over class actions, and, therefore, that the provisions of the CAFA should be construed broadly to allow a cross-claim defendant to remove an action to Federal Court.

The Court does not disagree that the intent of Congress was to expand federal jurisdiction over class actions, by doing away with the nonaggregation rule and providing for minimal diversity. However, the argument that Congress intended to allow a cross-claim defendant to remove a case in enacting the CAFA is tenuous at best. As noted by Mullinax, the Circuit Courts are split on the issue of whether a cross-claim defendant is a defendant for purposes of removal. In the Sixth Circuit, a cross-claim defendant is not permitted to remove an action. There is no basis upon which to find otherwise.

Mullinax cites the decision in Lessard v. City of Allen Park, 247 F.Supp.2d 843 (E.D.Mich.2003), finding that unlike 28 U.S.C. § 1441(a) which states that "the defendant or the defendants" may remove an action, there is no restriction as to who may remove under 28 U.S.C. § 1441(c). Relying on Lessard, Mullinax argues that because the CAFA uses the language "any defendant," it should also be interpreted to permit a cross-claim defendant to remove an action to Federal Court. The court does not find Lessard to be persuasive in this case.

28 U.S.C. § 1441(c) states "Whenever a separate and independent claim or cause of action within the jurisdiction conferred by section 1331 of this title is joined with one or more otherwise nonremovable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters in which State law predominates." 28 U.S.C. § 1441(c). In Lessard, the "joined" claims which served as the basis of removal were part of the original Complaint, not part of the third-party complaint brought against the third-party defendant. Lessard, 247 F.Supp.2d at 858. The Lessard Court distinguished the case from Curry on that basis. Further, the Court in Curry specifically held that a third-party defendant cannot remove a case under 28 U.S.C. § 1441(c) and that § 1441(c) was meant to apply to claims joined by the Plaintiff. In the case at bar, Mullinax, a cross-claim Defendant seeks to remove the case based upon cross-claims raised by Defendant Moore. Thus, pursuant to Sixth Circuit law, permitting Mullinax to remove this case is improper.

Even if this Court were to find that Mullinax could properly remove this case, which it does not, the case should be remanded pursuant to 28 U.S.C. § 1332(d)(4). 28 U.S.C. § 1332(d)(4) provides that a district Court should decline to exercise jurisdiction over a class in which at least two-thirds of the proposed class members are citizens of Ohio; at least one significant defendant is a citizen of Ohio; the principal injuries were incurred in Ohio; and, within the last three years, no other class-action complaint has been filed asserting the same or similar factual allegations.

Mullinax argues that Defendant Moore has failed to prove that the greater than two-thirds of the proposed class are Ohio residents. Mullinax relies on the decision in Nichols v. Progressive Direct Ins. Co., No. 06-146-DLB, 2007 U.S. Dist. LEXIS 28689 (E.D.Ken., March 31, 2007), in arguing that a proposed statewide class is insufficient to prove residency. In Nichols, the proposed class consisted of "all customers of the Defendants and customers of any other insurance company doing business in the Commonwealth of Kentucky who purchased an insurance policy and who were unlawfully charge local government premium taxes or collection fees for the period of time from January 2001 to the present ..." This is significantly different from the proposed class in the case at bar. In Nichols, the proposed class included all customers of insurance companies doing business in the Commonwealth of Kentucky during the specified time period. However, the Complaint in this case expressly limits the class members to "Ohio residents," as is acknowledged by Ms. Moore. Further, all of the leases at issue were entered into in Ohio between Ohio residents and Mullinax. Therefore, the principal injuries were incurred in Ohio and Mullinax is clearly a significant defendant in this case. Finally, neither party has identified a class-action filed within the last three years with the same or similar factual allegations. This is a local controversy. Accordingly, this Court must decline to exercise diversity jurisdiction over this matter.