Tuesday, May 08, 2007

E.D.La. Finds that Plaintiffs Cannot Meet Burden of Proving "Local Controversy" Exception to CAFA

Per Caruso v. Allstate Ins. Co., 469 F. Supp. 2d 364 (E.D. La. Jan. 8, 2007):

Plaintiffs . . . contend that this case should be remanded to state court under CAFA's so-called “local-controversy exception.” This provision requires federal courts to decline jurisdiction when the case satisfies four requirements: (1) more than two-thirds of the class members are citizens of the original forum; (2) at least one defendant from whom “significant relief” is sought and whose conduct is a “significant basis” for the claims is a citizen of the original forum; (3) the “principal injuries resulting from the alleged conduct or any related conduct of each defendant” occurred in the original forum; and (4) in the three-year period preceding the filing of the class action, no other class action has been filed “asserting the same or similar factual allegations against any of the defendants” on behalf of any person. 28 U.S.C. § 1332(d)(4)(A). No party disputes that the third prong is satisfied here. Defendants, however, contend that plaintiff's proposed class action does not meet the first, second, and fourth prongs. As an initial matter, the Fifth Circuit recently held that CAFA places the burden of proof on plaintiffs to show that the “local-controversy” exception applies. See Frazier v. Pioneer Americas LLC, 455 F.3d 542, 546 (5th Cir.2006).

[T]he Court finds that the description of the proposed class is sufficient to establish that more than two-thirds of the proposed class are Louisiana citizens. . . .

Because the purported class includes all Louisiana Citizens policyholders who suffered a total loss of their property, in whole or in part, as a result of Hurricane Katrina's winds, the Court finds that Louisiana Citizens is a “significant defendant” as that term is contemplated by CAFA. Construing the statute in any other manner would be inconsistent with the plain, unambiguous meaning of its text.

Finally, defendants argue that CAFA's “local-controversy” exception does not apply here because, during the three-year period preceding the filing of this action, both Allstate and State Farm were named defendants in class actions in which similar factual allegations were raised against them. . . [However, two of the plaintiffs had already filed suits against their insurers, who were again named as defendants in the instant suit.] These proposed class actions against two of the named defendants in the present action undoubtedly assert similar factual allegations as those set forth here. Since they were filed during the three-year period before the instant action, their existence is fatal to plaintiffs' argument that this lawsuit falls under CAFA's “local-controversy” exception. The use of the conjunctive “and” in Section 1332(d)(4)(A) makes it clear that all four of its elements must be satisfied for the “local-controversy” exception to apply. Therefore, because plaintiffs cannot carry their burden on the fourth element of the “local-controversy” test, this Court has jurisdiction over this matter under CAFA. The Court need not address defendants' alternative theories for why federal jurisdiction is appropriate in this matter.


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