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Saab v. Home Depot U.S.A., WL0249463601, No. 06-8014 (8th Cir. November 22, 2006)

Automotive engineering versus mega home improvement? Nope, but this one might be just as interesting, in a perverse sort of way that only our brilliant CAFA aficionados would appreciate. The Eighth Circuit differentiates between traditional complete diversity jurisdiction and CAFA’s new minimal diversity jurisdiction in the context of appealing a remand related decision.
The Eighth Circuit handed down a short opinion regarding the appeal provisions of CAFA and whether they are applicable to cases removed to federal court under traditional, complete diversity jurisdiction. This may be an important appellate court decision because it draws a distinction between complete diversity jurisdiction and minimal diversity jurisdiction under CAFA, where other courts have tended to blur this distinction, particularly in the context of jurisdictional burden of proof. 

On November 22, 2006, United States Circuit Judge Bright, writing for the Eighth Circuit Court of Appeals, handed down a short opinion regarding CAFA. The Judge did not state the facts of this case, filed in Missouri state court by David Saab on behalf of himself and others against Home Depot. We can only imagine that the plaintiff had some terrible experience with a Do It Yourself project.  The judge simply stated that Home Depot removed the class action to district court arguing that the parties were diverse and the amount in controversy exceeded $75,000.00. The removal notice listed traditional, complete diversity jurisdiction as the ground for removal under 28 U.S.C. § 1332(a). The district court agreed with Home Depot and denied Saab’s motion to remand the case back to Missouri state court. Saab petitioned the Eighth Circuit to accept his appeal pursuant to 28 U.S.C. § 1453(c)(1), enacted under CAFA. The Eighth Circuit determined, however, that CAFA’s appeal provision does not permit an appeal from the denial of a motion to remand when the class action has been removed to federal court on the basis of traditional, complete diversity jurisdiction under Section 1332(a). 

Saab argued that CAFA’s § 1453 should be viewed expansively to give federal courts of appeal jurisdiction to review the grant or denial of a motion to remand in ANY class action. The Eighth Circuit stated that this argument does not differentiate between class actions removed pursuant to 1332(a) – complete diversity jurisdiction, or 1332(d) – CAFA’s minimal diversity jurisdiction. (Editors' Note:   The Eighth Circuit here differentiated between the provisions governing complete diversity jurisdiction and CAFA’s minimal diversity jurisdiction, whereas other courts of appeal have broadly applied Section 1332(a) jurisprudence and precedent to 1332(d) minimum jurisdiction questions under CAFA in a manner that the Editors believe leads to incorrect results since the objectives behind the two types of jurisdiction are opposite. The objective behind complete diversity jurisdiction is to limit access to the federal courts, and the objective behind minimal diversity jurisdiction is to expand access.) 

Finally, the Eighth Circuit joined with the Fifth Circuit in Patterson v. Morris and Wallace v. Louisiana Citizens Property Insurance Corp., in its holding. (Editors' Note:  See the CAFA Law Blog analysis of Patterson posted on June 5, 2006 and the CAFA Law Blog analysis of Wallace posted on May 22, 2006). The court stated that it must limit § 1453(c)’s appellate review provisions to only those class actions brought under CAFA. According to the Court, that reading is consistent with the legislative history of CAFA, which includes the observation that “new sub-section 1453(c) provides discretionary appellate review of remand orders under this legislation, but also imposes time limits.” (emphasis in original). The Eighth Circuit then dismiss

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Blockbuster v. Galeno, 2006 WL 3775326, Docket No. 05-8019 (2d Cir. Dec. 26, 2006).

On March 23, 2006, the United States Court of Appeals for the Second Circuit handed down a summary order remanding this case against Blockbuster back to state court, in order to meet CAFA’s 60 day time limit to render decision under 1453(c)(2). The summary order can be found at Galeno v. Blockbuster, Inc., 171 Fed. Appx. 904 (2d Cir. 2006). On December 26, 2006, Circuit Judge Cardamone, writing for the Second Circuit, handed down an opinion explaining its reasoning behind the summary order.
The case was originally filed as a class action in New York State Supreme Court on February 15, 2005 by Michael L. Galeno and other Plaintiffs against Blockbuster regarding Blockbuster’s “No Late Fee” program. The plaintiffs alleged deceptive business practice under New York law along with unjust enrichment under common law. The court noted that Blockbuster’s conduct resulted in a suit being brought by 47 Attorneys General and the District of Columbia which resulted in settlement and closing of the program by March 15, 2005. 

The no late fee program began on January 1, 2005, and it was widely advertised by Blockbuster.  Under the program, Blockbuster no longer charged customers late fees for keeping rented videos past their due date, but instead automatically converted the rental to a sale of the video on the eighth day past the video’s original due date. The customer was billed for the selling price of the video minus the initial rental fee already paid. If the customer returned the video within 30 days after the sale date, Blockbuster refunded the sales price minus a $1.25 restocking fee. 

The complaint alleged that the advertising was deceptive because it omitted the material fact that customers would be charged a sale fee. Blockbuster included some information on its website, but allegedly did not make the details clear. Also, Blockbuster allegedly omitted pertinent details from its store signage and television advertising. The plaintiff alleged this advertising program violated New York General Business Law. The plaintiff claimed that there were thousands of members of the class with statutory damages of $50 dollars per customer. 

Blockbuster removed the action to federal court on April 1, 2005 asserting diversity jurisdiction under both complete diversity and minimal diversity based on CAFA. The plaintiffs moved for remand on the ground that the federal court lacked jurisdiction because Blockbuster could not satisfy the CAFA amount in controversy of $5 million. Blockbuster filed under seal a declaration by its senior vice president and corporate controller, James Howell. The declaration described the total amount of restocking fees and converted sales incurred by New York customers from January 1, 2005 to May 19, 2005. 

Blockbuster also asserted that CAFA changed the traditional rule applied in the complete diversity context, that the party seeking removal to federal court bears the burden of establishing jurisdiction, citing Yeroushalmi v. Blockbuster, Inc., No. 05-225, 2005 WL 2083008 (C.D. Cal. July 11, 2005) (implicitly overruled by Abrego v. Dow Chemical Company). (Editors' Note: See the CAFA Law Blog analysis of Yeroushalmi posted on November 28, 2005 and the CAFA Law Blog analysis of Abrego posted on May 25, 2006). 

On July 13, 2005, the district court issued a brief order denying the motion to remand stating “I’m in substantial agreement with [the Yeroushalmi court].” The court did not, however, explain the basis on which it found subject matter jurisdiction. 

The plaintiff filed a motion for permission to appeal the district court’s ruling, which the Second Circuit granted. The Second Circuit issued the summary order on March 23, 2006, and vacated and remanded the order of the district court with instructions that the district court explain its

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Lanier v. Norfolk Southern Corporation, 2006 WL 1878984, No. 1:05-3476-MBS (D.S.C. July 6, 2006)

You could almost hear the district judge shout, "All aboard!"  The South Carolina District Court let the defendants ride the CAFA train into federal court, and then derailed the plaintiff’s case on a motion to dismiss, stopping only to address the burden of proof issue.  On July 6, 2006, United States District Judge Margaret B. Seymour issued an opinion and order not only retaining federal court jurisdiction under CAFA, but also dismissing the plaintiffs’ complaint.  
The plaintiff filed the action in South Carolina state court on December 9, 2005 seeking to certify a class of individuals who were laid off or discharged from Avondale Mills facilities in Graniteville, South Carolina after a train derailment which released chlorine gas damaged the mill facility. The chlorine gas damaged the property and equipment, and it interrupted production capacity thereby causing a reduction in employment levels. The plaintiffs alleged that the defendants’ negligence resulted in the derailment, subsequent release of chlorine gas, the disruption of the facilities, and the reduction in work force. 

The defendants removed the action to federal court pursuant to CAFA.  The plaintiff, wanting off of the train headed to federal court, responded with a motion to remand.  The defendants, wanting to punch the plaintiffs' ticket, also filed a motion to dismiss the plaintiffs' complaint. 

Judge Seymour examined each motion in turn.  First, the remand motion focused solely on CAFA. The defendants argued that the burden of proof, under CAFA, shifts to the plaintiff to demonstrate that removal is improvident. The court disagreed and noted that the Seventh Circuit in Brill, the Ninth Circuit in Abrego and the Eleventh Circuit in Miedema had all rejected the argument.  Specifically, the court quoted Miedema for its proposition that “a committee report cannot serve as an independent statutory source having the force of law.” (Editors' Note:  See the CAFA Law Blog's analysis of Brill posted on November 2, 2005, the CAFA Law Blog analysis of Abrego posted on May 25, 2006, the CAFA Law Blog analysis and critique of Miedema posted on August 22, 2005, and a discussion and Law Review article by the Editors that disagrees with these holdings entitled “CAFA’s New Minimal Diversity Standard For Interstate Class Actions Creates A Presumption That Jurisdiction Exists, With The Burden Of Proof Assigned To The Party Opposing Jurisdiction” here). 

The Court did find, however, that the defendants carried the burden noting that “once the proponent of jurisdiction has set out the amount in controversy, only a legal certainty that the judgment will be less forecloses federal jurisdiction.” The court also made short work of the minimal diversity requirement holding that the Plaintiff was from South Carolina and the defendants were Virginia corporations. The remand motion was denied.

Thereafter, the court granted the defendants’ motion to dismiss on the ground that the plaintiff could not allege a cause of action for negligence on the basis of purely economic loss. The plaintiff was asserting the indirect damages from the train derailment as economic loss. The court held that there were policy reasons that limit tort liability for this exact type of indirect economic loss. Even though the federal court retained jurisdiction, in the same opinion it dismissed the case.