MEMORANDUM AND ORDER
YOUNG, District Judge.
On May 17, 2007, this Court took under advisement the Plaintiffs' motion to remand this action to the Massachusetts Superior Court in order to analyze in more detail the issue of the burden of proof for removal of actions under the Class Action Fairness Act of 2005 ("CAFA") § 4, Pub.L. No. 109-2, 119 Stat. 14 (2005) (codified as amended in 28 U.S.C. § 1332(d)(2)), an issue of first impression in the First Circuit.
On February 5, 2007, Leah McMorris filed the original complaint in this putative class action (the "McMorris class") in the Massachusetts Superior Court sitting in and for the County of Middlesex. Notice of Removal [07-cv-10682, Doc. No. 1], Decl. of Brian R. Blais, Ex. A ("Original Compl."). The complaint defined the proposed class as:
Original Compl. ¶ 14. In the complaint, the McMorris class also identified the defendant, The TJX Companies, Inc. ("TJX") as "a Delaware Corporation with its principal place of business in Framingham, Massachusetts." Id. ¶ 4.
The McMorris class did not proceed with service of a summons and complaint at that time. Rather, on April 4, 2007, the McMorris class filed a "Notice of Filing First Amended Complaint" in the Superior Court, along with a First Amended Complaint. Notice of Removal [07-cv-10682, Doc. No. 1], Decl. of Brian R. Blais, Ex. B ("Am.Compl."). The First Amended Complaint
Id. The First Amended Complaint continued to identify TJX as "a Delaware Corporation with its principal place of business in Framingham, Massachusetts." Id. ¶ 10.
On April 13, 2007, TJX filed a Notice of Removal in this matter then pending in the Middlesex Superior Court, thus removing this case from the state court to this session of the United States District Court. The McMorris class action was not the only putative class action seeking redress from TJX.
In fact, by the time the notice of removal was filed, this Court had significantly progressed on similar cases and claims. On January 29, 2007, AmeriFirst Bank ("AmeriFirst") filed, a class action complaint against TJX Companies, Inc., T.J. Maxx, Fifth Third Bancorp, and Fifth Third Bank. [07-cv-10169, Doc. No. 1].
On April 4, 2007, this Court entered a Case Management Order consolidating six related actions then pending in this district and appointing Berger & Montague, P.C. and Wolf Popper, LLP as Co-Lead Counsel over all consolidated actions. Case Management Order [Doc. No. 11] ¶¶ 1, 13. This Order also appointed Shapiro Haber & Urmy LLP and Stern Shapiro Weissberg & Garin, LLP to serve as Plaintiffs' Co-Liaison Counsel. Id. ¶ 14.
On April 9, 2007, AmeriFirst moved the Court to amend the Case Management Order of April 4, 2007, moving for the creation of two separate tracks — a Consumer Track and a Financial Institution Track — and the appointment of Amerifirst counsel as Lead Counsel of the Financial Institution Track. Mot. to Amend [Doc. No. 14] at 1.
On April 10, 2007, the Massachusetts Bankers Association filed a Motion to Defer Appointment of Lead Class Counsel Representing Financial Institutions. [Doc. No. 16].
On April 11, 2007, this Court had already held a Scheduling Conference pursuant to Local Rule 16.1 concerning these six consolidated cases. At this conference, the Court, among other things, ordered that the consolidated actions would proceed as one case under the title In re TJX Companies Retail Security Breach Litigation, and placed the consolidated case on the running trial list for May 2008 (later amended to June 2008). In addition, the Court appointed AmeriFirst's Counsel interim class counsel for the financial institutions and gave the Massachusetts Bankers Association and other banks until April 25, 2007 to file a complaint and any motion to appoint their counsel as lead counsel for the financial institutions.
Thus the consolidated case — the putative classes of which entirely encompass the McMorris class — had already commenced its march to trial in this session when this case arrived. Almost immediately, the McMorris class wanted out, filing a Motion to Remand on April, 27, 2007. It is this motion that this Court heard on May 17, 2007, and it is this motion that this memorandum addresses.
For class actions covered by CAFA,
This Court has jurisdiction because the putative class satisfies the requirements of minimal diversity.
The First Amended Complaint proposes a class of "[r]esidents of Massachusetts" who engaged in transactions at TJX during a specified time. Am. Compl. ¶ 20. Accordingly, by definition, the class may include foreign citizens who resided in Massachusetts during that period and who made purchases at TJX.
The McMorris class attempts to secure remand by arguing that residence and citizenship are to be used interchangeably for the purpose of ascertaining diversity jurisdiction under CAFA. Pls.' Mem. in Supp. of Mot. to Remand [Doc. No. 30] ("Pls.Mem.") at 3. Citizenship, however is equated not with residence, but with "domicile," i.e., the place where an individual "has his true, fixed home and principal establishment, and to which, whenever he is absent, he has the intention of returning." See Valentin v. Hospital Bella Vista, 254 F.3d 358, 366 (1st Cir.2001) (internal quotation omitted). As the First Circuit emphasized in Valentin v. Hospital Bella Vista, and upon which the McMorris class themselves rely, see Pls. Mem. at 5, "[j]urisdictionally speaking, residency and citizenship are not interchangeable." Valentin, 254 F.3d at 361 n. 1. Federal courts that have focused on the issue consistently have rejected the proposition that mere residence establishes a party's citizenship for the purpose of diversity. See Bank One, Texas, N.A. v. Montle, 964 F.2d 48, 53 (1st Cir.1992) ("We add that citizenship or domicile, not residence, is the basis of subject matter jurisdiction."); Lundquist v. Precision Valley Aviation, Inc., 946 F.2d 8, 10 (1st Cir.1991) ("[Plaintiff] correctly notes that the relevant standard is `citizenship,' i.e., `domicile,' not mere residence. . . ."); ConnectU LLC v. Zuckerberg, 482 F.Supp.2d 3, 9, & n. 5 (D.Mass. 2007) (Woodlock, J.) (stating that an allegation that "[u]pon information and belief, Defendant Mark Zuckerberg is an individual with a place of residence in the State of New York" was "an insufficient allegation for jurisdictional purposes in any event since the pertinent inquiry is the citizenship or domicile, not the residency, of a party."); see also Preston v. Tenet Health-system Mem'l Med. Ctr., Inc., 485 F.3d 793, 798 (5th Cir.2007) (rejecting plaintiffs' contention that residency can serve as a
The McMorris class cites a number of cases described as using the words "resident" and "citizen" interchangeably. Pls.' Mem. at 3-5 (citing, for example, Walker v. Armco Steel Corp., 446 U.S. 740, 742, 100 S.Ct. 1978, 64 L.Ed.2d 659 (1980); McCord v. Horace Mann Ins. Co., 390 F.3d 138, 141 (1st Cir.2004); and Cowan v. Keystone Employee Profit Sharing Fund, 449 F.Supp. 235, 237 (D.Mass.1978) (Freedman, J.)). These cases, however, are not focused upon the difference between "residence" and "citizenship"; they merely use the term "residence" to summarize the procedural history. See, e.g., Cowan, 449 F.Supp. at 237.
Other courts that have specifically addressed the application of CAFA's `minimal diversity requirement have likewise rejected the contention of the McMorris class here. See Preston, 485 F.3d 793, 798-99; Schwartz, 2006 WL 487915, at *6. In Preston v. Tenet Health-system Memorial Medical Center, Inc., the court denied the plaintiffs' motion to remand under CAFA's statutory exceptions, because "[a] party's residence in a state alone does not establish domicile." 485 F.3d at 798 (citing Mas v. Perry, 489 F.2d 1396, 1399 (5th Cir. 1974)). Additionally, the Preston court rejected the plaintiffs' contention that proof of an individual's residence creates a rebuttable presumption of domicile. Id. at 798-99.
Moreover, in Schwartz v. Comcast Corp., a case very similar to this one, a customer sought relief on behalf of a class defined as "[a]ll persons and entities residing or doing business in the Commonwealth of Pennsylvania." 2006 WL 487915, at *3. The court concluded that "allegations of residence are not sufficient for purposes of establishing citizenship." Id. (citing Krasnov v. Dinan, 465 F.2d 1298, 1300 (3d Cir.1972)). The court then denied the plaintiffs motion to remand under CAFA's statutory exceptions, reasoning that he failed to offer sufficient evidence that the putative class members residing in Pennsylvania were actually domiciled there and instead relied on the flawed "assumption that residence is an effective proxy for domicile." Id. at *6.
Thus, this putative class that is composed entirely of residents of Massachusetts, does not, by definition, foreclose the inclusion of non-citizens as well. This suffices to support the assertion of federal jurisdiction in this case.
"Minimal" diversity is rooted in Article III, Section 2 of the United States Constitution, which courts have long construed as permitting federal jurisdiction in cases where diversity of citizenship exists between any two parties on opposite sides of an action. See State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523, 530-31, 87 S.Ct. 1199, 18 L.Ed.2d 270 (1967) (discussing the sufficiency of minimal diversity under the federal interpleader statute, 28 U.S.C. § 1335). The Supreme Court recently noted that minimal diversity may well be satisfied in any situation where one of the parties has multiple citizenship:
Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 577 n. 6, 124 S.Ct. 1920, 158 L.Ed.2d 866 (2004).
This Court need not reach the issue left open in Grupo Dataflux because TJX has sufficiently alleged a "reasonable probability" that at least one member of the McMorris class is domiciled in a state other than Massachusetts or Delaware, the two states in which TJX is domiciled. See Blockbuster, Inc. v. Galeno, 472 F.3d 53, 59 (2d Cir.2006). Such minimal diversity is enough to satisfy the requirements of Article III. Tashire, 386 U.S. at 531, 87 S.Ct. 1199. It is also enough to satisfy the requirements of CAFA: jurisdiction exists wherever "any member of a class of plaintiffs is a citizen of a State different from any defendant." 28 U.S.C. § 1332(d)(2)(A).
CAFA generally grants jurisdiction to district courts over "class actions. CAFA also specifies some circumstances, however, where jurisdiction is nonetheless not to be exercised. See, e.g., 28 U.S.C. § 1332(d)(4),(5) & (9). For instance, it provides that a district court shall decline jurisdiction over a class action in which "two-thirds or more members of all proposed plaintiff classes in the aggregate, and the primary defendants, are citizens of the State in which the action was originally filed." Id. § 1332(d)(4)(13). The McMorris class asks the Court to apply this exception, otherwise known as the "home state exception" to this case since all known class members are citizens of Massachusetts.
The appeal to the home state exception necessarily raises the issue as to which party bears the burden of proof. The argument of the McMorris class rests solely on one recent case from the Central District of California. See Mot. Hr'g Tr. at 9:10-10:1; Lao v. Wickes Furniture Co., Inc., 455 F.Supp.2d 1045 (C.D.Cal.2006). In Lao v. Wickes Furniture Co., Inc., the district court held that 28 U.S.C. § 1332(d)(4) did not constitute an exception to CAFA's jurisdictional sweep, but simply provided additional criteria that must affirmatively be shown by the party seeking, to establish CAFA jurisdiction in the first instance. 455 F.Supp.2d at 1059. Lao has, however, been overruled by a subsequent decision by the Ninth Circuit Court of Appeals. See Serrano v. 180 Connect, Inc., 478 F.3d 1018, 1023 (9th Cir.2007). In Serrano, the Ninth Circuit declined plaintiffs argument that the Lao reasoning was applicable and held that the party seeking remand of a case removed
Similarly, this Court is not persuaded by the reasoning in Lao. First and foremost, Lao's result is inconsistent with the plain language of CAFA. As noted above, sections 1332(d)(4)(A) and (B) require federal courts, despite having jurisdiction under section 1332(d)(2), to "decline to exercise jurisdiction" when the criteria set forth in those provisions are met. Subsections (d)(4)(A) and (B) are, therefore, not part of the prima facie elements of jurisdiction but exceptions to such jurisdiction. As the proponent of the exception, the McMorris class bears the burden.
This Court gives significant weight to the fact that every other federal court that has considered this issue has held that the burden of showing that a statutory exception applies falls on the party moving to remand. See, e.g., Preston, 485 F.3d at 801 (stating that the parties moving to remand must prove that a CAFA exception to federal jurisdiction apply); Hart v. FedEx Ground Package Sys. Inc., 457 F.3d 675, 679-680 (7th Cir.2006) (analogizing the structure of CAFA to that of the general removal statute, which places the burden on the opponent of removal to show express exceptions to removability); Frazier v. Pioneer Americas LLC, 455 F.3d 542, 546 (5th Cir.2006) (noting that district court properly placed the burden on plaintiffs to show statutory exclusions); Evans v. Walter Indus., Inc., 449 F.3d 1159, 1164 (11th Cir.2006) (holding that when a party seeks to avail itself of an express statutory exception to CAFA, that party bears the burden of proof with regard to that exception); Martin v. Lafon Nursing Facility of the Holy Family, Inc., No. 06-5108, 2007 WL 162813, at *2-*3 (E.D.La. Jan.18, 2007) (ruling that the burden of proving citizenship of a putative class, and therefore the applicability of CAFA exception, rests with plaintiff). Thus, this Court holds it is the plaintiffs opposing remand who have the burden of demonstrating that two-thirds or more of the proposed class are citizens of Massachusetts.
Commentators have also addressed the issue of who bears the burden of proving CAFA's local controversy exception. Most of them have reached the same conclusion this Court has: that the burden of proving an exception rests with the party opposing removal. See, e.g., James M Garner, Congressional Welcome to Federal Court — The Class Action Fairness Act: Has the Party Just Begun?, 80 Tul. L.Rev. 1669, 1689-1690 (2005-06) (explaining that placing the burden on the plaintiff seeking remand comports with the general principle of statutory construction that a party seeking the benefit of an exception bears the burden of proving it); Steven M. Puiszis, Developing Trends with The Class Action Fairness Act of 2005, 40 J. Marshall L.Rev. 115, 154-55 (2006) ("[W]hile the party seeking removal may continue to bear the initial burden of demonstrating removal was proper under CAFA, once that initial jurisdictional threshold is established, the party opposing removal bears the burden of establishing the applicability of one of CAFA's jurisdictional exceptions."); Stephen J. Shapiro, Applying the Jurisdictional Provisions of The Class Action Fairness Act of 2005: In Search for a Sensible Judicial Approach, 59 Baylor L.Rev. 77, 98-99 (2006) (stating that the general rule that the party seeking federal jurisdiction has the burden of proof does not apply to a party seeking to apply the home state exception).
Since the McMorris class must shoulder the burden of proof, the question becomes whether that burden has been satisfied. In this case, the McMorris class simply asserts that all the named plaintiffs
Accordingly, since the McMorris class has not met its burden of proof, this Court will not apply CAFA's home state exception.
While these are matters of first impression in the First Circuit, the great weight of authority elsewhere suggests that the arguments here presented are something of a Hail Mary pass. Why bother?
Of course, counsel ought have the incentive to advance every legitimate argument on behalf of their clients. Moreover, the weight of independent analysis amply confirms the societal benefits derived from vigorous prosecution of class actions. Myriam Ellis & Gary B. Friedman, Exploding the Class Action Agency Cost Myth: The Social Utility of Entrepreneurial Lawyers, 155 U. Pa. L.Rev. 103, 106-108 (2006); see also, Deborah R. Hensler, Nicholas M. Pace, Bonnie Dombey-Moore, Elizabeth Giddens, Jennifer Gross & Erik Moller, Class Action Dilemmas: Pursuing Public Goals for Private Gain, Rand Institute (2000), available at http://www.rand. org/pubslmonograph_reportsIMR969/ index.html (last visited June 14, 2007) (stating that whether the benefits of class actions outweigh their costs is "a deeply political question, implicating fundamental beliefs about the structure of the political system, the nature of society, and the roles of courts and law in society").
Whatever the actual social benefits of class action litigation, however, CAFA is generally regarded as reflecting skepticism about the work of plaintiffs' class action attorneys. See Edward F. Sherman, Decline and Fall, A.B.A.J. 51, 51 (June, 2007). CAFA implements its statutory policy by favoring federal courts over state courts. In the federal district courts, of course, overlapping class actions in a particular district may easily be consolidated — as was done here. See Local Rule 40.1(j). Moreover, wherever venue is appropriate, civil cases may be transferred between districts. 28 U.S.C. § 1404(a). Federal cases may also be consolidated, at least for pre-trial purposes, by the Judicial Panel on Multidistrict Litigation. 28 U.S.C. § 1407.
It is for this reason that, having already appointed qualified lead counsel and colead counsel for the putative consumer and banking class actions, this Court declined to modify the Case Management Scheduling Order to include in the leadership group the distinguished plaintiffs' class action attorneys who represent an overlapping class in a related action in the District of California. So here, denying the present motion to remand and consolidating the McMorris class with the other pending putative class actions will have the practical consequence of marginalizing the McMorris class counsel and excluding them from the leadership group.
The consolidated cases are, of course, solely concerned with the rights of the putative class members and the rights of TJX. It would be unseemly and unprofessional for attorneys to jockey for position (and their own potential monetary advantage). This Court, thus, made the following inquiry
Mot. Hr'g Tr. at 4:5-7:20.
Given the distinguished record of the McMorris class action counsel and the directness and candor of attorney Fritz, this Court accepts the reasons motivating her argument in their entirety, even though the Court ultimately rejected the proffered legal analysis.
For all the reasons stated above, the Motion to Remand [Doc. No. 29] is DENIED.
SO ORDERED.
Comment
User Comments