In United Steel, Paper & Forestry, Rubber, Manufacturing, Energy, Allied Industrial & Service Workers International Union, AFL-CIO, CLC, et al. v. Shell Oil Company (9th Cir. Apr. 21, 2010) (say that three times fast), a putative class action alleging various wage & hour violations was removed to federal district court pursuant to 28 U.S.C. § 1332(d)(2) (CAFA). Certification was eventually denied. The district court concluded that it lacked jurisdiction and remanded the matter to state court. On appeal, the Ninth Circuit joined the Seventh and Eleventh Circuits in holding that denial of class certification does not divest the federal district court of jurisdiction. The Court recognized the general principles that jurisdiction is evaluated at the time it is invoked, and subsequent developments do not destroy jurisdiction if it was properly invoked originally. All else equal, this decision should reduce the overall degree of hapiness experienced by district court judges. Now they can't put an unsuccessful, removed class action out of its misery with a remand bullet to the head. Thus, federal district courts will have the pleasure of overseeing more individual, state law-based actions.
A unanimous United States Supreme Court held today, in Hertz Corp. v. Friend, 559 U.S. ____ (February 23, 2010):
The federal diversity jurisdiction statute provides that "a corporation shall be deemed to be a citizen of any Stateby which it has been incorporated and of the State where it has its principal place of business." 28 U. S. C. §1332(c)(1) (emphasis added). We seek here to resolve different inter-pretations that the Circuits have given this phrase. In doing so, we place primary weight upon the need for judicial administration of a jurisdictional statute to remain assimple as possible. And we conclude that the phrase "principal place of business" refers to the place where thecorporation’s high level officers direct, control, and coordinate the corporation’s activities. Lower federal courts have often metaphorically called that place the corporation’s "nerve center."
Opinion, at 1. In light of this holding, Tosco Corp. v. Communities for a Better Environment, 236 F. 3d 495 (9th Cir. 2001) is no longer good law. The result is likely to be fewer diversity-based suits but more CAFA-based removals for class actions.
It occurs to me that an amicus filing in support of the plaintiff would be a friend of a Friend. You see, the amicus filing is also called .... oh nevermind.
Other media commentary on Hertz v. Friend:
- Court Says Business HQ Is Where Executives Are (ABC News)
- Jurisdiction Hinges On Company's 'Nerve Center' (Courthouse News)
- U.S. top court: Companies are based where execs are (Reuters)
This past week, the California Supreme Court heard oral argument in the Tobacco II cases. Extensive coverage of the oral argument is available from the UCL Practitioner in this post. The obligatory reading of tea leaves has, in this instance, revealed little. For examle, Mike McKee, writing for The Records, said, "Just a few weeks ago, the California Supreme Court ruled that lawsuits under the Consumer Legal Remedies Act can only be filed by individuals who suffer real damage from unlawful business practices. But during oral arguments on Tuesday it wasn't clear where the court stood on applying that same rule to every participant of class actions filed under the state's Unfair Competition Law." (Mike McKee, Calif. Justices Air Standing for UCL Class Actions Against Tobacco Industry (March 4, 2009) www.law.com.) Having watched the argument myself, I agree that it was hard to discern much from the Justices. The cynic in me always assumes that the creep of Proposition 64 will keep on spreading its tendrils, but the argument itself gives me little actual evidence to support that guess.
Meanwhile, the significance of the Ninth Circuit's decision in Davis v. HSBC Bank Nevada, N.A., et al. (February 26, 2009) reached the legal media: "In a blow to plaintiffs class action lawyers, the 9th U.S. Circuit Court of Appeals has made it tougher to hold that a national company is a 'citizen' of California merely based on the disproportionate size of the state's population." (Pamela A. MacLean, 9th Circuit Deals a Blow to Plaintiffs Lawyers in 'Principal Place of Business' Test (March 9, 2009) www.law.com.) Not that Tosco actually held that a state's population size governed corporate citizenship, but the remainder of the article is accurate. This blog noted the decision in this short post.
Finally, while a bit late to the party, another ISP and the defunct Adzilla were sued for deep packet inspection for the purposes of obtaining the advertising holy grail: complete knowledge of each consumer's behaviors and preferences. (Ryan Singel, Another ISP Ad Snooper Hit With Lawsuit (March 3, 2009) www.wired.com.) I've already expressed my contempt for this behavior by ISPs. Luckily, these projects appear dead in the United States. But don't count on them staying down forever.
If you spend any time litigating class actions, CAFA almost guarantees that some of that time will be spent in federal court. Thus, the citizenship of the defendant(s) is a significant issue. In Davis v. HSBC Bank Nevada, N.A., et al. (February 26, 2009), the Ninth Circuit interpreted and limited the “substantial predominance” analysis for the “principal place of business” test, as it was described in Tosco Corp. v. Communities for a Better Env't, 236 F.3d 495 (9th Cir. 2001). In brief, the Court held that the “substantial predominance” of activities is tested against national activities, not the next largest state, but a per-capita analysis is not required.
In Korn v. Polo Ralph Lauren Corp., the defendant found the right recipe for resisting the plaintiff's efforts to remand the matter back to state court. (Korn v. Polo Ralph Lauren Corp. (E.D. Cal. 2008) 536 F.Supp.2d 1199.) First, defendant successfully opposed plaintiff's argument that defendant had not established diverse citizenship. The Court accepted as true the plaintiff's allegation that Polo Ralph Lauren Corp. was incorporated in Delaware, with a principle place of business in New Jersey. (Korn, at p. 1203.) Second, the Court coupled plaintiff's demand for $1,000 in statutory penalties per unlawful transaction with defendant's declaration that it had processed more than 5,000 credit transactions to conclude that the amount in controversy exceeded $5 million. (Korn, at p. 1205-6.) The moral of the story is that you can plead around CAFA removal, but not if you insist on alleging facts that will undermine any possibility for a successful remand motion.