Hart v. Fedex Ground Package System Inc.

• Decision Date: 09 August 2006
• Docket Number: No. 06-2903.,06-2903.
• Citation: 457 F.3d 675
• Parties: Jeffrey HART, Plaintiff-Appellant, v. FEDEX GROUND PACKAGE SYSTEM INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

457 F.3d 675

Jeffrey HART, Plaintiff-Appellant, v. FEDEX GROUND PACKAGE SYSTEM INC., Defendant-Appellee.

No. 06-2903.

United States Court of Appeals, Seventh Circuit.

Submitted June 30, 2006.

Decided August 9, 2006.

Gary F. Lynch (submitted), Carlson Lynch, New Castle, PA, Daniel O. Myers, Richardson, Patrick, Westbrook & Brickman, Charleston, SC, for Plaintiff-Appellant.

Mitchell B. Katten, O'Rourke, Katten & Moody, Chicago, IL, Shannon H. Paliotta, Littler Mendelson, Pittsburgh, PA, for Defendant-Appellee.

Before ROVNER, WOOD, and WILLIAMS, Circuit Judges.

WOOD, Circuit Judge.

After Jeffrey Hart filed suit against FedEx Ground Package System, Inc. ("FedEx Ground"), in Pennsylvania state court, FedEx Ground removed the case to federal court under the Class Action Fairness Act of 2005, (CAFA), Pub.L. 109-2, 119 Stat. 4 (2005); later, the case found its way to the Northern District of Indiana, where Hart unsuccessfully tried to persuade the district court that this case really belonged back in Pennsylvania state court, under the "home-state controversy" or "local controversy" exceptions to CAFA. Concluding that Hart had the burden of showing that these exceptions applied, the district court denied his motion to remand. Hart appeals, see 28 U.S.C. § 1453(c), asking us to resolve which party has the burden of proving whether these exceptions to CAFA apply. Although we consider the question close, we conclude that the structure of the statute logically shifts the burden of persuasion to the plaintiff to show that the general rule does not apply. We granted the petition for the appeal in an order dated June 30, 2006, and we now affirm.¹

I

Hart initially filed this suit as a state court class action in Pennsylvania, on behalf of himself and all persons that FedEx Ground employed there as local package delivery drivers who were or are improperly classified as "independent contractors." FedEx Ground's principal place of business is in Pittsburgh, Pennsylvania, making it a citizen of Pennsylvania for purposes of federal court diversity jurisdiction. See 28 U.S.C. § 1332(c)(1). Because Hart too is a citizen of Pennsylvania, in the absence of CAFA nothing would support federal subject-matter jurisdiction over these claims. That is because § 1332 requires "complete diversity," meaning that no plaintiff may be from the same state as any defendant, and in class actions only the citizenship of the named plaintiff counts. See Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806) (complete diversity rule); Snyder v. Harris, 394 U.S. 332, 340, 89 S.Ct. 1053, 22 L.Ed.2d 319 (1969) (look only to citizenship of named plaintiffs in a class). Ever since the Supreme Court decided State Farm Fire & Casualty Co. v. Tashire, 386 U.S. 523, 87 S.Ct. 1199, 18 L.Ed.2d 270 (1967), however, it has been established that the grant of diversity jurisdiction in Article III of the Constitution permits the federal courts to decide cases with only "minimal" diversity—that is, just one party with citizenship different from all others—and that the "complete" diversity requirement is statutory. See id. at 531, 87 S.Ct. 1199.

Congress is naturally free to expand or contract the statutory diversity jurisdiction, and it has done so from time to time. For many years, it has permitted minimal diversity suits under the federal interpleader statute, 28 U.S.C. § 1335. In 2005, it did the same thing for large class actions, when it enacted CAFA. Section 1332(d)(2) reads as follows:

The district courts shall have original jurisdiction of any civil action in which the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs, and is a class action in which

(A) any member of a class of plaintiffs is a citizen of a State different from any defendant;

(B) any member of a class of plaintiffs is a foreign state or a citizen or subject of a foreign state and any defendant is a citizen of a State; or

(C) any member of a class of plaintiffs is a citizen of a State and any defendant is a foreign state or a citizen or subject of a foreign state.

Congress decided to qualify this rule of minimal diversity, however, for class actions that were essentially local in nature. If the minimal diversity rule of CAFA is an exception to the normal rule in § 1332 requiring complete diversity, then the home-state and local controversy provisions of § 1332(d)(4) are the exceptions to the exception. The subsection pertinent to Hart's case is § 1332(d)(4)(B), which says that "[a] district court shall decline to exercise jurisdiction [under § 1332(d)(2)]" if "two-thirds or more of the 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." See also § 1332(d)(4)(A) (setting forth an alternative way to prove that the controversy is local).

Relying on this provision, Hart alleged in his complaint that federal jurisdiction was lacking in his case "because the defendant and greater than two-thirds of the members of the plaintiff class, if not all of the members of the plaintiff class, are citizens of Pennsylvania." FedEx Ground filed a notice of removal claiming federal question jurisdiction² and diversity jurisdiction pursuant to CAFA, § 1332(d), stating that "[u]pon information and belief, some of the proposed class members are not residents of Pennsylvania."

After the case was removed, it was transferred to the Northern District of Indiana by the Judicial Panel on Multidistrict Litigation. In that court, Hart moved for remand, relying on the home-state controversy exception to CAFA's jurisdictional rule. See § 1332(d)(4)(B). He argued, relying on this court's decision in Brill v. Countrywide Home Loans, 427 F.3d 446, 447-49 (7th Cir.2005), that FedEx Ground, as the proponent of CAFA jurisdiction, bore the burden of demonstrating not only that CAFA's general jurisdictional requirements were met, see § 1332(d)(2), but also that none of the mandatory exclusions from CAFA jurisdiction found in § 1332(d)(4) applied. Hart also argued that allegations of residence are not sufficient to establish citizenship for diversity purposes. Hart has waived the latter objection, however, because he did not move for remand within thirty days of removal. See Harmon v. OKI Sys., 115 F.3d 477, 479 (7th Cir.1997); 28 U.S.C. § 1447(c).

In response, FedEx Ground provided affidavits from three of its employees who asserted that they had personal knowledge that 12 members of the plaintiff class were not citizens of Pennsylvania. The company argued in addition that Brill held only that the defendant bears the burden of showing that CAFA's threshold jurisdictional requirements are satisfied and did not address which party bears the burden of establishing that an exception to CAFA's minimal diversity jurisdiction applies. CAFA contains an entirely new set of rules that, in FedEx Ground's view, are ambiguous enough to require courts to resort to CAFA's legislative history for illumination. That history, it continues, shows that Congress wanted the plaintiff to bear the burden of proving that the "local" or "home-state" exception applies (or, put otherwise, that the default rule of § 1332 requiring complete diversity applies). In his reply, Hart noted that Brill rejected any reliance on CAFA's legislative history and again argued that FedEx Ground had not met its burden because it had not shown that less than two-thirds of the proposed plaintiff class (66 people or less, since § 1332(d)(5)(B) also makes CAFA inapplicable to classes with less than 100 members) were citizens of Pennsylvania.

The district court denied the motion to remand, holding that once FedEx Ground established that at least one plaintiff was not a citizen of Pennsylvania, it was Hart's burden to show that the home-state controversy exception was applicable. The district court relied on the wording of the statute, stating that § 1332(d)(4)(B) "deals not with whether the court has jurisdiction, but rather . . . whether the right circumstances exist to prevent the court from exercising jurisdiction." The court noted that § 1332(d)(8) supports this conclusion by allowing a party to argue that § 1332(d)(4)(B) precludes the exercise of jurisdiction even after a class has been certified. The court added that plaintiffs are not barred from making a future motion to remand based on § 1332(d)(4), when appropriate.

We accepted this appeal so that we could address the important question of which party has the burden of establishing jurisdiction when the home-state and local controversy provisions of CAFA are implicated.

II

A

Before addressing the merits of the petition, we explain more fully our earlier holding that the 60-day time limit for resolving CAFA appeals begins to run at the time a petition is granted, not when it is initially filed. We join the Fifth, Ninth, and Eleventh Circuits in this conclusion. Evans v. Walter Industries, Inc., 449 F.3d 1159, 1162-63 (11th Cir.2006); Patterson v. Dean Morris L.L.P., 444 F.3d 365, 368 (5th Cir.2006); Amalgamated Transit Union Local 1309, AFL-CIO v. Laidlaw Transit Serv., Inc., 435 F.3d 1140, 1144 (9th Cir.2006); see also Bush v. Cheaptickets, Inc., 425 F.3d 683, 685-86 (9th Cir. 2005) (calculating 60-day deadline for decision on merits of § 1453(c)(1) appeal from date appeal was accepted).

Section 1453(c)(2), directs that "[i]f the court of appeals accepts an appeal under paragraph (1), the court shall complete all action on such appeal, including rendering judgment, not later than 60 days after the date on which such appeal was filed." The language of § 1453(c) is ambiguous as to whether an appeal exists when a party files an application to appeal, or whether it exists only after the appellate court accepts the appeal. We agree with our sister circuits that Congress intended that an appeal would exist only after the appellate court accepts the...