Marlene Westerfeld v. Indep. Processing Llc.

• Decision Date: 20 September 2010
• Docket Number: No. 10-2635.,10-2635.
• Parties: Marlene WESTERFELD, Plaintiff-Appellee, v. INDEPENDENT PROCESSING, LLC; Defendant, Provident Funding Associates, LP, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

621 F.3d 819

Marlene WESTERFELD, Plaintiff-Appellee,

v. INDEPENDENT PROCESSING, LLC; Defendant,Provident Funding Associates, LP, Defendant-Appellant.

No. 10-2635.

United States Court of Appeals,Eighth Circuit.

Submitted: Sept. 7, 2010.

Filed: Sept. 20, 2010.

Mark G. Arnold and Christopher A. Smith, St. Louis, MO, for appellant.

Christian Gerhard Montroy, St. Louis, MO, for appellee.

Before SMITH, BOWMAN, and GRUENDER, Circuit Judges.

BOWMAN, Circuit Judge.

Marlene Westerfeld, a Missouri resident, filed this class action in Missouri state court against Independent Processing, LLC, a Missouri limited liability company that processed residential mortgage documents, and Provident Funding Associates, LP, a California limited partnership that provided residential mortgages. Westerfeld alleged that when Independent and Provident charged her and other Missouri residents a “broker processing fee” and an “administrative fee,” respectively, in residential mortgage financing transactions, the two entities engaged in the unauthorized practice of law and violated the Missouri Merchandising Practices Act, Mo.Rev.Stat. §§ 407.010-407.1500. Provident removed the case to federal court pursuant to the Class Action Fairness Act of 2005 (CAFA). ¹ Westerfeld then moved to remand the case based on an exception to CAFA jurisdiction, the local-controversy exception, 28 U.S.C. § 1332(d)(4)(A). The District Court granted Westerfeld's motion, ordering the case remanded to the Circuit Court of St. Louis County. Provident filed a timely petition with this Court under 28 U.S.C. § 1453(c)(1) for leave to appeal the District Court's remand order. We granted Provident's motion, and reviewing the District Court's interpretation of CAFA de novo, see Iowa 80 Grp., Inc. v. IRS, 406 F.3d 950, 952 (8th Cir.2005) (standard of review), we now vacate the judgment of the District Court and remand the case for further consideration consistent with this opinion.

Because of perceived “abuses of the class action device,” Congress enacted CAFA to provide, inter alia, for “Federal court consideration of interstate cases of national importance.” Class Action Fairness Act of 2005, Pub.L. No. 109-2, § 2, 119 Stat. 4. Accordingly, CAFA grants broad federal jurisdiction over class actions and establishes narrow exceptions to such jurisdiction. See S.Rep. No. 109-14, at 43 (2005), reprinted in 2005 U.S.C.C.A.N. 3, 41 (CAFA “is intended to expand substantially federal court jurisdiction over class actions. Its provisions should be read broadly, with a strong preference that interstate class actions should be heard in a federal court if properly removed by any defendant.”). “The language and structure of CAFA ... indicate[ ] that Congress contemplated broad federal court jurisdiction with only narrow exceptions.” Evans v. Walter Indus., 449 F.3d 1159, 1164 (11th Cir.2006) (citation omitted); see S.Rep. No. 109-14, at 39, reprinted in 2005 U.S.C.C.A.N. 3, 38 (emphasizing that the local-controversy exception to CAFA jurisdiction “is a narrow exception that was carefully drafted to ensure that it does not become a jurisdictional loophole”).

Under CAFA, federal courts have jurisdiction over class actions in which the amount in controversy exceeds $5,000,000 in the aggregate; there is minimal (as opposed to complete) diversity among the parties, i.e., any class member and any defendant are citizens of different states; and there are at least 100 members in the class. 28 U.S.C. § 1332(d). Despite this broad grant of jurisdiction, Congress established two mandatory exceptions to federal jurisdiction under CAFA, only one of which is relevant here. Under the local-controversy exception, a district court must decline to exercise jurisdiction over a class action in which more than two-thirds of the class members in the aggregate are citizens of the state in which the action was originally filed, at least one defendant “from whom significant relief is sought by members of the plaintiff class” and “whose alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class” is a citizen of the state in which the class action was originally filed, the principal injuries were incurred in the state in which the action was filed, and no other class action alleging similar facts was filed in the three years prior to the commencement of the current class action. 28 U.S.C. § 1332(d)(4)(A).

Although CAFA expanded federal jurisdiction over class actions, it did not alter the general rule that the party seeking to remove a case to federal court bears the burden of establishing federal jurisdiction. Kaufman v. Allstate N.J. Ins. Co., 561 F.3d 144, 151 (3d Cir.2009); Amoche v. Guarantee Trust Life Ins. Co., 556 F.3d 41, 48 (1st Cir.2009); Serrano v. 180 Connect, Inc., 478 F.3d 1018, 1021 (9th Cir.2007); Evans, 449 F.3d at 1164. Once CAFA's initial jurisdictional requirements have been established by the party seeking removal, however, the burden shifts to the party seeking remand to establish that one of CAFA's express jurisdictional exceptions applies. Serrano, 478 F.3d at 1024 (“[O]nce federal jurisdiction has been established under [§ 1332(d)(2) ], the objecting party bears the burden of proof as to the applicability of any express statutory exception....”); Kaufman, 561 F.3d at 154 (same); Hart v. FedEx Ground Package Sys. Inc., 457 F.3d 675, 681 (7th Cir.2006) (same); Frazier v. Pioneer Ams. LLC, 455 F.3d 542, 546 (5th Cir.2006) (same) (citing Evans); Evans, 449 F.3d at 1164 (same).

Here, Provident bore the initial burden of establishing that CAFA's fundamental jurisdictional requirements were met, and the District Court so stated, noting correctly that “[t]he party seeking removal ... has the burden to establish federal subject matter jurisdiction.” Mem. & Order of June 17, 2010, at 3. After discussing the application of the local-controversy exception, however, the court stated that “[e]ven if [application of the exception] was not as clear as it is, any doubt ... must be resolved in favor of remand.” Id. at 6. Provident argues that this was a misstatement of the law, and we agree. Once Provident satisfied CAFA's basic jurisdictional requirements (and Westerfeld does not contend on appeal that Provident failed to do so), the burden shifted to Westerfeld to establish that CAFA's local-controversy exception applied. The District Court erred by resolving any doubt regarding applicability of the local-controversy exception in favor of remand, i.e., in favor of Westerfeld, the party who was invoking the exception to federal jurisdiction and the party who was required to establish that the exception applied. We agree with Provident that the party bearing the burden of proof is not entitled to the benefit of the doubt. On remand, the District Court should resolve any doubt about the applicability of CAFA's local-controversy exception against Westerfeld, the party who seeks remand and the party who bears the burden of establishing that the exception applies.

Provident next argues that the District Court erred in concluding that CAFA's local-controversy exception precluded the court's exercise of federal jurisdiction over the action. The local-controversy exception requires, as relevant here, that an in-state defendant-in this case, Independent-be a so-called “significant” defendant, one “from whom significant relief is sought by members of the plaintiff class” and one “whose alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class.” 28 U.S.C. § 1332(d)(4)(A)(i)(II)(aa) & (bb).

In her amended complaint, Westerfeld asserted two state-law claims against Independent and two identical state-law claims against Provident on behalf of two separate plaintiff classes. Specifically, in Counts I and II of her amended complaint, Westerfeld asserted state-law claims against Independent and requested certification of a plaintiff class against Independent. In Counts III and IV, she asserted identical state-law claims against Provident and requested certification of a separate plaintiff class against Provident. After Provident removed the action, Westerfeld filed her motion to remand, arguing that the District Court was prohibited from exercising jurisdiction over the action by virtue of CAFA's local-controversy exception.

Provident opposed remand, arguing that the local-controversy exception did not apply because Independent, the in-state defendant, did not qualify as a significant defendant under the exception. In support of its argument, Provident submitted the declaration of Independent's sole proprietor, who stated that Independent provided services in connection with only 56 loans in Missouri, as well as the declaration of its own compliance manager, who stated that Provident had originated 3,894 loans in Missouri. Based on this information and the dollar amount of the contested fees paid by Westerfeld, Provident estimated that Independent charged $16,800 and Provident charged $2.7 million in contested fees. ² Provident urged the District Court to determine whether Independent was a significant ...