McAtee v. Capital One, F.S.B.

• Decision Date: 16 March 2007
• Docket Number: No. 07-55065.,07-55065.
• Citation: 479 F.3d 1143
• Parties: Melodie McATEE, individually and on behalf of all others similarly situated, Plaintiff-Appellee, v. CAPITAL ONE, F.S.B., a Foreign Corporation; Capital One Services, a Foreign Corporation; Capital One Financial Corporation, a Foreign Corporation; Capital One Bank, a Foreign Corporation, Defendants-Appellants, and John Does, 1 Through 20, Inclusive Defendant.
• Court: U.S. Court of Appeals — Ninth Circuit

479 F.3d 1143

Melodie McATEE, individually and on behalf of all others similarly situated, Plaintiff-Appellee, v. CAPITAL ONE, F.S.B., a Foreign Corporation; Capital One Services, a Foreign Corporation; Capital One Financial Corporation, a Foreign Corporation; Capital One Bank, a Foreign Corporation, Defendants-Appellants, and John Does, 1 Through 20, Inclusive Defendant.

No. 07-55065.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 14, 2007.

Filed March 16, 2007.

James R. McGuire, Dean J. Zipser, Morrison & Foerster, Irvine, CA, for the appellants.

Anthony A. Ferrigno, San Clemente, CA; David J. Franklin, Franklin & Franklin, San Diego, CA, for the appellee.

Appeal from the United States District Court for the Central District of California; Cormac J. Carney, District Judge, Presiding. D.C. No. CV-06-00709-CJC.

Before HUG, BRUNETTI, and W. FLETCHER, Circuit Judges.

WILLIAM A. FLETCHER, Circuit Judge.

Melodie McAtee, a California citizen, was the substituted plaintiff in an amended complaint filed in California state court before the effective date of the Class Action Fairness Act of 2005 ("CAFA"), Pub.L. No. 109-2, 119 Stat. 4 (2005) (codified in scattered sections of 28 U.S.C.), naming as defendants Capital One, F.S.B., Capital One Services, and John Doe defendants 1 to 20. After the effective date of CAFA, McAtee amended her complaint to substitute Capital One Bank for one of the Doe defendants. Capital One Bank removed the action to federal district court based on the supposed authority of CAFA. Capital One Bank argued that the substitution "commenced" a civil action within the meaning of CAFA, and that CAFA therefore applied to McAtee's suit and authorized removal.

The district court remanded, holding that McAtee's action commenced upon the filing of the original complaint. We affirm.

I. Procedural Background

This action has a lengthy procedural history. On August 13, 2004, Susanne Ball filed a complaint in Orange County Superior Court under section 17204 of the California Business and Professions Code. Ball's complaint named as defendants Capital One, F.S.B. and Capital One Services. Both are subsidiaries of Capital One Financial Corporation. The complaint also named John Doe defendants 1 through 20, as permitted by section 474 of California Code of Civil Procedure. Ball's complaint alleged that provisions in the credit card contracts of the two named defendants constituted unlawful business practices under California law. Ball filed an amended complaint on November 6, 2004, which the two named defendants answered on December 10, 2004.

On November 2, 2004, California voters approved Proposition 64, which limited the ability of citizens to bring claims under Section 17204. Compare Cal. Bus. & Prof. Code § 17204 (West 1997) (allowing claims to be brought by "any person acting for the interests of . . . the general public") with Cal. Bus. & Prof.Code § 17204 (West 2005) (allowing actions brought by "any person who has suffered injury in fact and has lost money or property"). The limitation applied retroactively to all pending cases. Id.

In May 2005, the Superior Court held that Proposition 64 prevented Ball from pursuing her claim against Capital One, F.S.B. and Capital One Services. A second amended complaint was filed on June 1, 2005, in which McAtee replaced Ball as the plaintiff. The two named defendants removed the action to federal district court based on supposed authority of the recently enacted CAFA. CAFA applies to "any civil action commenced on or after" February 18, 2005. Pub.L. No. 109-2, § 9, 119 Stat. 4, 14 (codified at 28 U.S.C. § 1332).

McAtee moved to remand. The federal district court granted the motion, holding that the action had "commenced" within the meaning of CAFA on August 13, 2004, when Ball's original complaint was filed. The defendants filed a petition to appeal under CAFA, Pub.L. No. 109-2, § 5, 119 Stat. 4, 12 (codified at 28 U.S.C. § 1453(c)), which we denied.

After remand, McAtee learned that her credit card contract was with a different subsidiary of Capital One Financial. Her contract was with Capital One Bank rather than Capital One, F.S.B. or Capital One Services. On June 22, 2006, McAtee filed an amended complaint substituting Capital One Bank in place of one of the Doe defendants. McAtee dismissed her claims against the other two named defendants.

Capital One Bank, like the two previous named defendants, removed to federal district court based on the supposed authority of CAFA. McAtee moved to remand. The district court again held that Ball's initial complaint filed on August 13, 2004, commenced McAtee's action, and remanded to state court.

We granted Capital One Bank's petition for appeal to this court. We must decide whether substitution of a named defendant for a Doe defendant in a California state court action commences a civil action against the new named defendant within the meaning of CAFA. Looking to California law for the definition of commence, we conclude that it does not. We therefore affirm.

II. Standard of Review

We review the district court's interpretation of CAFA de novo. Bush v. Cheaptickets, Inc., 425 F.3d 683 (9th Cir. 2005). If we have jurisdiction under CAFA to review a district court's remand order, we review de novo. Abrego Abrego v. Dow Chemical Co., 443 F.3d 676, 679 (9th Cir.2006); Lowdermilk v. U.S. Bank Nat'l Ass'n, 2007 WL 678221, *2 n. 3 (9th Cir.2007).

III. Discussion

Our decision is controlled by our recent decision in Progressive West v. Preciado, 479 F.3d 1014, 2007 WL 725717, at *1 (9th Cir.2007), published just before oral argument in this case. Assuming arguendo that a defendant's counterclaim could serve as a basis for a CAFA-based removal by the plaintiff, we held in Preciado that an amendment to a cross-complaint in California state court (a counterclaim in federal court) does not commence an action under CAFA as of the date of the amendment. 2007 WL 725717, at *3. (We also held, contrary to our arguendo assumption, that CAFA does not depart from the normal rule under 28 U.S.C. § 1446 that a counterclaim does not provide a basis for removal. Id. at *3-4.)

In Preciado, we followed our previous decision in Bush v. Cheaptickets, Inc., 425 F.3d 683 (9th Cir.2005), which requires that we look to state law to determine when an action has been commenced under CAFA. See also Braud v. Transp. Servs. Co., 445 F.3d 801, 803 (5th Cir.2006) (citing Bush for proposition that "when a lawsuit is initially `commenced' for purposes of CAFA is determined by state law"). We wrote, "Although CAFA does not define the term `commenced,' we have held that an action commences for purposes of CAFA when a suit becomes `a cognizable legal action in state court' under `[a] state's own laws and rules of procedure.'" 2007 WL 725717, at *2 (quoting Bush, 425 F.3d at 686).

We looked to California state law in Preciado. We noted that California courts have employed the relation back doctrine for only two purposes—for the purpose of applying the statute of limitations, and for the purpose of applying timeliness rules for serving process. Preciado, 2007 WL 725717, at *2-3. So far as we were able to determine, the relation back doctrine has never been used in California for the purpose of determining a statute's effective date. We therefore held that for the purpose of determining CAFA's effective date, an action is commenced under California law when the original complaint in the action is filed, irrespective of any relation back analysis. Id. at *2 (citing Cal.Civ. Proc.Code § 350 (West 2006) ("An action is commenced, within the meaning of this Title, when the complaint is filed.")).

We take this occasion to provide further explanation of our holding in Preciado, and to apply it to the Doe defendant practice in California.

A. Definition of Commence Under State Law

Much of the discussion in federal courts about the definition of "commence" has involved the operation of Federal Rule of Civil Procedure 3. Rule 3 provides that "a civil action is commenced by filing a complaint" with the federal district court. The Supreme Court has looked to the federal definition of commence in Rule 3 for the purpose of tolling the statute of limitations in an action based on federal law. West v. Conrail, 481 U.S. 35, 107 S.Ct. 1538, 95 L.Ed.2d 32 (1987). However, the Court has looked to the state law definition of commence for that purpose in an action based on state law. Walker v. Armco Steel Corp., 446 U.S. 740, 100 S.Ct. 1978, 64 L.Ed.2d 659 (1980). Class actions removable under CAFA are diversity suits based on state law. Thus, in Bush we were following the lead of the Court in Walker and West v. Conrail when we held that we must look to the definition of commence to determine the meaning of that term in CAFA. See Bush, 425 F.3d at 686.

Because McAtee's suit was filed in California state court, we look to California law to determine whether her action was commenced before the effective date of CAFA. All of the federal courts of appeals that have so far addressed the question of when an action is commenced under CAFA have relied at least in part on state-law relation back doctrine. Prime Care of Ne. Kan. v. Humana Ins. Co., 447 F.3d 1284, 1289 (10th Cir.2006) (holding that "the effect of post-CAFA amendments should be a function of whether they relate back to the pre-CAFA filing"); Plubell v. Merck & Co., 434 F.3d 1070, 1071 (8th Cir.2006) (stating that when complaint was amended to replace class representative "[t]he issue becomes whether the amendment relates back or is instead a new action"); Knudsen v. Liberty Mut. Ins. Co., 435 F.3d 755, 757 (7th Cir.2006) (holding that amending a complaint to add new claims commenced new litigation for purposes of CAFA and employing relation back principles); see also Braud v. Trans. Serv. Co., 445 F.3d 801, 806 (5th Cir.2006) (noting that "the same result" that addition of a new defen...