Rhodes v. Kroger Co., 4:16CV00640 JLH
| Decision Date | 09 February 2017 |
| Docket Number | No. 4:16CV00640 JLH,4:16CV00640 JLH |
| Parties | KYLE RHODES, individually and as plaintiff class representative; WESLEY ATWOOD, individually and as plaintiff class representative; and SAMANTHA HUDON, individually and as plaintiff class representative PLAINTIFFS v. KROGER CO. DEFENDANT |
| Court | U.S. District Court — Eastern District of Arkansas |
Kyle Rhodes, Wesley Atwood, and Samantha Hudon commenced this putative class action in the Circuit Court of Pulaski County, Arkansas, against Kroger Co. and two of its Arkansas district managers, Andrea Tyson and Patrick Scherrey, challenging the legality of portions of Kroger's discount program. Kroger offers discounts to customers who apply for and use a Kroger Plus Card, and one day a week Kroger offers Kroger Card customers over age 55 an additional discount of five percent. The plaintiffs contend that Kroger's actions violate Ark. Code Ann. § 4-75-501(a)(2), which makes it unlawful for any person or corporation willfully to fail to grant any purchaser of a manufactured product a discount that is granted to other purchasers of like quantities. As a remedy, the plaintiffs seek between $200 and $1,000 for each purchase, which represents the civil penalty provided in Ark. Code Ann. § 4-75-501(b)(1).
Kroger first removed this action on June 1, 2015, asserting subject-matter jurisdiction based on traditional diversity pursuant to 28 U.S.C. § 1332(a) and based on the Class Action Fairness Act (CAFA) pursuant to 28 U.S.C. § 1332(d)(2). The plaintiffs filed a motion to remand and this Court remanded the action to the Circuit Court of Pulaski County, holding that Arkansas citizens Tyson and Scherrey were not fraudulently joined and thus traditional diversity was not a basis for federal jurisdiction, and that CAFA's local controversy exception applied and mandated remand. Rhodes v. Kroger Co., 4:15CV312 JLH, 2015 WL 5006070 (E.D. Ark. Aug. 24, 2015). The local controversy exception applied because the alleged conduct of Tyson and Scherrey formed a significant basis for the class claims and Tyson and Scherrey were defendants from whom significant relief was sought. Kroger petitioned the Eighth Circuit for permission to appeal the remand order pursuant to 28 U.S.C. § 1453(c). The Eighth Circuit entered an order granting permission to appeal but later withdrew the order, saying that it had been improvidently granted. Kroger then requested this Court to reconsider the remand order, but this Court declined.
Upon remand, the plaintiffs and Kroger briefed and argued a motion to dismiss filed on behalf of all of the defendants. The state court denied the motion as to Kroger but held sua sponte that the complaint failed to state a claim against Tyson and Scherrey because they were not engaged in the sale of any manufactured product as is required for conduct to be unlawful under Ark. Code Ann. § 4-75-501(a). After Tyson and Scherrey were dismissed, Kroger removed this action a second time on September 2, 2016.1 Kroger asserts that because the dismissal of local defendants Tyson and Scherrey rendered the local controversy exception inapplicable, the case is now removable pursuant to CAFA. Document #1. The plaintiffs have filed a motion to remand. For the following reasons, the motion to remand is granted.
II.
The threshold issue is whether the second removal is timely. A removal must comply with the procedural requirements set forth by Congress in 28 U.S.C. § 1446. Section 1446(b)(1) provides:
The notice of removal of a civil action or proceeding shall be filed within 30 days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based, or within 30 days after the service of summons upon the defendant if such initial pleading has then been filed in court and is not required to be served on the defendant, whichever period is shorter.
Kroger received a copy of the complaint on May 1, 2015, which triggered the original 30-day period for removal. Document #1 at 162. That original 30-day period has clearly expired. However, section 1446(b)(3) provides:
[I]f the case stated by the initial pleading is not removable, a notice of removal may be filed within 30 days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable.
Kroger received a copy of the order dismissing Tyson and Scherrey from the action on August 29, 2016. Kroger argues that it was first able to ascertain that the action had become removable upon receipt of the order, so the dismissal of Tyson and Scherrey triggered a new 30-day period for removal.
In order for section 1446(b)(3) to apply and to allow for timely removal, the action as stated in the initial complaint must not have been removable. The statutes do not define "removable." The question here is: If the facts alleged in the initial complaint gave this Court original jurisdiction, was the action "removable" as that term is used in the statute even if the local controversy exceptionmandated remand?2
The right to remove an action from state to federal court is derived from 28 U.S.C. § 1441(a), which provides:
Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant . . . .
The two well-established sources of original jurisdiction are federal question jurisdiction and traditional diversity jurisdiction. 28 U.S.C. §§ 1331-32. With the enactment of CAFA, Congress has expanded diversity jurisdiction with respect to certain class actions. 28 U.S.C. § 1332(d). CAFA provides that district courts have original jurisdiction over class actions in which the amount in controversy exceeds $5,000,000 and there is minimal diversity of citizenship. 28 U.S.C. § 1332(d)(2). A district court, however, "shall decline to exercise jurisdiction" over certain local controversies. 28 U.S.C. § 1332(d)(4). Here, it is undisputed that the jurisdictional requirements of section 1332(d)(2) were met from the commencement of the case in state court.
Kroger contends that even though the Court had original jurisdiction pursuant to CAFA, the action was not initially removable because a case cannot be considered removable if the court is required to remand it. According to Kroger, this action was not originally removable under CAFA because the local controversy exception applied; rather, it became removable when the local defendants were dismissed.
Even though the local controversy exception mandated remand, this Court had original jurisdiction under CAFA when the case was initially removed. See Jacks v. Meridian Res. Co., LLC,701 F.3d 1224, 1229 (8th Cir. 2012) (); Graphic Commc'ns Local1B Health &Welfare Fund A v. CVS Caremark Grp., 636 F.3d 971, 973 (8th Cir. 2011) (); see also Mason v. Lockwood, Andrews & Newman, P.C., 842 F.3d 383, 394 (6th Cir. 2016) ( ); Dutcher v. Matheson, 840 F.3d 1183, 1190 (10th Cir. 2016); Gold v. New York Life Ins. Co., 730 F.3d 137, 141-42 (2d Cir. 2013); Hollinger v. Home State Mut. Ins. Co., 654 F.3d 564, 570 (5th Cir. 2011).
In considering whether this action was originally removable even though remand was required, the distinction between a lack of jurisdiction and a directive from Congress to abstain from exercising jurisdiction is significant. A defendant who removes an action to a federal district court has the burden to show that the district court has subject-matter jurisdiction, whereas a plaintiff has the burden to prove that the local controversy exception applies. See Westerfield v. Indep. Proc., LLC, 621 F.3d 819, 822-23 (8th Cir. 2010). Statutorily, the local controversy exception "is not part of the initial jurisdictional calculus," which means that the local controversy exception comes into play only if the court has original jurisdiction. Mason, 842 F.3d at 389. "Congress's use of 'decline' [in 28 U.S.C. § 1332(d)(4) is important. It necessarily implies a prior determination ofjurisdiction, since 'a court could not 'decline' jurisdiction that it never had in the first place.'" Id. (quoting Clark v. Lender Proc. Servs., 562 Fed. Appx. 460, 465 (6th Cir. 2014)).
Even when the parties do not raise the issue, courts have an independent obligation to determine whether they have been vested with original jurisdiction over a matter. Arbaugh v. Y&H Corp., 546 U.S. 500, 514, 126 S. Ct. 1235, 1244, 163 L. Ed. 1097 (2006). Courts have no corresponding independent obligation to satisfy themselves that the local controversy exception does not apply. Kroger argues in a supplemental brief filed that courts may raise the local controversy exception sua sponte and, therefore, a matter in which the local controversy exception applies is not removable, relying primarily on Bey v. Solarworld Indus. Am., Inc., 904 F. Supp. 2d 1103 (D. Or. 2012). In Bey, the court, acting sua sponte, ordered the parties to show cause why the local controversy and home state exceptions...
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