Wednesday, May 24, 2017

FYI: 8th Cir Holds Removal Proper Where Absence of CAFA Jurisdiction Not "Established to a Legal Certainty"

The U.S. Court of Appeals for the Eighth Circuit recently held that the requirements for the federal Class Action Fairness Act ("CAFA") were met and the matter was properly removed to federal court, where the plaintiffs could not "establish to a legal certainty" that their claims were for less than the requisite amount. 

 

A copy of the opinion is available at:  Link to Opinion

 

The plaintiff insureds ("Insureds") purchased automobile insurance from the insurer ("Insurer"). 

 

The Insureds' policies required deductible payments of $100 for medical expense payments and $200 for economic loss payments.  Both policies provided only the minimum coverage required by Minnesota law: $20,000 for medical expenses, and $20,000 for economic losses.

 

The Insureds both suffered covered losses and incurred more than $20,100 in medical expenses as a result. Because their policies included the $100 deductible for medical expense payments and a maximum coverage of $20,000, each insured received a payment of just $19,900 from the Insurer.

 

The Insureds subsequently filed suit in Minnesota state court alleging that the Insurer's practice of selling policies with deductibles which reduced benefit payments below $20,000 for medical expenses and for economic losses violated Minnesota law.  The Insureds sought to represent a class of all similarly situated individuals.

 

The Insurer timely removed the case to federal court, and the Insurers moved to remand to state court on the ground that CAFA's jurisdictional requirements were not met because the amount in controversy did not exceed $5,000,000. After the trial court denied the motion to remand, the Insurer moved to dismiss the case for failure to state a cause of action, which motion was granted.  The Insureds appealed.

 

On appeal, the Insureds first argued that the trial court should have remanded the case to state court because it lacked jurisdiction because the requirements of CAFA were not met.

 

As you may recall, under CAFA,  federal courts have original jurisdiction over class actions "where, among other things, 1) there is minimal diversity; 2) the proposed class contains at least 100 members; and 3) the amount in controversy is at least $5 million in the aggregate."

 

The Insureds argued that the trial court erred when it determined that the amount in controversy exceeded $5 million because as plaintiffs were "the master of the complaint," and the trial court therefore should have restricted its analysis of the amount in controversy to what could be recovered by the class of individuals identified in the complaint, which was only individuals who had actually made claims for covered losses and were paid less than the statutory minimum.

 

The Insurer stated some six hundred individuals fell within that class.  However, when the trial court calculated the amount in controversy, it relied on premiums collected on all the Insurer's policies which included the challenged deductibles, regardless of whether the policyholders had made claims which led to application of the deductibles.  The Insureds argued this figure was overinclusive.

 

In ruling against the Insureds, the Eighth Circuit first noted that where the party seeking to remove has shown CAFA's jurisdictional minimum by a preponderance of the evidence, "remand is only appropriate if the plaintiff can establish to a legal certainty that the claim is for less than the requisite amount."

 

The Eighth Circuit then held that the Insureds "failed to show that it is legally impossible for them to recover more than $5,000,000. While they put [the Insurer's] sales practices at issue and seek a refund of their premium payments, they have not offered evidence to establish the amount they collectively paid in premiums. Without such information, we cannot determine whether it would be legally impossible for them to recover $5,000,000. We therefore conclude that the district court properly denied the motion for remand."

 

The Eighth Circuit also affirmed the trial court's ruling granting the Insurer's motion to dismiss, finding that the Insured did not allege a violation of the Minnesota No Fault Act. 

 

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
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Chicago, Illinois 60602
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Email: rwutscher@MauriceWutscher.com

 

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