Friday, July 16, 2021

FYI: 8th Cir Reverses Trial Court's Remand Order Under CAFA's "Local-Controversy" Exception

The U.S. Court of Appeals for the Eighth Circuit recently reversed a trial court's decision to remand a removed action to state court under the local-controversy exception to the federal Class Action Fairness Act of 2005 (CAFA).

 

In so ruling, the Eighth Circuit concluded that CAFA's local-controversy exception did not require remand in this case because the plaintiff landowners failed to show that the conduct of the only Missouri-citizen defendant, and thus the only possible local defendant for the purposes of the exception, formed a significant basis for the claims asserted in the complaint.

 

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

 

A group of landowners filed a putative class action complaint in Missouri state court against the companies that owned and/or operated a landfill that were allegedly responsible for the contamination of the landowners' property, which the landowners claimed occurred due to the defendants' allegedly improper acceptance and handling of radioactive waste at the landfill. Only one defendant was a citizen of Missouri at the time the landowners filed their complaint.

 

The defendants removed the action to federal court. As grounds for removal, the defendants claimed that federal-question jurisdiction existed under the Price Anderson Act (PAA), 42 U.S.C. § 2011 et seq., as well as the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. § 9601 et seq., and they asserted that diversity jurisdiction existed under CAFA, 28 U.S.C. § 1332(d)(2).

 

The landowners moved to remand, arguing that their complaint did not trigger federal-question jurisdiction under either the PAA or CERCLA and that the trial court had to "decline to exercise [CAFA] jurisdiction" because CAFA's local-controversy exception applied. See 28 U.S.C. § 1332(d)(4). The trial court agreed, concluding that federal-question jurisdiction did not exist and that the local-controversy exception applied, and granted the landowners' motion to remand.

 

On appeal, the defendants challenged the trial court's application of the CAFA local-controversy exception.

 

The Eighth Circuit first addressed the landowners' claim that it lacked jurisdiction over the appeal. The Court first noted that in Jacks v. Meridian Resource Co., it held that a remand order is both " final and appealable as a collateral order under [28 U.S.C. § 1291]" insofar as it was based on the trial court's determination that the local-controversy exception applied. 701 F.3d 1224, 1229 (8th Cir. 2012).

 

Therefore, the Court concluded that Jacks provided that it had jurisdiction under § 1291 over the appeal in this matter. The Court also determined that, even though it had previously denied the defendants permission to appeal under 28 U.S.C. § 1453(c), Jacks allowed it to address their separately filed § 1291 appeal.

 

Therefore, the Eighth Circuit moved to address the merits of the defendants' appeal. The sole issue on appeal was whether CAFA's local-controversy exception required remand in this case.

 

as you may recall, CAFA gives federal district courts subject-matter jurisdiction over class actions where the parties are minimally diverse (meaning any class member and any defendant are citizens of different states), all proposed plaintiff classes include at least 100 members in total, and the amount in controversy exceeds $5,000,000. See Westerfeld v. Indep. Processing, LLC, 621 F.3d 819, 822 (8th Cir. 2010) (citing 28 U.S.C. 1332(d)).

 

Under CAFA's local-controversy exception, however, a federal district court "shall decline to exercise jurisdiction":

 

(i) over a class action in which:  (I) greater than two-thirds of the members of all proposed plaintiff classes in the aggregate are citizens of the State in which the action was originally filed;  (II) at least 1 defendant is a defendant:  (aa) from whom significant relief is sought by members of the plaintiff class; (bb) whose alleged conduct forms a significant basis for

the claims asserted by the proposed plaintiff class; and (cc) who is a citizen of the State in which the action was originally filed; and  (III) principal injuries resulting from the alleged conduct or any related conduct of each defendant were incurred in the State in which the action was originally filed; and

(ii) during the 3-year period preceding the filing of that class action, no other class action has been filed asserting the same or similar factual allegations against any of the defendants on behalf of the same or other persons . . . .

 

28 U.S.C. § 1332(d)(4)(A).

 

Although the exception is an abstention doctrine rather than a jurisdictional rule, Graphic Comm's Local 1B Health & Welfare Fund A v. CVS Caremark Corp., 636 F.3d 971, 973 (8th Cir. 2011), it is mandatory, Westerfeld, 621 F.3d at 822. The party seeking remand on this basis has the burden to establish that the exception applies. Westerfeld, 621 F.3d at 822.

 

Under the significant-basis requirement, the Eighth Circuit decided that the party seeking remand must show that the local defendant's "alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class." § 1332(d)(4)(A)(i)(II)(bb). The Eighth Circuit observed that in Westerfeld, it adopted the Third Circuit's comparative approach to analyzing this issue. 621 F.3d at 825 (following Kaufman v. Allstate N.J. Ins., 561 F.3d 144 (3d Cir. 2009)).

 

Thus, the Court determined that deciding whether the significant-basis requirement is met requires a substantive analysis comparing the local defendant's alleged conduct to the alleged conduct of all the defendants.  Kaufman 561 F.3d at 156. Given the plain meaning of "significant," the Court held that the comparative approach requires that the party seeking remand show that the local defendant's conduct is "an important ground for the asserted claims in view of the alleged conduct of all the defendants."  Id. at 157.

 

The Eighth Circuit observed that in Atwood v. Peterson, it found that a complaint that did "not allege any substantive distinctions between the conduct" of the local and nonlocal defendants failed to indicate whether the local defendants' alleged conduct is "an important ground for the asserted claims in view of the alleged conduct of all the Defendants."  936 F.3d 835, 840 (8th Cir. 2019) (quoting Westerfeld, 621 F.3d at 825).

 

Here, the Eighth Circuit held that the allegations in the complaint did not satisfy the significant-basis requirement because nothing in the complaint distinguished the conduct of the local Missouri defendant from the conduct of the other defendants. Opelousas Gen. Hosp. Auth. v. FairPay Sols., Inc., 655 F.3d 358, 362 (5th Cir. 2011). The Court concluded that such collective allegations left doubt about the comparative significance of the local defendant's conduct, preventing remand under the local-controversy exception. See Westerfeld, 621 F.3d at 823.

 

Lastly, the landowners asked the Eighth Circuit to take judicial notice of the EPA's 2018 Amended Record of Decision concerning the landfill at issue and a 1993 Consent Order referred to in that document. They argued that these materials, showing that the EPA deemed the local defendant (along with three other entities) a "potentially responsible party" (PRP) for cleaning up the landfill under CERCLA, demonstrated that the local defendant's conduct met the significant-basis requirement. See Atwood, 936 F.3d at 840.

 

However, the Eighth Circuit observed that the 2018 Amended Record of Decision only indicated that the local defendant was designated a PRP; it did not explain why. In light of the fact that even an "innocent" party can be designated a PRP, Solutia, Inc. v. McWane, Inc., 726 F. Supp. 2d 1316, 1331 (N.D. Ala. 2010), the Court held that this designation without more did not demonstrate beyond doubt that the local defendant's conduct formed a significant basis for the landowners' claims. See Westerfeld, 621 F.3d at 823.

 

Furthermore, the Eighth Circuit noted that the 1993 Consent Order only deemed the local defendant a PRP because it was the "current owner" of the landfill. Therefore, the Court determined that the reason for the local defendant's designation as a PRP left open the possibility, particularly when contrasted with the reasons provided for the other entities' designations as PRPs, that the EPA deemed the local defendant a PRP even though its conduct was not "significant" for purposes of the local-controversy exception.

 

Thus, the Court held that the 1993 Consent Order also did not demonstrate, and again certainly not beyond doubt, that the local defendant's conduct formed a significant basis for the landowners' claims. See Westerfeld, 621 F.3d at 823.

 

Accordingly, the Eighth Circuit reversed the trial court's order remanding this action back to state court, and the Court remanded the case back to the trial court for further proceedings.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

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Monday, July 12, 2021

FYI: IL Sup Ct Vacates Foreclosure Judgment Due to Service in Cook County by Non-Appointed Process Server

The Supreme Court of Illinois recently reversed a trial court order in a case filed outside of Cook County denying a Cook County borrower's petition challenging a foreclosure judgment as void for lack of jurisdiction, finding that a licensed or registered private detective may not serve process in counties with a population of 2,000,000 or more – such as Cook County -- without special appointment under 735 ILCS 5/2-202.

 

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

 

A mortgagee filed a foreclosure action against a borrower in Kankakee County.  The mortgagee served the borrower in Cook County without moving to appoint a process server.  The borrower did not appear, the trial court found that it had personal jurisdiction over the borrower and entered a judgment of foreclosure and sale. The mortgagee was the successful bidder at the foreclosure sale and moved to confirm the sale.

 

The borrower appeared at the sale confirmation hearing and argued "that he had not been aware of the sale." Despite this, the trial court confirmed the sale. 

 

The borrower then filed a petition to vacate the foreclosure judgment for lack of personal jurisdiction arguing "that under section 2-202 of the [Illinois Code of Civil Procedure], a private process server cannot serve process on a defendant in Cook County without first being appointed by the circuit court." 

 

The trial court denied the borrower's petition and the appellate court affirmed.  This appeal to the Illinois Supreme Court followed.

 

The Illinois Supreme Court observed that the issue on appeal turned "on the proper construction of section 2-202."  The relevant portion of Section 2-202 of the Code states, in pertinent part:

 

"Persons authorized to serve process; Place of service; Failure to make return. (a) Process shall be served by a sheriff, or if the sheriff is disqualified, by a coroner of some county of the State. In matters where the county or State is an interested party, process may be served by a special investigator appointed by the State's Attorney of the county ***. A sheriff of a county with a population of less than 2,000,000 may employ civilian personnel to serve process. In counties with a population of less than 2,000,000, process may be served, without special appointment, by a person who is licensed or registered as a private detective under the Private Detective, Private Alarm, Private Security, Fingerprint Vendor, and Locksmith Act of 2004 ***. *** * * * (b) Summons may be served upon the defendants wherever they may be found in the State, by any person authorized to serve process. An officer may serve summons in his or her official capacity outside his or her county, but fees for mileage outside the county of the officer cannot be taxed as costs. The person serving the process in a foreign county may make return by mail."

 

735 ILCS 5/2-202(a), (b).

 

The mortgagee argued that service on the borrower was proper because when you read the two subsections together, the correct interpretation is that the county where the lawsuit is filed, not the county where service occurs, controls the authority of the process server.  Thus, the restriction in subsection (a) that only allows service of process in Cook County by a court appointed private detective should not apply. 

 

The Illinois Supreme Court rejected the mortgagee's interpretation because section 2-202 does not address where a complaint is filed. Instead, the plain language of the section concerns where a defendant is served with process. 

 

Subsection (a) provides that in all counties except Cook County (which has more than two million residents), "process may be served, without special appointment, by a person who is licensed or registered as a private detective."  Thus, according to the Illinois Supreme Court, it follows that to serve a defendant using a private detective in Cook County, the court must appoint a private process server.

 

Here, because the mortgagee did not obtain an order appointing a process server to serve the borrower in Cook County, the service by the private detective on the borrower was not "by any person authorized to serve process" as required by subsection (b) and the service on the borrower was not proper.

 

The Illinois Supreme Court acknowledged that it may be inconvenient to require the trial court to appoint a special process server to serve a defendant in Cook County, but "where the language of a statute is clear, this court is not free to read into it exceptions that our legislature did not express and must give it effect as written." 

 

Thus, because the mortgagee's private detective served the borrower in Cook County without the required order specifically appointing the private process server, the service of process was defective and the trial court lacked personal jurisdiction over the borrower.

 

The mortgagee also argued that the trial court had jurisdiction over the borrower because he voluntarily appeared and submitted himself to the trial court's jurisdiction at the motion to confirm sale hearing.  However, this only waived the borrower's objection to the trial court's jurisdiction prospectively.  This "appearance did not retroactively validate void" prior orders and the trial court still lacked jurisdiction to enter the foreclosure judgment.

 

Thus, the Illinois Supreme Court reversed and remanded the matter to the trial court for proceedings consistent with its decision.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

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