FYI: 8th Cir Holds No Presumption Against Removal in CAFA Cases, Declaration Supporting Removal Improperly Ignored

The U.S. Court of Appeals for the Eighth Circuit recently vacated a trial court's order remanding a defendant's removal to federal court of a putative class action under the federal Class Action Fairness Act (CAFA).

 

In so ruling, the Eighth Circuit held that CAFA did not contain a presumption that class action cases should be remanded to state court, and the trial court failed to properly consider a declaration provided by the defendant in support of the request for removal under CAFA.

 

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

 

Plaintiff purchased a computer from the defendant. Plaintiff alleged that he was unable to view the laptop's warranty prior to his purchase.

 

Plaintiff filed a putative class action lawsuit in state court on behalf of himself and all citizens of Arkansas who purchased products from the defendant at a price over $15 that included written warranties. Plaintiff's complaint alleged that the defendant violated the Magnuson-Moss Warranty Act because the product's written warranties were not reasonably available or in close proximity to the products, and there were no signs nearby informing customers that they could access the warranties upon request. Notably, Plaintiff's complaint only sought injunctive and declaratory relief, and did not seek monetary damages.

 

Defendant filed a notice of removal to federal court based on CAFA. The notice of removal alleged that the plaintiff's proposed class contained more than one hundred (100) members and over $5 million dollars in controversy. Plaintiff moved to remand the case back to state court and argued that amount in controversy did not exceed $5 million dollars.

 

Defendant submitted multiple declarations in support of its request for removal. The first 2 declarations indicated that the defendant had laptop sales amounting to over $1.58 million dollars over the last 5 years and electronic sales over $5 million dollars over the same time period in Arkansas. The defendant also submitted a declaration from a compliance consultant that defendant would incur at least $7.5 million dollars in costs such as adding extra warranty signage, conducting additional training, and adding in-store warranty systems.

 

The trial court ignored the declaration of the compliance consultant, and remanded the case back to state court. Defendant appealed.

 

Generally, federal appellate courts do not review trial court remand orders but CAFA allows a federal appellate court to accept an appeal of a removal order involving an action subject to CAFA when a party timely files a notice of appeal. In this case the defendant timely appealed, and the Eighth Circuit decided that the case presented important and potentially recurring issues. The Eighth Circuit therefore granted the defendant's request for an appeal.

 

On appeal, the Eighth Circuit first determined whether jurisdiction was proper. A federal court has jurisdiction over class action complaints when at least one plaintiff and one defendant are citizens of different states, the amount in controversy is higher than $5 million dollars, and the proposed class of members is more than one hundred (100). If a class action meets all three requirements, a federal court can exercise jurisdiction. The Eighth Circuit determined that is had jurisdiction over this appeal.

 

When seeking to remove a case, the removing party, bears the burden of showing by a preponderance of the evidence that the case meets each one of the requirements. On appeal, the appellate court reviews the trial court's CAFA remand order de novo.

 

Initially, the Eighth Circuit determined that the trial court did not apply the correct legal standard. Although the trial court was correct that there is a general presumption that favors remand, this presumption did not apply because the CAFA and prior Eighth Circuit precedent is clear that there is no anti-removal presumption in class action cases. See Dart Cherokee Basin Operating Co. v. Owens, 574 U.S. 81, at 89 (2014). 

 

Accordingly, the removing party in a CAFA removal must prove by a preponderance of evidence that the value of the case exceeds $5 million dollars. In examining whether the removing party met its burden, the court must examine the notice of removal to determine that it plausibly alleges that the case might be worth more than $5 million. Here, the defendant's notice of removal and supporting evidence plausibly plead that the case might be worth more than $ 5 million dollars.

 

However, the inquiry does not end there.  The trial court must next determine if a finder of fact might legally conclude that the value of the case is more than $5 million dollars.

 

In the trial court, the defendant submitted numerous declarations in support of its request for removal. In its remand ruling, the trial court considered some declarations but did not consider others, specifically the affidavit of the compliance consultant. The Eighth Circuit noted that the trial court should have considered the affidavit of the compliance consultant who attested that the defendant's costs may exceed $7.5 million dollars.

 

Because the trial court's remand order did not apply the correct legal standard and did not adequately consider the declaration in support of removal, the trial court's order was vacated and remanded for further consideration consistent with the Eighth Circuit's opinion.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6^th 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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FYI: Cal Sup Ct Holds TCPA Claims May Be Covered By CGL Policy Provision for Violation of "Right to Privacy"

The California Supreme Court recently answered a certified question from the U.S. Court of Appeals for the Ninth Circuit, holding that a commercial general liability ("CGL") insurance policy that provides coverage for "injury ... arising out of ... [o]ral or written publication, in any manner, of material that violates a person's right of privacy" can cover liability for intrusion on the right of seclusion arising from violations of the federal Telephone Consumer Protection Act (TCPA) if such coverage is consistent with the insured's objectively reasonable expectations.

 

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

 

An insurer refused to defend and indemnify a media and tech company against five class action lawsuits alleging the company violated provisions of the TCPA by sending unsolicited spam "robotext" messages. The company settled some of the claims and sought to recover defense costs from the insurer under a CGL policy.

 

The policy at issue here provided liability coverage for injuries "arising out of . . . [o]ral or written publication, in any manner, of material that violates a person's right of privacy." The parties also had negotiated an endorsement removing an exclusion for claims arising under the TCPA.

 

The company argued that its policy, as modified by the endorsement, gave rise to the potential for coverage of the TCPA claims alleged against it in the class action lawsuits, and therefore the insurer was obligated to defend the company in those suits, and it breached its contract by declining to do so.

 

A federal trial court rejected the company's argument and granted the insurer's motion to dismiss, concluding that the TCPA lawsuits did not fall within the policy's coverage provision because they did not allege an injury arising out of the "publication... of material that violates a person's right of privacy."

 

The company appealed, and the U.S. Court of Appeals for the Ninth Circuit certified a question of state law to the California Supreme Court, which granted the Ninth Circuit's request and rephrased its question. See Cal. Rules of Court, rule 8.548(f)(5).

 

As rephrased, the California Supreme Court addressed the following question: "Does a commercial general liability insurance policy that provides coverage for 'personal injury,' defined as 'injury . . . arising out of . . . [o]ral or written publication, in any manner, of material that violates a person's right of privacy,' and that has been modified by endorsement with regard to advertising injuries, trigger the insurer's duty to defend the insured against a claim that the insured violated the [TCPA] by sending unsolicited text message advertisements that did not reveal any private information?"

 

The California Supreme Court began by noting that the law of privacy recognizes, among other things, a right to secrecy and a right to seclusion. Furthermore, the Court explained that privacy injuries that involve the right of seclusion are sometimes actionable under the TCPA, provided the violation involves the use of telephonic equipment. Specifically, the TCPA protects the seclusion interests of telephone users by placing restrictions on automated telephone calls ("robocalls") and unsolicited facsimile machine advertisements ("junk faxes"). See § 227; Duguid v. Facebook, Inc. (9th Cir. 2019) 926 F.3d 1146, 1149. Additionally, the Court pointed out that the TCPA's prohibitions have also been interpreted to apply to text messages. Duguid, supra, 926 F.3d at p. 1149; Satterfield v. Simon & Schuster, Inc. (9th Cir. 2009) 569 F.3d 946, 954.

 

In this vein, the parties here stipulated that the TCPA creates a statutory cause of action to redress telephonic intrusions that can violate the common law right of seclusion, and the parties also agreed that the TCPA is not concerned with disclosures that violate the common law right of secrecy. See Los Angeles Lakers, Inc. v. Federal Ins. Co. (9th Cir. 2017) 869 F.3d 795, 806.

 

Upon a de novo review of the relevant CGL policy, the California Supreme Court found it unclear whether the restrictive clause "that violates a person's right of privacy" modified a group of words or just a single word. Specifically, it was ambiguous whether the clause modified the entire phrase "[o]ral or written publication, in any manner, of material" or whether it modified only the word "material."

 

Using the standard rules of contract interpretation, the California Supreme Court reasoned that the addition of the word "material" immediately before the restrictive clause "that violates a person's right of privacy" arguably suggested that something about the content of the material itself, viewed in isolation, must violate a person's right of privacy. Thus, since content is irrelevant to right-of-seclusion violations, the inclusion of the word "material" implied that the policy did not cover right-of-seclusion liability.

 

However, the California Supreme Court observed that other aspects of the insurer's policy suggested that, in the policy's coverage provision, the restrictive clause "that violates a person's right of privacy" modified the entire phrase "[o]ral or written publication, in any manner, of material," thus creating coverage for any publication-based right-of-privacy violation, including right-of-seclusion violations.

 

Accordingly, the California Supreme Court answered the Ninth Circuit's question by holding that the coverage provision was ambiguous and that the standard rules of contract interpretation do not resolve the ambiguity.

 

Where, as here, the standard rules of contract interpretation do not resolve an ambiguity in the operative language of an insurance policy, the Supreme Court determined that it should  "interpret [that language] to protect '"the objectively reasonable expectations of the insured." ' " Boghos v. Certain Underwriters at Lloyd's of London, supra, 36 Cal.4th at p. 501. However, the Court concluded that the company's  reasonable expectations must be determined in further litigation.

 

Finally, if the foregoing procedures did not resolve the ambiguity at the trial court level, then the California Supreme Court pointed to the rule that ambiguities are to be resolved against the drafter, and here the insurer was considered to be the drafter of the specific coverage language whose meaning was in dispute.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6^th 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

 

 

 

Alabama   |   California   |   Florida   |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Tennessee   |   Texas   |   Washington, DC

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.

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and

 

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and

 

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