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White Knight Diner, LLC v. Arbitration Forums, Inc.

United States District Court, E.D. Missouri, Eastern Division

January 12, 2018

WHITE KNIGHT DINER, LLC, et al., Plaintiffs,
ARBITRATION FORUMS, INC., et al., Defendants.



         This putative class action is brought on behalf of various Missouri insureds, for damages incurred as a result of the alleged misconduct of their respective insurance companies, and the insurance companies for unnamed third-party tortfeasors, in connection with an arbitration services company. Plaintiffs seek relief in the form of declaratory judgment, permanent injunctive relief, and unjust enrichment, as well as compensatory and punitive damages. The action was originally filed on July 27, 2017 in the Circuit Court of St. Louis County, Missouri (Doc. No. 5). Plaintiffs named as Defendants Arbitration Forums, Inc. (“Arbitration Forums”), State Farm Mutual Automobile Insurance Company and State Farm Fire and Casualty Company (collectively “State Farm”), Owners Insurance Company (“Owners”), Safeco Insurance Company (“Safeco”), Zurich Insurance Company (“Zurich”)[1], Acuity Insurance Company (“Acuity”), and AAA Insurance Company (“AAA”). On September 5, 2017, Plaintiffs amended their petition by interlineation to change the name Safeco Insurance Company to Safeco Insurance Company of Illinois, and the name AAA Insurance Company to Automobile Club Inter-Insurance Exchange (Doc. No. 6).

         State Farm timely removed the action to this Court on September 14, 2017 under the Class Action Fairness Act (“CAFA”), 28 U.S.C. 1332(d). (Doc. No. 1.) On September 15, 2017, Acuity and Owners removed the identical state court case on the basis of complete diversity and CAFA, resulting in a separate case being opened, Case No. 4:17-CV-02416 RLW. The Court subsequently consolidated the cases and directed that all future filings be made in Case No. 4:17-CV-02406 JAR (Doc. No. 50).

         Acuity moved to dismiss the case on September 15, 2017 (Doc. No. 12), as did State Farm on September 19, 2017 (Doc. No. 19), Owners on September 21, 2017 (Doc. No. 21), and Arbitration Forums on October 6, 2017 (Doc. No. 28). Plaintiffs did not respond to Defendants' motions to dismiss[2], or request additional time to respond pursuant to Fed.R.Civ.P. 6(b)(1). Instead, on October 11, 2017, well after the deadlines for responding had passed, Plaintiffs moved to remand on the grounds that their action comes under the “local controversy” exception to CAFA, thus defeating federal jurisdiction (Doc. No. 34). Plaintiffs then moved to stay the Court's ruling on the pending motions to dismiss (as well as any later filed motions to dismiss[3]) until such time as a decision is rendered on their motion for remand (Doc. No. 32). Defendants oppose Plaintiffs' motion to remand on the grounds that Plaintiffs have failed to meet their burden to establish the applicability of any exception to CAFA removal. (Doc. Nos. 43, 46, 47, 48.)

         On October 18, 2017, the Court ordered Plaintiffs to respond to Defendants' opposition to their request for a stay by October 23, 2017. (Doc. No. 50.) On October 23, 2017, Plaintiffs responded that “judicial economy would best be served by granting the stay so that this Court can first consider the jurisdictional issues raised by the removal and remand pleadings.” (Doc. No. 55.) Also on October 23, 2017, Plaintiffs moved for leave to amend their complaint to “set[] forth the nature of their claim with more particularity” pursuant to the pleading requirements of the Federal Rules of Civil Procedure. (Doc. Nos. 53, 54.) No proposed amended pleading was submitted with the motion for leave to amend.

         The Court addresses Plaintiffs' motion to remand first, because it must determine whether subject matter jurisdiction exists in this case.

         Legal standard

         Federal courts are courts of limited jurisdiction. Ark. Blue Cross & Blue Shield v. Little Rock Cardiology Clinic, P.A., 551 F.3d 812, 816 (8th Cir. 2009). A federal district court may exercise removal jurisdiction only where the court would have had original subject-matter jurisdiction had the action initially been filed there. Krispin v. May Dep't Stores Co., 218 F.3d 919, 922 (8th Cir. 2000) (citing 28 U.S.C. § 1441(b)). A party seeking removal and opposing remand carries the burden of establishing federal subject-matter jurisdiction by a preponderance of the evidence. In re Prempro Prods. Liab. Litig., 591 F.3d 613, 620 (8th Cir. 2010). When removal jurisdiction is premised upon CAFA, after the removing party demonstrates CAFA's subject-matter jurisdictional requirements, “the burden shifts to the party seeking remand to establish that one of CAFA's express jurisdictional exceptions applies.” Westerfeld v. Indep. Processing, LLC, 621 F.3d 819, 822 (8th Cir. 2010).

         Generally, a court must resolve all doubts about federal jurisdiction in favor of remand to state court. In re Prempro, 591 F.3d at 620. However, when a party invokes a court's subject-matter jurisdiction under CAFA, a court must give strong preference to the resolution of interstate class actions in federal court. Westerfeld, 621 F.3d at 822 (“CAFA grants broad federal jurisdiction over class actions, ” and it has “‘a strong preference that interstate class actions ... be heard in a federal court.'” (quoting S. Rep. No. 109-14, at 43 (2005))). Stated another way, a court “should resolve any doubt about the applicability of CAFA's ... exception[s] against ... the party who seeks remand and ... bears the burden of establishing that the exception[s] applies.” Id. at 823.


          Plaintiffs do not dispute that the subject-matter jurisdictional requirements of CAFA have been met in this case, but argue that the Court must remand the case pursuant to the local controversy exception to CAFA jurisdiction.

         Under the local controversy exception, a district court must decline jurisdiction over a class action lawsuit in which (1) more than two-thirds (2/3) of the class members in the aggregate are citizens of the state in which the action was originally filed; (2) at least one defendant “from whom significant relief is sought by members of the plaintiff class” and “whose alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class” is a citizen of the state in which the class action was originally filed; (3) the principal injuries were incurred in the state in which the action was filed; and (4) no other class action alleging similar facts was filed in the three (3) years prior to the commencement of the current class action. 28 U.S.C. § 1332(d)(4)(A); City of O'Fallon, Mo. v. CenturyLink, Inc., 930 F.Supp.2d 1035, 1045 (E.D. Mo. 2013).

         Congress created the local controversy exception to CAFA in order to address those removed cases which consist primarily of intrastate disputes. Id. (emphasis in the original) (citations omitted). “This provision is intended to respond to concerns that class actions with truly local focus should not be moved to federal court under this legislation because state courts have a strong interest in adjudicating such disputes. At the same time, this is a narrow exception that was carefully drafted to ensure that it does not become a jurisdictional loophole. Thus, [ ] in assessing whether each of these criteria is satisfied by a particular case, a federal court should bear in mind that the purpose of each of these criteria is to identify a truly local controversy-a controversy that uniquely affects a particular locality to the exclusion of all others.” Id. (quoting Senate Report No. 109-14, at 39 (2005)). The party seeking to invoke the local controversy exception bears the burden of establishing by a preponderance of the evidence that it applies. City of O'Fallon, 930 F.Supp.2d at 1045 (citations omitted).

         Defendants do not dispute that the Plaintiffs satisfied the third requirement - that the principal injuries occurred in Missouri - or the fourth requirement - that no other class action with similar facts has been filed within the three years prior to the present action commencing. The dispositive issues are thus (1) whether two-thirds of the class in the aggregate are Missouri citizens, and (2) whether AAA, the only local defendant, qualifies as a “significant defendant.”

         Two-thirds of the class are Missouri citizens

          Under CAFA, the citizenship of plaintiffs in the class action is to be determined “as of the date of filing of the complaint or amended complaint.” 28 U.S.C. § 1332(d)(7). For the local controversy exception to apply, Plaintiffs must therefore establish by a preponderance of the evidence that more than two-thirds of Plaintiffs' class members were citizens of Missouri as of the date of the operative complaint.

         In their motion to remand, Plaintiffs state that “each named plaintiff and all of the potential putative plaintiff class member[s] were residents of the State of Missouri at the time this action was filed with the exception of the few potential putative plaintiff class members who may have moved from Missouri between the date of their collision and the date of this filing. At the very least, well over ninety percent of the putative plaintiff class members would have been residents of the State of Missouri at the time this action was filed.” (Doc. No. 34 ¶ 7.) However, Plaintiffs' proposed class definition contains no such Missouri-based limitation. Instead, the class consists broadly of all persons who suffered a property damage loss caused by a third party; were insured by one of the Defendant insurance companies; and whose insurer made a subrogation claim ...

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