United States Court of Appeals
For the First Circuit
No. 09-1393
IN RE: HANNAFORD BROS. CO. CUSTOMER
DATA SECURITY BREACH LITIGATION,
THOMAS T. GRIMSDALE, III,
Plaintiff, Appellee,
v.
KASH N' KARRY FOOD STORES, INC.
d/b/a SWEETBAY SUPERMARKET AND SWEETBAY LIQUORS,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. D. Brock Hornby, U.S. District Judge]
Before
Lynch, Chief Judge,
Farris* and Boudin, Circuit Judges.
Clifford H. Ruprecht with whom William J. Kayatta, Gavin G.
McCarthy, and Pierce Atwood LLP were on brief for appellant.
David J. Metcalf with whom Christopher T. McRae, McRae &
Metcalf, P.A., Richard L. Coffman, and The Coffman Law Firm were on
brief for appellee.
May 1, 2009
*
Of the Ninth Circuit, sitting by designation.
LYNCH, Chief Judge. This appeal presents an issue of
first impression for this circuit regarding the application of the
home state exception to federal jurisdiction under the Class Action
Fairness Act of 2005 ("CAFA"), Pub. L. No. 109-2, 119 Stat. 4.
Congress enacted CAFA in response to perceived abuses by
plaintiffs' counsel in keeping class action cases of national
importance out of the federal courts. See CAFA § 2(a)(4), 119
Stat. at 5; see also Amoche v. Guarantee Trust Life Ins. Co., 556
F.3d 41, 47-48 (1st Cir. 2009); Johnson v. Advance Am., 549 F.3d
932, 935 (4th Cir. 2008). Defendant's essential argument is that
the plaintiff has drawn his complaint in terms limiting the class
and the defendants in order to defeat federal jurisdiction in
violation of congressional intent. Plaintiff retorts that this
suit fits precisely into an exception to the exercise of federal
jurisdiction set forth explicitly in CAFA.
Here, a class defined to consist entirely of Florida
citizens sued a single corporation, also a Florida citizen, in
Florida state court. After defendant removed to federal court
under CAFA, plaintiff sought remand to the state court under CAFA's
home state exception, which requires a federal court to decline to
exercise jurisdiction if at least two-thirds of the members of all
proposed plaintiff classes in the aggregate and the primary
defendants are citizens of the state where the action was
originally filed. See 28 U.S.C. § 1332(d)(4)(B).
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The district court found that this case fit squarely
within CAFA's home state exception and granted the plaintiff's
motion to remand. See In re Hannaford Bros. Co. Customer Sec.
Breach Litig., 592 F. Supp. 2d 146 (D. Me. 2008). We agree and
reject, on the facts here, the defendant's argument that the
application of CAFA's home state exception depends on a broader
assessment of the claims brought by others who do not fall within
the complaint's class definition or of the claims available to the
class against other possible defendants.
I.
Defendant Kash N' Karry Food Stores, Inc. operates a
chain of grocery stores in Florida. A computer hacker stole the
credit card information of customers who had shopped at Kash N'
Karry's stores between December 2007 and March 2008. Plaintiff
Thomas Grimsdale, III regularly shopped at Kash N' Karry's stores
in Tampa, Florida during this period and paid for his purchases
using his bank debit card.
On April 4, 2008, Grimsdale sued Kash N' Karry in Florida
state court, alleging that Kash N' Karry had failed to adopt
adequate security measures to protect its customers' credit card
information. He sought to represent a class of approximately 1.6
million persons who had "used credit/debit cards at [Kash N'
Karry's] stores between December 7, 2007 and March 10, 2008 and/or
had their personal and sensitive Confidential Information stolen
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and/or compromised as a result of the [security] Breach." The
class definition explicitly excluded "any persons and entities who
are not citizens of the State of Florida."
Kash N' Karry removed the case to federal court in
Florida under CAFA on April 17, 2008. On April 25, 2008, Grimsdale
filed a motion to remand the case to state court, arguing that
CAFA's home state exception applied.
On October 8, 2008, the Judicial Panel on Multidistrict
Litigation transferred the case to the District of Maine, where
twenty-four other suits had been consolidated against entities
related to Kash N' Karry, raising similar allegations of wrongdoing
in the security breach. These related entities were Kash N'
Karry's sister corporation, Hannaford Brothers Co., and their
common corporate parent, Delhaize America, Inc. Combined, the
multidistrict litigation involved an estimated 4.2 million class
members. On December 10, 2008, the district court granted
Grimsdale's motion to remand, finding the requirements of CAFA's
home state exception satisfied. See In re Hannaford Bros., 592 F.
Supp. 2d at 148.
Kash N' Karry timely petitioned for leave to appeal the
district court's remand order under 28 U.S.C. § 1453(c). We
granted Kash N' Karry's petition on March 26, 2009. After
expedited briefing, we heard oral argument in this appeal on April
9, 2009.
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II.
Congress expanded diversity jurisdiction through CAFA to
allow for federal court jurisdiction over class actions satisfying
the statute's amount in controversy and minimal diversity
requirements. See 28 U.S.C. § 1332(d)(2); see also Amoche, 556
F.3d at 47-48. Yet that grant of jurisdiction is subject to
several exceptions. Here, our focus1 is on the home state
exception, which provides:
A district court shall decline to exercise
jurisdiction [where] . . . two-thirds or more
of the members of all proposed plaintiff
classes in the aggregate, and the primary
defendants, are citizens of the State in which
the action was originally filed.
28 U.S.C. § 1332(d)(4)(B).2
1
Although we are required to consider first any questions
of Article III jurisdiction, see Steel Co. v. Citizens for a Better
Env't, 523 U.S. 83, 93-94 (1998), it is clear there is such
jurisdiction over this case. We may bypass questions of statutory
jurisdiction where, as here, there are prudential reasons to do so.
See Restoration Pres. Masonry, Inc. v. Grove Eur. Ltd., 325 F.3d
54, 60 (1st Cir. 2003) ("[A] jurisdictional inquiry is not required
here given that the question invokes statutory jurisdiction."); see
also Parella v. Ret. Bd. of the R.I. Employees' Ret. Sys., 173 F.3d
46, 53-54 (1st Cir. 1999). Here, the district court's analysis
focused on whether the home state exception to jurisdiction
applied, see In re Hannaford Bros., 592 F. Supp. 2d at 148, and so
have the parties' arguments to us. We therefore bypass the
preliminary question of whether the requisite minimal diversity
exists here for jurisdiction under 28 U.S.C. § 1332(d)(2) and
consider only whether CAFA's home state exception applies.
2
To remain in federal court, this case must both satisfy
the minimal diversity requirement for federal jurisdiction under 28
U.S.C. § 1332(d)(2) and also not fall under CAFA's home state
exception in § 1332(d)(4)(B). Kash N' Karry therefore argues that
its dual citizenship as a Delaware corporation with its principal
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There is a threshold question of which party bears the
burden of showing that CAFA's home state exception applies. We
hold that the burden is on the plaintiff to show that an exception
to jurisdiction under CAFA applies. This is the rule adopted by
our sister circuits. See Kaufman v. Allstate N.J. Ins. Co., 561
F.3d 144, 153 (3d Cir. 2009); Serrano v. 180 Connect, Inc., 478
F.3d 1018, 1024 (9th Cir. 2007); Hart v. FedEx Ground Package Sys.
Inc., 457 F.3d 675, 680-81 (7th Cir. 2006); Frazier v. Pioneers
Ams. LLC, 455 F.3d 542, 546 (5th Cir. 2006); Evans v. Walter
Indus., Inc., 449 F.3d 1159, 1165 (11th Cir. 2006). And it is
consistent with the Supreme Court's general approach to removal
jurisdiction. See Breuer v. Jim's Concrete of Brevard, Inc., 538
U.S. 691, 698 (2003) ("[W]henever the subject matter of an action
qualifies it for removal, the burden is on a plaintiff to find an
express exception."). Here, however, as the parties agree, the
burden of proof is largely immaterial because the outcome turns
purely on questions of law.
place of business in Florida creates the requisite minimal
diversity for jurisdiction under § 1332(d)(2). See 28 U.S.C.
§ 1332(d)(2)(A) (granting federal jurisdiction over class actions
in which the amount in controversy exceeds $5 million and "any
member of a class of plaintiffs is a citizen of a State different
from any defendant"). We are skeptical of this argument and note
that one other circuit has rejected it. See Johnson, 549 F.3d at
936. In any event, Kash N' Karry concedes that we need not decide
whether minimal diversity exists under § 1332(d)(2) if the home
state exception applies. And Kash N' Karry admits that the home
state exception is worded differently from § 1332(d)(2) such that
it applies regardless of whether the defendant's dual citizenship
creates minimal diversity for purposes of § 1332(d)(2).
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At first blush, the requirements of CAFA's home state
exception appear to be satisfied here. As Grimsdale has defined
the class in his complaint, all class members are Florida citizens.
Kash N' Karry, the only defendant in this case, is also a Florida
citizen because its principal place of business is in Florida. See
28 U.S.C. § 1332(c)(1) ("[A] corporation shall be deemed to be a
citizen . . . of the State where it has its principal place of
business . . . ."). And this case was originally filed in Florida
state court.
Still, Kash N' Karry offers a different reading of CAFA's
home state exception, turning on the interpretation of the sub-
phrase "the members of all proposed plaintiff classes in the
aggregate" within the home state exception. See id.
§ 1332(d)(4)(B) ("A district court shall decline to exercise
jurisdiction [where] . . . two-thirds or more of the members of all
proposed plaintiff classes in the aggregate, and the primary
defendants, are citizens of the State in which the action was
originally filed."). Specifically, Kash N' Karry argues that the
plain meaning of "all proposed plaintiff classes in the aggregate"
requires reference outside the four corners of the complaint in the
particular case before the court to all previously filed class
actions which arise from a core nucleus of operative facts such as
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to meet an "Article III case or controversy" requirement.3 It
contends that the term "aggregate" means that Congress intended to
refer beyond the plaintiff's complaint; otherwise, Congress would
have simply used the term "class members" as it did in
§ 1332(d)(1)(D).4 Applying this principle here, Kash N' Karry says
the previously filed national class actions involving Hannaford
that were consolidated by the Judicial Panel on Multidistrict
Litigation are the appropriate reference point to measure "the
members of all proposed plaintiff classes in the aggregate."
We reject Kash N' Karry's reading as contrary to the
plain language of § 1332(d)(4)(B). The most natural reading of the
home state exception is that Congress meant § 1332(d)(4)(B) to be
read in conjunction with the federal class action rule, Fed. R.
Civ. P. 23, or similar state statutes and rules of judicial
procedure.5 That is made explicit by the definition of "class
3
Kash N' Karry also argues, as a fallback position, that
its reading of the statute is supported by CAFA's legislative
history, specifically a post-enactment Senate report. Kash N'
Karry did not make this argument to the district court, and because
we hold that the plain text of the statute refutes Kash N' Karry's
position, we do not consider CAFA's legislative history.
4
Likewise, Kash N' Karry argues that CAFA's reference to
"primary defendants" requires a court to look beyond the
plaintiff's complaint to consider unnamed defendants against whom
the class could pursue a claim arising from the same core set of
facts. This claim is analytically similar to Kash N' Karry's
argument as to class membership, and we reject it for the same
reasons.
5
Here, the Florida state rule is similar in all relevant
aspects to Rule 23. See Fla. R. Civ. P. 1.220.
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action" in § 1332(d)(1)(B), which refers to Rule 23 or similar
state rules. Under Rule 23, "a class may be divided into
subclasses that are each treated as a class under this rule." Fed.
R. Civ. P. 23(c)(5). The home state exception's use of the plural
"classes," therefore, does not indicate that Congress intended an
inquiry into what Kash N' Karry has termed the broader "Article III
case or controversy" because a single complaint may contain
multiple classes.6
In rejecting Kash N' Karry's reading of § 1332(d)(4)(B),
we do not mean to say that the four corners of the plaintiff's
complaint necessarily control the question of whether CAFA's home
state exception applies. We do not rely on the maxim that the
plaintiff is the master of his own complaint -- the answer to that
question is that it depends. Indeed, as we recently recognized in
Amoche, 556 F.3d at 48-51, courts need not accept the plaintiffs'
allegations regarding the amount in controversy when it appears to
a reasonable probability that more than the jurisdictional minimum
is at issue. We can imagine situations -- for example, if the
plaintiff has omitted an indispensable defendant -- where looking
6
Moreover, Kash N' Karry's reading would present serious
administrability problems, which Congress surely did not intend.
It would be extremely difficult to define the scope of what Kash N'
Karry calls the "Article III case or controversy." And Kash N'
Karry's own definition is arbitrary: nothing in its theory supports
its limitation to already-filed national actions. Indeed, Kash N'
Karry uses the phrase "Article III case or controversy" in ways
very different from the usual understanding of the phrase.
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beyond the four corners of the plaintiff's complaint may be
necessary to determine whether the home state exception applies.
But that situation is not before us here, and we leave further
consideration of it for another day.
Kash N' Karry argues that our reading, which here gives
effect to the plaintiff's choice to define the scope of the suit
narrowly, will ultimately cause the home state exception to defeat
CAFA's broader purpose of expanding federal jurisdiction. That is,
Kash N' Karry says that if courts are not allowed to consider the
existing class members and defendants in national class actions but
are limited to those described in the complaint in a single state,
plaintiffs will tailor their pleading to avoid federal jurisdiction
under CAFA.
It is common for removing defendants trying to remain in
federal court under CAFA to make this generic argument -- that the
four corners of the complaint do not control -- as to various
provisions of CAFA. For example, in Freeman v. Blue Ridge Paper
Products, Inc., 551 F.3d 405 (6th Cir. 2008), five separate state
court class actions were filed by plaintiffs from the same state
for the same injuries covering sequential time periods. Each suit
sought damages of $4.9 million, just below CAFA's $5 million
jurisdictional minimum. Id. at 406. The Sixth Circuit held that
this type of structuring is impermissible where "there is no
colorable basis" for dividing the suit "other than to frustrate
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CAFA." Id. at 409. Whether or not we would agree with Freeman,
this case is very different. Grimsdale has not artificially split
his class of Florida plaintiffs into multiple suits to avoid
federal jurisdiction.
And in Tanoh v. Dow Chemical Co., ___ F.3d ___, 2009 WL
826404 (9th Cir. Mar. 27, 2009), the court interpreted the "mass
action" provisions of CAFA, 28 U.S.C. § 1332(d)(11)(B)(i), as not
permitting aggregation of seven separate state court toxic-tort
suits against the same manufacturer, each with fewer than 100
plaintiffs, to create a basis for removal under CAFA.
There is no one-size-fits-all response to a claim of
evasion of congressional intent. The analysis will turn on the
precise language of that section of CAFA. Our job is to effectuate
the intent expressed in the plain language Congress has chosen, not
to effectuate purported policy choices regardless of language. See
Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530
U.S. 1, 5 (2000) ("[W]hen the statute's language is plain, the sole
function of the courts -- at least where the disposition required
by the text is not absurd -- is to enforce it according to its
terms." (quoting United States v. Ron Pair Enters., Inc., 489 U.S.
235, 241 (1989)) (internal quotation marks omitted)).
In any event, we are dubious about the policy arguments.
Several factors make it unlikely that the exception will swallow
the rule entirely. In particular, CAFA's home state exception is
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fairly narrow, encompassing only those suits where at least two-
thirds of the class members and all of the primary defendants are
citizens of the same state. Suits involving a primary defendant
who is not a citizen of the forum state cannot qualify for the
exception. Moreover, plaintiffs potentially sacrifice a great deal
in terms of the parties they can sue and the claims they can bring
by narrowing their pleadings to fit within the home state
exception. And to the extent that the home state exception in
practice creates an undesirable loophole, Congress may choose to
amend the statute to address those problems as they arise.
Beyond that, many of the policy concerns that motivated
Congress to enact CAFA are simply not implicated where the suit
qualifies for the home state exception. As we recently recognized:
In enacting CAFA, Congress was
responding to what it perceived as abusive
practices by plaintiffs and their attorneys in
litigating major interstate class actions in
state courts, which had "harmed class members
with legitimate claims and defendants that
ha[d] acted responsibly," "adversely affected
interstate commerce," and "undermined public
respect for our judicial system."
Amoche, 556 F.3d at 47 (alteration in original) (quoting CAFA
§ 2(a), 119 Stat. at 4). According to Congress, these abusive
practices included forum shopping to take advantage of potential
state court biases against foreign defendants. See CAFA
§ 2(a)(4)(B), 119 Stat. at 5. But where, as here, the defendant is
also a citizen of the forum state, the concern for bias simply does
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not arise. Likewise, Congress in enacting CAFA was concerned that
state courts were "making judgments that impose their view of the
law on other States and bind the rights of the residents of those
States." Id. § 2(a)(4)(C), 119 Stat. at 5. But again, that
potential problem is not implicated where the class members are
largely citizens of the forum state.
Kash N' Karry has a final contention that Grimsdale has
improperly defined the class in this case by requiring that all
class members be Florida citizens. Defining the class in this way,
Kash N' Karry says, makes the class impossible to ascertain because
state citizenship depends upon a person's subjective intent.
The language of CAFA itself refutes the argument. It
requires a court to assess the citizenship of the class members
when applying the home state exception, an exercise Congress
obviously did not consider to be impossible. Moreover, at least
one other circuit has recognized that defining the class to include
only citizens of a particular state can defeat federal jurisdiction
under CAFA. See Dennison v. Carolina Payday Loans, Inc., 549 F.3d
941, 943 (4th Cir. 2008); Johnson, 549 F.3d at 937. Therefore, we
reject Kash N' Karry's argument that Grimsdale has improperly
limited his class allegations to include only Florida citizens.
III.
The district court's remand order is affirmed. Costs are
awarded to Grimsdale.
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