In the
United States Court of Appeals
For the Seventh Circuit
No. 13‐2729
ADDISON AUTOMATICS,
INCORPORATED,
Plaintiff‐Appellee,
v.
HARTFORD CASUALTY INSURANCE
COMPANY,
Defendant‐Appellant.
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 13 C 1922 — John Z. Lee, Judge.
ARGUED SEPTEMBER 10, 2013 — DECIDED October 2, 2013
Before EASTERBROOK, ROVNER, and HAMILTON, Circuit
Judges.
HAMILTON, Circuit Judge. This is an appeal from a district
court’s decision remanding a case to state court. See 28 U.S.C.
§ 1453(c) (court of appeals may accept appeal from order
remanding class action). Plaintiff Addison Automatics, Inc.
filed a complaint in state court seeking a declaratory judgment
2 No. 13‐2729
that defendant Hartford Casualty Insurance Company owed
a duty to defend and indemnify a third party against whom
Addison had earlier brought and settled a class action on terms
that included an assignment to the class of the third party’s
rights against its insurers. Addison’s complaint stated that it
intended to proceed solely in its individual capacity rather
than on behalf of the previously certified class.
The question before us is whether Addison’s follow‐on suit
is a class action removable under the Class Action Fairness Act,
28 U.S.C. §§ 1332(d) and 1453. The district court thought not,
concluding that it should not look past Addison’s assertion
that it was suing only as an individual. We accepted the
appeal, see § 1453(c), and we reverse the remand to state court.
Despite Addison’s disclaimer of its status and duties as class
representative, it has standing to pursue relief against Hartford
only as class representative. The declaratory judgment action
is in substance a class action that was properly removed to
federal court.
I. Procedural Background
The case now before us has its origins in state court, where
Addison filed a class action against Domino Plastics Company.
The complaint alleged that Domino had sent thousands of
“junk faxes” in violation of the federal Telephone Consumer
Protection Act, 47 U.S.C. § 227, and the Illinois Consumer
Fraud Act, 815 ILCS 505/2, and had committed the tort of
conversion. Domino’s liability insurers refused to defend the
suit. Left to its own devices and checkbook, Domino negotiated
a settlement that would protect its own interests and leave its
insurers to face the plaintiff class. Addison and Domino agreed
No. 13‐2729 3
that the state court should certify a class and then enter a
nominal judgment against Domino for nearly $18 million. We
say “nominal” because Addison agreed that the class would
not recover a single dollar of that amount from Domino itself.
Instead, Domino assigned to Addison—as class represen‐
tative—whatever claims Domino might have against its absent
liability insurers. The settlement made clear that Addison’s
status as assignee depended on its continuing role as class
representative. Domino assigned its claims against its insurers
“to the Class (as represented by Plaintiff and its attorneys).”
After notice and a fairness hearing, the state court certified a
class of all recipients of Domino’s faxed advertisements
between January 2007 and October 2008 and approved the
settlement in an order that also recognized that Domino’s
assignment was “to the Class” and not to Addison individu‐
ally.
Addison then filed a new state court action against Hart‐
ford seeking a declaratory judgment holding Hartford liable
for the $18 million judgment against Domino. In the new
complaint, Addison alleged that it was suing both “individu‐
ally and as the representative of a certified class.” Hartford
removed the case to federal court under 28 U.S.C. § 1453.
Addison responded by immediately dismissing the case
voluntarily, notwithstanding Federal Rule of Civil Procedure
23(e), which requires court approval to dismiss a claim by a
certified class.
The new twist in this case comes from Addison’s and class
counsel’s next move. Addison quickly filed yet another state
court lawsuit against Hartford. That complaint, which is now
4 No. 13‐2729
before us in this appeal, names Addison as the only plaintiff,
describes the suit as “an individual declaratory judgment
action,” and insists that it is “not a class action” under Federal
Rule of Civil Procedure 23 or any state equivalent.
Hartford removed this new action to federal court under
28 U.S.C. § 1453, asserting that the case is in substance a class
action. Addison moved to remand, arguing that its suit does
not fit CAFA’s statutory definition of a class action as “any
civil action filed under rule 23 of the Federal Rules of Civil
Procedure or similar State statute or rule of judicial procedure
authorizing an action to be brought by 1 or more representa‐
tive persons as a class action.” 28 U.S.C. § 1332(d)(1)(B).
The district court granted Addison’s motion to remand. The
court found that the complaint’s language asserting that
Addison was suing only as an individual plaintiff showed
conclusively that the suit did not fit CAFA’s definition of a
class action. Hartford argued that under the terms of the
assignment in the underlying settlement agreement, Addison
had standing only as a class representative. The district court
did not address the merits of that argument, reasoning that the
standing question should be decided in state court because
there was no federal jurisdiction under CAFA. Hartford sought
permission to appeal the remand order under 28 U.S.C.
§ 1453(c). We granted Hartford’s request, thereby binding
ourselves to the statute’s 60‐day time limit for decision.
II. Analysis
The question before us is whether this new action is a class
action removable under CAFA. We conclude that it is in
substance a class action and was properly removed to federal
No. 13‐2729 5
court, notwithstanding Addison’s artificial attempt to disguise
the true nature of the suit. We base our conclusion on two
closely related grounds.
First, the terms of the class settlement approved in state
court make clear that Addison has standing to pursue relief
from Hartford only in its capacity as class representative.
Unlike the district court, we reach the question of standing
because it goes directly to the characterization of Addison’s
claim as a class action, a threshold inquiry for deciding federal
jurisdiction under CAFA. See generally United States v. Ruiz,
536 U.S. 622, 628 (2002) (“it is familiar law that a federal court
always has jurisdiction to determine its own jurisdiction.”).
Despite Addison’s artful pleading, its complaint seeks a ruling
on Hartford’s duties to Domino on a claim that Domino
assigned “to the Class (as represented by Plaintiff and its
attorneys).” Such a ruling will determine Hartford’s liability
not just to Addison but for the entire $18 million judgment that
the state court entered “in favor of the Class.” Moreover, only
Addison has standing to pursue this relief on behalf of the class
certified by the state court. If any other members of the class
sought similar relief from Hartford, they would encounter an
insurmountable roadblock. The settlement gave other class
members no right to pursue such relief on their own because
it assigned Domino’s claims against its insurers only to “the
Class (as represented by [Addison] and its attorneys).”
Second, as Addison correctly conceded at oral argument, in
pursuing this action against Hartford, Addison owes continu‐
ing fiduciary obligations to the class it represents. See Fed. R.
Civ. P. 23(a)(4); 735 ILCS 5/2‐801(3); Back Doctors Ltd. v.
Metropolitan Property & Cas. Ins. Co., 637 F.3d 827, 830 (7th Cir.
6 No. 13‐2729
2011) (named plaintiff “has a fiduciary duty to its fellow class
members”); CIGNA HealthCare of St. Louis, Inc. v. Kaiser, 181 F.
Supp. 2d 914, 922 (N.D. Ill. 2002) (“We agree that a class
representativeʹs fiduciary duty to class members carries over
to separate litigation affecting the class.”), affʹd as modified on
other grounds, 294 F.3d 849 (7th Cir. 2002). In a similar context,
the Eighth Circuit held that where representatives of a class in
a federal case under federal law pursued individual relief in a
separate but parallel action in state court under state law, the
class representatives still owed fiduciary duties to the members
of the federal class when pursuing the state court action. As a
result, the Eighth Circuit held that a state court judgment
against the class representatives in their individual capacities
was binding as res judicata against the parallel federal claims of
the certified class. See Sondel v. Northwest Airlines, Inc., 56 F.3d
934, 938–39 (8th Cir. 1995).
We agree with Sondel and CIGNA HealthCare on this point.
Addison owes fiduciary duties to the class in pursuing relief
against Hartford, and this is true even though the new lawsuit
is nominally separate and even though Addison has tried to
disclaim its role as class representative. If we were to treat
Addison as anything other than a class representative here, the
interests of the class would be in danger. If a class representa‐
tive could seek such relief on its own, relieved of its fiduciary
duties, it could be induced to sell out the interests of other class
members in a lucrative settlement. The risk is analogous to the
one we have recognized in the context of class counsel who
may be in a position to sacrifice the interests of the class to
obtain more generous compensation for themselves. See
No. 13‐2729 7
Creative Montessori Learning Centers v. Ashford Gear LLC, 662
F.3d 913, 918 (7th Cir. 2011) (collecting cases on this point).
Even if a class representative resisted such a temptation in
an individual suit, it would likely still have breached its duties
by failing to advance diligently the interests of the class. See
Standard Fire Ins. Co. v. Knowles, 133 S. Ct. 1345, 1349 (2013)
(plaintiff’s failure to seek full damages could suggest inade‐
quacy of representation), citing Back Doctors, 637 F.3d at
830–31; 7A Wright & Miller, Federal Practice & Procedure
§ 1766 (3d ed. 2013) (“Even more directly [than a conflict of
interest], the failure of the representative to move for class
certification in a timely fashion or otherwise to prosecute the
action is a clear indication that the named party is not an
adequate representative.”). Addison’s going it alone would
mean leaving fellow class members to pursue for themselves
claims they were entitled to expect Addison to prosecute on
their behalf. The possibility that a declaratory judgment could
produce benefits for other class members in the form of
collateral estoppel effects is not enough to remedy this breach.
Recall that the assignment was to “the Class (represented by
Plaintiff [Addison] and its attorneys).” Class members who
might have wanted to take the individual route were free to
opt out of the class. Those who remained in the class are
entitled to count on their representative to represent them.
Addison’s attempt to evade this conclusion by the language
of its pleading falls short. By pursuing the rights assigned to it
as class representative in the state court class action, Addison
is necessarily continuing that class action. Addison urges us to
consider the present suit in a vacuum, arguing that there is no
need to “reconstitute” the class here. On the contrary, the class
8 No. 13‐2729
has been and remains certified pursuant to Illinois law, and
Addison and its counsel are responsible for trying to obtain
relief on the class’s behalf under the very assignment Addison
now wants to pursue for itself.
While we have not previously addressed CAFA jurisdiction
under these exact circumstances, the present action is at heart
little more than a procedural variation on the path to federal
court described in Travelers Property Casualty v. Good, 689 F.3d
714, 723 (7th Cir. 2012) (state court citation action to satisfy
class judgment from insurance policies would be removable
under CAFA). See also Back Doctors, 637 F.3d at 830–31 (plain‐
tiff’s declaration that it would not seek punitive damages did
not prevent removal under CAFA); In re Burlington Northern
Santa Fe Ry., 606 F.3d 379, 381 (7th Cir. 2010) (amending
complaint after CAFA removal did not extinguish federal
jurisdiction). “To hold otherwise would, for CAFA jurisdic‐
tional purposes, … exalt form over substance, and run directly
counter to CAFA’s primary objective” of expanding federal
jurisdiction over national class actions. Knowles, 133 S. Ct. at
1350.
Addison’s reliance on our decision in LG Display Co. v.
Madigan, 665 F.3d 768 (7th Cir. 2011), is unsound. The question
in LG Display was whether a parens patriae antitrust action by
Illinois against manufacturers of LCD panels was removable
under CAFA. We held that CAFA did not apply because class
actions “must be brought under Rule 23 or the state equiva‐
lent,” and a parens patriae action brought by a state government
is a different sort of proceeding that does not qualify. Id. at 772.
We declined the defendant’s invitation to look through the
pleadings and recognize that the state was trying to act on
No. 13‐2729 9
behalf of a group of its citizens much as a class representative
would in a class action. Id. Addison argues that LG Display
means courts should look only to the complaint in determining
whether a given claim is a class action.
The argument is not persuasive. Addison overlooks the fact
that it remains the representative of a class that was actually
certified “under Rule 23 or the state equivalent.” Addison
would also have us overlook the important procedural
differences between class actions and parens patriae actions.
Parens patriae suits are a special form of action brought by a
state on behalf of its residents generally to protect a “quasi‐
sovereign interest” belonging to the state. Id. at 771. Such suits
brought by a government to vindicate interests beyond those
of any particular victims do not involve certified plaintiff
classes and “should not be considered representative actions
subject to Rule 23.” E.E.O.C. v. Waffle House, Inc., 534 U.S. 279,
288 (2002), quoting General Telephone Co. of the Northwest v.
E.E.O.C., 446 U.S. 318, 326 (1980). As with many actions taken
by governments, the protection against excesses in the parens
patriae context lies in the electoral process, not the procedural
protections and fiduciary duties owed by private counsel and
named plaintiffs in a class action.
Finally, our decision does not depend on two details that
made the true nature of this action more transparent. Addi‐
son’s first complaint against Hartford was explicitly a class
action, but our decision would be the same even if Addison
had not filed that first complaint. Also, deletion of the present
complaint’s many references to the state court class would not
change our decision.
10 No. 13‐2729
As we have warned, a “statute governing class actions must
define that term carefully, or plaintiffs who want to litigate in
state court will devise close substitutes that escape the statute’s
application.” Bullard v. Burlington Northern Santa Fe Ry. Co.,
535 F.3d 759, 761 (7th Cir. 2008). Addison’s coy pleading in this
case cannot disguise the true nature of its claim or avoid its
fiduciary duties to the class it represents. Accordingly, we
REVERSE the district court’s order remanding this action to
state court and REMAND this matter to the district court for
further proceedings on the merits of Addison’s claims.