Fourth Circuit Clarifies CAFA Removal Standards
Today's case involved a class action filed in West Virginia state court against a cellular phone carrier (AT&T) alleging the carrier has a "pattern or practice" of automatically enrolling new cellular phone customers in a free trial of its optional Roadside Assistance service and then charging them $2.99 per month if they don't opt out. The complaint defined the class as: "all customers who: (1) purchased [an AT&T Mobility cellular] account in the state of West Virginia; and (2) were charged a $2.99 monthly charge for Roadside Assistance without ever requesting or enrolling for said service." The claim was brought under West Virginia law, under a statute regulating deceptive trade practices.
AT&T removed to federal court under CAFA, attaching to its notice of removal an affidavit attesting that, based on the number of customers who remained enrolled in Roadside Assistance beyond their free trial period and the minimum statutory damages available ($200 per person), the amount in controversy exceeds $5 million. Plaintiffs responded that the class definition should be narrowed to exclude those customers who willingly remained enrolled in the Roadside Assistance program. Because AT&T could not calculate that number (it couldn't ascertain the number of customers charged who didn't want the service), the district court concluded that AT&T couldn't establish that the case met the $5 million CAFA threshold, and thus the district court remanded the case to state court. AT&T appealed.
The first question the Fourth Circuit clarified is who bears the burden of proof in the context of CAFA removal. Relying on legislative history, AT&T argued that the plaintiff should bear the burden of demonstrating that removal was improper. The Fourth Circuit disagreed, joining six other circuits in this holding: "in removing a class action based on diversity jurisdiction under 28 U.S.C. §§ 1453 and 1332(d), the party seeking to invoke federal jurisdiction must allege it in his notice of removal and, when challenged, demonstrate the basis for federal jurisdiction."
The Fourth Circuit then confronted plaintiffs' narrowing of the class definition in response to AT&T's removal notice. The Court held that plaintiffs' tactic "amounts to a post hoc characterization of the pattern and practice that they are challenging complaint as illegal" because their "complaint makes clear that what the plaintiffs are challenging as unlawful under West Virginia law is AT&T’s allegedly deceptive practice of 'bundling' the Roadside Assistance service with new cellular telephone service, such that all customers were automatically enrolled in a free trial period and then charged $2.99 per month end of that period if they did not opt out." (Emphasis in original) The complaint didn't define the class as those unwilling retain the program, but rather as who "were not given an option." Thus, this case will now proceed in federal court pursuant to CAFA.
The upshot: plaintiffs wishing to avoid CAFA removal had better be careful in pleading their class definition and their theory of the case. In this case the complaint didn't limit the class to customers who didn't want the service, because plaintiffs were pushing a broad theory that challenged the act of automatically enrolling customers. Of course, in most court systems (I can't speak for West Virginia), limiting the class to those who unwillingly receive a service that they don't want would present a different problem: individualized issues that would likely predominate over common issues, thereby defeating class certification.