Norman Walsh v. Defenders Inc , 894 F.3d 583 ( 2018 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______________
No. 18-2156
______________
NORMAN WALSH, on behalf of himself
and others similarly situated
v.
DEFENDERS, INC., d/b/a Protect Your Home;
ADT SECURITY SERVICES, INC.;
B&R RECOVERY LLC
Defenders, Inc.; ADT Security Services, Inc.,
n/k/a Tyco Integrated Security LLC;
and ADT LLC,
Appellants
______________
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civ. No. 2-16-cv-00753)
Honorable Esther Salas, District Judge
______________
Submitted under Third Circuit L.A.R. 34.1(a)
July 2, 2018
BEFORE: CHAGARES, BIBAS, and GREENBERG, Circuit
Judges
(Opinion Filed: July 9, 2018)
______________
Yongmoon Kim
Kim Law Firm
411 Hackensack Avenue
Suite 701
Hackensack, NJ 07601
Henry P. Wolfe
The Wolf Law Firm
1520 U.S. Highway 130
Suite 101
North Brunswick, NJ 08902
Counsel for Appellee
Charles C. Eblen
Gregory Wu
Shook, Hardy & Bacon
2555 Grand Boulevard
Kansas City, MO 64108
Counsel for Appellants
______________
OPINION OF THE COURT
______________
GREENBERG, Circuit Judge.
2
I. INTRODUCTION
Defendants Defenders, Inc., ADT LLC, and ADT
Security Services, Inc. (“ADT SSI-Tyco”)1 (collectively,
“defendants”) appeal with leave of this Court from the District
Court’s January 25, 2018 Memorandum and Order granting
plaintiff Norman Walsh’s motion to remand the case. Walsh
filed this action in the Superior Court of New Jersey and sought
an order to remand the case to that court after Defenders, Inc.
removed the case to the District Court under the Class Action
Fairness Act (“CAFA”), 28 U.S.C. § 1332(d)(2). The District
Court originally denied Walsh’s motion to remand but, on
Walsh’s motion for reconsideration, granted the motion to
remand based on CAFA’s local controversy exception to district
court class action jurisdiction in actions subject to CAFA. 28
U.S.C. § 1332(d)(4). Though we have granted defendants’
petition for review of the remand order under 28 U.S.C. §
1453(c)(1), for the reasons set forth below, we will affirm that
order.
II. STATEMENT OF JURISDICTION AND
STANDARD OF REVIEW
The issue on this appeal is whether the District Court
1
Defendant ADT Security Services, Inc. is now known as Tyco
Integrated Security Systems LLC (“TycoIS”). The change
occurred during the events giving rise to this action, so we will
refer to the entity as ADT SSI-Tyco. In their brief appellants
refer to TycoIS as ADT SSI’s “reformed corporate successor.”
Appellants’ br. at 8.
3
should have retained jurisdiction or was required to remand the
case to the Superior Court. District courts have jurisdiction,
where requirements respecting diversity of citizenship and the
amount in controversy are met, over class actions removed from
state courts under CAFA, 28 U.S.C. § 1332(d)(2)(A). CAFA
broadened federal diversity jurisdiction over interstate class
actions of national importance. Standard Fire Ins. Co. v.
Knowles, 568 U.S. 588, 595, 133 S. Ct. 1345, 1350 (2013).
Specifically, 28 U.S.C. § 1332(d) provides district courts with
original jurisdiction over cases that have (1) an amount in
controversy over $5,000,000; (2) minimally diverse parties,
meaning at least one member of the plaintiff class is a citizen of
a state different from any defendant; and (3) a class consisting of
at least 100 members. Id. at 592, 133 S.Ct. at 1348. The parties
do not dispute, and we find that all three factors have been met,
making this case subject to removal under CAFA unless there is
an applicable exception to CAFA jurisdiction barring removal.
The local controversy exception to CAFA jurisdiction, at
issue here, requires a district court to decline to exercise
jurisdiction under CAFA over a class action involving a
uniquely local controversy. 28 U.S.C. § 1332(d)(4)(A). We
have jurisdiction to review a district court’s CAFA remand order
under 28 U.S.C. § 1453(c)(1), and we review issues of subject
matter jurisdiction and statutory interpretation de novo.
Vodenichar v. Halcon Energy Props., Inc., 733 F.3d 497, 502
(3d Cir. 2013).
III. BACKGROUND
In February 2016, Walsh, a New Jersey citizen, filed an
amended putative class action complaint against defendants in
4
the New Jersey Superior Court.2 Walsh alleged that starting in
December 2009 he and the class members purchased home
security equipment and monitoring service from defendants and
signed contracts that defendants prepared which contained
illegal provisions relating to fees due on cancellation of the
contracts. JA 92 (Am. Compl. ¶ 18). Walsh advances two
claims based on the allegedly illegal provisions relating to fees
due on cancellation of the contracts, one under New Jersey’s
Truth-in-Consumer Contract, Warranty and Notice Act
(“TCCWNA”), N.J. Stat. Ann. §§ 56:12–14 et seq., and the
other under the New Jersey Consumer Fraud Act (“NJCFA”),
N.J. Stat. Ann. §§ 56:8–1 et seq.3
After Defenders, Inc., an Indiana corporation with its
principal place of business in that state, removed the case
invoking CAFA diversity jurisdiction to the District Court, see
28 U.S.C. § 1332(d)(2), (d)(2)(A), (d)(5)(B), Walsh moved to
remand the case to the Superior Court. In his motion he claimed
that ADT SSI-Tyco’s presence in the case triggered CAFA’s
local controversy exception under which a district court must
decline to exercise jurisdiction if the controversy is uniquely
connected to the state in which the plaintiff originally filed the
2
Walsh pleaded that he was a resident of New Jersey but did not
plead that he was a citizen of New Jersey. The notice of
removal, however, asserted that he was a New Jersey citizen and
he has not contested that allegation.
3
A magistrate judge in a report and recommendation to the
District Court set forth Walsh’s claims in more detail, so we
need not repeat them. See 2016 WL 6775706, at *1.
5
state court action.4 See Vodenichar, 733 F.3d at 506-07. Walsh
argued that the exception applied, inter alia, because (1) ADT
SSI-Tyco is a local defendant as it is a citizen of New Jersey, the
state in which Walsh filed the case; (2) ADT SSI-Tyco’s
conduct forms a significant basis for the claims asserted; and (3)
Walsh seeks significant relief from ADT SSI-Tyco. Walsh had
to prevail on each argument to trigger the exception.
The District Court originally denied Walsh’s motion to
remand, Walsh v. Defenders, Inc., No. 2:16-cv-753, 2016 WL
6775634 (D.N.J. Nov. 15, 2016) (“Walsh I”), adopting in part a
report and recommendation of a magistrate judge, see Walsh v.
Defenders, Inc., No. 2:16-cv-753, 2016 WL 6775706 (D.N.J.
July 15, 2016), recommending that it do so. Nevertheless, the
Court agreed that ADT SSI-Tyco, though a Delaware LLC had
New Jersey citizenship and was a local defendant in this New
Jersey case.5 In fact, ADT SSI-Tyco has been a New Jersey
4
The “local controversy exception” states in relevant part that
“[a] district court shall decline to exercise [CAFA] jurisdiction .
. . over a class action in which,”
(II) at least 1 defendant is a defendant—
(aa) from whom significant relief is sought by
members of the plaintiff class;
(bb) whose alleged conduct forms a significant
basis for the claims asserted by the proposed
plaintiff class; and
(cc) who is a citizen of the State in which the action
was originally filed. . . .
28 U.S.C. § 1332(d)(4)(A)(i)(II).
5
ADT SSI-Tyco is a LLC formed under Delaware Law. But it
6
citizen since 2012, when it converted from a Delaware
corporation called ADT SSI, which was a citizen of Delaware
and Florida, and consequently ADT SSI-Tyco was a local
defendant when Walsh initiated this action. But the Court
denied the motion to remand for reasons that we will explain
below.
In considering the matter, the District Court adopted the
magistrate judge’s report and recommendation observing that
after ADT SSI-Tyco changed its corporate form and citizenship
in 2012, it made another important change with respect to its
business organization. It assigned its assets and liabilities under
its residential contracts, including the contracts at issue in this
case, to ADT LLC, a citizen of Delaware. But ADT SSI-Tyco
remained a viable entity after the assignment as it retained its
commercial contracts and continued its operations. The Court
found that ADT SSI-Tyco continued to be a local defendant
despite the partial transfer of its assets and liabilities because
“an assignment does not let an assignor off the hook.” Walsh I,
2016 WL 6775634, at *2. Elsewhere in its opinion, however,
the Court suggested that the transfer could lead to a remand.
In reliance on Johnson v. SmithKline Beecham Corp.,
724 F.3d 337, 358 (3d Cir. 2013), where we said that “a federal
court must disregard nominal or formal parties, and can base its
jurisdiction only upon the citizenship of parties with a real
interest in the litigation,” the Court stated that “ADTSSI-Tyco
appears to have no actual interest in the outcome of this
litigation” because “ADTSSI-Tyco has transferred its liabilities
is a citizen of New Jersey because its sole member is a corporate
citizen of New Jersey. See Zambelli Fireworks Mfg. Co. v.
Wood, 592 F.3d 412, 420 (3d Cir. 2010).
7
to ADT LLC.” Walsh I, 2016 WL 6775634, at *4 n.5. It is
understandable that the Court took this view as Walsh based his
case on claims arising from contracts that ADT SSI-Tyco
transferred to ADT LLC.
The District Court saw other problems with the motion to
remand because it ruled that Walsh did not show that ADT SSI-
Tyco’s conduct formed a significant basis for the claims of the
proposed class, a requirement of the local controversy
exception. The Court stated that Walsh failed to analyze any of
the several factors we set out in Kaufman v. Allstate New Jersey
Insurance Co., 561 F.3d 144, 157 n.13 (3d Cir. 2009), to guide
evaluation of the significant-basis prong of the local controversy
exception. Consequently, the Court denied Walsh’s motion to
remand, and did not reach the final disputed issue of whether
Walsh sought significant relief from ADT SSI-Tyco, another
element of the local controversy exception.
But the District Court did not settle the remand issue with
its first order for Walsh moved for reconsideration and, in its
consideration of this motion, the Court reversed its course.
Walsh v. Defenders, Inc., No. 2:16-cv-753, 2018 WL 555690
(D.N.J. Jan. 25, 2018) (“Walsh II”). The Court found that
Walsh satisfied the significant-basis element of the local
controversy exception because of “new evidence [Walsh]
obtained during class discovery.” Id. at *2. The new evidence
showed that ADT SSI-Tyco entered into the allegedly unlawful
contracts with 35.3% of the putative class, and created the
standardized contract provisions that form the basis of the entire
class’s claims. Id. The Court found that the evidence satisfied
several of the factors that we set forth in Kaufman and
concluded that ADT SSI-Tyco’s conduct formed a significant
basis for the claims asserted on behalf of the putative class. Id.
8
The District Court in Walsh II then reached Walsh’s final
argument that he sought significant relief from ADT SSI-Tyco.
Id. at *3. The Court agreed with Walsh that he had done so,
finding that the relief Walsh sought against ADT SSI-Tyco—
money damages, statutory damages under TCCWNA, treble
damages under the NJCFA, declaratory and injunctive relief,
attorneys’ fees and costs, and pre- and post-judgment interest—
was significant enough to satisfy the local controversy exception
to its jurisdiction. It thus appeared that all of the elements of the
local controversy exception were present. The Court
accordingly granted Walsh’s motion by order of January 25,
2018, to reconsider its original ruling in which it had denied the
remand motion and it remanded the case to the New Jersey
Superior Court. Defendants then filed a timely petition for
interlocutory review of the remand order that we have granted.
We now consider the remand order on the merits.6
6
There is a procedural wrinkle in this case arising from what
appears to be Walsh’s understandable pleading error in this
confusing case. In his amended complaint, Walsh named as a
defendant “ADT Security Services, Inc. . . . a foreign [i.e., non-
New Jersey and thus not the ADT SSI-Tyco] corporation. . . .”
JA 91 (Am. Compl. ¶ 5) and did not include ADT SSI-Tyco as a
defendant. The parties agree, however, that ADT SSI, the
predecessor to ADT SSI-Tyco, was dissolved in 2012 before
Walsh initiated this case, and that the surviving business
operates as ADT SSI-Tyco, a limited liability company. Despite
naming the wrong entity, Walsh had process served on ADT
SSI-Tyco. See JA 292. Moreover, ADT SSI-Tyco has
participated in this litigation in several ways: it appeared with
representation before the District Court; several briefs filed in
the District Court were purportedly filed on its behalf; and it
9
IV. DISCUSSION
The local controversy exception to a district court’s
CAFA class action jurisdiction requires a court to decline to
exercise jurisdiction over a class action where more than two-
thirds of the proposed plaintiff class members and at least one
defendant, here ADT SSI-Tyco, are citizens of the state in which
the suit was filed, here New Jersey, provided that the local
defendant is one “from whom significant relief is sought by
members of the plaintiff class” and “whose alleged conduct
forms a significant basis for the claims asserted.” 28 U.S.C. §
1332(d)(4)(A)(i)(II)(aa), (bb). Defendants do not contend that
the two-thirds requirement was not met but they do argue that
ADT SSI-Tyco cannot be considered a local defendant for
purposes of the exception because it is not a real party in interest
to this litigation. In addition, defendants dispute whether the
“significant relief” and “significant basis” prongs of the local
controversy exception have been satisfied with respect to ADT
SSI-Tyco, even if it is considered a local defendant for purposes
of the CAFA exception. For the following reasons, we conclude
that ADT SSI-Tyco is a local defendant under CAFA from
whom Walsh and the proposed class seek significant relief and
that its alleged conduct forms a significant basis for the claims
asserted. For those reasons, we will affirm the order remanding
this action to the state court from which it was removed.
A. ADT SSI-Tyco is a local defendant.
Defendants first challenge the conclusion that ADT SSI-
joined in the petition for interlocutory review of the Court’s
remand order. These facts lead us to treat ADT SSI-Tyco—
rather than ADT SSI—as the real defendant in this case.
10
Tyco is a local defendant. They recognize that Walsh filed this
case in a New Jersey state court against ADT SSI-Tyco, and
they do not deny that, as the District Court recognized, see
Walsh II, 2018 WL 555690, at *2, ADT SSI-Tyco is a New
Jersey citizen. But they claim that ADT SSI-Tyco is merely a
“nominal party” without “a real interest in the litigation.”
Appellants’ br. at 15 (quoting SmithKline Beecham, 724 F.3d at
358). Accordingly, they contend that the Court should have
ignored ADT SSI-Tyco’s citizenship in its jurisdictional
analysis. If it had done so then it could not have said that there
was a defendant who was a citizen of the state in which Walsh
originally filed the action. We, however, disagree with
defendants’ contention that ADT SSI-Tyco is a nominal party.
To the contrary, ADT SSI-Tyco has an interest in this litigation,
and the Court correctly considered it in making its decision.
In determining whether there is diversity jurisdiction, a
district court must consider the citizenship of defendants who
are “real and substantial parties to the controversy.” Navarro
Sav. Ass’n v. Lee, 446 U.S. 458, 460, 100 S. Ct. 1779, 1781-82
(1980). “Thus, a federal court must disregard nominal or formal
parties,” id. at 461, 100 S.Ct. at 1782, “and can base its
jurisdiction only upon the citizenship of parties with ‘a real
interest in the litigation,’” SmithKline Beecham, 724 F.3d at 358
(quoting Bumberger v. Ins. Co. of N. Am., 952 F.2d 764, 767
(3d Cir. 1991)).
Based on the evidence submitted on the motion to
remand we believe that the key events on the jurisdictional issue
were: (1) ADT SSI, a Delaware corporation, owned and drafted
the residential contracts at issue here; (2) ADT SSI converted to
ADT SSI-Tyco, a Delaware limited liability company with New
Jersey citizenship; and (3) though ADT SSI-Tyco transferred the
11
residential contracts and related liabilities to co-defendant ADT
LLC it retained and continued to service the commercial
contracts.
When Walsh brought this suit four years after the above
events, ADT SSI-Tyco was a real and substantial party because
it allegedly participated in the wrongful conduct in which Walsh
charges defendants engaged and it has a stake in the outcome of
this case. Walsh alleges, and we accept the allegation at this
stage of the litigation, that ADT SSI-Tyco is at least partly to
blame for the inclusion of the allegedly illegal terms in the
security service contracts. Although the now-defunct ADT SSI
corporation may have drafted the allegedly illegal terms, any
liability that ADT SSI could have faced for drafting those terms
sits with ADT SSI-Tyco because when a Delaware corporation
converts to a Delaware LLC as happened here, when ADT SSI
converted to ADT SSI-Tyco, Delaware statutory law
automatically transfers the corporation’s liabilities to the new
LLC. Del. Code Ann. tit. 6, § 18–214(f). And although ADT
SSI-Tyco attempted to transfer all potential liability for that
conduct to ADT LLC, it has not shown that the transfer freed it
from liability. Rather, as Walsh asserts, the transfer did not
have that consequence. Walsh claims that he can still sue ADT
SSI-Tyco because the transfer of assets and liabilities from ADT
SSI-Tyco to ADT LLC could not discharge his claim against
ADT SSI-Tyco unless he consented to the transfer and the
discharge, something he did not do.
We agree with Walsh’s contention because his claim
comports with rules that accompany common-law assignments
of liability and defendants provide no reason why we should
treat the assignment involved here differently. See Am. Flint
Glass Workers Union v. Anchor Resolution Corp., 197 F.3d 76,
12
80 (3d Cir. 1999) (“A party subject to a contractually created
obligation ordinarily cannot divest itself of liability by
substituting another in its place without the consent of the party
owed the duty.”) (internal citation omitted); accord 29 R. Lord,
Williston on Contracts § 74:27 (4th ed. 2012) (“No one can
assign his liabilities under a contract without the consent of the
party to whom he is liable.”).7 Thus, consumers like Walsh who
signed the residential contracts still can sue ADT SSI-Tyco even
though it transferred some of its contracts to ADT LLC.
Inasmuch as the purchaser of its equipment and services can sue
ADT SSI-Tyco for the alleged wrongs arising from the
residential contracts for which it is allegedly responsible, it is a
“real and substantial part[y] to the controversy.” Navarro, 446
U.S. at 460, 100 S.Ct. at 1781-82.
Defendants argue, however, that we should regard ADT
SSI-Tyco merely as a nominal party in light of SmithKline
Beecham, 724 F.3d 337, which was not a CAFA case. Indeed,
at one point the District Court made the same suggestion. See
Walsh I, 2016 WL 6775634, at *4 n.5. But SmithKline
7
We would be more receptive to defendants’ argument if this
were a case of successor liability. In such cases, where a
company sells all of its assets to another company, the
purchasing company may contract to assume the seller’s
liabilities. See 15 William Meade Fletcher et al., Fletcher
Cyclopedia of the Law of Private Corporations § 7122. See also
Berg Chilling Sys., Inc. v. Hull Corp., 435 F.3d 455, 464 (3d
Cir. 2006). But the transfer in this case does not create
successor liability—nor do defendants claim that it does—
because ADT SSI-Tyco transferred only some assets to ADT
LLC.
13
Beecham is distinguishable. In that case SmithKline Beecham,
a Pennsylvania corporation, was sued, along with several related
entities over allegations that it manufactured an injurious
defective pharmaceutical drug. But before the case was filed, it
had dissolved as a Pennsylvania corporation, domesticated as a
Delaware corporation, and converted to a limited liability
company called GSK LLC. When the plaintiffs, one of whom
was a Pennsylvania citizen, subsequently brought the action in
state court and defendants removed it to the district court, the
plaintiffs claimed that the case should be remanded because
SmithKline Beecham and one of the plaintiffs were
Pennsylvania citizens and thus diversity of citizenship was
absent. Plaintiffs claimed that the former SmithKline Beecham
should be considered in the jurisdiction analysis as it was still a
real party in interest because Pennsylvania statutory law
preserved a dissolved corporation’s interest in litigation against
it.
We accepted the principle that dissolved companies can
be interested parties where statutes like Pennsylvania’s render
the companies “sufficiently alive to sue . . .” SmithKline
Beecham, 724 F.3d at 358 (quoting Stentor Elec. Mfg. Co. v.
Klaxon Co., 115 F.2d 268, 271 (3d Cir. 1940), rev’d on other
grounds, 313 U.S. 487, 495-97, 61 S. Ct. 1020, 1021-22 (1941)),
but we emphasized that SmithKline Beecham did not merely
dissolve. Rather, it domesticated as a new entity in Delaware
which has “has stepped into SmithKline Beecham’s shoes”
because “under Delaware law, all of SmithKline Beecham’s
debts, liabilities and duties now lie with GSK LLC.” Id. at 359
(internal citations and quotation marks omitted). In these
circumstances, we concluded that SmithKline Beecham had
become a nominal party and we disregarded its citizenship for
purposes of diversity jurisdiction.
14
Defendants claim that we should treat ADT SSI-Tyco
like SmithKline Beecham, and, by extension, treat ADT LLC,
which is not a New Jersey citizen, like GSK LLC. Appellants’
br. at 17. But the entities are in different positions. Unlike
SmithKline Beecham, which dissolved completely and passed
all of its liability to GSK LLC, ADT SSI-Tyco is an active entity
that has not dissolved. It did not pass all of its liabilities to ADT
LLC, to the end that ADT LLC “has stepped into [its] shoes”;
rather, ADT SSI-Tyco is subject to liability in this case,
depending on its outcome,8 and can defend the claims against it.
Accordingly, SmithKline Beecham does not preclude us from
holding that ADT SSI-Tyco is a real party in interest in this
case.
In sum, we agree with the District Court’s ultimate
conclusion that ADT SSI-Tyco is a local defendant under
CAFA. ADT SSI-Tyco has an interest in the litigation and the
Court correctly took into account its citizenship for the purposes
of determining subject matter jurisdiction.
B. Other elements of the local controversy exception are
satisfied.
We now consider the two remaining disputed prongs of
the local controversy exception: First, whether the proposed
class seeks “significant relief” from ADT SSI-Tyco and second,
whether ADT SSI-Tyco’s conduct “forms a significant basis for
the claims asserted by the proposed plaintiff class.” 28 U.S.C. §
1332(d)(4)(A)(i)(II)(aa), (bb).9
8
We, of course, are not implying that we have any view on the
merits of this case.
9
There is no dispute on this appeal with respect to the presence
15
We have no difficulty in concluding that Walsh’s
amended complaint seeks significant relief from ADT SSI-Tyco.
In evaluating whether the amended complaint seeks significant
relief from a given defendant, we look to the complaint rather
than extrinsic materials such as those on which defendants rely,
as the complaint is the best evidence of the relief that the
plaintiffs seek. See Coleman v. Estes Express Lines, Inc., 631
F.3d 1010, 1015 (9th Cir. 2011). In an instructive opinion on
the significant relief prong of the local controversy exception,
the Court of Appeals for the Tenth Circuit observed that based
on the plain language of the statute, “a defendant from whom
significant relief is sought does not mean a defendant from
whom significant relief may be obtained.” Coffey v. Freeport
McMoran Copper & Gold, 581 F.3d 1240, 1245 (10th Cir.
2009) (quotation marks omitted). Coffey rejected the
proposition that a local defendant’s “financial viability” should
factor into the preliminary analysis of whether significant relief
is being sought. Id. Similarly, the possibility that another entity
ultimately might satisfy a judgment against ADT SSI-Tyco by
virtue of the reallocation of ADT SSI-Tyco’s liabilities between
itself and ADT LLC has no bearing on whether plaintiffs seek
of the other elements of the local controversy exception, which
require that at least two-thirds of the proposed plaintiff class
members be citizens of the local forum, that the “principal
injuries resulting from the alleged conduct or any related
conduct of each defendant were incurred in the State in which
the action was originally filed” and that “during the 3–year
period preceding the filing of that class action, no other class
action has been filed asserting the same or similar factual
allegations against any of the defendants on behalf of the same
or other persons[.]” 28 U.S.C. § 1332(d)(4)(A).
16
significant relief from ADT SSI-Tyco in the first instance.
Walsh’s amended complaint seeks the following relief
with respect to ADT SSI-Tyco: monetary relief for the class
pursuant to New Jersey Court Rule 4:32-1(b)(3); statutory
damages under the TCCWNA; declaratory, injunctive, and
monetary relief for the subclass comprised of class members
whose contracts were terminated early; treble damages under the
NJCFA; and reasonable fees, costs, and interest.10 We conclude
that these requests for relief collectively constitute “significant
relief” for purposes of the local controversy exception.
Finally, we consider whether ADT SSI-Tyco’s conduct
provides a significant basis for the claims that Walsh asserts. As
we observed in Kaufman, a court must analyze the significance
of a defendant’s conduct in relation to that of the other
defendants in light of the plain meaning of the word
“significant.” See Kaufman, 561 F.3d 144, 157 (defining
“significant” as “important, notable”) (quoting Oxford English
Dictionary (2d ed. 1989)). Walsh argues that ADT SSI-Tyco’s
conduct forms a significant basis for the proposed class’s claims
because ADT SSI-Tyco used the allegedly illegal contract
provisions at issue and because ADT SSI-Tyco entered into
allegedly unlawful alarm-service contracts with 35.3% of class
members.
While we have observed that the significant basis prong
10
We do not need to address the possibility that fees and costs
should not be regarded as relief that a plaintiff is seeking for
CAFA purposes even though in some contexts a claim for
counsel fees might not be regarded as a claim for damages.
17
“does not establish an absolute quantitative requirement” for the
number of class members asserting claims based on a local
defendant’s conduct, the number of claims involving the local
defendant can be a helpful consideration in the analysis.
Kaufman, 561 F.3d at 155-56. We agree with the District Court
that Walsh’s evidence satisfies the required showing for the
significant basis prong of the local controversy exception.11
Walsh II, 2018 WL 555690, at *3. Though a greater number of
class members entered into alarm-services contracts with ADT
LLC than with ADT SSI-Tyco, the local controversy exception
does not require that the local defendant’s conduct be the most
significant conduct or that it predominates over claims against
other defendants. Because of ADT SSI-Tyco’s role with respect
to the use of allegedly illegal provisions, and because over a
third of the class members entered into contracts directly with
ADT SSI-Tyco, it is clear that ADT SSI-Tyco’s conduct forms a
significant basis for the claims of the class.
V. CONCLUSION
For the above-stated reasons, we conclude that the
District Court did not err in remanding this action to the state
court based on CAFA’s local controversy exception to the
exercise of its jurisdiction. Because ADT SSI-Tyco is a local
defendant and the elements of the exception are otherwise
satisfied, we will affirm the remand order of January 25, 2018,
11
Although the District Court considered evidence of the
proportion of class members that entered into contracts with
ADT SSI-Tyco, we conclude that the significant basis prong has
been satisfied by the allegations in the amended complaint
alone.
18
under consideration.
19