The Significant 1% and CAFA’s Local Controversy Exception
Judge Limbaugh’s analysis in City of O’Fallon v. Centurylink, Inc., 2013 WL 1036514 (E.D. Mo., March 14, 2013), is interesting in two respects. First, it’s interesting because the Court did not simply decline to exercise its jurisdiction as Judge Fleissig did in City of Maryland Heights v. Trafcone Wireless, Inc., 2013 WL 791866 (E.D. Mo., March 4, 2013), a similar class action composed of plaintiff municipalities seeking to recover business license taxes from defendant providers of telephone services. It’s also interesting for its thorough discussion of what exactly constitutes a “significant defendant” for purposes of applying CAFA’s Local Controversy Exception.
This analysis was a bit of overkill because the Court had already determined that the removing defendants had failed to meet their burden of establishing both the requisite amount in controversy (defendants had pleaded only $4.2 million in controversy in their Notice of Removal and had inexplicably ignored attorneys’ fees and punitive damages) and the requisite number of class members. Nevertheless, Judge Limbaugh concluded that CAFA’s Local Controversy Exception demanded remand as well, the only element of that exception at issue being whether the only Missouri defendant – Embarq, serving tiny Orrick, Missouri (population 837) – qualified as a “significant defendant.” In a thorough analysis of Eighth, Ninth, and Third Circuit authority, the Court looked past the undisputed fact that Embarq’s conduct accounted for less than 1% of all claims asserted by the class, and instead focused on the fact that the class complaint alleged the same claims against all defendants, and that the conduct of Embarq was the same conduct alleged against all the defendants. Going forward, proponents of CAFA jurisdiction will be better served drawing substantive distinctions between the relief sought from in-state defendants, as opposed to focusing on a strictly numerical approach.