Consumer Finance Insights
October 30, 2017

Ninth Circuit Reverses CAFA Remand in Call Recording Case

On October 20, 2017, the Ninth Circuit reversed the Southern District of California’s remand of a putative class action alleging that defendant Monterey Financial Services improperly recorded calls to individuals in California and Washington.  In Brinkley v. Monterey Financial Services, Inc., the Ninth Circuit held that the plaintiff had not demonstrated that two-thirds of her proposed class were citizens of California, as required to establish the home-controversy exception to the Class Action Fairness Act (CAFA).  Defendants faced with class actions filed in state courts should evaluate Brinkley as they consider removal.

In Brinkley, the plaintiff (a citizen of Washington) alleged that the defendant (headquartered in California) recorded calls with her without giving her notice, in alleged violation of California and Washington state law.  The defendant removed the case to federal court under CAFA, which grants federal district courts jurisdiction over class actions that involve more than one hundred putative members, an amount in controversy over $5,000,000, and where any one putative class member is a citizen of a different state than any defendant.  The plaintiff sought a remand under the home-controversy exception to CAFA.  That exception deprives the district courts of jurisdiction when two-thirds of the putative class are citizens of the state where the action was filed.  The Southern District of California delayed ruling on the plaintiff’s motion to allow jurisdictional discovery.  In support of her remand argument, the plaintiff sought and obtained discovery regarding the number of putative class members who had a California or Washington mailing address.

On appeal, the defendant argued that the plaintiff’s evidence was insufficient to establish the applicability of the home-controversy exception.  The Ninth Circuit agreed.  Explaining that the plaintiff had provided no evidence regarding a group of individuals who were present in California or Washington when they received calls from the defendant but who were not citizens of California.  These individuals, the court reasoned, had not been captured in the plaintiff’s analysis.  And because the plaintiff’s class citizenship analysis failed to account for putative class members captured by her class definition, the court held that the plaintiff had not met her burden.  The court rejected the plaintiff’s argument that the issue was a red herring because the defendant failed to produce any evidence of a single putative class member who was a citizen of another state but was called while in California or Washington, explaining that the burden was hers alone because she sought the remand.

State court class action defendants must consider whether removal to federal court is both possible and desirable from a strategic standpoint.  Brinkley provides two key data points for consideration under such circumstances.  First, defendants must consider whether the risk of potentially costly and broad jurisdictional discovery into the CAFA elements (especially class size and amount at issue) might be open to plaintiffs seeking to remand and whether that risk is worth the potential benefits.  Second, defendants must look carefully at plaintiffs’ proposed class definitions to see whether disconnects between those proposed definitions and CAFA’s provisions might assist in staving off remand.