The U.S. District Court for the District of Columbia denied a motion to remand an action removed pursuant to the Class Action Fairness Act (CAFA), where the plaintiff failed to show CAFA’s local controversy exception applied.  Plaintiff sued a Washington, D.C. health club and several others for allegedly fraudulently taking out lines of credit against customers and billing against them without the customers’ knowledge or consent.

The Plaintiff conceded minimal diversity, and the Court found the Defendant had established the requisite class size and amount in controversy, in part, by way of Plaintiff’s own allegations, and through a declaration.  At issue was the applicability of CAFA’s local controversy exception.

28 U.S.C. § 1332(d)(4)(A), provides:

(4) A district court shall decline to exercise jurisdiction under paragraph (2)–

(A)(i) over a class action in which–

(I) greater than two-thirds of the members of all proposed plaintiff classes in the aggregate are citizens of the State in which the action was originally filed;

(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; and

(III) 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

(ii) 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; or

(B) two-thirds or more of the members of all proposed plaintiff classes in the aggregate, and the primary defendants, are citizens of the State in which the action was originally filed.

The local controversy exception applies when the class is mostly local, the action is against at least one real in-state defendant whose alleged conduct is central to the class claims and from whom the class seeks significant relief, the alleged injuries occurred within the forum, and no other similar class actions have been filed against the defendant.  The parties agreed the principal alleged injuries occurred in D.C. and that no other similar class actions had been filed during the previous three years.

The Court found several of the Defendants were real, in-state Defendants, because their principal places of business were in and they were organized under the laws of D.C., that Plaintiff sought significant relief from those Defendants, and that their conduct formed a significant basis for the claims asserted.

However, the Court found the Plaintiff failed to establish that greater than two-thirds of the proposed class members are D.C. citizens.  Plaintiff relied solely on her own allegations and definition of a class of customers “in the District of Columbia,” which the Court explained does not directly translate to “customers who are citizens of the District of Columbia,” because some such customers may have moved from D.C. or may never even have been D.C. citizens, noting that some health clubs have members who work in D.C., but live in Maryland or Virginia.  As a result, the Court denied Plaintiff’s motion to remand, but allowed the Plaintiff to conduct limited expedited discovery on the issue of class citizenship.

McMullen v. Synchrony Bank, et al., Case No. 14-1983 (D.D.C. Feb. 13, 2015).