In Westerfeld v. Independent Processing, Inc., ___ F.3d ___, 2010 WL 3619819 (8th Cir. 2010), Marlene Westerfeld, a Missouri citizen, filed a Missouri state-court class action against Independent Processing, a Missouri limited liability company, and Provident Funding, a California limited partnership. Westerfeld alleged separate classes against the two defendants, claiming they charged unlawful processing and administrative fees in connection with residential mortgages.

The California defendant removed the case pursuant to CAFA. Plaintiff moved to remand, citing CAFA’s “local-controversy” exception. The local-controversy exception requires a district court to decline jurisdiction over a class action if (a) more than two-thirds of the class members are citizens of the state in which the action was originally filed, (b) at least one “significant” defendant is a citizen of the state in which the class action was originally filed, (c) the principal injuries were incurred in the state in which the action was filed, and (d) no other class action alleging similar facts was filed in the three years prior to the commencement of the current class action.

Provident opposed remand by arguing that Missouri-citizen Independent Processing was not a significant defendant. Evidence showed that Independent serviced only 56 loans in Missouri, while Provident originated 3,894 Missouri loans. Based on these numbers and Westerfeld’s damage allegations, Provident estimated that Independent charged $16,800 and Provident charged $2.7 million in contested fees. Considering the case in its entirety, Provident argued that Independent was not a significant defendant.

The district court disagreed and remanded the case, finding that Independent was necessarily a significant defendant with regard to the class claims Westerfeld asserted separately against Independent. The court observed that “[e]ven if [application of the exception] was not as clear as it is, any doubt ... must be resolved in favor of remand.” 2010 WL 3619819 at *2.

The Eighth Circuit vacated the remand order, finding the district court twice applied improper standards of review. First, resolving doubts in favor of remand was contrary to CAFA’s objective of expanding federal jurisdiction over major federal class actions. Once Provident established that CAFA removal was appropriate, Westerfeld bore the burden of establishing that an exception to CAFA jurisdiction applied. The district court should have resolved any doubts about the applicability of the exception against, rather than in favor of, the party seeking remand. 2010 WL 3619819 at *2.

Second, the district court erred by analyzing whether Independent was a significant defendant separately for each class alleged in the complaint. CAFA defines class as “all of the class members in a class action.” 28 U.S.C. § 1332(d)(1)(A) (emphasis added). The plaintiff class described in the local-controversy exception, therefore, includes all of the class members in the class action as a whole. “It follows, then, that whether an in-state defendant is a significant defendant for purposes of the local-controversy exception must be determined by considering the claims of ‘all of the class members in [the] class action’ and not by considering the claims of class members on a class-by-class basis.” 2010 WL 3619819 at *4. The Eighth Circuit declined to rule on whether Independent was a significant defendant, leaving that determination to the district court on remand.

Westerfeld is an important decision for defendants seeking a federal forum, emphasizing that CAFA is to be interpreted liberally in favor of expanding federal court jurisdiction over interstate class actions.