In this week's Alabama Law Weekly Update, we consider two recent decisions of the U.S. Court of Appeals for the Eleventh Circuit, one concerning the impact of a lack of standing on a lawsuit removed to federal court from state court, and the other addressing the applicability of a state law prohibition on private class actions in federal court.
Doug Esteves and Daniela Esteves vs. Suntrust Banks, et al, 2015 WL 4100064 (11th Cir. July 8, 2015)
In this decision, the U.S. Court of Appeals for the Eleventh Circuit held that a lawsuit removed from state court must be remanded to state court if it is found that the plaintiff therein lacks standing.
Doug and Daniela Esteves filed suit against their home lender and loan servicer in Florida state court. The plaintiffs' complaint contained only one count – a claim for declaratory judgment, declaring that their defendants had violated a variety of federal consumer protection laws, including the Truth in Lending Act, the Real Estate Settlement Procedures Act, and the Fair Debt Collection Practices Act. The Esteves' fundamental assertion was that the chain of title was not properly documented, and that a foreclosure which was initiated against the Esteves arising from such chain of title was wrongful. The defendants removed the case to the U.S. District Court for the Middle District of Florida and promptly filed a motion to dismiss.
The plaintiffs moved to remand the case to state court. The federal district court denied the motion to remand and granted the motion to dismiss. Among the reasons noted for granting the motion to dismiss was plaintiffs' lack of standing to file suit. The plaintiffs appealed the judgments granting the motion to dismiss and denying the motion to remand. The Eleventh Circuit reversed, but on grounds that had not been identified by any of the parties.
The Eleventh Circuit agreed with the lower court's conclusion that the plaintiffs had no standing. Specifically, the court found that, where a plaintiff files suit for a declaratory judgment, to demonstrate standing the plaintiff must allege facts from which it appears there is a substantial likelihood that he will suffer injury in the future if declaratory relief is not granted. Because the loan relationship complained of had been terminated by foreclosure, there was no concern that any chain of title issue (and related consumer protection legal violations) would cause any harm in the future. Because there was no standing to bring the declaratory judgment, the Eleventh Circuit concluded there was no jurisdiction for the lower court to dismiss the case.
Accordingly, instead of supporting the defendants' motion to dismiss, the fact that the plaintiffs lacked standing actually mandated that their motion to remand be granted. The Eleventh Circuit reversed with instructions to remand in accordance with that finding.
Lisk v. Lumber One Wood Preserving, LLC, 2015 WL 4139740 (11th Cir. July 10, 2015)
In this decision, the U.S. Court of Appeals for the Eleventh Circuit addressed whether the restriction on private class actions in the Alabama Deceptive Trade Practices Act prohibited a private class action filed in federal court, and held that it did not.
The Alabama Deceptive Trade Practices Act, Alabama Code § 8–19-1, et seq (“ADTPA”) prohibits a variety of deceptive practices, including the misrepresentation of the characteristics or qualities of goods. An individual may file suit to recover damages for violation of the ADTPA; however, the ADTPA prohibits an individual from filing a class action, and provides that only the State of Alabama Attorney General or an Alabama state district attorney may initiate a class action.
Notwithstanding the proscription on private class actions, the plaintiff in Lisk filed a class action in federal district court under the ADTPA. At issue was the labeling of certain wood products as having been treated, when in fact the products were allegedly untreated. The defendant in Lisk filed a motion to dismiss the class action premised on the restriction on private class actions in the ADTPA. The district court agreed and dismissed the case.
On appeal, the Eleventh Circuit reversed. The court's analysis began by noting the apparent conflict between the ADTPA restriction on class actions and Federal Rules of Civil Procedure Rule 23, which permits class actions under the appropriate circumstances without any subject matter restriction that would apply in this case. Per the terms of the Rules Enabling Act, the U.S. Supreme Court has the authority to promulgate general rules of practice and procedure governing cases in federal courts. Here, the court found that, where a rule of practice and procedure under the Rules Enabling Act conflicts with the law of a state, the federal rule governs unless its application abridges, enlarges, or modifies a substantive right. Accordingly, the Eleventh Circuit held that the ADTPA's class restriction was superseded by Federal Rule 23, and reversed the lower court's judgment of dismissal.