The Tenth Circuit Court of Appeals has determined that neither the state-action provision nor the local-controversy exception to the Class Action Fairness Act (CAFA) requires the remand to state court of a putative class action filed by New Mexico state employees against an insurance company, a state agency and a state resident who managed the agency’s account with the insurance company. Woods v. Std. Ins. Co., No. 13-2160 (10th Cir., decided November 10, 2014).
CAFA’s state-action provision excludes from federal jurisdiction cases in which the primary defendants are states and related entities. The local-controversy exception requires that federal courts decline to exercise jurisdiction where a local defendant’s alleged conduct forms a significant basis for the asserted claims and from whom the plaintiffs seek significant relief. The plaintiffs here alleged in state court that they paid for insurance coverage through payroll deductions and premiums under a policy issued by the insurance company defendant, but did not receive the coverage for which they paid or were denied coverage entirely. The defendants, who removed that action to federal court, were the Oregon-based insurance company, the state agency that contracted with the insurance company and administers benefits under the policy, and a New Mexico-based insurance company employee who managed the agency’s account and was allegedly responsible for providing account management and customer service to the plaintiffs.
According to the court, under a plain-language reading of CAFA, the state-action provision, which excepts from jurisdiction those class actions in which “the primary defendants are States, State officials, or other governmental entities,” shows that Congress intended the provision “to preclude CAFA jurisdiction only when all of the primary defendants are states, state officials, or state entities. If Congress had intended otherwise, it could have expressly stated that federal CAFA jurisdiction shall not apply to any class action in which ‘a primary defendant is’ a state, state official, or state entity.”
As to whether suit against the New Mexico-based insurance company employee was a defendant from whom significant relief was sought by members of the plaintiff class and whose alleged conduct formed a significant basis for the claims asserted, the court determined that her role was not enough, “standing alone, to meet the significant defendant requirement. Instead, Ms. Quintana must also be a real target of the litigation, rather than an isolated role player in the alleged scheme implemented by Standard and the Division.” The plaintiffs apparently mentioned her alleged unlawful conduct in just one paragraph of the complaint. “Absent from the complaint is any allegation of conduct by Ms. Quintana illustrating she played a significant role in the Division’s and Standard’s alleged scheme. . . . Thus, our holistic review of the complaint reveals Plaintiffs’ primary focus is the Division’s and Standard’s creation and implementation of a scheme to accept and retain premiums without providing the paid-for coverage.” The plaintiffs also failed to seek significant relief from this defendant.
The court remanded the matter for the court to consider factual disputes as to the amount in controversy, stating that until the matter is resolved it is unable to determine whether the defendants had established jurisdiction in federal court under CAFA.