Addison Automatics, Inc. v. Hartford Casualty Insurance
2013 U.S. App. LEXIS 20109
| 7th Cir. | 2013Background
- Addison brought and settled a state-law class action against Domino for junk faxes; the settlement included a nominal $18 million judgment in favor of the certified class and an assignment of Domino’s claims against its insurers to the class "as represented by Plaintiff and its attorneys."
- State court certified the class and approved the settlement; the assignment language made Addison’s role as assignee contingent on remaining the class representative.
- Addison then filed (and voluntarily dismissed) a first suit against Hartford seeking a declaratory judgment about Hartford’s duty to defend/indemnify. That first filing expressly described class claims.
- Addison filed a second state-court declaratory suit against Hartford styled as an "individual" action and disclaimed any class status; Hartford removed under CAFA (28 U.S.C. §§ 1332(d), 1453).
- District court remanded, treating Addison’s pleading disclaimer as dispositive; the Seventh Circuit granted appeal and reversed, holding the suit is, in substance, a removable class action because Addison can only pursue the assigned insurer claims as class representative and owes fiduciary duties to the class.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the follow-on declaratory action is a "class action" removable under CAFA | Addison: complaint disclaims class status; suit is individual so CAFA does not apply | Hartford: assignment and settlement make Addison the class representative entitled to pursue insurer claims; suit is substantively a class action | Held: removable under CAFA; substance controls over pleading form |
| Whether Addison has standing to pursue insurer claims individually | Addison: asserting individual capacity; no need to "reconstitute" the class | Hartford: assignment is to the class (as represented by Addison); only Addison, as class rep, can pursue those assigned claims on class’s behalf | Held: Addison’s standing to pursue the claims derives from its role as class representative, not as a freestanding individual plaintiff |
| Whether fiduciary duties constrain Addison from litigating individual claims | Addison: seeks to avoid Rule 23 fiduciary obligations by pleading individual suit | Hartford: class representative duties continue in separate litigation affecting the class; risk of conflict or inadequate representation if allowed | Held: fiduciary duties persist; allowing individual suit would imperil class interests and breach duties |
| Whether courts should "look through" pleadings to substance despite Addison’s pleading choices | Addison: rely on complaint language and LG Display precedent to limit inquiry to pleadings | Hartford: courts may examine settlement, assignment, and practical effects to determine CAFA jurisdiction | Held: courts may look beyond labels to substance; LG Display distinguished and does not bar considering underlying reality |
Key Cases Cited
- United States v. Ruiz, 536 U.S. 622 (jurisdictional threshold; federal courts determine their own jurisdiction)
- Back Doctors Ltd. v. Metropolitan Property & Cas. Ins. Co., 637 F.3d 827 (7th Cir.) (named plaintiff’s fiduciary duty to class)
- CIGNA Healthcare of St. Louis, Inc. v. Kaiser, 181 F. Supp. 2d 914 (N.D. Ill.) (class representative’s fiduciary duties carry into separate litigation)
- Sondel v. Northwest Airlines, Inc., 56 F.3d 934 (8th Cir.) (state judgment against class reps binding in parallel federal class claims where fiduciary duties exist)
- Travelers Property Casualty v. Good, 689 F.3d 714 (7th Cir.) (state-court citation action satisfying class judgment removable under CAFA)
- In re Burlington Northern Santa Fe Ry., 606 F.3d 379 (7th Cir.) (amending complaint after CAFA removal does not defeat jurisdiction)
- Creative Montessori Learning Centers v. Ashford Gear LLC, 662 F.3d 913 (7th Cir.) (risks of counsel or representatives sacrificing class interests)
- Standard Fire Ins. Co. v. Knowles, 133 S. Ct. 1345 (Supreme Court) (limitations in plaintiffs’ filings can suggest adequacy issues relevant to class matters)
- LG Display Co. v. Madigan, 665 F.3d 768 (7th Cir.) (parens patriae actions differ from Rule 23 class actions)
- Bullard v. Burlington Northern Santa Fe Ry. Co., 535 F.3d 759 (7th Cir.) (substance over form in CAFA jurisdictional analysis)