930 F. Supp. 2d 1035
E.D. Mo.2013Background
- Plaintiffs filed a putative class suit in Missouri state court seeking to impose business license taxes on telecom providers; defendants removed to federal court on CAFA grounds (June 21, 2012) and a remand motion was briefed by July 17, 2012.
- Plaintiffs allege Missouri municipalities impose license taxes and that defendants owe back taxes on gross receipts from various telecom revenue sources over the preceding five years.
- Plaintiffs define the class as all Missouri cities/political subdivisions with an ordinance imposing a business/occupational tax on telephone service, estimating at least 40 municipalities.
- Defendants assert CAFA jurisdiction: minimal diversity, 100+ class members, and >$5 million in controversy.
- Plaintiffs argue CAFA thresholds are not met (no proof of 100 members or sufficient amount) and urge CAFA’s home-state/local controversy carve-outs.
- Court remands the action to Missouri state court, applying CAFA standards and ultimately the local controversy exception, after concluding CAFA numbers/amount were not proven and the case is truly local in nature.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CAFA requirements for removal are satisfied | Plaintiffs allege class may be <100 and amount uncertain | Defendants contend >100 members and >$5M | CAFA thresholds not met on the record; remand analyzed further under local controversy exception |
| Whether the local controversy exception applies to remand | The action is local in focus with state interests | Embarq not a significant defendant; local controversy may fail | Local controversy exception satisfied; remand to state court |
| Whether franchise fees and business license taxes may be aggregated for CAFA amount | Franchise fees and licenses are distinct; could drive >$5M | They are interchangeable for purposes of CAFA | Not treated as the same; lack of clear, separate damages prevents CAFA amount theory from sustaining jurisdiction |
| Whether Embarq constitutes a 'significant defendant' under Kaufman/Westerfeld | Embarq is a significant defendant because all defendants are alleged to share conduct; seeks same relief | Embarq’s size and scope render it non-significant | Court finds Embarq a significant defendant for local controversy analysis; supports remand |
Key Cases Cited
- Hargis v. Access Capital Funding, LLC., 674 F.3d 783 (8th Cir. 2012) (CAFA jurisdictional elements must be proven by preponderance)
- Westerfeld v. Indep. Processing, LLC, 621 F.3d 819 (8th Cir. 2010) (local controversy exception considerations and presiding standards)
- Bell v. Hershey Co., 557 F.3d 953 (8th Cir. 2009) (preponderance standard for CAFA amount in controversy; burden shifting)
- Kaufman v. Allstate New Jersey Ins. Co., 561 F.3d 144 (3d Cir. 2009) (significant defendant analysis under local controversy; nine-factor framework)
- Coleman v. Estes Express Lines, 631 F.3d 1010 (9th Cir. 2011) (plain-language reading of CAFA local controversy; 'sought' and 'alleged' focus in complaint)