Douglas Atwood v. Stephen Peterson
936 F.3d 835
| 8th Cir. | 2019Background
- Plaintiff Douglas Atwood (Arkansas) sued Walgreens (Illinois) and two Arkansas district managers, alleging Walgreens’ Balance Rewards program violated Arkansas Code § 4-75-501 by giving discounts to rewards-card holders and denying them to nonparticipants.
- Atwood alleged he paid more than another customer at three Arkansas stores because he did not present a rewards card; he sought class relief and named the two local managers as jointly and severally liable.
- Defendants removed under CAFA; Atwood moved to remand invoking CAFA’s local controversy exception, arguing the local managers were "significant defendants." Defendants argued the managers were fraudulently joined and submitted affidavits that pricing/program decisions were made at corporate headquarters.
- The district court considered the affidavits, denied remand, and later dismissed Atwood’s complaint on the merits, reasoning Atwood declined the discounted price by not enrolling in the program.
- The Eighth Circuit affirmed: it held the district court properly considered extrinsic evidence in resolving CAFA jurisdiction, the local managers were not significant defendants, CAFA removal was proper, and the Arkansas Supreme Court’s decision in Rhodes v. Kroger foreclosed Atwood’s statutory claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CAFA’s local controversy exception applies because local managers are "significant defendants" | Atwood: district managers implemented the program and are independently liable under the Arkansas statute, so their conduct is a significant basis for the claims | Defendants: managers were nominal/agent-level actors; corporate headquarters set and controlled the rewards program and pricing; affidavits show managers lacked discretion | Held: managers are not significant defendants; local controversy exception does not apply; CAFA removal proper |
| Whether court may consider extrinsic evidence (affidavits) when deciding CAFA local-defendant significance | Atwood: court must rely only on the complaint’s allegations ("alleged conduct") | Defendants: court may examine factual record/affidavits to resolve jurisdictional questions and avoid sham pleading | Held: Court may consider affidavits and other evidence to resolve jurisdictional questions (citing Land and related authority) |
| Standing / Article III jurisdiction | Atwood argued merits show injury; implied challenge that dismissal lacked Article III basis | Defendants: any injury resulted from Atwood’s choice not to enroll, undermining merits but not standing | Held: No Article III defect; standing is independent of merits; court had jurisdiction to decide merits |
| Merits: whether Balance Rewards violated Ark. Code § 4-75-501 | Atwood: rewards program unlawfully denied discounts to non-enrolled purchasers | Defendants: offering a discounted price to enrolled customers does not violate the statute when participation is voluntary; Atwood’s refusal to enroll caused his differential pricing | Held: Dismissal affirmed under Rhodes v. Kroger — plaintiffs’ failure to enroll meant no viable statutory claim; complaint dismissed with prejudice |
Key Cases Cited
- Westerfeld v. Indep. Processing, LLC, 621 F.3d 819 (8th Cir. 2010) (framework for evaluating "significant basis" and local-defendant comparison under CAFA)
- Land v. Dollar, 330 U.S. 731 (1947) (district courts may examine affidavits and other evidence when resolving jurisdictional questions)
- Warth v. Seldin, 422 U.S. 490 (1975) (standing inquiry is distinct from the merits)
- Evans v. Walter Indus., Inc., 449 F.3d 1159 (11th Cir. 2006) (considering extrinsic evidence in local-controversy CAFA analysis)
- Kaufman v. Allstate N.J. Ins. Co., 561 F.3d 144 (3d Cir. 2009) (comparing alleged conduct of local defendants to all defendants in CAFA local-defendant analysis)
- Rhodes v. Kroger Co., 575 S.W.3d 387 (Ark. 2019) (Arkansas Supreme Court holding grocery rewards program did not violate § 4-75-501 where plaintiffs declined to join the rewards program)