In Touch Concepts, Inc. v. Cellco Partnership
788 F.3d 98
| 2d Cir. | 2015Background
- Zcom (a former Verizon retail sales agent) sued in New York state court asserting state-law claims on its own behalf and as a putative class alleging fraudulent practices and wrongful termination of the sales-agent relationship.
- Defendants removed under CAFA (28 U.S.C. § 1332(d)) as to class claims and invoked supplemental jurisdiction for individual claims; the case was transferred between SDNY and D.N.J. and back to SDNY.
- After removal Zcom filed a First Amended Complaint that dropped all class allegations and pleaded only individual state-law contract and tort theories challenging Verizon’s termination (despite an express contract clause allowing termination at will on six months’ notice).
- The district court retained jurisdiction post-removal, granted defendants’ Rule 12(b)(6) motions in substantial part, and dismissed Zcom’s claims on the merits; Zcom voluntarily dismissed remaining claims and appealed.
- The Second Circuit affirmed, holding (1) post-removal elimination of class allegations does not defeat CAFA-based jurisdiction and (2) Zcom’s substantive claims failed under New York law (breach, implied covenant, tortious interference), and district-court procedural rulings were not abused.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether post-removal amendment dropping class allegations destroys CAFA jurisdiction | Zcom implicitly argued jurisdiction should be assessed on the operative (amended) complaint, which lacks class allegations | Defendants argued removal was proper under CAFA and post-removal amendment cannot defeat removal jurisdiction | Court held CAFA jurisdiction survives post-removal amendment; district court properly retained jurisdiction |
| Whether Zcom stated a breach of contract claim despite an express termination-for-convenience clause | Zcom argued termination violated express and implied contractual rights and that the clause should not permit the conduct alleged | Verizon argued the agent agreement expressly permitted termination at any time with six months’ notice | Court held the termination clause governed; breach claim failed |
| Whether the implied covenant of good faith and fair dealing supplies obligations contrary to express contract terms | Zcom argued implied covenant prevented Verizon from exercising termination rights in the asserted manner | Verizon argued the implied covenant cannot be used to contradict explicit contractual terms | Court held implied covenant cannot override express terms; claim failed |
| Whether tortious interference and other tort claims were adequately pleaded | Zcom alleged fraudulent scheme and scapegoating but offered limited specific factual allegations | Verizon argued allegations were conclusory and failed Twombly/Iqbal plausibility standards | Court held tort claims lacked specific plausible facts and failed to state a claim |
Key Cases Cited
- Arbaugh v. Y&H Corp., 546 U.S. 500 (jurisdictional defects may be raised at any stage)
- Rockwell Int’l Corp. v. United States, 549 U.S. 457 (post-removal amendments that eliminate federal-question jurisdiction generally do not defeat jurisdiction)
- St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283 (post-removal reductions in amount in controversy do not defeat diversity jurisdiction)
- In re Burlington N. Santa Fe Ry. Co., 606 F.3d 379 (CAFA jurisdiction survives post-removal elimination of class allegations)
- Blockbuster, Inc. v. Galeno, 472 F.3d 53 (CAFA’s scope and purpose expanding class-action diversity jurisdiction)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (pleading standard requiring plausibility)
- Murphy v. American Home Prods. Corp., 448 N.E.2d 86 (N.Y. law: implied covenant cannot override express contract terms)