Kress Stores of Puerto Rico, Inc. v. Wal-Mart Puerto Rico, Inc., 121 F.4th 228

Background

In March–May 2020 Puerto Rico issued executive orders closing most retailers for 72 days but exempting supermarkets and pharmacies; orders allowed residents to leave home to purchase food, pharmaceuticals, and "basic necessity products."
Plaintiffs are local Puerto Rico merchants who closed under the orders; defendants Wal‑Mart Puerto Rico and Costco (both qualifying as supermarkets) remained open and sold broad inventories, including alleged "non‑essential" goods.
Plaintiffs filed a putative class action in Puerto Rico court asserting unfair competition (Article 1802/unjust enrichment/equity) based on defendants' sales during the orders; Costco removed under CAFA.
The district court denied Costco’s motion to sever, denied plaintiffs’ remand motion, dismissed some claims, denied class certification, then granted summary judgment for defendants on the remaining unfair‑competition claim.
The First Circuit reversed the district court’s denial of remand, holding (1) CAFA jurisdiction persists after denial of class certification, (2) the home‑state exception did not apply because Costco was a "primary" defendant, but (3) the local‑controversy exception did apply because Wal‑Mart’s alleged conduct formed a significant basis of the claims; the court also found no abuse of discretion in denying severance and remanded the whole action to Puerto Rico court, vacating the judgment on the merits.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether CAFA jurisdiction survives district court denial of class certification	CAFA jurisdiction ends after denial of certification and case must be remanded	CAFA applies based on status at removal and persists despite later denial	Held: CAFA jurisdiction continues after denial of class certification (statutory text and circuit consensus).
Whether CAFA home‑state exception (§1332(d)(4)(B)) bars removal because "primary defendants" are local	All primary defendants are Puerto Rico citizens so home‑state exception applies	Costco is non‑local and is a "primary" defendant	Held: Home‑state exception does not apply; Costco is a primary defendant.
Whether CAFA local‑controversy exception ("a significant basis") applies because a local defendant's conduct significantly supports the claims	Wal‑Mart’s local conduct is a significant basis (plaintiffs rely on Wal‑Mart statements and local impact)	Plaintiffs failed to show Wal‑Mart’s conduct was distinguishable or more significant than non‑local defendants	Held: "A significant basis" is a comparative test that can be satisfied even when local and non‑local defendants are alleged to have engaged in identical conduct; Wal‑Mart meets the element, so the local‑controversy exception applies.
Whether district court abused discretion by denying Costco’s motion to sever under Rules 20/21	Severance was required because claims against Costco are separate and joinder was improper; denial deprived Costco of a federal forum	Claims against Costco and Wal‑Mart arise from the same series of transactions (COVID orders) and common issues justify joinder; no abuse of discretion	Held: No abuse of discretion; logical relationship/aggregate‑of‑operative‑facts test supports joinder, so the motion to sever was properly denied.

Key Cases Cited

F5 Capital v. Pappas, 856 F.3d 61 (2d Cir. 2017) (federal courts retain CAFA jurisdiction after post‑removal denial of class certification)
Coba v. Ford Motor Co., 932 F.3d 114 (3d Cir. 2019) (CAFA jurisdiction anchored at removal; (d)(8) timing language does not mandate remand after decertification)
Singh v. American Honda Finance Corp., 925 F.3d 1053 (9th Cir. 2019) (test for who counts as a "primary defendant" under CAFA home‑state exception)
Kaufman v. Allstate New Jersey Ins. Co., 561 F.3d 144 (3d Cir. 2009) (comparative test for whether a local defendant's alleged conduct is "a significant basis" for CAFA local‑controversy exception)
In re Hannaford Bros. Co. Customer Data Sec. Breach Litig., 564 F.3d 75 (1st Cir. 2009) (plaintiff bears burden to establish CAFA exceptions; interpretive guidance)
Iglesias v. Mutual Life Ins. Co. of New York, 156 F.3d 237 (1st Cir. 1998) ("logical relationship" / "same aggregate of operative facts" test for transaction/occurrence joinder analysis)
In re EMC Corp., 677 F.3d 1351 (Fed. Cir. 2012) (caution in joinder where multiple independent defendants allegedly infringed the same IP; need overlapping operative facts)
Opelousas Gen. Hosp. Auth. v. FairPay Solutions, Inc., 655 F.3d 358 (5th Cir. 2011) (example where local defendant's role was peripheral and did not satisfy "a significant basis")