ELLITHY v. HEALTHCARE TRAINING INSTITUTE, INC.

2:12-cv-06209 | D.N.J. | Jun 21, 2013

NOT FOR PUBLICATION UNITED STATES DISTRICT COIiRT DISTRICT OF NEW JERSEY NANCY ELLITHY and all others similarly Civil Action No. 2:12-cv-06209 (CCC)(JAE) situated, Plaintif`f`s, OPINI()N AND REPORT AND RECOMMENDATION v. HEALTHCARE TRAINING INSTITUTE, INC., a New Jersey for-profit corporation, BASHIR MOHAMMAD, M.D., JOY CROWLEY and JOHN DOE 1 THROUGH X (X being a number as yet unknown, being fictitious persons or corporations whose identities are currently unknown), Def`endants. This matter comes before the Court upon motion (ECF No. 8) by plaintiffs Nancy Ellitlly (“Ellithy”) and all others similarly situated (“Plaintiffs”) to remand this case to the Superior Court of New Jersey, Law Division, Union County pursuant to 28 U.S.C. §1447.l The Colkt held oral argument on the Motion on January 11, 2013. After carefully considering tle submissions of the parties, and based upon the following, it is the recommendation of this Colit that Plaintiffs’ motion to remand be DENIED. 1 Defendants also filed a motion to strike the certification of Nancy Ellithy (the “Ellithy Certification”) that s submitted in support of Plaintist Motion to Remand. The Court finds that the Ellithy Certification is flawed in t o respects. First, Ellithy’s statements, if they are offered for their truth, are premised upon inadmissible hear y testimony. Second, if these statements are not offered for their truth, but rather identify conversations that “allo d they are improper insomuch as they are not based on her personal knowledge and irrelevant insomuch as they do t establish citizenship of putative class members at the time the Complaint was filed. However, even considering e facts set forth in the Ellithy Certification, the Court has decided that such facts do not sustain Plaintiffs’ burden f establishing that a CAFA Exception (as defined below) applies. Accordingly, the motion to strike (ECF No. 13 is denied as moot. I. BACKGROUND. This action involves allegations that defendants Healthcare Training Institute, Inc. (“HTI”), Bashir Mohammad, M.D., and Joy Crowley (collectively, “Defendants”) fraudulent y sold Plaintif`fs educational programs of study based on the false premise that, upon graduation from the program, Plaintiffs would be qualified as certified technicians in the field of Diagnostjic Medical Sonography; however, in reality, Plaintiffs Would not be so qualified because tile program Was not adequately certified and failed to contain sufficient clinical hours. (Br. Supp>. Mot. Remand 2, ECF No. 8-1). A. Removal from State Court. Plaintiff filed the original class action complaint (the “Complaint”) on or about Augwt 20, 2012, in the Superior Court of New Jersey, Law Division, Union County. (Notice of Removal, Ex. A, ECF No. 1). The Complaint alleged various state law causes of action, including violations of the New Jersey Consumer Fraud Act, common law fraud, breach of contract and unjust enrichment On October 3, 2012, Defendants filed a notice of removal (the “Notice of Removal”), and based federal jurisdiction on diversity pursuant to 28 U.S.C. § 1332(d) and the Class Actian Faimess Act, 28 U.S.C. § 1453 (“CAFA”). The Notice of Removal alleged that CAFA s minimal diversity requirement Was met because the proposed class consisted of all “students Wllo . . . attended HTI’s courses conducted in New Jersey and Who graduated or expected to graduate from HTI in the years 2009 - 2011.” '(lc_i; at 11 12). According to Defendants, all of which ake residents of New Jersey, HTI is aware of individual members of the proposed class who aie citizens and/or residents of other states, including North Carolina, Virginia, Pennsylvania and New York. Thus, Defendants argued minimal diversity existed. The case Was removed to tins Court. Thereafter, Plaintiff moved to remand arguing that Defendants did not sustain thar burden of establishing CAFA jurisdiction Plaintif`fs argued that Defendants relied an “speculation and assumptions” concerning the citizenship of potential plaintiffs, and did not establish that any such plaintiff Was not a citizen of New Jersey. In addition, Plaintif`fs argued that even if this Court finds that Defendants’ demonstrated minimal diversity, CAFA nevertheless requires a district court to decline jurisdiction over a proposed class action if eithbr of two exceptions apply, namely (i) the local controversy exception, 28 U.S.C. § 1332(d)(4)(A) (the “Local Controversy Exception”); and/or (ii) the home state exception, § 1332 (d)(4)(B) (t e “Home State Exception”) (together, the CAFA Exceptions”).2 According to Plaintiffs, t e Complaint “specifically limits the class to students Who are residents of New Jersey3 anll, therefore, the CAFA Exceptions apply. (Br. Supp. Mot. Remand 3, ECF No. 8-1). Defendan$, however, countered that once they met their burden of establishing minimal diversity, the burden shifted to Plaintiffs to prove, by a preponderance of the evidence, that either of the CAFA Exceptions apply. (Opp. Br. 4, ECF No. 16). B. Jurisdictional Discover_v Establishing that TWo-Thirds of the Putatii _e_ Class are Citizens of NeW Jersey. In their opposition to the Motion to Remand, Defendants argued that the CAFA Exceptions do not apply because Plaintiffs failed to prove that two-thirds of the putative class 2 In the altemative, Plaintiffs’ argued that even if the Court determines that neither of the CAFA Exceptions applyj it should nevertheless exercise its discretion to decline to exercise jurisdiction because the instant action “uniqu y affects” New Jersey, which is a third exception to CAFA jurisdiction The Court declines to exercise su h jurisdiction based on Plaintiffs’ failure to meet their burden of establishing that one to two-thirds of the putati 'e class are citizens of New Jersey, as is discussed more fully in the following paragraphs 3 Def`endants disagreed that the Complaint specifically limits the putative class to “residents ofNew Jersey.” (Oppl Br. 3-4, ECF No. 16). members are citizens of New Jersey. (Opp. Br. 4, ECF No. 16). According to Defendants, a class members’ citizenship for purposes of diversity jurisdiction is determined as of the date bf V the filing of the complaint - n_ot their citizenship at the time they attended HTI. (I_d_. at 5 Defendants argued that the evidence produced by Plaintiffs, namely the Certification of Ellithy, failed to establish the two-thirds requirement because it did not address the citizenship of amy putative class members as of the date the Complaint Was filed. (I_471 F.3d 469" date_filed="2006-12-15" court="3rd Cir." case_name="Morgan v. Gay">471 F.3d 469, 473 (3d Cir. 2006). Within CAFA, there are two exceptions that direct district courts to decline jurisdiction bn favor of the appropriate state court, namely the Local Controversy Exception, § 1332(d)(4)(A) and the Home State Exception, § 1332 (d)(4)(B). _S_e_e Dicuio v. Brother Int’l Corp., Civ. A. Np. 11-1447 (FLW), 2011 WL 5557528, *1 (D.N.J. Nov. 15, 2011). The Home State Exception provides that a district court must decline to exercise jurisdiction where “two thirds or more of all proposed plaintiff classes in the aggregate, and the primary defendants, are citizens of the State in Which the action was originally filed.” 28 U.S.( . § 1332(d)(4)(B). If a class action meets these requirements, a district court must remand the cam back to the state court where it was originally filed. Dicuio v. Brother lnt'l Corp., 2011 WL 5557528 at *2. Importantly, the party seeking to remand the suit back to state court bears the burden of meeting the home state exception requirements Ld. (citing Kaufman v. Allstate N. Ins. Co. 561 F.3d 144" date_filed="2009-03-26" court="3rd Cir." case_name="Kaufman v. Allstate New Jersey Insurance">561 F.3d 144, 153 (3d Cir. 2009), Serrano v. 180 Connect, Inc., 478 F.3d 1018" date_filed="2007-02-22" court="9th Cir." case_name="Serrano v. 180 Connect, Inc.">478 F.3d 1018, 1034 (9th Cir. 2007); Hart v. FedEx Ground Package Svs. Inc., 457 F.3d 675" date_filed="2006-08-09" court="7th Cir." case_name="Hart v. FedEx Ground Package System Inc.">457 F.3d 675, 680-81 (7th Cir. 2006¢; Frazier v. Pioneer Ams. LLC, 455 F.3d 542" date_filed="2006-07-06" court="5th Cir." case_name="Frazier v. Pioneer Americas LLC">455 F.3d 542, 546 (5th Cir. 2006); Evans v. Walter Indus., Inq¢, 449 F.3d 1159" date_filed="2006-05-22" court="11th Cir." case_name="Isaiah Evans v. Walter Industries">449 F.3d 1159, 1165 (1 lth Cir. 2006)). j Similarly, the Local Controversy Exception also requires a two-thirds showing, providirg that a district court must remand when more than two-thirds of the proposed class are citizens c f the state in which the action was originally filed.4 § Again, the party seeking removal beads the burden of demonstrating citizenship. § (citing Kaufman 561 F.3d 144" date_filed="2009-03-26" court="3rd Cir." case_name="Kaufman v. Allstate New Jersey Insurance">561 F.3d at 153). 4 The Local Controversy Exception, 28 U.S.C.A. § l332(d)(4)(B), provides: (4) A district court shall decline to exercise jurisdiction under paragraph (2)-- (A)(i) over a class action in which-- (I) greater than two-thirds of the members of all proposed plaintiff classes in the aggregate are citizens of the State in which the action was originally filed; (II) at least 1 defendant is a defendant-- (aa) from whom significant relief is sought by members of the plaintiff class; (bb) whose alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class; and III. DISCUSSION. As a primary matter, this Court finds that Defendants properly removed this actidn pursuant to CAFA. The parties did not dispute that Defendants adequately alleged the amount m controversy exceeds $5 million, or that that proposed class contains more than 100 members With respect to the final element, the Court finds that Defendants satisfied their burden cf establishing minimal diversity. CAFA requires a showing of minimal diversity in order lo remove a matter to federal court, meaning that Defendants were required to show that “ary member of a class of plaintiffs is a citizen of a State different from any defendant.” 28 U.S.C. ‘§ l332(d)(2)(A). The parties agreed that Defendants are all citizens of New Jersey; thu!, Defendants needed to show that any putative class member is a citizen of a different State 11 order to remove. Defendants satisfied this burden by submitting a sworn declaration of Joly Crowley (“Crowley Declaration”), which declared that HTI’s records reveal that “at least ore former student of the School who falls within the [putative class] does not reside in and is notka citizen of New Jersey.” (Notice of Removal, Ex. C, Crowley Decl. 11 4, ECF No. 1). Tl‘le Crowley Declaration further averred that HTI’s records show that former students, who at potential members of the putative class, reside in North Carolina, Virginia, Pennsylvania ar¢l New York.” (Li). Thus, the issue before this Court is whether either of the CAFA Exceptions apply. (cc) who is a citizen of the State in which the action was originally filed; and (III) principal injuries resulting from the alleged conduct or any related conduct of each defendan were incurred in the State in which the action was originally filed; and (ii) during the 3-year period preceding the filing of that class action, no other class action has been fil asserting the same or similar factual allegations against any of the defendants on behalf of the same or oth persons; or (B) two-thirds or more of the members of all proposed plaintiff classes in the aggregate, and the prima defendants, are citizens of the State in which the action was originally filed. 7 A. The CAFA Exceptions. lt is Plaintiffs’ burden under the CAFA Exceptions to prove that at least two-thirds of the putative class members are citizens of New Jersey. Dicuio, 2011 WL 5557528 at *2; Kaufmaj; 561 F.3d 144" date_filed="2009-03-26" court="3rd Cir." case_name="Kaufman v. Allstate New Jersey Insurance">561 F.3d at 153. To sustain this burden, Plaintiffs submitted the Ellithy Certification, whi declares that, while Ellithy attended HIT, she “learned that almost all of her fellow students live d in New Jersey.” (Farber Cert., Ex. D, Ellithy Cert. jj 3, ECF No. 8-3). However, Ellithy expressly stated that she learned this information from “general conversations,” and not througi a formal survey of the residency or citizenship of her fellow students. (_I_d_.). Ellithy ali) estimated that, at the time she attended HTI, more than ninety-five percent of her fellow students resided in New Jersey. (Li_. at 11 5). The flaw in Plaintiffs proofs is twofold. First, the certifications made by Ellithy ake explicitly limited to her informal understanding of the residency of HTI students at the time Ellithy attended HTI, n_ot at the time Plaintiffs filed the Complaint. §§ 28 U.S.C. 1332(d)(') (“Citizenship of the members of the proposed plaintiff classes shall be determined . . . as of tie date of filing of the complaint or amended complaint . . .”.); s_ee BQ Kaufrnan, 561 F.3d 144" date_filed="2009-03-26" court="3rd Cir." case_name="Kaufman v. Allstate New Jersey Insurance">561 F.3d at 152 (“It is true that under a long-standing rule, federal diversity jurisdiction is generally determine cl based on the circumstances prevailing at the time the suit was filed.”). Second, even if this Court were to accept the Ellithy Certification as relevant h establishing residency of her classmates, residency is not the same as citizenship for purposes cf diversity jurisdiction A party’s citizenship for purposes of subject matter jurisdiction § synonymous with domicile. McCann v Newman Irrevocable Trust, 458 F.3d 281" date_filed="2006-08-16" court="3rd Cir." case_name="McCann v. George W. Newman Irrevocable Trust">458 F.3d 281, 286 (3d Cir. 2006). Plaintiffs concede that the information submitted in the Ellithy Certification, as well as the information identified in the Status Report, is relevant to establishing the residency cf members of the putative class, not domicile. However, they argue that this Court shouid “consider residence at the time of enrollment as indicative of domicile.” (Pls.’ Supp. Br. 3, EC F No. 31). Even if the Court were to do so, it is another analytical jump to determine that evidence of a student’s residence nearly five years ago is indicative of his or her citizenship at the time l>f the filing of the Complaint. Plaintiffs asked this Court to make the “common sense” assumptidn that if a student was domiciled in New Jersey at the time of enrollment, that student should le presumed to remain domiciled in New Jersey until evidence of a change in domicile is presente l. (E_.). Yet, it is at least equally reasonable to assume that not every student that resided in Ne W Jersey remained domiciled here at the time Plaintiffs filed the Complaint. It is Plaintiffs burden to establish citizenship by a preponderance of the evidence, not by compounded assumptions Moreover, Plaintiffs did not limit the putative class to students who are current residerts and/or citizens of New Jersey. The plain language of the Complaint defines the class is “students who paid for, received financial aid for, and/or took out loans and attended HTlis courses conducted in New Jersey and who graduated and/or expected to graduate from HTI m the years 2009 - 2011 [hereinafter, “Students] . . . The Students entered into enrollth agreements with HTI within the State of New Jersey and were residents of New Jerseylc” (Compl. 11 8, ECF No. 1). This is not the same as limiting the class to current residents of a sta , which courts have deemed permissible under CAFA. §§e Lcui_o, 2011 WL 5557528 at fl (citing In re Sprint Nextel Corp., 593 F.3d 669" date_filed="2010-01-28" court="7th Cir." case_name="In Re Sprint Nextel Corp.">593 F.3d 669 (7th Cir. 2010)). The jurisdictional discovery permitted by the Court does not change its decision tfmt Plaintiffs failed to meet their burden of establishing that either of the CAFA Exceptions appll/. Again, the problem with Plaintiffs’ argument that the Status Report yields relevant informati