KRESS STORES OF PUERTO RICO, INC.; J.M.J. APPLIANCES CORPORATION; VALIJA GITANA, INC.; HUMBERTO VIDAL, INC.; and ALMACENES KRESS DE CAYEY, INC., Plaintiffs, Appellants, J. PICA Y CIA, INC., d/b/a Capri; ANTONIO BAYON, d/b/a Tienda Junelba; and ELBA CASIANO, d/b/a Tienda Junelba, Plaintiffs, v. WAL-MART PUERTO RICO, INC., and COSTCO WHOLESALE CORPORATION, Defendants, Appellees, WALGREEN OF PUERTO RICO, INC., and PUERTO RICO CVS PHARMACY, LLC, Defendants.
No. 23-1060
United States Court of Appeals For the First Circuit
November 12, 2024
Hon. William G. Young, U.S. District Judge
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO
* Of the District of Massachusetts, sitting by designation.
** Of the Seventh Circuit, sitting by designation.
Salvador J. Antonetti-Stutts, with whom Ubaldo M. Fernández Barrera, Laura E. Díaz González, and O‘Neill & Borges LLC were on brief, for appellee Costco Wholesale Corporation.
Paul J. Berks, with whom Suyash Agrawal, Schuyler C. Davis, and Massey & Gail LLP were on brief, for appellee Wal-Mart Puerto Rico, Inc.
Plaintiffs’ theory is that defendants took advantage of the closure orders to sell non-essential goods, which plaintiffs say violated the executive orders and breached a duty to avoid unfair competition, causing defendants to capture sales that otherwise would have gone to the local retailers. The executive orders remained in effect from March 15 to May 25, 2020. The local retailer plaintiffs seek damages for lost sales.
The plaintiffs filed this case as a putative class action in Puerto Rico‘s Court of First Instance. Costco, the only non-local defendant, removed the case to federal district court
The plaintiffs moved for remand, arguing on several grounds that federal subject-matter jurisdiction was lacking under CAFA. The district court denied that motion as well. Defendants then moved to dismiss for failure to state a claim, and only plaintiffs’ unfair competition claim survived. Plaintiffs then moved for class certification on that claim, which the district court denied. Finally, the district court granted summary judgment for defendants on the lone remaining claim, finding that the executive orders did not create an enforceable duty on the part of Costco and Wal-Mart.
We resolve the appeal on jurisdictional grounds. First, we join other circuits in holding that CAFA jurisdiction is not lost when a district court denies class certification. Second, we hold that CAFA‘S “home state” exception in
I. FACTUAL AND PROCEDURAL BACKGROUND
A. Undisputed Facts
On March 12, 2020, the Governor of Puerto Rico declared a state of emergency because of the COVID-19 pandemic. On March 15, the Governor issued the first of four executive orders requiring businesses to close and residents to stay at home to protect public health. The last of the four orders remained in force until May 25, 2020, so they were in effect for a total of 72 days.
The executive orders required most businesses to close but exempted certain categories of retailers, including pharmacies and supermarkets. The orders also permitted Puerto Rico residents to leave their homes only for specified purposes, including “[p]urchasing food, pharmaceutical, and basic necessity products,” alternatively phrased as “to acquire food, pharmaceutical products, and essential supplies.” None of the orders further defined “basic necessity products” or “essential supplies.” Each executive order also included a provision entitled “Non-Creation of Enforceable Rights” stating:
This Executive Order is not intended to create any rights, substantive or procedural, enforceable at law or equity, by any person or entity, in any matter, civil, criminal, or administrative, against the Government of
Puerto Rico or its agencies, officials, employees, or any other person.
Plaintiffs are local retailers in Puerto Rico. They were among the businesses that closed for the 72 days the executive orders remained in effect. Defendants Wal-Mart and Costco were not required to close because both sold essential supplies. Wal-Mart included both a supermarket and a pharmacy, and Costco included a supermarket. Both Wal-Mart and Costco remained open during the entire 72 days the executive orders were in place. Wal-Mart continued to sell its full array of merchandise. Costco limited the categories of products it sold, but it consistently maintained that the terms of the executive order did not clearly require it to do so.
After the first executive order was issued, Wal-Mart and Costco sought clarification from Puerto Rico officials as to what merchandise they could and could not sell, but they did not receive responses as to most categories of merchandise. Puerto Rico police and compliance officials from the Department of Consumer Affairs visited Wal-Mart regularly while the executive orders were in effect. The government of Puerto Rico never directed Wal-Mart or Costco to stop any of their sales, never suggested that they might be breaking the law, and never brought any enforcement action against them.
On August 6, 2020, plaintiffs filed a putative class action complaint in Puerto Rico‘s Court of First Instance, alleging that defendants Wal-Mart, Costco, Walgreens, and CVS leveraged their status as exempt retailers to sell non-essential goods while the executive orders were in place.1 Plaintiffs alleged these sales violated duties defendants owed to refrain from unfair competition against local retailers like plaintiffs. Plaintiffs alleged that defendants sold non-essential items like clothes, shoes, televisions, and appliances in violation of the executive orders. Plaintiffs argued that defendants’ sales of non-essential items while plaintiffs were ordered not to do so amounted to unfair competition. Plaintiffs sought damages from Wal-Mart and Costco for the income plaintiffs say they and other local retailers would have received during the 72 days of the executive orders based on claims of unfair competition, unjust enrichment, and equity.
On September 8, 2020, Costco removed the case to federal court, invoking jurisdiction under the Class Action Fairness Act,
After Costco‘s removal to federal court, plaintiffs moved to remand, arguing that two CAFA exceptions independently barred federal jurisdiction: the “home state” exception in
After the district court denied remand, the defendants moved to dismiss plaintiffs’ claims on the merits. The court dismissed the claims for unjust enrichment and equity on the pleadings, and plaintiffs have not argued these theories on appeal. Id. at *5, 9-10. The district court then denied class certification on plaintiffs’ remaining unfair competition claims. Kress Stores of Puerto Rico, Inc. v. Wal-Mart Puerto Rico, Inc., 573 F. Supp. 3d 604, 607 (D.P.R. 2021). Following the denial of class certification, plaintiffs renewed their motion to remand the case to the Puerto Rico courts, arguing that the denial of class certification eliminated the district court‘s jurisdiction under CAFA. The district court denied plaintiffs’ renewed motion and retained jurisdiction over the case.
Wal-Mart and Costco then moved for summary judgment on the plaintiffs’ only remaining claim, for unfair competition. The district court granted summary judgment for Wal-Mart and Costco on the unfair competition claim. The court held that exempt retailers had no duty under the executive orders or Puerto Rico‘s unfair competition law to refrain from selling certain merchandise. The
II. JURISDICTION UNDER CAFA
The existence of federal subject-matter jurisdiction under CAFA is a question of law subject to de novo review. Amoche v. Guarantee Trust Life Insurance Co., 556 F.3d 41, 48 (1st Cir. 2009) (citing Lowery v. Alabama Power Co., 483 F.3d 1184, 1193 (11th Cir. 2007)). The district court resolved no factual disputes relevant to jurisdiction, so we review de novo the district court‘s CAFA holdings. See id.
The plaintiffs raise three distinct jurisdictional issues. Plaintiffs argue first that the district court erred in retaining jurisdiction under CAFA after denying class certification. Plaintiffs argue second that CAFA‘s home state exception applies and third that its local controversy exception applies. We address plaintiffs’ arguments in that order.
A. Jurisdiction After Denial of Class Certification
CAFA provides that its grant of federal jurisdiction “shall apply to any class action before or after the entry of a class certification order by the court with respect to that action.”
All other circuits that have decided the question interpret CAFA as requiring federal courts to retain proper CAFA jurisdiction after denying certification. E.g., F5 Capital v. Pappas, 856 F.3d 61, 76 (2d Cir. 2017) (“We . . . must decide whether district courts may retain jurisdiction over state-law claims with minimally diverse parties where the class-action component of the complaint is dismissed after the case is removed
District courts have “original jurisdiction” over “class actions,”
28 U.S.C. § 1332(d)(2) , which the statute defines as “civil actions filed under Rule 23 . . . or a similar State statute or rule of judicial procedure authorizing an action to be brought . . . as a class action,”id. § 1332(d)(1)(B) (emphasis added). This conferral of jurisdiction plainly encompasses a suit like [plaintiffs‘], which was “filed under Rule 23,” notwithstanding its eventual failure to become certified under Rule 23. See Metz v. Unizan Bank, 649 F.3d 492, 500 (6th Cir. 2011) (“The ‘filed under’ language shows that it is the time of filing that matters for determining jurisdiction under CAFA.“); Cunningham Charter Corp. v. Learjet, Inc., 592 F.3d 805, 806 (7th Cir. 2010) (noting that§ 1332(d)(1)(B) “defines class action as a suit filed under a statute or rule authorizing class actions, even though many such suits cannot be maintained as class actions because the judge refuses to certify a class“). Indeed, “[h]ad Congress intended that a properly removed class action be remanded if a class is not eventually certified, it could have said so.” United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int‘l Union, AFL-CIO, CLC v. Shell Oil Co., 602 F.3d 1087 (9th Cir. 2010).
True,
§ 1332(d)(8) states that CAFA “shall apply to any class action before or after the entry of a class certification order by the court with respect to that action,” but, as the Seventh Circuit has aptly noted, that subsection refers to “a” certification order, not “the” certification order, and the former connotes an indefinite expectation that a certification order may issue. Cunningham, 592 F.3d at 806 (explaining that subsection (d)(8) at most suggests that a class “may be certified eventually” (emphasis added)). Moreover, unlike subsection (d)(2), subsection (d)(8) omits reference to “jurisdiction,” indicating it pertains not to the scope of jurisdiction conferred by the statute, but to the timing of certification in relation to removal. See id.
Coba v. Ford Motor Co., 932 F.3d 114, 119 (3d Cir. 2019) (cleaned up).
This reading of CAFA‘s text fits well with more general jurisdictional principles. As the Second Circuit reasoned,
the Supreme Court has consistently held that if jurisdiction exists at the time an action is commenced, such jurisdiction may not be divested by subsequent events. At the time of removal, [plaintiff‘s] complaint contained a class-action claim that met CAFA‘S other jurisdictional requirements, including a $5 million amount in controversy and minimal diversity. It therefore follows that the later failure of the class claim did not divest the district court of subject matter jurisdiction because CAFA anchored jurisdiction at the time of removal.
Further, because class certification may be revisited both in the district court and on appeal (including interlocutory appeals), plaintiffs’ theory would cause jurisdiction to bounce back and forth between federal and state courts, perhaps several times. Suppose, for example, that a federal district court denied class certification and remanded to state court under plaintiffs’ theory, and the state courts then granted class certification. Could a defendant then remove again? And upon return to federal court, suppose the district court or circuit court found class certification erroneous and decertified the class. Would the case need to be remanded to state court again?
That confusing and unseemly prospect is not required, or even suggested, by CAFA‘s text. It would also tend to undermine the core purpose of CAFA, “providing for Federal court consideration of interstate cases of national importance under diversity jurisdiction.” Class Action Fairness Act of 2005,
Consistent with the statutory text, we agree with the uniform rule among the circuits. If jurisdiction is otherwise proper under CAFA when the action is filed in or removed to federal court, district courts retain CAFA jurisdiction after denying a motion for class certification. The district court here did not err by exercising jurisdiction under CAFA after it denied class certification.
B. CAFA‘S Exceptions
Plaintiffs argue next that CAFA‘s “home state” exception and “local controversy” exception both independently bar federal jurisdiction over their case. We address each exception in turn.
1. The Home State Exception
CAFA‘s home state exception provides: “A district court shall decline to exercise jurisdiction [over a class action in which] two-thirds or more of the members of all proposed plaintiff classes in the aggregate, and the primary defendants, are citizens of the State in which the action was originally filed.”
The first requirement for plaintiffs’ citizenship is satisfied here. The proposed plaintiff class was limited to “legal and natural persons who reside and have businesses throughout
Plaintiffs originally sued three Puerto Rico citizens, Wal-Mart Puerto Rico, Inc., Walgreen of Puerto Rico, Inc., and Puerto Rico CVS Pharmacy, LLC. They also sued Costco Wholesale Corporation, which is not a citizen of Puerto Rico. The district court held that plaintiffs’ allegations had rendered Costco a “primary” defendant in this case. Because not all the primary defendants were local, the district court found that the home state exception did not bar jurisdiction. We agree.
CAFA does not define “primary” defendants in statutory text, and this appeal presents a question of first impression in this circuit. Other courts have used different language to describe when a defendant is “primary.” “Some courts have embraced the definition of primary to mean direct and construed the words ‘primary defendants’ to capture those defendants who are directly liable to the proposed class, as opposed to being vicariously or secondarily liable based upon theories of contribution or indemnification.” Vodenichar v. Halcon Energy Props., Inc., 733 F.3d 497, 504 (3d Cir. 2013) (collecting cases). Other courts
a court analyzing whether a defendant is a “primary defendant” for purposes of CAFA‘s home state exception should first assume that all defendants will be found liable. The court should then consider whether the defendant is sued directly or alleged to be directly responsible for the harm to the proposed class or classes, as opposed to being vicariously or secondarily liable. The court should also consider the defendant‘s potential exposure to the class relative to the exposure of other defendants. Courts should not treat these considerations as exhaustive or apply them mechanistically. The inquiry is whether a defendant is a “‘principal,’ ‘fundamental‘, or ‘direct‘” defendant. Finally, we agree that “by using the word ‘the’ before the words ‘primary defendants’ rather than the word ‘a,’ CAFA requires remand under the home state exception only if all primary defendants are citizens of” the alleged home state. It is insufficient that only some of the primary defendants are citizens of that state.
Singh v. American Honda Finance Corp., 925 F.3d 1053, 1068 (9th Cir. 2019) (brackets and citations omitted).3
To revive the home state exception on appeal, plaintiffs argue only that they believe Costco‘s potential liability is about $65 million, while Wal-Mart‘s potential liability is more than $265 million. Plaintiffs cite testimony from their expert witness on this point. This argument fails. It assumes incorrectly that only one defendant, the one with the single greatest exposure, can be “primary.” The statutory text makes clear that more than one defendant can be “primary” within the meaning of
Plaintiffs alleged that all class members were likely to be adversely affected by Costco‘s sales of non-essential goods while the executive orders were in effect. As plaintiffs themselves note, Costco could face direct liability to class
2. The Local Controversy Exception
The district court also found that CAFA‘S “local controversy” exception,
In their motion to remand this case, plaintiffs asserted that the conduct of Wal-Mart, a local defendant, was “a significant basis” for their claims. The district court disagreed, finding that plaintiffs had failed to meet their burden to show that “Walmart‘s conduct [was] ‘broader than the conduct of the rest of the co-defendants,‘” and accordingly, was not a significant basis
(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
- (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 defendant 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 filed asserting the same or similar factual allegations against any of the defendants on behalf of the same or other persons . . . .
of plaintiffs’ claims. This “a significant basis” element is the only disputed element of the exception here.
CAFA does not define “a significant basis” in the statutory text, and this circuit has not yet addressed its meaning. See Manson v. GMAC Mortgage, LLC, 602 F. Supp. 2d 289, 295 (D. Mass. 2009). To highlight the choices we face, we first explore how other circuits have approached the phrase. We then define our standard for this inquiry by evaluating CAFA‘s text and apply our standard to plaintiffs’ allegations against Wal-Mart.
a. “A Significant Basis” in the Circuits
In a leading case on the local controversy exception, the Third Circuit explained that CAFA‘S use of the word “significant” means that “[t]he local defendant‘s alleged conduct must be an important ground for the asserted claims in view of the alleged conduct of all the Defendants.” Kaufman v. Allstate New Jersey Ins. Co., 561 F.3d 144, 157 (3d Cir. 2009) (citing Oxford English Dictionary (2d ed. 1989) (defining “significant” as “important, notable“)). The test is relative: “Whether the local defendant‘s alleged conduct is significant cannot be decided without comparing it to the alleged conduct of all the Defendants.” Id. “If the local defendant‘s alleged conduct is a significant part of the alleged conduct of all the Defendants, then the significant basis provision is satisfied. Whether this condition is met requires a substantive analysis comparing the local
Other circuits have largely followed the Third Circuit‘s approach to the “a significant basis” element of CAFA‘s local controversy exception.6 Kaufman‘s comparative analysis is not difficult to apply where a local defendant‘s conduct plays only a peripheral role in plaintiffs’ claims. In such cases, a defendant‘s conduct is clearly not “a significant basis” for the
But courts adopting Kaufman‘s comparative approach have split over its application to cases like this one: claims alleging that local and non-local defendants “all engaged in the same conduct.” Kitchin v. Bridgeton Landfill, LLC, 3 F.4th 1089, 1094 (8th Cir. 2021) (internal quotation omitted). Courts considering complaints of this nature under CAFA have reached different results. Id. at 1094-95 (collecting cases and noting split outcomes). “Some courts . . . have adopted the view that allegations that the local and nonlocal defendants all engaged in the same conduct suffice to show that the local defendant‘s conduct meets the significant-basis requirement.” Id. at 1094 (quotation marks omitted); see also, e.g., Benko v. Quality Loan Serv. Corp., 789 F.3d 1111, 1118-19 (9th Cir. 2015); Coleman v. Estes Express Lines, Inc., 631 F.3d 1010, 1020 (9th Cir. 2011). But “a number of courts taking the opposite view” have “found that a complaint that did not allege any substantive distinctions between the conduct of the local and nonlocal defendants failed to indicate
Courts taking the latter view have required some sort of plus-factor in the allegations of a local defendant‘s conduct (as compared to non-local defendants’ conduct) to count the local defendant‘s conduct as “a significant basis” of the plaintiffs’ claims. “If ‘nothing in the complaint distinguishes the conduct of [the local defendant] from the conduct of the other defendants,’ then the allegations in the complaint do not satisfy the significant-basis requirement.” Id. (quoting Opelousas, 655 F.3d at 362); see also Opelousas, 655 F.3d at 363 (requiring “more detailed allegations or extrinsic evidence detailing the local defendant‘s conduct in relation to the out-of-state defendants” to satisfy significant basis requirement).8
b. “A Significant Basis” and CAFA‘s Text
This circuit has not previously applied CAFA‘s local controversy exception where local and non-local defendants are
In relevant part, the text of CAFA‘s local controversy exception requires that a local defendant‘s “alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class.”
CAFA‘s use of the phrase “a significant basis” requires a comparative analysis to determine whether the defendant‘s alleged conduct is “an important ground for the asserted claims in view of the alleged conduct of all the Defendants.” Kaufman, 561 F.3d at 157. But it does not follow that the test must be superlative, as the requirement of a plus-factor would have it.
Requiring special, more detailed, or additional allegations about the local defendant‘s conduct would rewrite “a significant basis” in the statute into “the most significant basis.” Under CAFA‘s plain text, more than one defendant‘s conduct can constitute “a significant basis” for the plaintiffs’ claims. First, the exception‘s requirement that “at least 1 defendant” must satisfy its provisions clearly implies that more than one defendant may do so. See
From CAFA‘s text, we see no need for a plus-factor to satisfy the “a significant basis” element of CAFA‘S local controversy exception. Nor does this contradict the Third Circuit‘s comparative approach as set out in Kaufman and adopted by many circuits. Plaintiffs allege here that the local defendants and the non-local defendant pursued parallel courses, without distinguishing between their roles. This situation easily satisfies Kaufman‘s comparative formulation of the “a significant basis” requirement. See 561 F.3d at 157 n.13 (factors include ratio of “claims that rely on the local defendant‘s alleged conduct” to total “number of claims asserted” and “number of members of the putative classes asserting claims that rely on the local defendant‘s alleged conduct” to total “number of members of the putative classes“); see also Evans, 449 F.3d at 1167 (“a significant basis” turned on whether “a significant number or
Under CAFA‘s text, the “a significant basis” element must remain comparative without sliding down a slippery slope to become superlative. To preserve that limit, courts should not collapse the inquiry into a mechanistic search for a plus-factor distinguishing the conduct of a local defendant. We agree with the Ninth Circuit: where a complaint makes undifferentiated allegations that a local defendant and a non-local defendant violated the same provisions of law in the same way and caused the same alleged harm, the conduct of the local defendant is not automatically rendered “insignificant.” See Coleman, 631 F.3d at 1020. To the contrary, when all defendants are alleged to have engaged in identical conduct forming the basis for all of plaintiffs’ claims, a proper application of CAFA‘s text and Kaufman‘s key factors will often mean that each defendant‘s conduct, including local defendants, counts as “a significant basis” of the claims.
Still, often is not always. In every case, a holistic evaluation of factors like those identified in Kaufman remains central to determine whether a local defendant‘s conduct forms “a significant basis” of plaintiffs’ claims. We remain sensitive to Congress‘s suggestion that the local controversy exception is a “narrow” one, “carefully drafted to ensure that it does not become
c. Wal-Mart‘s Conduct as a Significant Basis
Wal-Mart is the key local defendant whose conduct was relevant for the “a significant basis” requirement. As the district court noted in denying remand under the local controversy exception, plaintiffs brought identical claims against each of the four initial defendants — three local (Wal-Mart, Walgreens, and CVS), and one non-local (Costco). Kress Stores, 2021 WL 2912436, at *4. The parties and the district court all looked for some plus-factor to differentiate Wal-Mart‘s conduct from the conduct of the other defendants, particularly Costco, as the lone non-local defendant.
To distinguish Wal-Mart‘s conduct, plaintiffs relied on press statements by a high-ranking Wal-Mart official in Puerto Rico admitting that the executive orders forbade the sale of non-essential goods. Id. Plaintiffs argued that the local
The district court was not persuaded. Even putting aside our doubts about plaintiffs’ supposed reliance, we agree with the district court that the Wal-Mart official‘s statements were not a “promise binding Walmart not to sell certain items.” Id. We also agree with the district court‘s additional finding that these statements, “even if promissory, would [not] make Walmart‘s conduct a ‘significant basis’ relative to the conduct of the other” large retailer defendants, since “all four Megastore[s] are alleged to have sold prohibited articles.” Id. at *5.
While we agree with those observations, we disagree with the district court‘s further conclusion that plaintiffs had “failed to meet their burden of showing that the conduct of a local defendant is a ‘significant basis’ for the claim asserted.” Id. at *4. As explained above, the local controversy exception‘s “a significant basis” element does not require such a plus-factor.
In this complaint, local and non-local defendants were referred to jointly by a collective noun that was the subject of all the allegations of the conduct forming the basis of the plaintiffs’ claims. Applying Kaufman‘s factors to this situation, all the claims run against Wal-Mart, and all the plaintiffs in the putative class have claims against Wal-Mart. See Kaufman, 561 F.3d at 157 n.13. Plaintiffs’ allegations against Wal-Mart, a
The district court thus erred in finding that the local controversy exception did not apply merely because plaintiffs did not point to an adequate plus-factor in Wal-Mart‘s conduct. Because the district court‘s decision not to apply the exception was based entirely on plaintiffs’ failure to establish this element, and because defendants do not challenge plaintiffs’ arguments as to any other elements on appeal, the local controversy exception applies here.
III. Costco‘s Motion to Sever
Because CAFA‘s local controversy exception applies, we must remand at least a portion of this case to the Puerto Rico courts. Before determining the scope of any remand, however, we turn to Costco‘s alternative argument for affirming summary judgment in its favor.
In Costco‘s view, the district court should have granted its motion to sever, thus permitting plaintiffs’ claims against Costco to proceed in federal court, regardless of the outcome of the court‘s CAFA analysis. As we explain below, we disagree. Contrary to Costco‘s arguments, there is a logical connection between the claims against it and Wal-Mart beyond the mere allegation that they both engaged in unfair trade practices. Thus,
To recap, when Costco removed this case to federal court, it also filed a motion to sever under
We review the district court‘s ruling denying Costco‘s motion to sever for an abuse of discretion. Cruz v. Bristol-Myers Squibb Co., P.R., Inc., 699 F.3d 563, 568-69 (1st Cir. 2012). An abuse of discretion occurs: (1) “when a relevant factor deserving of significant weight is overlooked“; (2) “when an improper factor is accorded significant weight“; (3) “when the [district] court considers the appropriate mix of factors, but commits a palpable error of judgment in calibrating the decisional scales“; or (4) when it commits “a material error of law.” United States v. Walker, 665 F.3d 212, 222-23 (1st Cir. 2011) (first quoting United States v. Nguyen, 542 F.3d 275, 281 (1st Cir. 2008), then citing United States v. Snyder, 136 F.3d 65, 67 (1st Cir. 1998)).
A. Waiver
On appeal, plaintiffs ignore the merits of Costco‘s arguments about the district court‘s ruling on its motion to sever and instead focus on waiver. Without citing any authority, they contend that Costco has waived its challenge to this ruling by failing to file a notice of appeal or “any further motion” in the district court on this issue.
We disagree that Costco has waived a challenge to this ruling. Costco did not need to file a cross-appeal from the final judgment to preserve this challenge. Because the district court‘s final judgment was favorable to Costco, a cross-appeal by Costco on the motion to sever would have been both unnecessary and improper. See Nat‘l Union Fire Ins. Co. of Pittsburgh, Pa. v. W. Lake Acad., 548 F.3d 8, 23 (1st Cir. 2008) (“A cross-appeal is generally not proper to challenge a subsidiary finding or conclusion when the ultimate judgment is favorable to the party cross-appealing.“). Under well-established principles, Costco is free to raise on appeal any argument made manifest in the record as an alternative ground for affirming the district court‘s judgment dismissing the claims against it. See Haley v. City of Boston, 657 F.3d 39, 53 (1st Cir. 2011) (“It is black-letter law that . . . an appellee can argue in support of a lower court‘s
B. Merits of the District Court‘s Denial of the Motion to Sever
We now turn to whether the district court abused its discretion in denying Costco‘s motion to sever. Costco brought its motion under
When considering a motion to sever under
Persons . . . may be joined in one action as defendants if:
(A) any right to relief is asserted against them jointly, severally, or in the alternative
with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences; and (B) any question of law or fact common to all defendants will arise in the action.
We have not previously construed the “transaction or occurrence” requirement for permissive joinder under
Turning to
Here, unlike in Iglesias, it was reasonable for the district court to conclude that plaintiffs’ claims against Costco and Wal-Mart related to the same occurrence: the break-out of the COVID-19 pandemic in Puerto Rico in March 2020, and the Governor‘s Executive Orders limiting business operations for eleven weeks in response. Thus, the district court did not abuse its discretion in concluding that the claims arise out of the same aggregate of operative facts.
Although portions of plaintiffs’ evidence related to breach and causation may be defendant-specific, the Supreme Court has confirmed that the “transaction or occurrence” standard does not require that the exact same body of evidence be used to prove all claims for joinder to be proper. See Moore, 270 U.S. at 610 (“That [the essential facts to constitute the claims] are not precisely identical, or that the counterclaim embraces additional allegations . . . does not matter.“). And review of the case law on this issue demonstrates that our court and other federal
appellate courts most often conclude that the “transaction or occurrence” requirement has not been met such that joinder is improper in cases with an unusually large number of parties or without any factual overlap between the claims. See, e.g., Abdullah, 30 F.3d at 268 & n.5 (affirming ruling finding misjoinder and severing parties in case with 1,000 plaintiffs and ninety-three defendants because plaintiffs had failed to satisfy “transaction or occurrence” requirement when “[t]he Complaint is bereft of factual allegations indicating why [1,093 parties] belong in the same action“); AF Holdings, LLC v. Does 1-1058, 752 F.3d 990, 993, 998 (D.C. Cir. 2014) (finding misjoinder in case with 1,058 unnamed Doe defendants, identified only by their IP addresses, because plaintiffs had not satisfied “transaction or occurrence” requirement); see also Alston v. Town of Brookline, Mass., No. CV 15-13987, 2016 WL 5745091, at *11, 14 (D. Mass. Sept. 30, 2016) (severing eight plaintiffs’ claims because they had “no facts in common“).
Neither factor is present here.
The dissenting opinion disagrees with our joinder analysis because it determines that plaintiffs’ claims against Costco and Wal-Mart are connected only by an allegation that defendants “committed the exact same violation of the law in exactly the same way.” Dissent, infra, at 54 (quoting Botero v. Commonwealth Limousine Serv. Inc., 302 F.R.D. 285, 286-87 (D. Mass. 2014)). In support, the dissent cites cases in which “a patent,
But in our view, the cases the dissent cites do not demonstrate that the district court abused its discretion here. For example, the dissenting opinion relies on In re EMC Corp., 677 F.3d 1351 (Fed. Cir. 2012), for the principle that when a plaintiff merely alleges that “independent defendants independently violat[ed] the same law in the same way, but in separate transactions,” it has not met the “transaction or occurrence” standard of
In EMC Corp., the Federal Circuit applied the same “logical relationship” and “aggregate of operative facts” standard that our court applied in Iglesias. Id. at 1358. Importantly, though, on appeal it was unclear if there was any logical relationship between the claims against the defendants in EMC Corp.; instead, it appeared possible they had been joined in a single action merely because plaintiffs claimed that they all had infringed the same patent. See id. at 1353, 1357-58. For example, the defendants were scattered around the country and allegedly
Further, the dissenting opinion does not cite and we have not found any cases in which a sister circuit relied upon EMC Corp. to reject joinder in a non-intellectual property case. Instead, only two circuits have relied on the joinder analysis in EMC Corp., and, in both cases, the circuits held that joinder was
One of the two circuit decisions citing EMC Corp. supports the district court‘s ruling permitting joinder in this case: the Fourth Circuit‘s decision in Courthouse News Service. There, a news organization brought First Amendment claims against the clerks of two Virginia state courts after observing delays in accessing newly filed complaints over a period of several months. Courthouse News, 2 F.4th at 322. The clerks, who lost below, appealed on multiple grounds, including misjoinder. Id. at 325. Applying
We point out the decision in Courthouse News not because the facts are identical to this case; we realize that the court clerks who were the defendants there were not competitors. But Courthouse News does support the conclusion that it is not an abuse of discretion for a district court to permit joinder when a plaintiff has sued multiple defendants for similar but independent conduct that occurred in the same time period and in the same place. That is exactly what happened here, and thus Courthouse News counsels in favor of affirming the district court‘s ruling denying Costco‘s motion to sever.
The dissenting opinion also cites seven district court decisions that apply EMC Corp. in intellectual property cases to conclude that
Take Golden Scorpio Corp. v. Steel Horse Bar & Grill, 596 F. Supp. 2d 1282 (D. Ariz. 2009), for example. In that case, the plaintiff, who operated a restaurant and bar named “STEEL HORSE” and had registered the “STEEL HORSE with design” trademark for its restaurant services, joined thirteen defendants from all over the country in a single trademark action. Id. at 1283-84. To support its claims, Golden Scorpio alleged that these thirteen defendants violated its trademark at different times in thirteen different states. Id. at 1284. It did not identify any relationship or factual connection between the thirteen defendants other than the allegation that they had infringed the same trademark. See id. Accordingly, the district court determined that Golden Scorpio‘s claims did not satisfy
This case is not like Golden Scorpio. Both Costco and Wal-Mart‘s violations occurred in Puerto Rico, during the same eleven weeks of the COVID-19 pandemic, in response to the same set of Executive Orders governing business operations during the earliest phases of the pandemic. Thus, there is a connection to the claims against these two parties beyond the mere allegation that they both engaged in unfair trade practices against plaintiffs. In our view, the intellectual property cases in which plaintiffs joined defendants based solely on their wholly separate
Costco presents two additional arguments for why the claims against it should be severed from the claims against Wal-Mart. Neither establishes that the district court‘s denial of Costco‘s motion to sever amounted to an abuse of discretion.
Costco‘s first argument -- that joinder is inappropriate where plaintiffs do not allege joint or several liability or concerted action by defendants -- ignores the plain text of
Costco next argues that “Costco would clearly be prejudiced by a loss of the federal forum to which it is entitled by virtue of diversity of citizenship,” but again, we are not persuaded. Costco does not identify any unusual prejudice considerations or address the fact that it can still file a motion to sever in the Puerto Rico court on remand. See In re Prempro Prods. Liab. Litig., 591 F.3d 613, 623-24 (8th Cir. 2010) (noting that, when federal diversity jurisdiction depends on a question of joinder, “the proper procedure” may be for parties to argue the joinder issue in state court). Further, Costco does not cite and we did not find any cases with analogous facts in which a circuit court overturned a district court‘s denial of a motion to sever on prejudice grounds. Thus, Costco has failed to demonstrate that the district court‘s ruling on its motion to sever was an abuse of discretion. The district court therefore lacked jurisdiction over the claims against either defendant. We therefore may not reach the merits of plaintiffs’ claims.
IV. CONCLUSION
The district court‘s denial of plaintiffs’ motion to remand is REVERSED, the judgment on the merits is VACATED for lack of jurisdiction, and this action is REMANDED to the district court with instructions to remand this action to the Puerto Rico courts. Costs are taxed in favor of plaintiffs-appellants.
-Opinion Concurring in Part/Dissenting in Part Follows-
HAMILTON, Circuit Judge, concurring in part and dissenting in part. I agree with the majority opinion on the Class Action Fairness Act issues and with the remand of plaintiffs’ claims against Wal-Mart to the Puerto Rico courts. I also agree that Costco preserved for appeal its challenge to the district court‘s denial of its motion to sever.
I respectfully disagree, however, with the majority‘s decision to affirm the denial of Costco‘s motion to sever. As explained below, plaintiffs’ claims against Costco did not arise from the same series of transactions as their claims against Wal-Mart. Plaintiffs do not even claim, let alone offer evidence, that Wal-Mart and Costco acted jointly. At most, plaintiffs allege that Wal-Mart and Costco -- acting independently and in competition with each other -- violated the same alleged legal duty in similar ways at the same time. The best guidance for such questions of joinder and misjoinder comes from patent and other intellectual property cases where plaintiffs allege that multiple defendants acted separately and infringed the same patent, copyright, or trademark. Sound practice should require severance of claims against such multiple defendants, even if some pretrial coordination of discovery and other matters might be sensible.
Further, because in my view the district court had jurisdiction over the claims against Costco, I would reach the
I. Misjoinder and Severance
In a class action against multiple defendants, a district court should be on the lookout for possible misjoinder designed to defeat application of CAFA. I believe that is what we see in this case. If plaintiffs had brought their claims against Costco in a separate class action, Costco would certainly have been entitled to remove to federal court under CAFA. The local controversy exception would not apply.
The district court had the power to sever the claims against the non-local defendant, Costco, and should have done so to protect Costco‘s rights under CAFA from the misjoinder. That would have allowed the court to retain federal jurisdiction over the non-local defendant while remanding the claims against local defendants back to the Puerto Rico courts.
On appeal, Costco argues that denial of severance here was an abuse of discretion because plaintiffs cannot meet the “same transaction, occurrence, or series of transactions or occurrences” requirement of
Plaintiffs did not respond to this argument on the merits. Instead, they argue only, without citing authority, that
Perhaps because of the district court‘s initial legal error in denying application of CAFA‘s local controversy exception to the claims against Wal-Mart, the court did not address significant factors weighing in favor of Costco‘s motion to sever. See Walker, 665 F.3d at 222-23 (quoting Nguyen, 542 F.3d at 281). Under the district court‘s view of CAFA, severance of Costco would have produced two similar cases in the federal court rather than one case in the Puerto Rico courts and one case in the federal court. Our application of the local controversy exception to this case should require recalibration of the “decisional scales” on Costco‘s motion to sever. Id. The district court did not have occasion to consider the prejudicial effects of denying Costco a federal forum for the claims against it. While one option might be to remand the claims against Costco to have the district court reconsider the severance question, the grounds for severance here are so strong that the denial amounted to an abuse of discretion. I must also note, however, that even though my colleagues and I disagree on this point, my colleagues do not suggest that granting the motion to sever would have been an abuse of discretion.
Plaintiffs’ claims satisfy the second prong of
Here, plaintiffs do not claim that Costco and the other defendants engaged in any form of coordinated behavior. Plaintiffs did not allege or offer evidence to support a theory that Costco worked together with Wal-Mart, CVS, or Walgreens to sell non-essential goods in possible violation of the executive
When stated in terms of a “logical relationship,” the standard for proper joinder is admittedly rather abstract. But case law has added a substantial gloss that should guide us here. The joinder-or-severance issue in this case alleging unfair competition is similar to issues federal courts have faced in many
The best parallels to this case are cases where a patent, trademark, or copyright holder tries to sue multiple independent competitors for infringing the same patent, trademark, or copyright. Such infringement cases all allege forms of illegal conduct to compete against the plaintiffs. Those cases invoke federal statutes, whereas plaintiffs here claim a form of unfair competition based on alleged violations of the Governor‘s executive orders and a broad Puerto Rico tort statute. For purposes of joinder v. severance, though, the key similarities are that the plaintiffs allege that separate competitors have taken unlawful action to obtain competitive advantages over the plaintiff, but have done so independently of one another.
Patent, copyright, and infringement cases against multiple, independent competitors often raise misjoinder issues very similar to the issue here. District courts decide such issues often. The issues rarely reach the circuit courts of appeals. A review of relevant case law shows, however, that the plaintiffs’ allegations here do not permit proper joinder of the claims against Costco and the other defendants.
One of the rare circuit cases, the Federal Circuit‘s decision in In re EMC Corp., is especially instructive. In EMC Corp., a patent holder tried to join in one action its claims
The Federal Circuit rejected that standard and applied instead the “logical relationship” standard. Id. at 1358-59. The court explained that the district court‘s “not dramatically different” standard would always be satisfied, even where the accused products and processes were different:
We agree that joinder is not appropriate where different products or processes are involved. Joinder of independent defendants is only appropriate where the accused products or processes are the same in respects relevant to the patent. But the sameness of the accused products or processes is not sufficient. Claims against independent defendants (i.e., situations in which the defendants are not acting in concert) cannot be joined under Rule 20‘s transaction-or-occurrence test unless the facts underlying the claim of infringement asserted against each defendant share an aggregate of operative facts. To be part of the “same transaction” requires shared, overlapping facts that give rise to each cause of action, and not just distinct, albeit coincidentally identical, facts. The sameness of the accused products is not enough to establish that claims of infringement arise from the “same transaction.” Unless there is an actual link between the facts underlying each claim of infringement, independently developed products using differently sourced parts are not part of the same transaction,
even if they are otherwise coincidentally identical.
Id. at 1359 (emphases added).
Based on that analysis, the Federal Circuit ordered the district court to reconsider the issue of severance under the proper standard. On remand, the district court ordered severance, making clear that joinder required more than the theories of parallel but independent infringement offered by plaintiff:
In conclusion, the Court finds that the creation of five (5) separate lawsuits is appropriate in this case based on the lack of a logical relationship between the claims against each Defendant. According to the motions before the Court, each Defendant‘s accused product is different, Defendants are competitors of each other, Defendants worked independently to create their accused products, and there is no aggregate of operative facts that would indicate joinder is appropriate in this case. Under Rule 20, the unrelated Defendants in this case were improperly joined and should be severed into their own cases.
Oasis Research, LLC v. Carbonite, Inc., No. 4:10-CV-435, 2012 WL 3544881, at *6 (E.D. Tex. Aug. 15, 2012) (emphasis added).
The thrust of EMC Corp. is that a plaintiff cannot establish a “series of transactions” for purpose of
The principle applied in EMC Corp. has been anticipated, followed, and applied to reject severance in a host of infringement cases against multiple competitors. E.g., Pinpoint, Inc. v. Groupon, Inc., No. 11 C 5597, 2011 WL 6097738, at *1 (N.D. Ill. Dec. 5, 2011) (severing claims against “unrelated companies that have nothing in common except [plaintiff‘s] allegation that they have infringed the same . . . patents“); Rudd v. Lux Prod. Corp. Emerson Climate Techs. Braeburn Sys., LLC, No. CIV.A. 09-CV-6957, 2011 WL 148052, at *3 (N.D. Ill. Jan. 12, 2011) (collecting cases: “a party fails to satisfy
A series of decisions dealing with attempts to join copyright infringement claims based on BitTorrent helps illustrate the
Against this weight of persuasive authority rejecting joinder in other cases alleging that independent competitors competed with the plaintiff unfairly by violating the same patent, trademark, or copyright, the majority must look even further afield for support for denying severance here. The majority relies on
Iglesias applied the difference between compulsory and permissive counterclaims between the same parties. Even where plaintiff‘s claims and the defendant‘s counterclaim in Iglesias arose between the same parties, arose out of the same employment relationship, and arose at the same time, that was not enough to treat the counterclaim as compulsory. 156 F.3d at 241-42. In this case, plaintiffs’ claims against the different defendants arose at the same time, but here we are also dealing with the quite different problems posed by joining claims against multiple and independent defendants, with the accompanying effects on jurisdiction that we see here. Iglesias offers little support.
The most remarkable feature of the majority‘s treatment of the severance question is the absence of support from any remotely analogous case. The majority‘s best offering is Courthouse News Service, where the Fourth Circuit allowed joinder of the plaintiff‘s First Amendment claims against the clerks of
The majority also takes aim at the patent, trademark, and copyright cases that offer us the closest guidance here. It targets one of the district court cases, Golden Scorpio Corp. v. Steel Horse Bar & Grill, 596 F. Supp. 2d 1282 (D. Ariz. 2009), for close attention, ante at 46, but even that shot at the selected target misfires. The plaintiff in Golden Scorpio sued thirteen independent defendants for infringing its trademark. The district court ordered severance, invoking the general proposition that “allegations against multiple and unrelated defendants for acts of patent, trademark, and copyright infringement do not support joinder under Rule 20(a).” 596 F. Supp. 2d at 1285. The majority tries to distinguish Golden Scorpio, but on grounds that were not relied upon in Golden Scorpio itself: the defendants were in
Given the absence of remotely comparable precedents for joinder here and the weight of persuasive authority from cases alleging unfair competition by independent competitors infringing the same patent, trademark, or copyright, I respectfully submit that severance was certainly the better course here and even the only sound course, once the jurisdictional consequences are understood.13
The stakes under CAFA for this question of misjoinder of these claims under state law may well be even higher than under
Costco was the only non-local defendant among the four co-defendants originally named by the plaintiffs (Costco, Wal-Mart, Walgreens, and CVS). If the claims against Costco had been severed as requested, the district court would have retained jurisdiction over plaintiffs’ claims against Costco by relying either on its standard diversity jurisdiction,
To be clear, I do not contend that denial of a federal forum should always entitle a defendant to severance. Instead, courts must “examine whether permissive joinder would comport with the principles of fundamental fairness or would result in prejudice
importance of joint or concerted action to justify joinder, as explained in AF Holdings, LLC v. Does 1-1058, 752 F.3d 990, 998 (D.C. Cir. 2014). See also, e.g., New Sensations, Inc. v. Does 1-175, 947 F. Supp. 2d 146, 150 (D. Mass. 2012) (rejecting similar attempt at joinder); Liberty Media Holdings, LLC v. Swarm Sharing Hash File, 821 F. Supp. 2d 444, 451 (D. Mass. 2011) (allowing similar attempt at joinder based on collective “swarm” under BitTorrent). Plaintiffs here have not offered allegations or evidence comparable to the BitTorrent “swarms” that have divided a number of district courts.
II. Summary Judgment for Costco
Because I believe the district court had jurisdiction over plaintiffs’ claims against Costco, I would also address the merits of the district court‘s grant of summary judgment to Costco. I would affirm summary judgment for Costco for the reasons given by the district court.
Summary judgment was proper if “there is no genuine dispute as to any material fact and the movant is entitled to
On appeal, plaintiffs assert only their claim of unfair competition under Article 1802 of the Puerto Rico Code,
Here, plaintiffs argue that Costco had a duty to avoid unfair competition, which they locate in the Puerto Rico Antitrust
Plaintiffs argue, however, that a violation of Act 77 triggers the right to bring an action under Article 1802, Puerto Rico‘s general tort statute. Relying on Puerto Rico case law, the district court agreed with the general proposition that claims for unfair competition are cognizable under Article 1802. In the hearing on cross-motions for summary judgment, the district court said it was “persuaded by” defendants’ argument that the language of the executive orders did not create a specific duty on the part of exempt retailers like Costco to avoid selling non-essential goods. The court found that a duty to refrain from non-essential sales “cannot be found simply in the . . . broad language of [Act] 77,” with its generic duty to avoid unfair competition. Thus, the district court concluded that plaintiffs’ unfair competition claim against Costco under Article 1802 failed for lack of any duty.
In a nutshell, I agree. In addition, plaintiffs have not plausibly alleged that Costco actually violated the terms of
This Executive Order is not intended to create any rights, substantive or procedural, enforceable at law or equity, by any person or entity, in any matter, civil, criminal, or administrative, against the Government of Puerto Rico or its agencies, officials, employees, or any other person.
Plaintiffs’ claims against Costco run directly contrary to this disclaimer. Plaintiffs seek to leverage the executive orders to create substantive rights in favor of plaintiffs enforceable at law against “any other person,” i.e., Costco, for selling non-essential goods when it was properly open to sell essential goods.
Even if plaintiffs could overcome those problems, we could still affirm summary judgment for Costco on an alternative ground that it argued before the district court and in this court — causation. Plaintiffs failed to offer any evidence from which a reasonable factfinder could conclude that Costco‘s actions caused any injury to any plaintiffs. Article 1802 requires a
To defeat summary judgment on the merits here, plaintiffs needed to offer evidence that losses they suffered during the 72-day partial lockdown were both actually and proximately caused by Costco‘s sales of non-essential goods. Plaintiffs themselves allege that their shops were required to close by the executive orders, not because of Costco‘s conduct. Plaintiffs’ theory of causation is that if Costco had refrained from selling non-essential goods, Puerto Rico consumers would have delayed their purchases of non-essential goods until the executive orders expired and then would have purchased equivalent goods from the local retailer plaintiffs instead of from Costco and other defendants.
On this record, a jury finding of causation on that theory would be unreasonable. First, there is no evidence that, if Costco had refrained from selling non-essential goods, consumers would have merely delayed such purchases rather than either forgoing the purchases or buying through channels other
The district court declined to dismiss plaintiffs’ claims based on this creative theory of harm, but at summary judgment, they did not supply evidence to support it. They seek to recover revenue on every product they claim they would have sold over the 72 days, but they do not identify which of these products Costco also sold and did not seek to prove that Costco sold reasonable substitutes for every item plaintiffs claim they would have sold. To prove that the plaintiffs’ lost sales went to Costco, plaintiffs would have needed to meet a substantial burden by offering evidence on “the universe of products” that both they and Costco sold “that are considered ‘reasonably interchangeable by consumers for the same purposes.‘” Flovac, Inc. v. Airvac, Inc., 817 F.3d 849, 854 (1st Cir. 2016) (quoting United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 395 (1956)).
Generally, to determine which products are “in the same market” and “interchange[able]” for consumers, a party must ask “expert economists to testify.” U.S. Healthcare, Inc. v. Healthsource, Inc., 986 F.2d 589, 599 (1st Cir. 1993). Experts look to “[u]sage patterns, customer surveys, actual profit levels, comparison of features, ease of entry, and many other facts” to measure the “interchangeability of products” within a market. Id.
Plaintiffs did not offer any expert testimony on these factual elements, as would have been needed to support their theory of causation. After plaintiffs failed to submit expert reports by the case management deadline, the court denied their requests for an extension. Plaintiffs do not challenge that denial. They rely instead on general assertions from their own accountants that plaintiffs’ and defendants’ stores sell some similar items and are in close proximity. (Some of these assertions are made in “unsworn statements,” but let‘s bypass that flaw.) This evidence is not sufficient to meet plaintiffs’ burden of producing evidence of specific facts to defeat summary judgment. Theidon, 948 F.3d at 494. The only reasonable conclusion from this record is that many of plaintiffs’ sales were permanently lost for reasons wholly unrelated to Costco‘s conduct. The district court correctly granted summary judgment for Costco on plaintiffs’ unfair competition claim under Article 1802.
Notes
(4) A district court shall decline to exercise [diversity jurisdiction]—
(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;
Id. (footnote omitted).For example, in a consumer fraud case alleging that an insurance company incorporated and based in another state misrepresented its policies, a local agent of the company named as a defendant presumably would not fit this criteria [sic]. He or she probably would have had contact with only some of the purported class members and thus would not be a person from whom significant relief would be sought by the plaintiff class viewed as a whole. Obviously, from a relief standpoint, the real demand of the full class in terms of seeking significant relief would be on the insurance company itself. Similarly, the agent presumably would not be a person whose alleged conduct forms a significant basis for the claims asserted. At most, that agent would have been an isolated role player in the alleged scheme implemented by the insurance company. In this instance, the real target in this action (both in terms of relief and alleged conduct) is the insurance company, and if that company is not local, this criterion would not be met.