Dugas v. Starwood Hotels & Resorts Worldwide, Inc. et al

Filing 54

ORDER Dismissing Second Amended Complaint. The Court DISMISSES this action without prejudice. See John Birch Soc'y v. Nat'l Broad. Co., 377 F.2d 194, 198 (2d Cir. 1967) (finding discretion not abused in dismissing case where the court point ed out pleading errors related to subject matter jurisdiction which were ignored). Plaintiff has 14 days from the date of this Order to file an amended complaint that cures the deficiencies identified by this Order, that makes a plausible showing tha t CAFA's jurisdictional threshold has been met, and that permits the Court to assess whether CAFA's mandatory "local controversy" exception applies. The Court warns that failure to do so will result in a final Order dismissing thi s civil action either for want of CAFA jurisdiction or for failure to prosecute in compliance with a Court order requiring amendment. See Lira v. Herrera, 427 F.3d 1164, 1169 (9th Cir. 2005) ("If a plaintiff does not take advantage of the opportunity to fix his complaint, a district court may convert the dismissal of the complaint into dismissal of the entire action."). Signed by Judge Gonzalo P. Curiel on 6/28/2017. (acc)

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

SOUTHERN DISTRICT OF CALIFORNIA

10
11

PAUL DUGAS,

Case No.: 3:16-cv-00014-GPC-BLM
Plaintiff,

12
13

v.

14

ORDER DISMISSING SECOND
AMENDED COMPLAINT

STARWOOD HOTELS & RESORTS
WORLDWIDE, INC.; HST LESSEE
SAN DIEGO, LP; HST GP SAN DIEGO,
LLC,

15
16
17

Defendants.

18
19
20

On January 5, 2016, Plaintiff Paul Dugas filed a class action lawsuit against

21

Defendants Starwood Hotels and Resorts Worldwide, Inc. (“Starwood”), HST Lessee San

22

Diego, LP, and HST GP San Diego, LLC (collectively “Defendants”). Dkt. No. 1. After

23

this Court granted Defendants’ motion to dismiss, Plaintiff filed a Second Amended

24

Complaint (“SAC”) on December 7, 2016, asserting jurisdiction under the Class Action

25

Fairness Act (“CAFA”), 28 U.S.C. § 1332(d). Dkt. No. 28, 31. Soon thereafter, this

26

Court issued an Order to Show Cause (“OSC”) why this action should not be dismissed

27

for lack of subject matter jurisdiction. Dkt. No. 49. Plaintiff responded to the Court’s

28

OSC on April 24, 2017 and Defendant responded on April 24, 2017. For the following
1
3:16-cv-00014-GPC-BLM

1

reasons and because Plaintiff has failed to address the deficiencies set forth in the OSC,

2

the Court DISMISSES the SAC without prejudice.

3

BACKGROUND

4

1. Second Amended Complaint

5

On December 7, 2016, Plaintiff Paul Dugas filed a Second Amended Class Action

6

Complaint against Defendants. ECF No. 31. In the Second Amended Complaint

7

(“SAC”), Plaintiff alleges two class action claims against Defendants under the California

8

Customer Records Act, Cal. Civ. Code § 1798.81.5, and the California Unfair

9

Competition Law (“UCL”), Cal. Bus. & Prof. Code § 17200, et seq. Id. Plaintiff states

10

that this Court has federal subject matter jurisdiction over these claims pursuant to the

11

Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d).

12

Plaintiff has brought this lawsuit against Defendants on behalf of all current and

13

former customers of Starwood Hotels who have provided Starwood with their consumer

14

information. SAC ¶ 32. In November 2015, Starwood explained in an internet press

15

release that there had been a data breach earlier in the year around April 13, 2015. Id.

16

¶ 23. The SAC asserts, though, that malware had been installed on Starwood’s customer

17

systems, targeting customer information, since November 2014. Id. ¶ 22. The SAC

18

alleges that Starwood knew or should have known the value of the information they were

19

storing and that such information made them a high profile target. Id. ¶ 28. Plaintiff

20

seeks damages for injuries stemming from these breaches.

21

2. Order to Show Cause

22

In an order dated April 6, 2017, this Court Ordered Plaintiff to Show Cause

23

(“OSC”) why this action should not be dismissed for lack of subject matter jurisdiction

24

under 28 U.S.C. § 1332(d). Dkt. No. 49. The OSC pointed out three deficiencies in

25

Plaintiff’s SAC.

26

First, the Court noted that it questioned whether the amount-in-controversy

27

exceeds the CAFA jurisdictional threshold. The Court emphasized that Plaintiff’s Prayer

28

for Relief was silent as to what amount of restitution or damages he sought and that the
2
3:16-cv-00014-GPC-BLM

1

SAC otherwise failed to plausibly allege how the $5,000,000 bar would be met in light of

2

the injuries claimed. As such and because the Court had reservations about whether the

3

amount-in-controversy had been met the Court ordered Plaintiff to support its allegation.

4

Second and irrespective of whether Plaintiff had met the jurisdictional threshold,

5

the Court concluded that the facts alleged in the SAC prevented the Court from

6

determining whether it must decline to assert CAFA jurisdiction under the mandatory

7

“local controversy” exception. Citing 28 U.S.C. § 1332(d)(4)(A)(i), the Court observed

8

that the exception requires courts to (1) determine whether “greater than two-thirds of the

9

members” of the proposed class “are citizens of the State in which the action was

10

originally filed” and (2) determine whether at least one defendant is a citizen of the State

11

in which the action was originally filed, among other facts.

12

The Court emphasized, however, that Plaintiff had incorrectly alleged the

13

citizenship of two of the Defendants, HST Lessee San Diego, a Limited Partnership, and

14

HST GP San Diego, a Limited Liability Company. Plaintiff’s statement of jurisdiction

15

stated that the Defendants were all “Maryland and Delaware” corporations, yet the Court

16

pointed out that this was inaccurate given that the SAC also described one Defendant as a

17

Limited Partnership and another as a Limited Liability Company. The Court further

18

invited Plaintiff to weigh in on whether two-thirds of the proposed class were “citizens of

19

the State in which the action was originally filed,” given that Plaintiff’s proposed class

20

would seek relief only for violations of California law.

21

CAFA JURISDICTION

22

“CAFA vests federal courts with ‘original’ diversity jurisdiction over class actions

23

if: (1) the aggregate amount in controversy exceeds $5,000,000, and (2) any class

24

member is a citizen of a state different from any defendant.” Serrano v. 180 Connect,

25

Inc., 478 F.3d 1018, 1020-21 (9th Cir. 2007); 8 U.S.C. § 1332(d)(2). “CAFA,” however

26

“only applies to ‘class action’ lawsuits where the aggregate number of members of all

27

proposed plaintiff classes is 100 or more persons . . . .” Serrano, 478 F.3d at 1020; 8

28

U.S.C.§ 1332(d)(5).
3
3:16-cv-00014-GPC-BLM

1

These prerequisites must be present for the Court to assert original jurisdiction

2

under CAFA, but they do not end a Court’s jurisdictional analysis. CAFA contains

3

mandatory and discretionary exceptions to the jurisdiction it confers. CAFA jurisdiction,

4

for instance, shall not be exercised when the class action is a “local controversy” or a

5

“home state controversy.” See Serrano, 478 F.3d at 1022 (citing §§ 1332(d)(4)(A) and

6

(B)). These mandatory provisions are “designed to draw a delicate balance between

7

making a federal forum available to genuinely national litigation and allowing the state

8

courts to retain cases when the controversy is strongly linked to that state.” Hollinger v.

9

Home State Mut. Ins. Co., 654 F.3d 564, 570 (5th Cir. 2011).

10

“Implicit in both subsections (d)(3) and (d)(4) is that the court has jurisdiction, but

11

the court either may or must decline to exercise such jurisdiction.” Serrano, 478 F.3d at

12

1022. A court may raise concerns about its duty to decline jurisdiction under

13

§ 1332(d)(4) sua sponte. See Bey v. SolarWorld Indus. Am., Inc., 904 F. Supp. 2d 1103,

14

1108 (D.Or. 2012) (holding that the CAFA mandatory exceptions raise abstention

15

concerns which may be raised sua sponte).

16
17

DISCUSSION
Plaintiff has entirely failed to respond to the deficiencies in its pleading or address

18

the Court’s concerns regarding whether it has original jurisdiction under CAFA and

19

whether it otherwise must decline to exercise such jurisdiction under § 1332(d)(4)(A).

20

One, Plaintiff has failed to explain its allegations concerning CAFA’s jurisdictional

21

minimum. In response to the Court’s OSC, Plaintiff states the following:

22

26

Mr. Dugas has alleged that all current and former customers of Starwood are
affected by the breach at issue in this case. On the date of attack, hundreds
of thousands of customer records were stolen. Even conservatively valuing
this at exactly 100,000 individuals would mean the value of the breach per
user would need to exceed just $50. A more than reasonable amount for the
sensitivity of the date that was compromised.
Dkt. No. 51 at 2-3. This statement, however, does not adequately respond to the

27

Court’s observation that the SAC’s silence as to the restitution sought, in light of

28

the California causes of action brought, fails to plausibly allege that CAFA’s

23
24
25

4
3:16-cv-00014-GPC-BLM

1

$5,000,000 jurisdictional minimum has been met. See St. Paul Mercury Indem.

2

Co. v. Red Cab Co., 303 U.S. 283, 287 n.10 (1938) (“It is plaintiff’s burden both to

3

allege with sufficient particularity the facts creating jurisdiction, in view of the

4

nature of the right asserted, and, if appropriately challenged, or if inquiry be made

5

by the court of its own motion, to support the allegation.”).
Two and more importantly, Plaintiff’s response does not provide the Court with the

6
7

information it requires to assess whether it must decline to assert CAFA jurisdiction

8

under the “local controversy” exception. See 28 U.S.C. § 1332(d)(4)(A)(i).1

9

Plaintiff’s response does not adequately allege the citizenship of the Defendants.

10

Plaintiff continues to assert that all of the Defendants are either Delaware or Maryland

11

corporations for purposes of jurisdiction. As the Court stated in its OSC, however, this

12

cannot be true as Defendant HST Lessee San Diego, LP, as its name implies, is a limited

13

partnership and Defendant HST GP San Diego, LLC is a limited liability corporation.

14

The Court pointed out in its OSC that for jurisdictional purposes LPs and LLCs are “a

15

citizen of every state of which its owners/members are citizens.” Johnson v. Columbia

16

Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006). Plaintiff has done nothing to

17

cure this blatant inconsistency or to assert the citizenship of the owners and members of

18
19
1

20
21
22
23
24
25
26
27
28

“A district court shall decline to exercise jurisdiction under [§ 1332(d)(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
(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.”
28 U.S.C. § 1332(d)(4)(A) (emphasis added).

5
3:16-cv-00014-GPC-BLM

1

the LP and LLC named as Defendants. Plaintiff, therefore, has failed to properly assert

2

the citizenship of two of the Defendants and as such the Court cannot determine whether

3

the second prong of the mandatory “local controversy” exception to CAFA applies. See

4

28 U.S.C. § 1332(d)(4)(A)(i).

5

Plaintiff’s response also fails to address the first prong of the “local controversy

6

exception,” which inquiries into whether two-thirds, or more, of the individuals in the

7

proposed class are California citizens. The Court pointed out in the OSC that the

8

proposed class could not be as broad as Plaintiff alleges because it is only asserting

9

California causes of action. Plaintiff’s response to the OSC fails to even grapple with this

10

concern. Accordingly, the Court is left to speculate as to whether two-thirds or more of

11

the proposed plaintiff class are citizens of California.

12

In sum, the Court finds that the SAC has not made a plausible showing that

13

CAFA’s jurisdictional bar has been met. The Court also concludes that it cannot assess

14

whether it must, irrespective of the jurisdictional minimum, decline to assert CAFA

15

jurisdiction pursuant to the mandatory “local controversy” exception because Plaintiff has

16

not properly alleged the citizenship of two of the Defendants and has not specified the

17

citizenship of the proposed class. See 28 U.S.C. § 1332(d)(4)(A)(i).

18

CONCLUSION

19

In light of the aforementioned deficiencies and Plaintiff’s failure to adequately

20

respond to the Court’s OSC, the Court DISMISSES this action without prejudice. See

21

John Birch Soc’y v. Nat’l Broad. Co., 377 F.2d 194, 198 (2d Cir. 1967) (finding

22

discretion not abused in dismissing case where the court pointed out pleading errors

23

related to subject matter jurisdiction which were ignored). Plaintiff has 14 days from the

24

date of this Order to file an amended complaint that cures the deficiencies identified by

25

this Order, that makes a plausible showing that CAFA’s jurisdictional threshold has been

26

met, and that permits the Court to assess whether CAFA’s mandatory “local controversy”

27

exception applies. The Court warns that failure to do so will result in a final Order

28

dismissing this civil action either for want of CAFA jurisdiction or for failure to
6
3:16-cv-00014-GPC-BLM

1

prosecute in compliance with a Court order requiring amendment. See Lira v. Herrera,

2

427 F.3d 1164, 1169 (9th Cir. 2005) (“If a plaintiff does not take advantage of the

3

opportunity to fix his complaint, a district court may convert the dismissal of the

4

complaint into dismissal of the entire action.”).

5

IT IS SO ORDERED.

6
7

Dated: June 28, 2017

8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
7
3:16-cv-00014-GPC-BLM