Carzell et al v. Life of the South Insurance Company et al
Filing
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OPINION AND ORDER that Defendants' Motion for Leave to File Surreply 17 is GRANTED NUNC PRO TUNC. IT IS FURTHER ORDERED that Plaintiffs' Motion to Remand 4 is GRANTED. IT IS FURTHER ORDERED that this action is REMANDED to the Superior Court of Fulton County, Georgia. Signed by Judge William S. Duffey, Jr on 4/26/2016. (anc)
I.
BACKGROUND
On August 6, 2015, Plaintiffs brought this class action in the Superior Court
of Fulton County, Georgia. (Compl. [1.4]).2 Defendants are insurance companies
that provide credit life, disability, accident, and property insurance to consumers at
the time they obtain, or renew, an installment loan.3 (Id. ¶ 4). Plaintiffs assert that
Defendants contract with installment lenders, such as World Acceptance
Corporation (“World”), to “push” Defendants’ insurance products and, in return,
Defendants pay the lender a “kickback,” often more than 70% of the total
insurance premium. (Id. ¶¶ 6-9). The insurance premium is added to the principal
of the installment loan, and borrowers are encouraged to renew their loans every
few months, at which time new insurance premiums are assessed. (Id. ¶ 37).
2
This is a renewed action under Georgia law. On June 4, 2015, Plaintiffs
filed a similar complaint against Defendants in the Superior Court of Fulton
County, Georgia, which Defendants removed to this Court on July 16, 2015. See
No. 1:15-cv-2535-WSD (N.D. Ga.). On August 5, 2015, Plaintiffs voluntarily
dismissed that action. The next day, Plaintiffs filed their Complaint in this action,
“with the allegations clarified to specifically define the classes to include only
Georgia citizens.” (Mot. to Remand at 4; compare complaint filed in
1:15-cv-3260, Doc. 1 at ¶ 147 (for each class, defining class members as “[a]ll
natural persons who . . .”) with complaint filed in this case [1.4] at ¶ 147 (for each
class, defining class members as “all Georgia citizens who . . .”)).
3
Plaintiffs allege that the installment loans at issue here are similar to
“payday loans,” in that they are “small-dollar, high-cost loans” marketed to
low-income borrowers with poor credit or little credit history. (Compl. ¶¶ 3,
23-25). Plaintiffs allege that they have “extremely high interest rates” and “are
frequently ‘renewed’ by borrowers unable to make timely payments.” (Id.).
2
Plaintiffs claim that Defendants wrongfully: (1) fail to provide insurance policy
refunds directly to consumers when a loan is renewed; (2) set premiums that do not
reflect the value of the policy because the premiums consist mostly of kickbacks
paid to lenders; and (3) enforce unconscionable agreements, including redundant
automobile insurance policies for automobiles that are already fully covered by
other insurance policies. (See generally id. ¶¶ 11-12, 23-86). Plaintiffs assert
claims under Georgia law for breach of contract, unconscionability, unjust
enrichment, negligence, and bad faith. Plaintiffs seek compensatory damages,
disgorgement of all insurance premiums paid by class members, punitive damages,
and attorneys’ fees and costs. (See generally id. ¶¶ 162-201).
Plaintiffs are Georgia citizens (id. ¶¶ 14-16), and they seek to represent other
Georgia citizens who, they claim, are similarly situated. In their Complaint,
Plaintiffs define three proposed classes:
i.
All Georgia citizens who were sold one or more Life of the
South and/or Insurance Company of the South credit life, credit
disability, accidental death and disability, or personal property
insurance policy by World Acceptance as their agent in the State of
Georgia (the “Premium Class”);
ii.
All Georgia citizens who were owed a refund by Life of the
South and/or Insurance Company of the South based on the early
termination of a credit life, credit disability, accidental death and
disability, or property insurance policy procured through World
Acceptance as their agent in the State of Georgia, but did not receive
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that refund in accordance with O.C.G.A. § 33-31-9(c) (the “Refund
Class”); and
iii. All Georgia citizens who purchased a Life of the South and/or
Insurance Company of the South property insurance policy through
World Acceptance as their agent in the State of Georgia for a vehicle
that was already insured against loss or damage (the “Coverage
Class”) (collectively, the “Classes”).
(Id. ¶ 147) (emphasis added). Plaintiffs “specifically excluded [from the Classes]
any individuals who were not Georgia citizens at the time this action was
commenced.” (Id. ¶ 148). Plaintiffs further assert that the “federal courts . . . have
no jurisdiction over this case for several reasons,” including because “there are no
members of the proposed classes who are citizens of states different from either
Defendant” because “all Plaintiffs, proposed class members, and Defendants are
citizens of Georgia.” (Id. ¶ 22).
On September 16, 2015, Defendants removed the Fulton County Action to
this Court pursuant to the Class Action Fairness Act, 28 U.S.C. §§ 1332(d), 1453,
and 1711-1715 (“CAFA”). Defendants allege that this matter is brought as a class
action under Georgia law; that there are at least 100 members in Plaintiffs’
proposed class; and the aggregate value of the claims exceeds the $5 million
jurisdictional threshold. (Notice of Removal [1] at ¶¶ 10-14, 22-31). Defendants
allege further that Life of the South and Insurance Company of the South are
incorporated in Georgia and have their principal places of business in Florida. (Id.
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¶¶ 17-18). Defendants argue that minimal diversity of citizenship exists, therefore,
because Defendants are citizens of Florida, and Plaintiffs are citizens of Georgia.
(Id. ¶ 19). Defendants also conclusorily allege, without any factual support, that
“minimal diversity is met under 28 U.S.C. § 1332(d)(2)(B) because there is at least
one class member who is a citizen of a foreign state and Defendants are citizens of
the States of Florida and Georgia.” (Id. ¶ 20).
On September 28, 2015, Plaintiffs filed their Motion to Remand, arguing
that Defendants fail to show that the citizenship of the parties is minimally diverse.
II.
DISCUSSION
A.
Legal Standard
Under CAFA, a federal district court has subject matter jurisdiction over a
class action in which: (1) the number of plaintiffs in all proposed plaintiff classes
exceeds one hundred; (2) any member of the plaintiff class is diverse from any
defendant; and (3) the aggregate of the claims of individual class members exceeds
$5 million, exclusive of interests and costs. See Lowery v. Ala. Power Co.,
483 F.3d 1184, 1194 (11th Cir. 2007) (citing 28 U.S.C. § 1332(d)(2), (5)(b), (6)).
“Prior to CAFA, the Supreme Court had interpreted the ‘diversity’ requirement of
§ 1332(a) to require that each named member of the plaintiff class be diverse from
each of the defendants.” Id. at n.24 (citing Snyder v. Harris, 394 U.S. 332, 340
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(1969) & Supreme Tribe of Ben-Hur v. Cauble, 225 U.S. 356 (1921)). “The new
§ 1332(d) replaces Ben-Hur’s modified ‘complete diversity’ requirement with a
‘minimal diversity’ requirement under which, for purposes of establishing
jurisdiction, only one member of the plaintiff class—named or unnamed—must be
diverse from any one defendant.” Id. Section 1332(d)(2) provides that minimal
diversity exists where:
(A) any member of a class of plaintiffs is a citizen of a State different
from any defendant;
(B) any member of a class of plaintiffs is a foreign state or a citizen or
subject of a foreign state and any defendant is a citizen of a State; or
(C) any member of a class of plaintiffs is a citizen of a State and any
defendant is a foreign state or a citizen or subject of a foreign state.
28 U.S.C. § 1332(d)(2)(A)-(C). “CAFA does not change the traditional rule that
the party seeking to remove the case to federal court bears the burden of
establishing federal jurisdiction.” Evans v. Walter Indus., Inc., 449 F.3d 1159,
1164 (11th Cir. 2006).
Here, the parties do not dispute that the proposed Classes consist of more
than 100 members and that the amount-in-controversy requirement is satisfied.4
4
Plaintiffs “estimate the number of members in each Class to be in the
thousands.” (Compl. ¶ 150). Plaintiffs seek, among others, disgorgement of all
premiums collected from class members and Plaintiffs allege that, in 2011,
Defendants received $26 million in premiums for the vehicle insurance policies
6
Plaintiffs argue, however, that the Classes are defined to include only Georgia
citizens, and thus minimal diversity does not exist because, although Defendants
are citizens of Florida, they are also citizens of Georgia.
B.
Analysis
In their Complaint, Plaintiffs define the Classes as “[a]ll Georgia citizens
who” were sold, purchased, or were owed a refund based on, certain policies
issued by Defendants. (Compl. ¶ 147). Plaintiffs also “specifically excluded [from
the Classes] any individuals who were not Georgia citizens at the time this action
was commenced.” (Id. ¶ 148). It is clear, therefore, that the Classes consist of
only Georgia citizens.
Life of the South is incorporated in Georgia and has its principal place of
business in Florida. (Vrban Aff. ¶ 3). Insurance Company of the South also is
incorporated in Georgia and has its principal place of business in Florida. (Id. ¶ 4).
Under 28 U.S.C. § 1332(c)(1), “a corporation shall be deemed to be a citizen of
any State by which it has been incorporated and of the State where it has its
principal place of business.” 28 U.S.C. § 1332(c)(1) (emphasis added).
Defendants are therefore citizens of both Georgia and Florida.
issued in connection with World installment loans. (Id. ¶¶ 82, 192). Defendants
also show that, in 2014 alone, they collected $5,393,371.52 in premiums for credit
disability policies in connection with World installment loans. (Notice of Removal
¶ 28 (citing Vrban Aff. ¶ 5)).
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Defendants, however, argue that their Florida citizenship is sufficient to
support that they are diverse from at least one member of the Classes. The Court
disagrees. To establish minimal diversity under CAFA, Defendants must show
that “any member of [the] class of plaintiffs is a citizen of a State different from
any defendant.” See 28 U.S.C. § 1332(d)(2)(A); see also Lowery, 483 F.3d at
1194 & n.24. Defendants have not, and cannot, show that any member of the
Classes—whose membership is, by definition, limited to only Georgia citizens—
are citizens of a State different from Defendants. This is because Defendants are
citizens of Georgia, even though they are also citizens of Florida. See 28 U.S.C.
§ 1332(c)(1), (d)(2)(A); Lowery, 483 F.3d at 1194 & n.24; Johnson v. Advance
America, 549 F.3d 932, 935-936 (4th Cir. 2008) (where plaintiff class was limited
to South Carolina citizens and defendant corporation was incorporated in Delaware
and had its principal place of business in South Carolina, rejecting argument that
dual citizenship entitles defendant to rely on only its Delaware citizenship to
establish minimal diversity under CAFA); Sundy v. Renewable Envtl. Sols., LLC,
No. 07-5069-cv-SW-ODS, 2007 WL 2994348, at *3 n.4 (W.D. Mo. Oct. 10, 2007)
(“The Court does not agree with Defendant’s suggestion that minimal diversity
exists unless a member of the class is a citizen of both Missouri and Delaware.”).5
5
Defendants rely on Fuller v. Home Depot Servs., LLC, No. 1:07-cv-1268,
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Defendants fail to show that minimal diversity exists between any member of the
Classes, who are all Georgia citizens, and Defendants, who are citizens of Georgia
and Florida. The Court therefore lacks subject matter jurisdiction over this action,
and it is required to be remanded to the Superior Court of Fulton County, Georgia.
See 28 U.S.C. § 1447(c) (“If at any time before final judgment it appears that the
district court lacks subject matter jurisdiction, the case shall be remanded.”).6
2007 WL 2345257 (N.D. Ga. Aug. 14, 2007), to support that minimal diversity
exists here based on Defendants’ dual citizenship. In Fuller, the court stated,
without citation:
[E]ven assuming that the plaintiff and all potential class members are
citizens of only Georgia, the minimal diversity requirement is met
here because Home Depot is a citizen of a different state—Delaware.
In other words, although Home Depot is a citizen of Georgia, it is also
a citizen of Delaware and, therefore, is diverse from at least one
member of the class. Thus, minimal diversity has been established.
Fuller, 2007 WL 2345257, at *3. The Court does not find Fuller persuasive. The
Court agrees with the Fourth Circuit’s well-reasoned decision in Johnson, that the
plain language of Section 1332 shows that Defendants cannot rely on only one
citizenship where their other citizenship would destroy minimal diversity.
6
To the extent Defendants argue that Plaintiffs “waived” their challenge to
minimal diversity based on foreign citizenship by raising it for the first time in
their Reply, it is well-settled that “a jurisdictional defect cannot be waived by the
parties and may be raised at any point during the litigation.” See, e.g.,
Allen v. Toyota Motor Sales, U.S.A., Inc., 155 F. App’x 480, 481 (11th Cir. 2005)
(citing Harris v. United States, 149 F.3d 1304, 1308 (11th Cir. 1998) (collecting
cases)); Ammedie v. Sallie Mae, Inc., 485 F. App’x 399, 401 (11th Cir. 2012) (“In
removed cases, a plaintiff cannot waive arguments regarding subject matter
jurisdiction by failing to move for remand.”).
Defendants’ argument that minimal diversity exists under 28 U.S.C.
§ 1332(d)(2)(B) because “there is at least one class member who is a citizen of a
foreign state and Defendants are citizens of the States of Florida and Georgia,”
9
Having concluded that Defendants fail to show that minimal diversity of
citizenship exists, the Court does not address whether the local controversy
exception to jurisdiction under CAFA applies in this case. See 28 U.S.C.
§ 1332(d)(4)(A), (B) (listing circumstances in which “a district court shall decline
to exercise jurisdiction”); Evans, 449 F.3d 1159, 1163 n.2.7
ignores that the definition of the Classes are expressly limited to include only
Georgia citizens. (See Compl. ¶¶ 147-148). It is well-settled that, “[t]o be a
citizen of a state within the meaning of the diversity statute, a natural person must
both be a citizen of the United States and be domiciled within the State.”
Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 828 (1989) (citing
Robertson v. Cease, 97 U.S. 648-649 (1878)); see also Kanter v. Warner-Lambert
Co., 265 F.3d 853, 857 (9th Cir. 2001) (“To be a citizen of a state, a natural person
must first be a citizen of the United States.”). Even if they otherwise meet the
criteria for membership in one of the Classes, that certain individuals are citizens
of a foreign state but live in Georgia precludes their participation because they are
not “Georgia citizens,” as required by the definition of the Classes in the
Complaint. Plaintiffs, as masters of their Complaint, choose to circumscribe the
definition of the Classes to avoid federal subject matter jurisdiction, which they
were entitled to do. See, e.g., Lincoln Prop. Co. v. Roche, 546 U.S. 81, 91 (2005)
(“In general, the plaintiff is the master of the complaint and has the option of
naming only those parties the plaintiff chooses to sue, subject only to the rules of
joinder [of] necessary parties”); Johnson, 549 F.3d at 937-938 (“Undoubtedly,
plaintiffs could have expanded their action to fall under the provisions of CAFA,
but, as the masters of their complaint, they opted to bring their suit only under
South Carolina law and to name only those parties who were South Carolina
citizens involved in entirely South Carolina transactions.”). The Court’s
jurisdiction in this case cannot be based on 28 U.S.C. § 1332(d)(2)(B), and this
case is required to be remanded for this additional reason.
7
Because the Court lacks subject matter jurisdiction over this action, the
Court does not address Defendants’ Motion to Add Party [9].
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III.
CONCLUSION
For the foregoing reasons,
IT IS HEREBY ORDERED that Defendants’ Motion for Leave to File
Surreply [17] is GRANTED NUNC PRO TUNC.
IT IS FURTHER ORDERED that Plaintiffs’ Motion to Remand [4] is
GRANTED.
IT IS FURTHER ORDERED that this action is REMANDED to the
Superior Court of Fulton County, Georgia.
SO ORDERED this 26th day of April, 2016.
_______________________________
WILLIAM S. DUFFEY, JR.
UNITED STATES DISTRICT JUDGE
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