Carter v. Allstate Insurance Company et al

Filing 20

MEMORANDUM OPINION AND ORDER DENYING 10 REMAND AND STRIKING CLASS 7 ACTION ALLEGATIONS. Class action allegations contained in Carter's Amended Complaint are ORDERED STRICKEN. Signed by Chief Judge John Preston Bailey on 8/21/12. (mji)

IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF WEST VIRGINIA
WHEELING

KENNETH CARTER,
Plaintiff,
v.

Civil Action No. 5:12-CV-72
(BAILEY)

ALLSTATE INSURANCE COMPANY,
and LARRY D. POYNTER, individually,
Defendants.
MEMORANDUM OPINION AND ORDER
DENYING REMAND AND STRIKING CLASS ACTION ALLEGATIONS
Pending before the Court are the defendants’ Motion to Strike Class Action
Allegations [Doc. 7], filed June 7, 2012, and the plaintiff’s Motion to Remand [Doc. 10], filed
June 21, 2012. These motions have been fully briefed and are now ripe for decision.
Having reviewed the record and considered the arguments of the parties, this Court
concludes that the plaintiff’s motion should be DENIED and the defendants’ motion should
be GRANTED.
BACKGROUND
I.

Factual Allegations
A.

Putative Class Representative

On December 29, 1990, plaintiff Kenneth Carter sustained serious and permanent
injuries in a motor vehicle accident caused by David Owens in McDowell County, West
Virginia. At the time of the accident, Owens was an underinsured motorist operating an

1

underinsured vehicle as defined by the laws of the State of West Virginia and the insurance
policy issued to Carter by Allstate Insurance Company (“Allstate”). Carter’s subsequent
bodily injury claim exhausted the $20,000 bodily injury coverage limit contained in Owens’
insurance policy issued by Dairyland Insurance Company.
Carter’s Allstate policy provided coverage on three separate vehicles and included
$50,000 per person and $100,000 per occurrence in underinsured motorist bodily injury
coverage benefits on each of the three vehicles. The policy did not contain language
prohibiting Carter from “stacking” these coverage benefits, effectively allowing Carter to
triple his coverage. In fact, Allstate had represented to the Office of the Insurance
Commissioner of the State of West Virginia that the insurer allowed claimants to stack
underinsured motorist coverage included in multi-vehicle policies issued by Allstate in West
Virginia on or before December 16, 1991. Nevertheless, Allstate and one of its Kanawha
County, West Virginia, adjusters named Larry D. Poynter failed to disclose or willfully
concealed this availability of stacking the coverages and instead told Carter that the
underinsured motorist coverage available to him was $50,000. Relying on this
representation, Carter subsequently accepted $43,500 as a full and final settlement of his
underinsured motorist coverage claim.
B.

Putative Class

Carter alleges that he is one of “hundreds” of Allstate insureds that compose a statewide putative class defined as:
a.

Persons who presented claims for underinsured motorist coverage
benefits arising prior to July 12, 1992 under Allstate policies of
insurance issued in the State of West Virginia between the dates of
2

June 28, 1982 and July 12, 1992 providing underinsured motorist
coverage benefits on more than one motor vehicle; and
b.

Who were not employees of Allstate at the time the claim was
presented; and

c.

Who are not employees of Plaintiff’s counsel or the Judge of this
Court.

([Doc. 3-3] at ¶ 51). According to Carter, common issues of fact and law among the
putative class members include:
A.

Whether policies of insurance issued by Allstate in the State of West
Virginia between the dates of June 28, 1982 and July 12, 1992
providing underinsured motorist coverage on more than one motor
vehicle contained legally enforceable language prohibiting the
stacking of underinsured motorist coverage benefits;

B.

If [so], whether Allstate waived its right to seek enforcement of any
anti-stacking language included in the policies by its affirmative
representations to the West Virginia Insurance Commissioner;

C.

The legal obligations of Allstate to the Class Members;

D.

Whether the nature and/or extent of underinsured motorist damages
claimed or ultimately recovered or recoverable impacts the amount of
available underinsured motorist coverage which must be disclosed to
claimants under West Virginia law;

E.

Whether Allstate breached its contract of insurance with Class
Members by failing to disclose the availability of stacked limits of
underinsured motorist coverage limits to compensate class members
for damages caused by an underinsured motorist;

F.

Whether Allstate breached its contract of insurance with Class
Members by willfully concealing the availability of stacked limits of
underinsured motorist coverage limits to compensate class members
3

for damages caused by an underinsured motorist;
G.

Whether Allstate violated the implied covenant of good faith and fair
dealing with Class Members by failing to disclose the availability of
stacked limits of underinsured motorist coverage limits to compensate
class members for damages caused by an underinsured motorist;

H.

Whether Allstate violated the implied covenant of good faith and fair
dealing with Class Members by willfully concealing the availability of
stacked limits of underinsured motorist coverage limits to compensate
Class Members for damages caused by an underinsured motorist;

I.

Whether Allstate violated W.Va. Code § 33-11-1, et seq. by failing to
disclose the availability of stacked limits of underinsured motorist
coverage limits to compensate Class Members for damages caused
by an underinsured motorist;

J.

Whether Allstate violated W.Va. Code § 33-11-1, et seq. by willfully
concealing the availability of stacked limits of underinsured motorist
coverage limits to compensate Class Members for damages caused
by an underinsured motorist;

K.

Whether Allstate violated 114 W.Va. C.S.R. 14-4.1 (1981) by failing
to disclose the availability of stacked limits of underinsured motorist
coverage limits to compensate Class Members for damages caused
by an underinsured motorist;

L.

Whether Allstate violated 114 W.Va. C.S.R. 14-4.1 (1981) by willfully
concealing the availability of stacked limits of underinsured motorist
coverage limits to compensate Class Members for damages caused
by an underinsured motorist;

M.

Whether Allstate’s conduct warrants the imposition of punitive
damages; and

N.

Whether the Members of the Class are entitled to recover damages
as a result of Allstate’s conduct and the proper measure of those
damages.
4

(Id. at ¶ 55). Finally, Carter alleges that “[a] class action is superior to other methods of
adjudication for the fair and efficient adjudication of this controversy because [these]
common questions of law and fact . . . predominate over questions affecting only individual
class members.” (Id. at ¶ 66).
II.

Procedural History
A.

Falls Action

On September 25, 2000, Cindy Jo Falls sued Allstate and Poynter in the Circuit
Court of Marshall County, West Virginia, after Allstate denied Falls’ claim for stacked
underinsured motorist coverage.

The Complaint alleged that this denial of stacked

coverage violated the West Virginia Unfair Settlement Practices Act and the attendant
regulations promulgated by the Office of the West Virginia Insurance Commissioner, and
breached the covenant of good faith and fair dealing implied in Falls’ insurance policy. The
Complaint sought compensatory and punitive damages.
On January 13, 2004, Falls filed an Amended Complaint [Doc. 7-6] containing class
allegations and adding claims for fraud, breach of contract, intentional infliction of emotional
distress, and unjust enrichment. Falls alleged a state-wide putative class defined as:
A.

Insureds under Allstate policies of automobile insurance issued in
West Virginia who had claims for underinsured motorist benefits
pending on any date on or after July 20th, 1990, where the applicable
Allstate policy included underinsured motorist coverage on more than
one vehicle and Allstate’s “AU69-3" or “AU69-2" underinsured motorist
coverage endorsement;

B.

The insured must have presented a claim for underinsurance to
Allstate to be a Member of the Class;
5

C.

Excluded from this Class are employees of Allstate, its officers or
directors, Plaintiff’s counsel and the Judge of this Court.

([Doc. 7-6] at ¶ 57). The parties agreed to refine this class definition for pre-certification
discovery as follows:
Persons who (a) gave notification . . . of an underinsured motor vehicle bodily
injury (BIUIM) claim, (b) under a policy of insurance issued by Allstate
Insurance Company with the AU69-2 or AU69-3 endorsement, (c) within the
State of West Virginia, (d) with underinsured motor vehicle bodily injury
coverage on more than one vehicle, (e) received payment of UIM benefits
equal to at least seventy percent (70%) of the BIUIM limit for a single vehicle
and (f) to whom the availability of stacking of UIM coverage was not
disclosed by Allstate.

([Doc. 3-6] at 1-2). The parties also agreed to define the class period as “roughly
contemporaneous with June 28, 1982 through January 12, 1992– which is the period during
which the AU69-3 Endorsement was utilized in the State of West Virginia.” (Id. at 3).
Falls alleged that common issues of fact and law among the putative class members
included:
A.

The construction of the AU69-2 and AU69-3 endorsement[s];

B.

The legal obligations of Allstate to the Class Members;

C.

Whether Allstate breached its contract and the implied covenant of
good faith and fair dealing with the Plaintiff and the Class Members by
failing to advise them of pertinent coverages;

D.

Whether Allstate breached its contract and the implied covenant of
good faith and fair dealing with the Plaintiff and the Class Members by
willfully concealing pertinent coverages from them;

E.

Whether Allstate and Poynter’s conduct violated West Virginia’s Unfair
6

Claims Settlement Practices Act; and the West Virginia Unfair Trade
Practices Act;
F.

Whether the Defendants’ conduct toward the Plaintiff and the Class
Members constitutes Fraud;

G.

Whether the Defendants’ conduct toward the Plaintiff and the Class
Members was so extreme and outrageous that no reasonable person
could be expected to endure it;

H.

Whether the Defendants knew or should have known that its conduct
was likely to cause severe emotional distress to the Plaintiff and the
Class Members;

I.

Whether Allstate has been unjustly enriched by its willful concealment
of available coverages from the Plaintiff and the Class Members; and

J.

Whether the Plaintiff and the Members of the Class have sustained
damages and the proper measure of those damages.

([Doc. 7-6] at ¶ 60). Falls alleged that these questions would “predominate over any
individual issues.” (Id.).
During discovery, counsel for Falls produced two spreadsheets that set forth what
he characterized as allegedly “Stolen Coverage.” Each spreadsheet, developed using the
claims Allstate identified as part of the pre-certification discovery, estimated that about
eighty putative class members lost coverage benefits of approximately $5.8 million. See
Doc. 3-15.

On December 17, 2007, Falls moved the circuit court for class certification. After a
hearing, the circuit court denied Falls’ motion on December 29, 2008. The circuit court
cited as one of the primary reasons for its ruling that individual issues predominated:

7

There is no administrative mechanism available for this Court to provide a
class-wide remedy given the unique factual underpinnings for this Court to
determine if, in fact, each putative class member was potentially entitled to
“stacked” coverage as a matter of law. Moreover, even if the potential
availability of “stacking” was clarified for each of the claims at issues, for
each respective point in time given the evolving nature of “stacking” law, it
would still be necessary for this Court to identify from the overall group those
persons, if any, who acted or failed to act based on Allstate’s alleged
misrepresentation.

This is particularly significant with respect to the selection criteria proposed
by the Plaintiff of putative class members who settled their underinsured
motorist claim for seventy percent (70%) of the single vehicle BIUIM limit,
therefore not exhausting available coverage, without the need to even
consider the issue of “stacking.” This factor was adopted by the parties for
the limited purpose of pre-certification discovery based on the Plaintiff’s
contention that settlement at that arbitrary point may have been precipitated
by an improper actual or anticipated denial of “stacking.”

Such a

determination in the context of class certification would, however, depend
upon subjective criteria that would necessitate an exercise in judicial
speculation as to the individual reasoning of each settling claimant and in
most cases, his or her attorney.

Furthermore, it would be necessary to conduct a plethora of “mini-trials to
ascertain if each of the putative class members actually sustained underlying
tort damages of sufficient magnitude to establish a claim valued in excess of
single vehicle limits, as well as the applicability and scope of derivative
damages resulting from this alleged misrepresentation.

...
8

Given the need for a highly individualized analysis to establish even the
identity of putative class members, this Court concludes as a matter of law
that the proposed class is neither adequately defined nor sufficiently
ascertainable.

([Doc. 7-7] at ¶¶ 11-13, 15). Subsequent to this ruling, counsel for Falls filed this action and
five additional individual actions based upon Allstate’s denial of claims for “stacking”
coverage in the Circuit Court of Marshall County, which this Court will reference herein as:
(1) the O’Brien action, (2) the Lee action, (3) the Ash action, (4) the Marple action, and
(5) the Cumptan action. The Lee, Ash, and Marple actions remain unresolved.
On November 30, 2010, counsel for Carter, Lee, Ash, and Marple made a demand
upon Allstate to settle Carter’s individual action for $250,000, the Marple action for $6
million, the Lee action for $1.2 million, while advising that $650,000 would “be
recommended” as a potential settlement of the Ash action. This equaled an aggregate
demand of $8.1 million.
B.

Instant Action

On March 15, 2010, Carter sued Allstate and Poynter in the Circuit Court of Marshall
County, alleging that the defendants failed to disclose or willfully concealed the availability
of “stacked” coverage and claiming, inter alia, that this conduct violated the West Virginia
Unfair Trade Practices Act [Doc. 3]. On April 5, 2010, Allstate removed this action to this
Court arguing that Carter had fraudulently joined Poynter and consequently invoking
diversity jurisdiction pursuant to 28 U.S.C. § 1332. On December 1, 2010, the Honorable
Frederick P. Stamp, Jr., rejected Allstate’s fraudulent joinder contention, found complete
diversity lacking, and remanded this matter back to the circuit court [Doc. 3-2].
9

On May 17, 2012, the circuit court granted Carter leave to file the Amended
Complaint containing the class allegations at issue and outlined above [Doc. 3-4]. On May
23, 2012, Allstate again removed this action to this Court, this time invoking jurisdiction
pursuant to the Class Action Fairness Act of 2005 (“CAFA”) [Doc. 3].
On June 7, 2012, the defendants filed the instant Motion to Strike Class Action
Allegations [Doc. 7], arguing that the same deficiencies identified in Falls’ class action
allegations are apparent in Carter’s allegations.1 More specifically, the defendants argue
that it appears from Carter’s allegations that individual issues substantially outweigh any
conceivable issues that may be common to the putative class and that Carter’s claims are
not typical to the putative class. In response, Carter states that he “does not oppose the
striking of the class allegations set forth in his Amended Complaint and joins this Motion.”
([Doc. 11] at 1). In reply, the defendants argue that, “[b]ased on Plaintiff’s express
concession . . . , this Court should, without more, grant [their] Motion and strike the class
action allegations from Plaintiff’s Amended Complaint.” ([Doc. 16] at 1).
On June 21, 2012, Carter filed the instant Motion to Remand [Doc. 12], arguing that
this matter should be remanded for one of three independent reasons. First, Carter
contends that the defendants have failed to prove by a preponderance of the evidence that
the amount in controversy exceeds $5 million. Second, Carter asserts that the local
controversy exception to CAFA jurisdiction applies.

Third, Carter argues that the

defendants’ motion to strike his class action allegations divests this Court of jurisdiction.
1

The same day, the defendants also moved to dismiss Carter’s individual claims as,
inter alia, untimely [Doc. 6]. That motion has since been fully briefed and is now ripe for
decision. However, this Court has resolved to accord that motion separate consideration
in a subsequent decision to be rendered in due course.
10

In response, the defendants contend that this Court possesses proper CAFA
jurisdiction [Doc. 15]. First, the defendants cite the Falls action spreadsheets and the
settlement demands which Carter’s counsel made in the subsequent individual actions as
establishing that the amount in controversy more likely than not exceeds $5 million.
Second, the defendants argue that the local controversy exception is inapplicable because
Poynter, though a West Virginia citizen, is not a defendant from who significant relief is
sought and whose alleged conduct forms a significant basis for the class claims. Third, the
defendants assert that their motion to strike Carter’s class action allegations does not
divest this Court of jurisdiction because jurisdiction is determined at the time of removal.
In reply, Carter attempts to counter each of the defendants’ arguments in opposition
to remand [Doc. 17]. First, Carter argues that the defendants’ amount in controversy
analysis is speculative to the extent that it relies upon the Falls action, which Carter
contends is distinct from the instant action. Second, Carter asserts that he should be
granted leave to amend before the Court considers the applicability of the local controversy
exception. Third, Carter argues that the post-removal striking of class action allegations
should be the exception to the time-of-removal rule. Alternatively, Carter claims that the
striking of his class action allegations implies that they were frivolous, and thus, that CAFA
jurisdiction had been absent from the outset.

11

DISCUSSION
I.

Applicable Standards
A.

Motion to Remand

“CAFA authorizes the removal of any civil action which is a class action in which (1)
‘the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest
and costs,’ 28 U.S.C. § 1332(d)(2); (2) ‘any member of a class of plaintiffs is a citizen of a
State different from any defendant,’ id. § 1332(d)(2)(A); and (3) there are 100 or more
plaintiff class members, id. § 1332(d)(5)(B).” West Virginia ex rel. McGraw v. CVS
Pharm., Inc., 646 F.3d 169, 174 (4th Cir. 2011).2 The removing party must prove these
three elements by a preponderance of the evidence. See Johnson v. Advance Am., 549
F.3d 932, 935 (4th Cir. 2008).
In the event these three elements are satisfied, CAFA nonetheless requires a district
court to decline to exercise jurisdiction over certain class actions. For example, a district
court shall decline to exercise jurisdiction over class actions in which: (1) greater than twothirds of the members of all proposed plaintiff classes– in the aggregate– are citizens of the
State in which the action was originally filed; (2) at least one defendant from whom
significant relief is sought, and whose alleged conduct forms a significant basis for the class
claims, is a citizen of the State in which the action was commenced; (3) the principal
alleged injuries were incurred in the State in which the action was filed; and (4) during the

2

CAFA “defines ‘class action’ to mean any civil action filed under rule 23 of the
Federal Rules of Civil procedure or similar State statute or rule of judicial procedure
authorizing an action to be brought by 1 or more representative persons as a class action.’
Id. § 1332(d)(1)(B).” McGraw, 646 F.3d at 174 (emphasis in original). West Virginia Civil
Rule of Procedure 23 satisfies the emphasized “similarity” requirement. See Id.
12

three years prior to filing, no other class action asserting similar factual allegations was
filed. 28 U.S.C. § 1332(d)(4)(A). This is commonly known as the “local controversy”
exception. See Eakins v. Pella Corp., 455 F.Supp.2d 450, 451 (E.D.N.C. 2006). A
plaintiff seeking remand pursuant to a CAFA exception must prove by a preponderance of
the evidence that the particular exception applies. See Johnson, 549 F.3d at 934-935.
Finally, 28 U.S.C. § 1453(b) “eliminates at least three of the traditional limitations on
removal: (1) the rule that, in a diversity case, a defendant cannot remove a case from its
home forum, § 1441(b); (2) the rule that a defendant cannot remove a diversity case once
it has been pending in state court for more than a year, § 1446(b); and (3) the rule that all
defendants must consent to removal . . ..” Palisades Collections LLC v. Shorts, 552
F.3d 327, 331 (4th Cir. 2008) (internal citations omitted).
B.

Motion to Strike Class Action Allegations

Federal Rule of Civil Procedure 12(f) allows a district court to strike, either on proper
motion by a party or on its own initiative, any redundant, immaterial, impertinent, or
scandalous matter in any pleading. Federal Rule of Civil Procedure 23(d)(1)(D) explains
that, “[i]n conducting an action under this rule, the court may issue orders that . . . require
that the pleadings be amended to eliminate allegations about representation of absent
persons and that the action proceed accordingly.”
To assert claims on behalf of a class, a plaintiff must clear three sets of procedural
hurdles. First, a plaintiff must establish that a class exists and is ascertainable. This
requires that the plaintiff define the class in objective terms and that the class be
administratively feasible to identify who falls within the class. See Kirkman v. N.C. R.R.

13

Co., 220 F.R.D. 49, 53 (M.D.N.C. 2004). Second, a plaintiff must satisfy the numerosity,
commonality, typicality, and adequacy requirements of Rule 23(a) of the Federal Rules of
Civil Procedure. See Fed. R. Civ. P. 23(a); Gunnells v. Healthplan Servs., Inc. 348 F.3d
417, 423 (4th Cir. 2003). Finally, class certification is appropriate only if the lawsuit falls
within one of the three categories set forth in Rule 23(b). See Gunnells, 348 F.3d at 423.
Where the inability to maintain the suit as a class action is apparent from the face of the
complaint, a court may dismiss the class allegations on the pleadings. See e.g., John v.
Nat’l Sec. Fire & Cas. Co., 501 F.3d 443, 445 (5th Cir. 2007). The court may issue such
an order upon a motion by the defendants, regardless of whether the plaintiff has moved
for class certification. Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935-40 (9th
Cir. 2009).
II.

Analysis
A.

Motion to Remand

Carter offers three independent arguments in support of his motion to remand,
namely: (1) the defendants have failed to establish the requisite amount in controversy, (2)
the local controversy exception applies, and (3) the defendants’ motion to strike his class
allegations divests this Court of jurisdiction. This Court will now address each argument
in turn.
1.

Amount in Controversy

As his first basis for remand, Carter argues that the defendants have failed to prove
beyond a preponderance of the evidence that the aggregate amount in controversy
exceeds $5 million. This Court disagrees.

14

Despite Carter’s assertions to the contrary, this Court finds that the spreadsheets
his counsel prepared in the Falls action are relevant to determining the amount that is more
likely than not in controversy here. Carter cannot reasonably dispute that this action is
substantially identical to the Falls action. This action arises, as did the Falls action, from
Allstate’s alleged failure to acknowledge that its claimants could stack underinsured
motorist bodily injury coverage benefits.

The putative class period alleged here

substantially mirrors the period alleged in Falls. The class definitions depart company only
in a way that actually increases the likelihood that the requisite amount is in controversy.
Specifically, by not limiting the class to those claimants who settled for less than seventy
percent of the single-vehicle coverage, Carter’s putative class is defined more broadly and
thus contemplates a larger putative class.
Therefore, the Falls spreadsheets, which estimated compensatory damages in
excess of $5.8 million for approximately 80 putative class members, persuade this Court
to conclude that this putative class action, which is broader in scope, more likely than not
satisfies the CAFA amount in controversy requirement of $5 million, especially when
Carter’s claim for punitive damages is also considered. Accordingly, because Carter does
not dispute the remaining requirements for CAFA jurisdiction, i.e., the existence of minimal
diversity and at least 100 putative class members, this Court concludes that it possesses
subject matter jurisdiction pursuant to CAFA and should proceed accordingly unless Carter
can establish the applicability of a CAFA exception.

15

2.

Local Controversy Exception

Carter contends that the local controversy exception more likely than not applies
here, requiring this Court to decline to exercise jurisdiction pursuant to CAFA. The only
element of this exception in dispute is whether Poynter, a West Virginia claims adjuster for
Allstate, qualifies as a significant local defendant. In other words, Carter must establish by
a preponderance of the evidence that Poynter is a local defendant from whom significant
relief is sought and whose alleged conduct forms a significant basis of the class claims
asserted. As explained below, this Court is unconvinced that Carter has made this
showing.
i.

Significant Relief

As an initial matter, this Court questions whether Congress even envisioned that
significant relief could be sought from a local claims adjuster for purposes of the local
controversy exception.
The term “significant relief” is ambiguous and has yet to be interpreted by the Fourth
Circuit. As such, the term should be interpreted in light of legislative history. The statute’s
Committee Report provides, in pertinent part:
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. 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.

16

S. Rep. No. 109-14, at 40. Based upon this passage, this Court finds it unlikely from the
outset that Congress intended for Carter’s joinder of Poynter to qualify as seeking
significant relief from a local defendant.
Even assuming Congress intended that the local controversy exception apply to
local claims adjusters, this Court nonetheless finds that application is unwarranted here.
Again, the Fourth Circuit has not interpreted the term “significant relief.” The Eleventh
Circuit, however, has held that “a class seeks ‘significant relief’ against a defendant when
the relief sought against the defendant is a significant portion of the entire relief sought.”
Evans v. Walter Indus., 449 F.3d 1159, 1167 (11th Cir. 2006) (citation omitted). The court
in Evans further explained that the significant relief test requires a comparative analysis
that “includes not only an assessment of how many members of the class were harmed by
the defendant’s actions, but also a comparison of the relief sought between all defendants
and each defendant’s ability to pay a potential judgment.” Id. (citation omitted).
Here, Carter has not attempted to provide this Court with the information necessary
to measure the relief sought against Poynter against the total relief sought. Instead, Carter
apparently seeks to hold Allstate and Poynter jointly and severally liable based upon his
allegation that the defendants formed and acted pursuant to a civil conspiracy. This theory,
however, is quickly foreclosed by the intra-corporate conspiracy doctrine, which holds that
“a corporation cannot conspire with its own officers while the officers are acting in their
official capacity.” United States ex. rel. DRC, Inc. v. Custer Battles, LLC, 376 F.Supp.2d
617, 651 (E.D. Va. 2005) (quotation and footnote omitted). “The Fourth Circuit has
recognized two exceptions to the general rule that agents of a principal cannot conspire

17

with one another or the principal: [1] the so-called ‘independent personal stake’ exception,
and [2] where the corporate agents are alleged to have acted outside the normal course
of their corporate duties – the ‘unauthorized acts’ exception.” United States v. Gwinn,
2008 WL 867927, *25 (S.D. W.Va. Mar. 31, 2008) (citation omitted). Carter has failed to
demonstrate that either exception applies here.
For these reasons, this Court concludes that Carter has failed to establish that he
seeks “significant relief” from Poynter, as contemplated in the local controversy exception
to the exercise of CAFA jurisdiction. Accord Martin v. State Farm Mut. Auto. Ins. Co.,
2010 WL 3259418, *7 (S.D. W.Va. Aug. 18, 2010).
ii.

Significant Basis

Again, this Court begins by questioning whether Congress intended that the term
“significant basis” apply to a local claims adjuster:
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 payer in the alleged scheme implemented
by the insurance company.

S. Rep. No. 109-14, at 40. Based upon this passage, this Court finds it unlikely from the
start that Congress intended for Poynter’s conduct, as alleged by Carter, to be considered
as forming a significant basis for the class claims asserted.
Even assuming Congress intended otherwise, this Court concludes that application
of the local controversy exception on this basis is inappropriate here. The term “significant
basis” has yet to be interpreted by the Fourth Circuit. The Third Circuit, however, has held
that this component of the local controversy exception requires that there be “at least one
18

local defendant whose alleged conduct forms a significant basis for all the claims asserted
in the action.” Kaufman v. Allstate New Jersey Ins. Co., 561 F.3d 144, 155 (3d Cir.
2009) (emphasis added). In this case, Carter does not dispute that Poynter was not the
claims adjuster for some of the claimants which would qualify under the class definition
because he did not become a manager until 1987.
For these reasons, this Court concludes that Carter has failed to establish that
Poynter’s alleged conduct formed a “significant basis” for all the class claims asserted in
this action, as required by the local controversy exception. Accord Martin, 2010 WL
3259418 at *8. Accordingly, this Court concludes that the local controversy exception is
inapplicable and thus that this Court is not required to decline to exercise its jurisdiction
under CAFA.3
3.

Divestiture of Jurisdiction

Finally, Carter argues that the defendants’ Motion to Strike Class Action Allegations
divests this Court of its jurisdiction under CAFA. This Court disagrees.
“The well-established general rule is that jurisdiction is determined at the time of
removal, and nothing filed after removal affects jurisdiction.” In re Burlington N. Santa Fe
Ry. Co., 606 F.3d 379, 380 (7th Cir. 2010) (citing St. Paul Mercury Indem. Co. v. Red
Cab Co., 303 U.S. 283, 293 (1938)). Based upon this time-of-removal rule, five United
States Courts of Appeals to have addressed the issue have held that a post-removal denial
of class certification does not divest a district court of CAFA jurisdiction that was present

3

The difference in pleading requirements between the state and federal courts
played no role this conclusion. Instead, this Court finds that it is relatively clear as a matter
of law that the local controversy exception does not apply here.
19

upon removal. See Vega v. T-Mobile USA, Inc., 564 F.3d 1256, 1268 n. 12 (11th Cir.
2009); Cunningham Charter Corp. v. LearJet, Inc., 592 F.3d 805, 806 (7th Cir. 2010);
United Steel v. Shell Oil Co., 602 F.3d 1087, 1091-92 (9th Cir. 2010); Buetow v. A.L.S.
Enters., Inc., 650 F.3d 1178, 1182 n. 2 (8th Cir. 2011); Metz v. Unizan Bank, 649 F.3d
492, 500 (6th Cir. 2011); see also Levitt v. Fax.com, 2007 WL 3169078, *7 (D. Md. May
25, 2007).4 Relying on the same rule, the Seventh Circuit has also held that a post-removal
amendment to eliminate class allegations does not divest a district court of previously
possessed CAFA jurisdiction. See In re Burlington, 606 F.3d at 381 (“Given our decision
in Cunningham, the limited question this appeal presents is whether CAFA jurisdiction also
continues when the post-removal change is not the district court’s denial of class
certification but is instead the plaintiffs’ decision not to pursue class certification. The district
court treated the two situations as indistinguishable, and we agree.”).
No federal appellate court has addressed the specific issue presented here, i.e.,
whether a defendant’s post-removal motion to strike class action allegations divests a
district court of its CAFA jurisdiction. At least one district court has had such an opportunity
and applied the same analysis to deny remand:
Additionally, Plaintiffs say that, because Defendants have moved to strike the
class allegations, this Court should not allow Defendants to rely on CAFA to
support jurisdiction. Plaintiffs continue that, the Court should therefore
remand this action because Defendants cannot support jurisdiction under the

4

This Court is aware that three of these federal appellate courts recognized that the
time-of-removal rule does not preclude removal when the jurisdictional allegations were
frivolous from the start. See Cunningham, 592 F.3d at 807; United Steel, 602 F.3d at
1092 n. 3; Metz, 649 F.3d at 501 n. 4. While potentially unwise, however, this Court is
unconvinced that Carter’s class action allegations were frivolous from the start.
20

traditional, strict diversity requirements of § 1332(a)(1).

28 U.S.C. §

1332(a)(1). As noted above, this Court judges the proprietary of removal on
the state of the world at the time of removal. At the time of removal,
Plaintiffs’ claim satisfied the requirements for CAFA jurisdiction.

The

Defendants’ post-removal arguments do not change the removal analysis.
Faktor v. Lifestyle Lift, 2009 WL 1107908, *3 (N.D. Ohio Apr. 23, 2009).5
Upon careful consideration, this Court agrees with the court in Faktor and finds no
reason to depart from the time-of-removal rule in this case. Instead, applying that well
established rule, this Court holds that the defendants’ Motion to Strike Class Action
Allegations does not divest this Court of the jurisdiction it had under CAFA at the time of
removal, as determined above.
Accordingly, this Court concludes that Carter’s Motion to Remand should be
DENIED.
B.

Motion to Strike Class Action Allegations

In responding to the defendants’ Motion to Strike Class Action Allegations, Carter
states that he “does not oppose the striking of the class allegations set forth in his
Amended Complaint and joins this Motion.” ([Doc. 11] at 1). Based upon Carter’s consent,
this Court concludes that the defendants’ Motion to Strike Class Action Allegations should
be GRANTED.6
5

This Court is aware that at least one other district court has addressed the same
issue and ruled that remand was required. See Adams v. Luxottica U.S. Holdings Corp.,
2009 WL 7401970, *7 (C.D. Cal. July 24, 2009). However, this Court questions the vitality
of this decision after the Ninth Circuit’s subsequent opinion in United Steel, as cited above.
6

To the extent that this consent was conditioned upon remand, this Court
nevertheless finds that the class action allegations should be stricken. In so finding, this
21

CONCLUSION
For the foregoing reasons, this Court concludes that the plaintiff’s Motion to Remand
[Doc. 10] should be, and hereby is, DENIED. In addition, this Court concludes that the
defendants’ Motion to Strike Class Action Allegations [Doc. 7] should be, and hereby is,
GRANTED. Accordingly, the class action allegations contained in Carter’s Amended
Complaint [Doc. 3-4] are hereby ORDERED STRICKEN.
It is so ORDERED.
The Clerk is directed to transmit copies of this Order to counsel of record herein.
DATED: August 21, 2012.

Court is unpersuaded that the plethora of individual issues which precluded class
certification in Falls are not just as compellingly present here. In fact, at least one
individual issue has been added because of the Falls action, namely: whether a putative
class member is entitled to tolling of the applicable statutes of limitation between the filing
of the pleading alleging a putative class and the denial of class certification. See Dunn v.
City of Chicago, 231 F.R.D. 367, 374 (N.D. Ill. 2005) (“[O]nly the claims of plaintiffs who
would have been included in a putative class are tolled.”). This conclusion is inevitable,
whether reached under the pleading requirements of the state courts or the heightened
pleading requirements of this Court.
22