Opinion
No. 02 C 2815.
March 7, 2003
ORDER
Plaintiffs Rob Schultz and Pamela A. Schultz, individually and on behalf of others similarly situated, initiated an action in the Circuit Court of Cook County against defendant CTX Mortgage Company, LLC claiming that defendant collected certain fees stemming from its unauthorized practice of law. Specifically, plaintiffs allege that defendant's employees, who are not lawyers, generate loan documents using a computerized document preparation system, then charge $150 in "document preparation fees" to mortgagees like plaintiffs. Plaintiffs claim this amounts to collecting fees for the unauthorized practice of law, and thus seek to recover the $150 they paid. Defendant filed a timely notice of removal under 28 U.S.C. § 1441 claiming that the court has diversity jurisdiction over the action under 28 U.S.C. § 1332(a). Plaintiffs responded with a motion for remand under 28 U.S.C. § 1447 on the grounds that (1) the court lacks diversity jurisdiction because the amount in controversy as to each class member is nowhere near the requisite $75,000, and (2) defendant failed to comply with Local Rule 81.2 when it filed its motion for remand. The court agrees with the plaintiffs on both grounds, as explained below, and therefore grants the motion to remand. As a result, defendant's motion to dismiss is denied as moot.
Removal to a federal court is proper under § 1441 only if that court has original jurisdiction over the action. 28 U.S.C. § 1441. Because defendant contends the court has diversity jurisdiction, defendant bears the burden of establishing that the amount in controversy exceeds the $75,000 minimum required under § 1332(a). In re Brand Name Prescription Drugs Antitrust Litig., 123 F.3d 599, 607 (7th Cir. 1999). It is undisputed that the monetary value of each plaintiff's claim is $150, and that the plaintiffs' claims cannot be aggregated: "[a]t least one named plaintiff must satisfy the jurisdictional minimum." Id. Defendant, however, argues that if plaintiffs prevail, the costs it will incur to change its business practices will exceed $75,000, and therefore the amount in controversy requirement is satisfied.
The complete diversity requirement is not at issue.
It is true that in the Seventh Circuit courts may consider "the cost a defendant will incur in complying with [an] injunction the plaintiff seeks" in assessing whether the amount in controversy exceeds the jurisdictional minimum. Uhl v. Thoroughbred Tech. Telecomm., Inc., 309 F.3d 978, 983 (7th Cir. 2002); In re Brand Name Prescription Drugs, 123 F.3d at 609; McCarty v. Amoco Pipeline Co., 595 F.2d 389, 391-95 (7th Cir. 1979). This approach is known as the "either viewpoint" rule — i.e., courts may look at either the cost to the defendant or the benefit to the plaintiff to evaluate the amount in controversy. Uhl, 309 F.3d at 983.
A case clearly satisfies the jurisdictional minimum "if the value of the injunction to the plaintiff exceeds the statutory minimum." In re Brand Name Prescription Drugs, 123 E.3d at 609.
But as far as the court is aware, that rule has been applied only in cases in which plaintiffs sought injunctive relief Uhl, 309 F.3d at 983; In re Brand Name Prescription Drugs, 123 F.3d at 609; McCarty, 595 F.2d at 391-92, 395; Zapka v. Coca-Cola Co., No. 99 C 8238, 2001 WL 1558276, at *3 (N.D. Ill. Dec. 5, 2001); Jacobson v. Ford Motor Co., No. 98 C 742, 1999 WL 966432, at * 3 (N.D. Ill. Sept. 30, 1999). Here, plaintiffs do not seek injunctive relief, yet defendant offers no basis for extending the application of the rule to cases in which plaintiffs seek only money damages. The court declines to extend the rule beyond cases in which injunctive relief is sought. Defendants do not (and could not) argue that any plaintiff's individual claim for monetary damages exceeds the jurisdictional minimum. Accordingly, this court lacks diversity jurisdiction.
There are certain flaws in defendant's argument, even if the "either view" rule were applicable. The Seventh Circuit has recognized three possible ways in which a request for an injunction, when viewed from the defendant's perspective, could satisfy the jurisdictional minimum: if complying with the injunction will require the defendant to alter its business methods and the cost of that alteration will exceed $75,000; if "the injunction would force the defendant to forego a benefit to him that is worth more" than $75,000; or if the "defendant's clerical or ministerial costs of compliance" with the injunction would exceed $75,000. In re Brand Name Prescription Drugs, 123 F.3d at 610. Defendant argues that (1) its costs to abandon or modify its current computerized document preparation system would exceed $75,000, (2) its costs to hire staff to prepare, organize and mail loan packages for closings would exceed $75,000, and (3) its costs simply to notify the class members regarding their entitlement to refund would exceed $75,000. In the court's opinion, the latter two potential costs constitute "clerical or ministerial costs of compliance. . . ." Id. The Seventh Circuit has expressed reservations about counting such costs toward the jurisdictional minimum, because if that argument were correct, then every large class action, regardless of how small the individual claims were, would meet the jurisdictional requirement. Id. ("It would be an invitation to file state-law nuisance suits in federal court.")
Moreover, despite defendant's argument to the contrary, even if this were an injunctive relief case, in this class action the court cannot properly consider defendant's entire expense of modifying or changing its current document preparation system to correct the effects of its allegedly unlawful business practice. Doing so would violate the nonaggregation rule. The court may consider only the cost to defendant of complying with the injunction as it relates to any individual plaintiff, not the cost of correcting the problem as a whole. See Uhl, 309 F.3d at 983 (court must look "separately at each named plaintiff's claim and the cost to the defendant of complying with an injunction directed to that plaintiff"). For example, if this were an injunctive relief case and plaintiffs prevailed, the court could enjoin defendant from having non-lawyer employees prepare loan documents. For purposes of determining the amount in controversy under the "either viewpoint" rule, the question would not be how much it would cost defendant to modify or replace its computerized document preparation system (as defendant argues), but rather how much it would cost defendant to have a lawyer prepare the loan documents for any given loan transaction. That cost could not reasonably exceed $75,000 per transaction. Thus, even if the "either viewpoint" rule applied here, defendant would not satisfy the jurisdictional minimum.
In any event, defendant also failed to comply with this district's local rules regarding removal. Under L.R. 81.2, if the complaint does not contain an express statement of the amount of damages claimed, as in the case at bar, the notice of removal must include (1) a statement by the defendant that it believes, in good faith, that the amount in controversy exceeds the jurisdictional minimum, and (2) must attach a discovery response (either an interrogatory response or a response to a request for admission) from at least one plaintiff in the state court action regarding the amount in controversy. L.R. 81.2. Defendant may very well have satisfied the first requirement through its assertion in the notice of removal that the amount in controversy exceeds $75,000. But it is undisputed that defendant failed to comply with the latter requirement. Defendant's failure to comply with L.R. 81.2 alone warrants remand. Hayes v. Bass Pro Outdoor World, LLC, No. 02 C 9106, 2003 WL 187411, at *3 (N.D. Ill. Jan. 21, 2003).
Plaintiffs also seek attorney's fees and costs relating to their motion to remand. Under § 1447(c), if the court orders remand, it may award "payment of just costs and any actual expenses, including attorney's fees." 28 U.S.C. § 1447(c). The decision whether to award such expenses lies within the discretion of the court, depending on the nature of the removal and remand. Id. at Commentary on 1988 Revision of Section 1447; Tenner v. Zurek, 168 F.3d 328, 330 (7th Cir. 1998). Plaintiffs argue that they should receive their fees and costs because "the removal was unjustified under existing law and defendant failed to comply with Local Rule 81.2." (Pls.' Mot. Remand at ¶ 15) (emphasis in original). Defendant's argument for removal was not contrary to settled law — defendant sought an extension of existing law, which is quite different. Unfortunately, defendant offered no basis for an extension, well-reasoned or otherwise. Given that deficiency and defendant's failure to comply with L.R. 81.2, the court grants plaintiffs request for attorney's fees and costs. A fee petition should be submitted within fourteen days of the date of this order.
Because defendant failed to demonstrate that the amount in controversy exceeds the jurisdictional minimum and failed to comply with L.R. 81.2, this case is remanded to the Circuit Court of Cook County under 28 U.S.C. § 1447(c) for lack of subject matter jurisdiction.