Open Wide and Say “Class Action.”

New Jersey Dental Assoc. v. Metropolitan Life Ins. Co., No. 10-2121, 2010 WL 3811305 (D.N.J. Sept. 21, 2010).

I have this vision of the defense attorneys in this case saying to the Judge, "Oh, by class action you mean ‘class action’ not ‘class action like.". They probably did not say that, but when I picture these hearings, they are always funnier than in reality.

A New Jersey District Court Judge was probably not all laughs and giggles when he remanded an action to state court holding that all the representative actions cannot be removed under CAFA unless they satisfy the requirements of either “class action” or “mass action.”

The plaintiff, a professional membership organization consisting of more than 4,700 dentists who work in the State of New Jersey (that seems like a lot of dentists to me), brought this lawsuit in state court against Met Life and Aetna Life Insurance Company, alleging that these insurance companies had, in their health benefit plans, established certain maximum fee levels for dentists that violated contracting arrangements and/or state law. Which, I will say as a policy holder who has paid for her child’s under bite, kind of sucks.

The defendants timely removed the action to the district court asserting diversity jurisdiction under 28 U.S.C. § 1332(a), and stated that the amount in controversy was greater than $75,000 and that the plaintiff’s place of business was in New Jersey while Met Life and Aetna’s principal places of business were in New York and Connecticut, respectively.

The plaintiff filed a motion to remand, arguing that as it was acting in a “representative capacity” in this lawsuit, the citizenship of its members was what mattered for purposes of establishing diversity jurisdiction, and submitted affidavits of two of its member dentists who stated that they were residents of the state of New York.

A month later, the defendants filed a “Revised Notice of Removal” along with their opposition brief to the plaintiff’s motion asserting that jurisdiction in the case was premised not on general diversity of citizenship rules, § 1332(a), but rather on CAFA. Although the district court found that the revised notice of removal was timely, the lawsuit did not qualify as a “class action” to be removed under CAFA. So, the case was remanded.

As to the timeliness issue, the Court observed that although § 1446(b) specifies that a notice of removal must be filed within 30 days of receiving the first removable pleading, the rule does not specify under what conditions a defendant may amend its notice of removal. Generally, a revised notice of removal may be filed only in order to correct minor, technical errors in alleging jurisdiction but not to allege an entirely new basis for federal jurisdiction. Here, the revised notice of removal went beyond correcting mere technical errors.

The defendants relied on Scattergood v. Perelman, 945 F.2d 618, 620 (3d Cir.1991) and USX Corp. v. Adriatic Insurance Co.,345 F.3d 190, 204-05 (3d Cir.2003) which suggested an exception to the general rule that a new basis for jurisdiction may not be raised in a revised notice of removal. Scattergood and USX suggest that a defendant should be allowed to file new jurisdictional allegations whenever the circumstances are such that he or she could not have been expected to know that its previously-asserted grounds for federal jurisdiction are insufficient.

The Court found that, here, none of the facts alleged in the complaint or amended complaint would have put the defendants on notice that members of the plaintiff association resided in New York. Therefore, when the defendants learned that certain plaintiffs resided in New York, a fact that rendered their first-asserted basis for federal jurisdiction inapplicable, they were entitled to amend their notice of removal to allege a new basis for federal jurisdiction.

But with one hand the court gives, and the next it takes away. Under CAFA, § 1332(d)(1)(B), the term “class action” is defined as “any civil action filed under Fed. R. Civ. P. 23 or similar State statute or rule of judicial procedure authorizing an action to be brought by one or more representative persons as a class action.” The Court found that this case did not explicitly meet this definition because the plaintiff’s complaint did not invoke any state or federal class action rules.

The defendants argued, however, that CAFA’s diversity rules should be interpreted liberally to cover what is a class action “in substance,” and asserted that this action was removable because it bore some of the hallmark characteristics of a class action because (1) it alleges harm to the dentists as a professional group, (2) it seeks class-wide relief, and (3) it is attempting to serve as a representative of all its members.

The district court disagreed and observed that Congress did not intend that all cases bearing a resemblance to a class action should be removable on the basis of minimal diversity and $5 million in controversy. CAFA has a separate provision allowing removal for “class-action like” lawsuits called “mass action” under § 1332(d)(11), which gives the federal courts jurisdiction over some actions that are substantially similar to class actions, but by limiting the jurisdiction to actions that meet specific criteria–at least one individual plaintiff’s claims should be at least $75,000.

Because none of the individual dentists on behalf of whom the plaintiff brought this lawsuit were alleged to have a claim for $75,000, the Court concluded that it may not retain jurisdiction over this case. Case remanded.