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LOKER, ADAM SMESTAD, XAVIER HAILEY, BRENT DAVIDSON, SHELLYE TAYLOR, ALLISON LEARY, on behalf of themselves and all others similarly situated, Plaintiffs, v. DE PAUL UNIVERSITY COLLEGE OF LAW, and DOES 1-20, Defendants. : : : : : : : : : : : : : : : : :
Hon. Milton Shadur
PLAINTIFFS’ MOTION TO REMAND Jonathan Phillips, Brian Loker, Adam Smestad, Xavier Hailey, Brent Davidson, Shellye Taylor, and Allison Leary (“Plaintiffs”), on behalf of themselves and all others similarly situated, hereby request the entry of an order remanding this case to the Circuit Court of Cook County and state the following in support thereof: PRELIMINARY STATEMENT This Court is without subject matter jurisdiction to preside over this action. Defendant De Paul University (“De Paul” or “Defendant”) removed this action pursuant to the provisions of the Class Action Fairness Act of 2005 (“CAFA”), which creates federal subject matter jurisdiction over nationwide class actions where, inter alia, there is minimal diversity and an aggregated amount in controversy of more than $5 million. 28 U.S.C. § 1332(d)(2). The burden of proving CAFA's jurisdictional prerequisites falls on the removing defendant.
No. 1:12-cv-01791 De Paul has not provided any evidence to satisfy its burden that minimal diversity exists,
thus remand is required. By relying solely on allegations of residency, DePaul has not properly alleged the citizenship of the named Plaintiffs. De Paul has failed to establish that the amount in controversy exceeds $5 million as required under CAFA. De Paul has relied entirely and improperly upon speculation and assumptions concerning the Plaintiffs’ citizenship and the amount in controversy. Most importantly, De Paul made no attempt to verify or substantiate the allegations in the Removal Petition. Even if De Paul established federal subject matter jurisdiction under CAFA, which it has not, the Court should still remand this case pursuant to CAFA's mandatory “local controversy” or “home state” exceptions, or pursuant to the “discretionary jurisdiction” exception. For the reasons set forth below, this Court should enter an order of remand. STATEMENT OF RELEVANT FACTS 1. Cook County. 2. The Plaintiffs based their causes of action upon the fraudulent conduct of the On February 1, 2012, the Plaintiffs filed the Complaint in the Circuit Court of
Defendants, primarily De Paul, a law school operating solely in Chicago, Illinois. 3. Plaintiffs allege that DePaul reported false placement rates for the members of its
2005, 2006 and 2007 classes and falsely reported that approximately 90% of its graduates had jobs for which a law degree was required or preferred. 4. The Plaintiffs have further alleged that De Paul reported inflated salary
information to prospective and current students to induce them to enroll in their program and incur heavy debt; debt which they have been unable to repay due to their inability to obtain gainful employment as attorneys. (Complaint ¶ 3-10, attached as Ex. 1 to the Removal Petition).
No. 1:12-cv-01791 5. The causes of action alleged in the Complaint include violations of the Illinois
Consumer Fraud Act, fraud and negligent misrepresentation, claims based entirely on state law. 6. The Plaintiffs have defined the proposed class (the “Class”) as “All persons who
are either presently enrolled or graduated from the De Paul Law School within the statutory period.” (Compl. ¶ 85). 7. Although not presently ascertained numerically, the size of the Class may be at
least 1,000 people, since more than 250 students graduate from De Paul each year. (Comp. ¶ 87). 8. The relief sought by the Plaintiffs includes: a) damages and equitable relief on
behalf of the Class which includes reimbursement of tuition costs; b) enjoinment of De Paul from disseminating false information regarding the employment and salaries of its graduates; and c) requiring De Paul to retain a third party to independently audit all employment and salary data, costs and expenses, together with attorney fees and experts’ fees. (Compl. ¶ 12, infra). 9. The Defendants’ Notice of Removal (ECF 1)(“Notice”), filed on March 12, 2012,
is predicated upon CAFA, which provides that “[t]he district court shall have original jurisdiction of any civil action in which the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs, and is a class action in which ... any member of a class of plaintiffs is a citizen of a State different from any defendant....” 28 U.S.C. §1332(d)(2). The proposed class must additionally contain 100 or more individuals. 28 U.S.C. § 1332(d)(5)(B). 10. De Paul has alleged minimal diversity based on its assumption that at least one
Plaintiff (or class member) is a citizen of a state other than Illinois, De Paul’s state of citizenship. 11. De Paul has further alleged that the amount in controversy exceeds $5,000,000,
exclusive of costs, based upon the typical amount of tuition, and that the numerosity requirement is met since the number of persons in the proposed Class will likely exceed 100 individuals.
No. 1:12-cv-01791 12. Plaintiffs do not dispute that this action meets the numerosity requirement of
CAFA. However, the minimal diversity and amount in controversy requirements have not been established based on the four corners of the Complaint. Even if these two requirements were met, the mandatory and discretionary exceptions to CAFA are applicable and require that this Court remand this action. ARGUMENT I. The Burden of Establishing Federal Jurisdiction Rests with the Removing Defendant and De Paul Has Failed to Meet That Burden. The United States Supreme Court has held that: “It is to be presumed that a cause lies outside this limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377, 114 S.Ct. 1673 (1994). The burden of proving the propriety of removal falls upon the party
“invoking federal jurisdiction.” Hart v. Fedex Ground Package System, Inc., 457 F.3d 675 (7th Cir. 2006); Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 118 S.Ct. 1003 (1998); American Bankers Life Assurance Co. of Florida v. Evans, 319 F.3d 907, 909 (7th Cir. 2003); Shaw v. Dow Brands, Inc., 994 F.2d 364, 373-74 (7th Cir. 1993). The removal jurisdiction of the federal courts is to be “scrupulously confined.” Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 109, 61 S.Ct. 868 (1941). This strict policy against removal and for remand protects the sovereignty of state governments and state judicial power. See Id. at 108-09. In the matter sub judice, the aforementioned policy would be furthered by remand since the Complaint asserts no federal question, implicates only state law and concerns a dispute between a local law school and its local students.
No. 1:12-cv-01791 CAFA grants the federal courts original jurisdiction to hear interstate class actions where:
(1) the proposed class contains more than 100 members; (2) minimal diversity exists between the parties (i.e., at least one plaintiff and one defendant are from different states); (3) the amount in controversy exceeds $5,000,000; and (4) the primary defendants are not states, state officials, or other governmental entities. 28 U.S.C. §1332(d)(2); see also Hollinger v. Home State Mut. Ins. Co., 654 F. 3d 564 (5th. Cir., 2011). De Paul has failed to meet its burden of establishing subject matter jurisdiction under CAFA. De Paul’s removal petition contains an obvious fatal error – De Paul alleges that two plaintiffs are citizens of California and Washington, D.C. See Notice of Removal ¶10. Both of these allegations of “citizenship” are based solely upon the complaint which alleges that Brian Loker and Brent Davidson are residents of those jurisdictions. No effort was made to put the allegations of citizenship under oath. See America’s Best Inns, Inc. v. Best Inns of Abilene, L.P., 980 F.2d 1072, 1074 (7th Cir. 1992). The allegations in the removal petition are insufficient because the "residency" of each party is meaningless for purposes of diversity jurisdiction, as "citizenship is what matters." Guar. Nat'l Title Co. v. J.E.G. Assocs., 101 F.3d 57, 58-59 (7th Cir. 1996) (explaining that statements concerning a party's "residency" are not proper allegations of citizenship as required by 28 U.S.C. § 1332); "It is well-settled that when the parties allege residence but not citizenship, the court must dismiss the suit." Held v. Held, 137 F.3d 998, 1000 (7th Cir. 1998); see generally Smoot v. Mazda Motors of Am.,Inc., 469 F.3d 675, 677-78 (7th Cir. 2006). This error, standing alone, is fatal to the effort to remove the action and deprives the court of subject matter jurisdiction. See Pettett Funeral Home v. Merrill, Lynch, Pierce, Fenner & Smith, 10-1000 (S.D.
Ill.) (opinion attached as Exhibit D) (court has independent duty to assure that subject matter jurisdiction exists). De Paul also speculates that the amount in controversy exceeds $5 million. Nowhere in Plaintiffs’ complaint is a specific dollar amount alleged. The burden of proving the amount in controversy is on the removing defendant. Spivey v. Venture, Inc., 528 F.3d 982, 986 (7th Cir. 2006). De Paul concludes that because tuition currently exceeds $41,000 per year, the amount in controversy must exceed $5 million, without any analysis or factual support for this blatant speculation. This is insufficient to meet De Paul’s burden to show jurisdiction is proper. DePaul bases its jurisdictional allegations on the Complaint, which was not verified. It is well-settled that allegations of subject matter jurisdiction may only be made on the basis of personal knowledge. See America’s Best Inns, Inc. v. Best Inns of Abilene, L.P., 980 F.2d 1072, 1074 (7th Cir. 1992). DePaul’s failure to include an affidavit is again, fatal, to removal. Because De Paul has not borne its burden of proving federal jurisdiction under CAFA by showing (a) minimal diversity or (b) the amount in controversy, remand is required. II. The Seventh Circuit Has Impermissibly Shifted the Burden to Plaintiffs. Under Article III, federal courts are courts of limited jurisdiction and the invoking party bears the burden to show jurisdiction exists. Hart v. FedEx Ground Package System, Inc., 457 F.3d 675, 679 (7th Cir. 2006). Through the Class Action Fairness Act Congress expanded that jurisdiction. 28 U.S.C. §§ 1332(d)(2), 1332(d)(5). However, the home state and local
controversy exceptions require that the federal court “decline to exercise jurisdiction” if it is a local matter; thus expressly limiting jurisdiction. Hart v. FedEx Ground Package System, Inc., 457 F.3d 675. In Hart, the Seventh Circuit held “[a]lthough we consider the question close, we conclude that the structure of the statute logically shifts the burden of persuasion to the plaintiff
to show the general rule does not apply.” Id. at 679. This burden shift improperly expands jurisdiction to a matter where it would not otherwise exist. For example, a defendant removes a class action to federal court under § 1332(d)(2). More than two-thirds of the class members are citizens of the same state as the primary defendants. The plaintiff elects (due to cost constraints or proof issues) not to prove that the exception applies. Jurisdiction was “created” where it should not exist. If invoking party bore the burden to prove that the exception did not apply, the federal court would not have jurisdiction. The limited jurisdiction of the federal court was improperly expanded. The Seventh Circuit’s decision in Hart places an enormous burden on Plaintiffs. Here, De Paul maintains records of the home and work addresses of each graduate. De Paul also maintains email addresses, phone numbers and bar admission information for each graduate. This information is not available to Plaintiffs. De Paul already posses the information that will reveal whether the exceptions to CAFA apply. Plaintiffs are disadvantaged by the erroneous burden shift, which may require plaintiffs to spend significant resources to prove the obvious – that subject matter jurisdiction is lacking. This case illustrates that the Hart decision was erroneous. Under Hart, all parties could know that the federal court lacked jurisdiction, but could choose not to litigate the issue, thus conspiring to give the federal court the appearance of subject matter jurisdiction. III. The Mandatory Exceptions to CAFA Apply. Assuming arguendo that Hart is good law, Plaintiffs meet their burden that an exception under CAFA applies. CAFA requires federal courts to decline jurisdiction over a proposed class action if the (1) the local controversy exception, 28 U.S.C. §1332(d)(4)(A), or (2) the home state exception, §1332(d)(4)(B), are proven by a preponderance of the evidence.
mandatory abstention provisions are "designed to draw a delicate balance between making a federal forum available to genuinely national litigation and allowing the state courts to retain cases when the controversy is strongly linked to that state." Hart at 682. "Congress crafted CAFA to exclude only a narrow category of truly localized controversies, and the exceptions provide a statutory vehicle for the district courts to ferret out the controversy that uniquely affects a particular locality to the exclusion of all others." Evans v. Walter Indus., Inc., 449 F.3d 1159 (11th Cir. 2006) (internal quotes omitted). Clearly, this matter affects Illinois with particularity since De Paul is solely located in Illinois, the students attending De Paul are in Illinois, the vast majority of the graduates lives and work in Illinois, and the claims are purely state law claims. A. The Local Controversy Mandatory Abstention Provision of CAFA Is Applicable
The "local controversy" exception provides that a district court "shall decline to exercise jurisdiction": (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). i. CAFA’s concept of “Minimal Diversity” is unconstitutional under Article III.
No. 1:12-cv-01791 Plaintiffs submit that the concept of “minimal diversity” set forth in CAFA is inconsistent
with Article III of the United States Constitution. class is certified.
A proposed class does not exist until the
Until then, a constitutional controversy exists only between the named
plaintiffs and the defendant. Taking that as true, only two out of eight named plaintiffs here reside out-of-state, meaning that six out of eight plaintiffs reside in Illinois, or 75%. Under CAFA, this is considered minimal diversity and the case could proceed in federal court under the guise of diversity jurisdiction. Article III does not recognize the concept of “minimal diversity” and prior cases decided by the United States Supreme Court on these issues do not extend Article III jurisdiction to “minimal diversity” cases such as this one. ii. The two-thirds requirement is met.
Plaintiffs have identified the proposed class to include current students and those who have graduated from De Paul within the statutory time period. (Compl. ¶ 86). De Paul admits that 79% of its 2010 graduates, 81% of its 2008 graduates and 87% of its 2006 graduates were employed in Illinois. (Exhibits A, B., C). De Paul has provided no evidence, under oath, that its previous claims are false. When courts determine citizenship for the purposes of the diversity statute, including CAFA, the citizenship of a natural person is equated with his or her domicile. Certain Interested Underwriters at Lloyd's v. Layne, 26 F.3d 39, 41 (6th Cir.1994); Von Dunser v. Aronoff, 915 F. 2d 1071, 1072 (6th Cir.1990). This is so because “[t]o acquire domicile within a particular state, a person must be physically present in the state and must have either the intention to make his home there indefinitely or the absence of an intention to make his home elsewhere.” Stifel v. Hopkins, 477 F.2d 1116, 1120 (6th Cir.1973); see Miss. Band of Choctaw Indians v. Holyfield,
490 U .S. 30, 48 (1989) (“For adults, domicile is established by physical presence in a place in connection with a certain state of mind concerning one's intent to remain there.”). A person's citizenship or domicile is composed of an objective and subjective component. The Court may apply its common sense in making a reasonable determination as to whether the class meets the two-thirds threshold. Mattera v. Clear Channel Communications, Inc., 239 F.R.D. 70, 80 (S.D.N.Y. 2006) (“While Defendants have not provided evidence, in the form of an affidavit or otherwise, establishing such citizenship, it is reasonably likely that more than twothirds of the putative class members of the proposed class-all of whom work in New York-are citizens of New York.”). This is especially appropriate here, where De Paul’s own statistics indicate that more than two-thirds of its graduates remain and are employed in Illinois. In sum, the Class will surpass the two-thirds threshold needed to satisfy the first prong of CAFA's local controversy exception. The Plaintiffs have served discovery requests addressed to De Paul to obtain certain records of DePaul which will be used by Plaintiffs to support their contention that two-thirds of the proposed Class are citizens of Illinois. iii. Plaintiffs seek significant relief from De Paul, an Illinois citizen, whose conduct forms a significant basis of Plaintiffs’ claims.
Plaintiffs seek significant relief from De Paul, i.e. damages and equitable relief. De Paul’s conduct forms a significant basis for Plaintiffs’ claims, i.e. inducing students to attend the school by promulgating erroneous and misleading salary and employment information. As required under this exception, at least one defendant, the primary defendant, De Paul, is a citizen of Illinois, the original filing state. De Paul has acknowledged that it is a citizen of Illinois. De Paul has its principal place of business in Illinois, rendering it a citizen of Illinois for CAFA purposes. See Hertz Corp. v. Friend, 130 S. Ct. 1181, 1186 (2010) (determining that the
“nerve center” test should be applied in all corporate situations and that “principal place of business” refers to the location from which the corporation's activities are directed, controlled, and coordinated). iv. Principal injuries occurred and continue to occur in Illinois.
As alleged in the Complaint, the Plaintiffs paid tuition to De Paul in Illinois based upon misleading and deceptive information promulgated by De Paul. This promulgation and dissemination occurred in Illinois, the state in which the action was originally filed. This case concerns the practice of law and the manner in which students are educated for the practice of law. Under long-standing Illinois law, the Illinois Supreme Court, alone,
regulates the practice of law in the State of Illinois. See Illinois Constitution Art. VI. Thus, the state court is the proper forum in which this dispute should be resolved. Finally, as further required under the exception, during the 3-year period preceding the filing of the class action, there have been no other class actions filed asserting similar factual allegations against De Paul on behalf of the same persons. Thus, remand is warranted. B. The Home State Mandatory Abstention Provision of CAFA Is Applicable.
The "home state" mandatory abstention provision prevents a federal district court from exercising subject matter jurisdiction when “two-thirds or more of the members of all proposed plaintiff classes in the aggregate, and the primary defendants, are citizens of the State in which the action was originally filed.” 28 U.S.C. § 1332(d)(4)(B); Hollinger, 654 F. 3d at 570. As noted in Hollinger, courts have acknowledged that where a proposed class is discrete in nature, a common sense presumption should be used in determining whether citizenship requirements have been met. See Bennett v. Board of Com'rs for East Jefferson Levee Dist., 2007 WL 2571942
at *4; (E.D. La., 2007); Caruso v. Allstate Insurance Company, 469 F. Supp. 2d 364, 368 (E.D. La., 2007). As set forth in the preceding section, the requirement that two-thirds of the proposed class members are citizens of Illinois, the original filing state, is met. De Paul’s own information shows that approximately 80% of its graduates remain in Illinois. Moreover, at least one defendant, the primary defendant, De Paul, is a citizen of Illinois. De Paul has acknowledged that it is a citizen of Illinois with its principal place of business in Illinois, rendering it an Illinois citizen under CAFA. See Hertz Corp., 130 S. Ct. at 1186. All of the requirements of the home state exception are met and remand is warranted. IV. Additional Discovery Is Being Undertaken. Remand is required due to the fatal flaws in the Notice of Removal, especially in light of Defendants’ failure to present sufficient evidence to establish subject matter jurisdiction. However, if the Court believes that additional information is necessary to reach a decision, Plaintiffs would respectfully request a short period of time in which to conduct factual discovery related to these issues. (Hart at 682: “plaintiffs have the right, through appropriate discovery, to explore the facts relevant to the court’s jurisdiction as the case progresses.”) Plaintiffs respectfully request that this Court set this matter for an evidentiary hearing within 60 days on the Home State mandatory exception. See Exhibit E (Interrogatories to DePaul). V. Remand Is Proper Pursuant to Discretionary Exception. In the event that this Court determines that the mandatory exceptions to CAFA are inapplicable, 28 U.S.C. §1332(d)(3) “provides a discretionary vehicle for district courts to ferret out the ‘controversy that uniquely affects a particular locality to the exclusion of all others.’”
Preston v. Tenet HealthSys. Mem'Fl Med. Ctr., Inc., 485 F.3d 804, 812 (5th Cir.2007) (citing Evans, 449 F.3d at 1164). Specifically, Section 1332(d)(3) provides: A district court may, in the interests of justice and looking at the totality of the circumstances, decline to exercise jurisdiction under [Section 1332(d)(2) ] over a class action in which greater than one-third but less than two-thirds of the members of all proposed plaintiff classes in the aggregate and the primary defendants are citizens of the State in which the action was originally filed based on consideration of— (A) whether the claims asserted involve matters of national or interstate interest; (B) whether the claims asserted will be governed by laws of the State in which the action was originally filed or by the laws of other States; (C) whether the class action has been pleaded in a manner that seeks to avoid Federal jurisdiction; (D) whether the action was brought in a forum with a distinct nexus with the class members, the alleged harm, or the defendants; (E) whether the number of citizens of the State in which the action was originally filed in all proposed plaintiff classes in the aggregate is substantially larger than the number of citizens from any other State, and the citizenship of the other members of the proposed class is dispersed among a substantial number of States; and (F) whether, during the 3–year period preceding the filing of that class action, 1 or more other class actions asserting the same or similar claims on behalf of the same or other persons have been filed. As set forth below, the factors enumerated within the discretionary exception of CAFA are present and mitigate strongly in favor of remand. Discretionary Remand Factors are Present. Factor (A): The claims asserted in the Complaint against De Paul are Illinois state law claims, asserted by primarily Illinois citizens, directed against an Illinois citizen. De Paul improperly concludes that because similar lawsuits have been filed in other states, that the suit before this Court is a matter of national interest. However, Seventh Circuit case law provides otherwise. (See In re: Sprint Nextel Corp., No. 09-8038 (7th Cir. 2010), “The fact that this suit may be but a slice of a bigger controversy, is irrelevant,” citing to In re Hannaford Bros. Co. Customer Data Sec. Breach Litig., 564 F.3d 75 (noting that despite the national and even
international flavor of the controversy as whole, the court would only look at the case before it and applied the citizenship requirements of the home state exception). This case involves matters purely related to Illinois law and thus this factor weighs in favor of remand. Factor (B): The claims asserted by Plaintiffs are entirely within the ambit of state court jurisdiction. The claims are state law claims only, i.e. Illinois Consumer Fraud and Deceptive Business Practices Act, fraud and negligent misrepresentation. These claims do not implicate the laws of any other state. Factor (C): Plaintiffs drafted their Complaint because plaintiffs strongly suspected that federal jurisdiction was lacking because the vast majority of DePaul graduates work in the State of Illinois. The Complaint on its face contains no federal question or issue warranting the invocation of federal jurisdiction. Factor (D): The Complaint was brought in a forum with a distinct nexus to the damages and plaintiffs. The damages occurred in Illinois as the payment of tuition incurred in Illinois and many Plaintiffs had difficulty obtaining employment in Illinois. The vast majority of Plaintiffs, as explained in the preceding section, reside, work and are citizens of Illinois. Factors (E) and (F) are inapplicable to this case. The factors outlined in the discretionary exception mitigate in favor of remand. CONCLUSION DePaul has not borne its burden of establishing federal jurisdiction under CAFA. The minimal diversity and amount in controversy requirements have not been established. Notwithstanding that, Plaintiffs have proven by a preponderance of the evidence that both the local controversy and home state mandatory exceptions apply. Were the Court to find otherwise, then the discretionary exception mitigates strongly in favor of remand to state court, the
Plaintiffs’ chosen forum. In sum, plaintiffs request that this case be remanded to the Circuit Court of Cook County, or that this court hold a fact hearing to determine whether either jurisdictional exception applies. By: /s/ Edward X. Clinton, Jr. The Clinton Law Firm 111 West Washington Street, Suite 1437 Chicago, Illinois 60602 (312) 357-1515; Fax (312) 201-0737 ARDC No. 6206773 email@example.com And David Anziska, Esq. The Law Offices of David Anziska 305 Broadway, 9th Fl. New York, NY 10007 (212) 822-1496; Fax: (212) 822-1437 Jessie Strauss, Esq. Strauss Law, PLLC 305 Broadway, 9th Fl. New York, NY 10007 (212) 822-1496; Fax (212) 822-1437 Counsel for Plaintiffs, individually and for all others similarly situated
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