In a case with interesting implications for class action practitioners, the Seventh Circuit recently ruled against plaintiff Addison Automatics (Addison) in its attempt to dodge federal court jurisdiction (see Addison Automatics, Inc. v. Hartford Casualty Insurance Co., case no. 13-2729).
Addison had previously brought and settled a class action against Domino Plastics Co. (Domino) over Domino’s practice of sending junk faxes in violation of the Telephone Consumer Protection Act (TCPA) (for more on TCPA issues, see Call Me, Maybe? A Nationwide Survey of Insurance Coverage for TCPA Class Actions and New Jersey Judge Certifies TCPA Junk Fax Class). Domino’s insurer, Hartford Casualty Insurance Co. (Hartford), refused to provide coverage, and in order to protect its own interests, Domino settled the case with Addison for $18 million. However, as part of that settlement, Addison agreed that none of that amount would be collected from Domino – rather, Domino assigned to the certified class any claims it had against Hartford, leaving it to Addision to litigate the coverage dispute.
Addison, on behalf of itself and the class, then filed a new state court action against Hartford over the $18 million. When Hartford sought to remove the new action to federal court under CAFA (28 U.S.C. § 1453), Addison responded by promptly dismissing its case voluntarily. Addison then turned around and filed yet another state court action, this time solely on behalf of itself, to recover the $18 million at issue, which Hartford again sought to remove under CAFA. The issue was simple: despite being master of the complaint and bringing suit solely on behalf of itself, was Addison’s latest suit really a class action in disguise?
The Seventh Circuit refused to countenance Addison’s attempt at forum shopping and to avoid federal court jurisdiction under CAFA. Noting its concern that Addison could shirk its responsibilities to the already certified class, the Court held that Addison’s latest claim was a class action removable under CAFA. The Court relied on two additional related grounds: first, the settlement that assigned the rights against Hartford was a class settlement that empowered Addison only in its role as class representative, and second, in its role as class rep, Addison continued to owe fiduciary duties to the other class members. The Court succinctly admonished, “Addison’s coy pleading in this case cannot disguise the true nature of its claim or avoid its fiduciary duties to the class it represents.”
As the Seventh Circuit held, a class action by any other name is still a class action, and is removable to federal court where CAFA applies. Plaintiffs, having stepped into a role as representatives of a class, cannot simply cast off the strictures of that responsibility when it no longer suits their litigation strategy or financial goals.