Washington DC | Dallas TX | Irvine CA
202.628.2000

WBK Industry News - Litigation Developments

9th Circuit: Plaintiff Inadvertently Assists Defendant in Curing Jurisdiction Issue

On May 30, 2019, the United States Court of Appeals for the Ninth Circuit determined that though a district court lacked jurisdiction to hear a removed state law claim under the Class Action Fairness Act (CAFA), the plaintiff’s amendment of his complaint to assert a federal claim cured the lack of jurisdiction in favor of the defendants.  

In the underlying putative class action, the plaintiffs alleged in state superior court that an auto lender and various car dealerships failed to provide the plaintiffs with add-ons that were promised in the Dealer Addendum. The defendants removed the case to district court and the district court denied the plaintiff’s motion to remand the case back to state court.  The named plaintiff then amended his complaint to assert a federal claim under the Truth in Lending Act (TILA) and the defendants subsequently filed a motion to dismiss.  The district court converted the motion to dismiss to a motion for summary judgement and granted summary judgement.  The plaintiff appealed the district court’s decision to deny removal and grant summary judgement.

The Ninth Circuit found that the district court initially did not have subject-matter jurisdiction over the action at the time of removal because CAFA’s home state exception barred the district court’s exercise of jurisdiction.  The “home state” exception provides that a “district court shall decline to exercise jurisdiction over a class in which 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.  The Ninth Circuit found that all of the primary defendants in the case were citizens of the state in which the action was originally filed, the home state exception applied, and thus, the case should have been remanded.

However, the Ninth Circuit determined that the district court’s lack of jurisdiction was cured when the plaintiff voluntarily amended his complaint to assert a federal TILA claim.  Since the amended complaint raised a federal claim under TILA, the district court had subject-matter jurisdiction at the time it rendered its final decision on the merits of the case.  According to the Ninth Circuit, to eliminate the adjudication after judgement and “return to a state court a case now satisfying all federal jurisdictional requirements, would impose an exorbitant cost on our dual court system, a cost incompatible with a fair and unprotracted administration of justice.”

In addition, the Ninth Circuit determined that the plaintiff had not demonstrated a genuine issue of material fact as the signed contract between the plaintiff and the defendants’ consisted of the Sales Contract, the Retail Installment Sale Contract, and possibly the Vehicle Purchase Order; none of which included the add-ons from the Dealer Addendum.  The Ninth Circuit, therefore, determined that the add-ons from the Dealer Addendum were not part of the bargain and affirmed the district court’s decision to grant summary judgement to the auto lender and car dealerships.