You may recall my blog post from last November about the Eighth Circuit’s opinion in Thatcher v. Hanover Ins. Group, Inc., 659 F.3d 1212 (8th Cir. 2011).  In that opinion, the Eighth Circuit reversed an Arkansas federal district court decision allowing a plaintiff to voluntarily dismiss a putative class action without prejudice in order to re-file the case in state court with several causes of action omitted.  The plaintiff sought to eliminate those causes of action in order to ensure that the amount in controversy would be below the $5 million threshold for federal jurisdiction under the Class Action Fairness Act (CAFA), and thereby keep the case in state court.  The Eighth Circuit explained that “we have repeatedly stated that it is inappropriate for a plaintiff to use voluntary dismissal as an avenue for seeking a more favorable forum,” and instructed the district court to first determine whether federal jurisdiction existed, and then, if it found jurisdiction, to reconsider whether the motion for voluntary dismissal was an improper “forum-shopping measure.” 

The Arkansas federal district court has now ruled in Thatcher that it has jurisdiction under CAFA, and that the motion to dismiss was an improper forum shopping device.  In Thatcher v. Hanover Ins. Group, Inc., Civil No. 10-4172, 2012 U.S. Dist. LEXIS 73961 (W.D. Ark. May 29, 2012), the court held that each of the causes of action in the complaint (unjust enrichment, fraud/constructive fraud, and breach of contract) potentially could result in a separate damages award, which, together with statutory penalties and attorneys’ fees, would substantially exceed the $5 million threshold for CAFA jurisdiction.  The court rejected the plaintiff’s argument that by alleging that he was not seeking a “double recovery,” he was seeking only breach of contract damages.  The court also found that punitive damages were potentially available on the fraud and constructive fraud claims because such damages potentially can be awarded even where not expressly requested in the complaint.  (For more on this point, see my blog post about the Seventh Circuit’s Back Doctors opinion.)  The court rejected the plaintiff’s argument that an allegation that the aggregate amount in controversy was less than $5 million could establish to a legal certainty that the actual amount in controversy was below $5 million.

After finding jurisdiction, the court then reconsidered its decision to grant the motion for voluntary dismissal without prejudice.  It held that to allow the plaintiff to voluntarily dismiss the case for the purpose of re-filing in state court “clearly amounts to improper forum shopping . . . .”  The court further explained that:

While this plaintiff and his attorneys had the right to draw his complaint as he saw fit (as the master of the complaint), he and they are obliged to live with it as drawn and to pursue it – if they can – in a court having proper jurisdiction over it as drawn.  They are not to be permitted to shop for a new and hopefully more favorable forum if it turns out that their complaint – as drawn – places them in a court not of their liking.

The amount in controversy is often the focus of disputes over whether CAFA jurisdiction exists in insurance class actions.  This is because the “local controversy” and “home state” exceptions to CAFA are inapplicable if none of the defendants are citizens of the state where suit is brought.  (And bringing one class action against multiple insurers is typically not proper.)  The only way plaintiffs’ lawyers can try to keep these cases in state court is by keeping the amount in controversy under $5 million.  As I mentioned in my prior post, filing an answer at the same time you remove a case to federal court is a helpful strategy to try to prevent plaintiffs from filing a notice of voluntary dismissal without prejudice so that they can re-file a case in state court with revised allegations designed to keep the amount in controversy below $5 million.  It’s also important, in preparing a notice of removal, to consider every potential category of damages that might be awarded on each cause of action that is pled.  It’s somewhat counterintuitive for a defendant to be trying to increase the calculation of potential damages and for the plaintiff to be fighting against that, but that is what determining the amount in controversy under CAFA is all about.

SPECIAL DISCLAIMER:  While I intend this blog to serve as an informational resource on insurance class actions and not advertising for my services as a lawyer, because I’m writing here about one of my own cases someone might think it is advertising.  Please understand that every case is different and the result achieved in the case described above may differ from the result in some other case, which may involve different facts, different applicable law or a different jurisdiction.  Past results do not guarantee future results, and you should always consult your own lawyer about your own case.