A recent Seventh Circuit decision made two rulings on issues arising under the Class Action Fairness Act (CAFA) that defendants may find useful in other cases. First, potential punitive damages exceeding a single-digit ratio may be considered in determining whether the class claims satisfy the $5 million threshold if compensatory damages are small or where a statute provides for punitive damages. Second, the local controversy exception does not apply if another class action asserted the “same or similar factual allegations” against any defendant within the last three years, even if the claims in the prior suit were under a different state’s law and there is no overlap between putative class members.

In Schutte v. Ciox Health, LLC, No. 22-1087, 2022 WL 792258 (7th Cir. Mar. 16, 2022), the plaintiff alleged that the defendant improperly charged for copies of electronic medical records, in violation of a Wisconsin statute that the Wisconsin Court of Appeals held does not allow any such fees. The defendant removed the case under CAFA, the district court denied the plaintiff’s motion to remand, and the Seventh Circuit agreed to hear the plaintiff’s appeal from that order.

On the amount in controversy issue, the plaintiff argued that since her individual claim was for only $61, under Supreme Court precedent generally limiting punitive damages awards to a single-digit ratio, it was unlikely that the punitive damages per claim would reach the point where a class of several thousand class members would recover more than $5 million. Rejecting that argument, the Seventh Circuit explained that “a higher punitive damages ratio may be warranted in cases where compensatory damages are too low to provide meaningful deterrence,” and the statute expressly provides for up to $25,000 for a “knowing and willful” violation, which could be an obstacle to a due process challenge. In any event, “[w]hat matters is the amount ‘in controversy’—not the amount that plaintiffs are most likely to recover.” The court of appeals emphasized that “it is critical for courts to focus on the phrase ‘in controversy’ and to remember the difference between even highly unlikely results and truly impossible results, and to avoid prematurely trying the merits of the case in deciding jurisdiction.” The court’s holding on this issue will be useful to defendants because this is not an uncommon scenario in class actions – the potential individual damages are quite small but punitive damages are sought (or potentially available on the claims alleged).

The second issue focused on CAFA’s local controversy exception, which requires a district court to decline jurisdiction where over two-thirds of proposed class members are citizens of the state where suit was filed, at least one “significant” defendant (satisfying certain requirements) is a citizen of that state, the principal injuries or defendant’s conduct were in that state, and “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) (emphasis added). Most of the requirements for the local controversy exception apparently were satisfied here. The dispute was over whether there had been a class action brought against the defendant within the three-year period involving the “same or similar factual allegations” and “on behalf of the same or other persons.” The defendant pointed to a prior case filed in Montana alleging that it had improperly charged for electronic medical records under Montana law. The plaintiff argued that the Montana case was brought under a different state’s law and involved class members in a different state. Rejecting that argument, the Seventh Circuit emphasized that the statute requires only “the same or similar factual allegations,” not an overlapping legal theory. Moreover, “[i]f geographic differences could render two otherwise identical complaints dissimilar for CAFA’s purposes, then plaintiffs would be able to avoid federal jurisdiction by filing individual actions based on the same kind of misconduct in all fifty states.”

The plaintiff further argued that if the statutory language requiring that the prior suit be brought “on behalf of the same or other persons” did not require any overlap in the proposed classes, the quoted language would be superfluous because in the context of a class action, the second suit would always be brought on behalf of “the same or other persons.” Not so, said the Seventh Circuit, because statutes often have redundancies, and if CAFA had not included the language at issue, courts might wonder whether Congress intended that the proposed classes in the prior and subsequent cases must overlap. The court also pointed to indications that the intent of this three-year exception to the local controversy requirement was so that a series of class actions in multiple states (except for the first one) might be considered for a multidistrict litigation where appropriate.

Overall, the Seventh Circuit appeared to make clear that plaintiffs cannot evade federal jurisdiction under CAFA by bringing similar single-state cases for small individual amounts, if punitive damages are potentially recoverable such that the amount in controversy requirement is satisfied.

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Photo of Wystan Ackerman Wystan Ackerman

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you…

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you have something to say.  For those looking for my detailed law firm bio, click here.  If you want a more light-hearted and hopefully more interesting summary, read on:

People often ask about my unusual first name, Wystan.  It’s pronounced WISS-ten.  It’s not Winston.  There is no “n” in the middle.  It comes from my father’s favorite poet, W.H. (Wystan Hugh) Auden.  I’ve grown to like the fact that because my name is unusual people tend to remember it better, even if they don’t pronounce it right (and there is no need for anyone to use my last name because I’m always the only Wystan).

I grew up in Deep River, Connecticut, a small town on the west side of the Connecticut River in the south central part of the state.  I’ve always had strong interests in history, politics and baseball.  My heroes growing up were Abraham Lincoln and Wade Boggs (at that time the third baseman for the Boston Red Sox).  I think it was my early fascination with Lincoln that drove me to practice law.  I went to high school at The Williams School in New London, Connecticut, where I edited the school newspaper, played baseball, and was primarily responsible for the installation of a flag pole near the school entrance (it seemed like every other school had one but until my class raised the money and bought one at my urging, Williams had no flag pole).  As a high school senior, my interest in history and politics led me to score high enough on a test of those subjects to be chosen as one of Connecticut’s two delegates to the U.S. Senate Youth Program, which further solidified my interest in law and government.  One of my mentors at Williams was of the view that there were far too many lawyers and I should find something more useful to do, but if I really had to be a lawyer there was always room for one more.  I eventually decided to be that “one more.”  I went on to Bowdoin College, where I wrote for the Bowdoin Orient and majored in government, but took a lot of math classes because I found college math interesting and challenging.  I then went to Columbia Law School, where I was lucky enough to be selected as one of the minions who spent their time fastidiously cite-checking and Blue booking hundred-plus-page articles in the Columbia Law Review.  I also interned in the chambers of then-Judge Sonia Sotomayor when she was a relatively new judge on the Second Circuit, my only connection to someone who now has one-ninth of the last word on what constitutes the law of our land.  I graduated from Columbia in 2001, then worked at Skadden Arps in Boston before returning to Connecticut and joining Robinson+Cole, one of the largest Connecticut-based law firms.  At the end of 2008, I was elected a partner at Robinson+Cole.

I’ve worked on class actions since the start of my career at Skadden.  Being in the insurance capital of Hartford, we have a national insurance litigation practice and I was fortunate to have the opportunity to work on some prominent class actions arising from the 2004 hurricanes in Florida and later Hurricane Katrina, including cases involving the applicability of the flood exclusion, statutes known as valued policy laws, and various other issues.  My interest and experience in class actions gradually led me to focus on that area.

In Connecticut courts I’ve defended various kinds of class actions that go beyond insurance, including cases involving products liability, securities, financial services and consumer contracts.

My insurance class action practice usually takes me outside of Connecticut.  I’ve had the pleasure of working on cases in various federal and state courts and collaborating with great lawyers across the country.  While class actions are an increasingly large part of my practice, I don’t do exclusively class action work.  The rest of my practice involves litigating insurance coverage cases, often at the appellate level.  That also frequently takes me outside of Connecticut.  A highlight of my career thus far was working on Standard Fire Ins. Co. v. Knowles, the U.S. Supreme Court’s first Class Action Fairness Act case.  I was Counsel of Record for Standard Fire on the cert petition, and had the pleasure of working with Ted Boutrous on the merits briefing and oral argument.

I started this blog because writing is one of my favorite things to do and I enjoy following developments in class action law, writing about them and engaging in discussion with others who have an in interest in this area.  It’s a welcome break from day-to-day practice, keeps me current, broadens my network and results in some new business.

When I’m not at my desk or flying around the country trying to save insurance companies from the plaintiffs’ bar, or attending a conference on class actions or insurance litigation (for more on those, see the Seminars/Programs page of this blog), I often can be found playing or reading with my young daughter, helping my wife with her real estate and mortgage businesses, reading a book about history or politics, or watching the Boston Red Sox (I managed to find bleacher seats for Game 2 of the 2004 World Series when Curt Schilling pitched with the bloody sock).  When the weather is good I also love to take the ferry to Block Island, Rhode Island and ride a bike or walk the trails there. If you go, I highly recommend the Clay Head Trail.