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In its first year on the books, the federal Class Action Fairness Act has proven to be difficult for plaintiffs to challenge, as evidenced by a pair of recent decisions handed down by Eastern District of Pennsylvania judges who refused to send the cases back to the state courts where they began. CAFA, which took effect on Feb. 18, 2005, permits defendants to remove certain class actions to federal court if “minimal diversity of citizenship exists.” Specifically, the law provides that the federal courts have original jurisdiction over any class actions where at least one member of the plaintiff class is diverse from any defendant; the aggregate amount in controversy exceeds $5 million; and the proposed class contains 100 or more members. Now, in two of the first Eastern District decisions to interpret the law, the plaintiffs have lost their bids to be returned to state court. In Robinson v. Holiday Universal Inc., U.S. District Judge Gene E. K. Pratter held that although the suit was originally filed prior to CAFA’s effectiveness date, the case was nonetheless properly removed to federal court because the plaintiffs had added another defendant after the law took effect. The suit accuses several health clubs of charging excessive “initiation fees” that allegedly violate Pennsylvania consumer laws and the Pennsylvania Health Club Act. When it was first filed in December 2004, the suit named three defendants – Holiday Universal Inc., Scandinavian Health Spa Inc. and Bally Total Fitness Holding Corp. But plaintiffs attorney David A. Searles of Donovan Searles later added a fourth defendant – Bally Total Fitness Corp., a subsidiary of Bally Total Fitness Holding Corp. Soon after, defense Albert G. Bixler and Anita J. Murray Eckert Seamans Cherin & Mellott invoked CAFA and removed the suit to U.S. District Court. Searles responded by agreeing to drop all claims against the newly added defendant and urged Pratter to remand the suit to the Pennsylvania Court of Common Pleas. But Pratter refused, saying “plaintiffs cannot now ‘unring the bell’ by dismissing the removing defendant . . . in an attempt to return the lawsuit to its status on Dec. 6, 2004. The [federal] court had subject matter jurisdiction over the action when it was removed on Oct. 28, 2005, and it continues to have subject matter jurisdiction over it now.” A few days later in Schwartz v. Comcast Corp., Senior U.S. District Judge Thomas N. O’Neill Jr. refused to remand a class-action suit brought by subscribers of Comcast’s high-speed Internet service after finding the evidence showed that less than one-third of the plaintiff class are citizens of Pennsylvania. In the suit, plaintiffs attorney Michael H. Landis of Smolow & Landis alleges that Comcast violated Pennsylvania consumer protection laws by violating its express and implied promise to provide a high-speed Internet service that is “always on . . . 24 hours a day, 7 days per week, 365 days per year.” The suit alleges that Comcast “broke its promise” during an 11-day period in April 2005 when its Internet services “failed or were intermittent,” and later refused to issue refunds. Comcast’s lawyers, Michael W. McTigue Jr. and Michael P. Daly of Drinker Biddle & Reath, removed the suit under CAFA, and Landis responded with a motion to remand to the Philadelphia Court of Common Pleas. O’Neill initially refused to remand the suit, but ordered the lawyers to conduct limited discovery relating to the legal status of the class. In a July 2005 decision, O’Neill held that CAFA “did not shift the long-standing burden of proof from a removing defendant to a remanding plaintiff.” Now O’Neill has ruled that Comcast met its burden of showing that the suit qualifies for removal under CAFA because the suit’s broad definition of it includes not only citizens of Pennsylvania, but also citizens of other states who are merely “doing business” in Pennsylvania or temporarily “residing” in Pennsylvania. CAFA requires that defendants show “minimal diversity,” meaning that at least one member of the plaintiff class is a citizen of a different state from at least one defendant. But Landis argued that CAFA also provides three exceptions to the minimal diversity rule. Under the so-called “home state controversy” exception, federal courts must decline to exercise jurisdiction where two-thirds or more of the members of the proposed plaintiff classes, and the primary defendants, are citizens of the original filing state. And under the “local controversy” exception, Landis said, federal courts must decline jurisdiction where four circumstances are met: More than two-thirds of the members of the proposed classes are citizens of the original filing state. At least one defendant whose alleged conduct forms a significant basis of the claims is a citizen of the original filing state. The principal injuries resulting from the alleged conduct of each defendant were incurred in the original filing state. No other class action asserting the same or similar allegations has been filed against any of the defendants within the preceding three years. Finally, under the “interests of justice” exception, Landis said, federal courts may look to the “totality of the circumstances” and decline to exercise jurisdiction over a class actions in which greater than one-third but less than two-thirds of the proposed class and the primary defendants are citizens of the state in which the suit was originally filed. Comcast’s lawyers argued that none of the exceptions applied because the evidence showed that the class, as defined in the suit, included twice as many non-Pennsylvanians as Pennsylvanians. In court papers, Comcast said it has more than 8.1 million Internet subscribers in the United States, and that a large number of them could be considered either to be “residing” or “doing business” in Pennsylvania. The defense team also noted that there are about 200,000 citizens of other states who are “doing business” in Pennsylvania by commuting to work in Pennsylvania and countless numbers of citizens from other states who are “doing business” with Pennsylvania via the Internet. But Landis urged O’Neill to focus on Comcast’s residential subscribers, and argued that at least 84 percent of the putative class are domiciled in and citizens of Pennsylvania. O’Neill sided with Comcast, saying the plaintiffs’ argument “assume[s] that only class members who subscribe to Comcast’s nonresidential Internet service in Pennsylvania could be considered to be Comcast internet subscribers that are ‘doing business’ in Pennsylvania.” As a result, O’Neill said, the plaintiffs’ argument “fails to address the millions of Comcast Internet subscribers across the nation that are not Pennsylvania citizens and could be considered to be ‘doing business’ in Pennsylvania.” None of CAFA’s exceptions apply, O’Neill said, because “I conclude that less than one-third of the putative class members are citizens of Pennsylvania.” O’Neill also found that federal jurisdiction was “further supported by a national interest in protecting the millions of citizens from many states whose contractual rights were allegedly violated by Comcast’s nationwide service disruption.” (Copies of the eight-page opinion in Robinson v. Holiday Universal Inc. , PICS No. 06-0307, and the 14-page opinion in Schwartz v. Comcast Corp. , PICS No. 06-0308, are available from The Legal Intelligencer . Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information. Some cases are not available until 1 p.m.)

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