Randy Roberts v. Mars Petcare US, Inc. , 874 F.3d 953 ( 2017 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 17a0250p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
RANDY ROBERTS, ┐
Plaintiff-Appellant, │
│
> No. 17-6122
v. │
│
│
MARS PETCARE US, INC., │
Defendant-Appellee. │
┘
Appeal from the United States District Court
for the Eastern District of Tennessee at Knoxville.
No. 3:17-cv-00043—Pamela Lynn Reeves, District Judge.
Argued: October 31, 2017
Decided and Filed: November 2, 2017
Before: GIBBONS, SUTTON, and THAPAR, Circuit Judges.
_________________
COUNSEL
ARGUED: Charles Barrett, NEAL & HARWELL, PLC, Nashville, Tennessee, for Appellant.
Xiao Wang, WILLIAMS & CONNOLLY LLP, Washington, D.C., for Appellee. ON BRIEF:
Charles Barrett, NEAL & HARWELL, PLC, Nashville, Tennessee, Gordon Ball, GORDON
BALL, PLLC, Knoxville, Tennessee, for Appellant. Xiao Wang, WILLIAMS & CONNOLLY
LLP, Washington, D.C., R. Dale Grimes, Russell E. Stair, BASS, BERRY & SIMS PLC,
Nashville, Tennessee, for Appellee.
_________________
OPINION
_________________
SUTTON, Circuit Judge. The Class Action Fairness Act of 2005 extends federal court
jurisdiction to class actions on behalf of 100 or more people and in request of $5 million or more
No. 17-6122 Roberts v. Mars Petcare US, Inc. Page 2
in damages so long as “any member of a class of plaintiffs is a citizen of a State different from
any defendant.” 28 U.S.C. §§ 1332(d)(2)(A), (d)(5), (d)(6). At issue is the quoted phrase.
Randy Roberts filed this class action on behalf of Tennessee citizens in Tennessee state court
against Mars Petcare US, a citizen of Tennessee and Delaware. Mars removed the case to
federal court, invoking its Delaware citizenship and claiming its Tennessee citizenship did not
matter. Because § 1332(d)(2)(A) refers to all of a defendant’s citizenships, not the alternative
that suits it, Mars cannot rely on its State of incorporation (Delaware) and ignore its principal
place of business (Tennessee) to create diversity under the Act. We reverse the district court’s
denial of the plaintiff’s motion to remand the case to state court.
On January 11, 2017, Roberts filed this class action against Mars in a Tennessee state
court. He alleged that Mars conspired with other pet food manufacturers, veterinarian chains,
and a retailer to employ a “prescription-authorization requirement” to sell pet food at above
market prices in violation of the Tennessee Trade Practices Act.
Roberts is a citizen of Tennessee, and he filed this lawsuit on behalf of other Tennessee
citizens. Mars is incorporated in Delaware and headquartered in Tennessee. On February 9,
2017, Mars removed the case to the Eastern District of Tennessee, invoking the court’s diversity
jurisdiction under the Class Action Fairness Act. 28 U.S.C. § 1332(d). Roberts filed a motion to
remand, which the district court denied. We granted Roberts’ petition for permission to appeal.
The Class Action Fairness Act, often called CAFA, amended the diversity statute to
extend the jurisdiction of federal courts from class actions between “citizens of different States”
to those in which “any member of a class of plaintiffs is a citizen of a State different from any
defendant.” 28 U.S.C. §§ 1332(a)(1), (d)(2)(A). Under § 1332(a)(1), the traditional grant of
diversity jurisdiction, all plaintiffs must be citizens of States different from all defendants.
See Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806). But under CAFA, federal courts may
hear class actions with minimal diversity, such that only one plaintiff and one defendant need be
citizens of different States, so long as there are 100 or more class members and an aggregate
amount in controversy of at least $5,000,000. 28 U.S.C. §§ 1332(d)(2)(A), (d)(5), (d)(6).
As always, the removing defendant bears the burden of establishing federal court jurisdiction.
See 28 U.S.C. § 1441(a); Rogers v. Wal-Mart Stores, 230 F.3d 868, 871 (6th Cir. 2000).
No. 17-6122 Roberts v. Mars Petcare US, Inc. Page 3
Incorporated in Delaware and headquartered in Tennessee, Mars is a citizen of both
States. 28 U.S.C. § 1332(c)(1); Hertz Corp. v. Friend, 559 U.S. 77, 92–93 (2010). Mars’ dual
citizenship prompts this question: Does CAFA grant jurisdiction over a class action brought by a
group of Tennessee citizens against a company that is a citizen of both Tennessee and Delaware?
Plucked from context, the language of the statute could support Mars just as easily as it
could support Roberts. The reference to “a citizen of a State different from any defendant,”
28 U.S.C. § 1332(d)(2)(A), does not tell courts whether to count a company defendant’s plural
citizenships or the single citizenship it invokes. If we treat Mars as a citizen of Tennessee and
Delaware, the district court lacked jurisdiction. But if we treat Mars as a citizen of Tennessee or
Delaware, the district court had jurisdiction. Nothing about the words of the law, examined in
isolation, points to one answer or the other.
But statutory context provides the necessary steering. Two of the provision’s statutory
neighbors say that a corporation is a citizen of the State in which it was incorporated and the
State of its principal place of business. 28 U.S.C. §§ 1332(a)(1), (c)(1). Ever since the passage
of § 1332(c)(1) in 1958, courts have considered corporations simultaneously citizens of both
States for diversity purposes. So it is that a federal court has no jurisdiction to hear a case
between a citizen of a State and a corporation headquartered in the same State under the ordinary
grant of diversity jurisdiction in § 1332(a)(1), even if the corporation is incorporated elsewhere.
Franzel v. Kerr Mfg. Co., 959 F.2d 628, 629 (6th Cir. 1992). Nothing in the 2005 statutory
amendments provided by CAFA changes the rule that a corporation is a citizen of its state of
incorporation and its principal place of business.
Historical context reinforces this conclusion. From the beginning, diversity jurisdiction
sought to protect out-of-state parties from the potential risk that local juries (or judges) would
favor in-state parties. See Charles Warren, New Light on the History of the Federal Judiciary
Act of 1789, 37 Harv. L. Rev. 49, 83 (1923). Madison, for one, worried that “a strong prejudice
may arise, in some states, against the citizens of others, who may have claims against them.”
3 The Debates in the Several State Conventions on the Adoption of the Federal Constitution 533
(Jonathan Elliot ed., 2d ed. 1901). Hamilton, for another, believed that cases between citizens of
different States should be heard by a federal court “likely to be impartial between the different
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States and their citizens, and which, owing its official existence to the Union, will never be likely
to feel any bias inauspicious to the principles on which it is founded.” The Federalist No. 80, at
497 (Alexander Hamilton) (Henry Cabot Lodge ed., 1889).
That traditional function of the diversity statute supports this interpretation here. It is
difficult to say that Wal-Mart, to use one example, would face prejudice in an Arkansas state
court or that Coca-Cola, to use another, would find a hostile audience in Georgia merely because
each company was incorporated in Delaware. So also here: A Tennessee state court is the
proper forum for this lawsuit against a company with its principal place of business in
Tennessee.
Sure, Congress passed CAFA to provide greater access to a federal forum for interstate
class actions of national importance. Class Action Fairness Act of 2005, Pub. L. 109–2, § 2, 119
Stat. 4. But when it put that purpose into words, it did so in straightforward ways, some of
which altered class action law and some of which left it unchanged. Before CAFA, federal
courts did not exercise jurisdiction over cases in which even a single plaintiff was from the same
State as a single defendant. See Strawbridge, 7 U.S. (3 Cranch) 267. After CAFA, federal
courts may hear class actions involving (1) 100 or more class members, (2) an aggregate amount
in controversy of at least $5,000,000, and (3) minimal diversity such that at least one plaintiff
and one defendant are citizens of different States. 28 U.S.C. §§ 1332(d)(2)(A), (d)(5), (d)(6).
No such precision, or even linguistic hints in § 1332(d)(2)(A), shows that Congress, in enacting
CAFA, sought to overrule decades of precedent by re-envisioning the core concept of corporate
citizenship. To believe Mars, one must believe that CAFA granted federal jurisdiction over class
actions against two-thirds of all publicly traded companies in the United States as long as the
lawsuit is filed outside of Delaware. Division of Corporations, State of Delaware,
https://corp.delaware.gov/aboutagency.shtml. That would significantly alter the balance between
federal and state courts. Congress does not ordinarily hide animals that big in dens so small.
Whitman v. Am. Trucking Ass’ns, 531 U.S. 457, 468 (2001).
Mars’ interpretation of § 1332(d)(2)(A), for what it is worth, also would require us to
resolve an unsettled constitutional question. Article III extends federal jurisdiction to
controversies “between citizens of different States.” U.S. Const. art. III, § 2. By claiming that
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CAFA grants jurisdiction between citizens of the same State, Mars takes us up to the frontier of
this constitutional boundary. As the Supreme Court has noted, “[i]t is possible, though far from
clear, that one can have opposing parties in a two-party case who are co-citizens, and yet have
minimal Article III jurisdiction because of the multiple citizenship of one of the parties.” Grupo
Dataflux v. Atlas Glob. Grp., L.P., 541 U.S. 567, 577 n.6 (2004). Happily for us,
§ 1332(d)(2)(A) does not pose this “far from clear” constitutional question.
We have ample company in holding that § 1332(d)(2)(A) incorporates dual, not
alternative, citizenship for corporations. All other courts of appeals to consider the issue have
reached the same conclusion. Life of the S. Ins. Co. v. Carzell, 851 F.3d 1341, 1344–46 (11th
Cir. 2017); Johnson v. Advance Am., 549 F.3d 932, 935–36 (4th Cir. 2008); see also In re
Hannaford Bros. Co. Customer Data Sec. Breach Litig., 564 F.3d 75, 78 n.2 (1st Cir 2009)
(expressing skepticism of alternative citizenship). And leading treatises on the subject suggest
the same result. See Expanded Federal Court Jurisdiction over Multistate Actions,
2 McLaughlin on Class Actions § 12:6 (14th ed. 2017); see also Wright & Miller, Diversity
Jurisdiction in Actions Involving Corporations, 13F Fed. Prac. & Proc. Juris. § 3624 (3d ed.
2017).
Mars offers some alternative sources of jurisdiction even if we treat Mars as a citizen of
Tennessee. It notes that Roberts’ complaint defines the putative class as “all persons in the State
of Tennessee who purchased Prescription Pet Food manufactured by Mars,” a category that,
standing alone, includes non-Tennessee citizens. R. 1-1 at 26. In the same vein, Mars argues
that Roberts’ complaint states only that he is a resident of Tennessee and not a citizen of the
State. All true. But we must read the complaint as a whole and draw all reasonable inferences in
the plaintiff’s favor. See Stratton v. Portfolio Recovery Assocs., 770 F.3d 443, 446 (6th Cir.
2014). Unlike Broadway Grill and other like-reasoned cases on which Mars relies, this
complaint later says that “[t]he proposed Class is strictly limited to citizens of Tennessee.” R. 1-
1 at 6; see Broadway Grill, Inc. v. Visa, Inc., 2016 WL 4498822, at *4 (N.D. Cal. Aug. 29,
2016). And in other parts of the complaint, it seeks relief on behalf of “a Tennessee class” and
“similarly situated Tennessee consumers.” R. 1-1 at 6, 15. Read as a whole, the complaint
imposes two conditions on the putative class members: that they are Tennessee citizens and that
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they purchased prescription pet food from Mars. Because the complaint restricts the putative
class to Tennessee citizens, Mars cannot satisfy CAFA’s minimal diversity requirement.
Mars adds that Roberts has sued the wrong subsidiary of Mars, Inc., because Royal
Canin, not Mars Petcare US, manufactured the pet food Roberts purchased. Because Royal
Canin is headquartered in Missouri, an identical class action against Royal Canin would satisfy
§ 1332(d)(2)(A). But even after CAFA, plaintiffs remain the masters of their claims and can
choose whom they want to sue. See Caterpillar Inc. v. Williams, 482 U.S. 386 (1987). Roberts
chose to sue Mars Petcare US, not Royal Canin. And Roberts has alleged that Mars, not Royal
Canin, marketed and sold the pet food at issue. Perhaps he is wrong. Or perhaps he is right but
has a stronger antitrust claim against Royal Canin than Mars Petcare. We cannot say based on
the slim record before us. But we do not need to say because these questions go to the merits of
the case. If Mars is right, the company has nothing to worry about, as the state court will either
quickly dismiss the claim or join Royal Canin, making the case properly removable to federal
court. See 28 U.S.C. § 1446(b)(3).
One other possibility exists. We may look beyond a complaint if a plaintiff fraudulently
joins non-diverse defendants in order to defeat removal. Coyne v. Am. Tobacco Co., 183 F.3d
488, 493 (6th Cir. 1999). But this possibility requires proof that the plaintiff has no colorable
claim against the non-diverse defendant under state law. Id. No one can say that Roberts joined
Mars to this lawsuit in order to defeat diversity because he did not join Mars at all. Roberts
named Mars as the original defendant in the lawsuit, and it remains the only defendant in the
lawsuit. On top of that, Roberts has alleged that Mars conspired with pet food manufacturers,
veterinary clinics, and a retailer to sell prescription pet food at above-market prices. If true, the
allegations establish a per se violation of the Tennessee Trade Practices Act. Tenn. Code Ann.
§ 47-25-101. That is a colorable claim against Mars. We see no evidence of fraud here even if
Royal Canin faces similar allegations in a class action elsewhere. First Amended Complaint at
4–5, Moore v. Mars Petcare US, Inc., No. 3:16-cv-07001-MMC (N.D. Cal. Feb. 16, 2017).
Nor can the district court exercise its power under Civil Rule 19 to join Royal Canin to
the lawsuit in order to create federal court jurisdiction. On its face, Civil Rule 19 contemplates
pre-existing federal court jurisdiction: It speaks of “joinder that will not deprive the court of
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subject-matter jurisdiction.” Civil Rule 19(a)(1)(A). More fundamentally, diversity jurisdiction
must exist at the time of removal. Rogers, 230 F.3d at 871. An act of joinder under Rule 19
would itself be an exercise of federal court jurisdiction. In the absence of jurisdiction over the
existing lawsuit, a district court has no power to join another party to the proceeding. See Vill. of
Oakwood v. State Bank & Tr. Co., 481 F.3d 364, 367 (6th Cir. 2007). Recognizing that
fraudulent joinder would accomplish little, Mars in essence seeks to create a new fraudulent non-
joinder doctrine. But we have no authority to do so.
Because Mars has not demonstrated the minimal diversity required by § 1332(d)(2)(A),
we need not address Roberts’ argument that the home-state exception in § 1332(d)(4)(B) applies
to this case. For these reasons, we reverse and remand to the district court for further
proceedings consistent with this opinion.