John Rolwing v. Nestle Holdings, Inc. , 666 F.3d 1069 ( 2012 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 11-3445
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John M. Rolwing, *
*
Appellee, *
* Appeal from the United States
v. * District Court for the
* Eastern District of Missouri.
Nestle Holdings, Inc., *
*
Appellant. *
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Submitted: December 14, 2011
Filed: February 2, 2012
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Before MURPHY, BOWMAN, and GRUENDER Circuit Judges.
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GRUENDER, Circuit Judge.
Nestle Holdings, Inc. (“Nestle”) appeals the district court’s1 order remanding
this putative class action to the jurisdiction of the state courts of Missouri. Because
at the time the case was removed it did not meet the requirements for federal subject
matter jurisdiction under the Class Action Fairness Act of 2005 (“CAFA”), 28 U.S.C.
§§ 1332(d), 1453, 1711-15, we affirm the order of the district court.
1
The Honorable Thomas C. Mummert, United States Magistrate Judge for the
Eastern District of Missouri, to whom the case was referred by consent of the parties
pursuant to 28 U.S.C. § 636(c).
I. BACKGROUND
On January 15, 2001, Nestle agreed to a merger with Ralston Purina Company
that provided for the cash purchase of Ralston Purina’s common stock by Nestle. The
merger agreement contained a choice-of-law provision selecting Missouri law as
controlling its terms. The merger was completed on December 12, 2001. On
December 18, 2001, Nestle paid Ralston Purina book-entry shareholders a total of
$8,880,809,766.50 for their 265,098,799 outstanding common shares of Ralston
Purina.
Ralston Purina book-entry shareholder John M. Rolwing filed this putative
class action in Missouri state court on March 30, 2011, on behalf of himself and all
other Ralston Purina book-entry shareholders at the time of the execution of the
merger agreement (“the class”). Rolwing claims that Nestle was required to pay the
class on December 12, that Nestle’s December 18 payment was delinquent, and that
the class is entitled to interest on the delinquent payment. Nestle removed the case
to federal court on May 17, 2011, invoking CAFA-provided jurisdiction under 28
U.S.C. § 1332(d). It then filed a motion to dismiss on the basis of a prior resolution
by the state courts of Ohio of a putative class action, brought by the same attorney on
behalf of a different named plaintiff in that state, that claimed damages under the
same theory for the same class.
Before the district court could rule on Nestle’s motion to dismiss, Rolwing
moved to remand the case to Missouri state court, arguing that the amount in
controversy was not in excess of $5 million, as required by § 1332(d). Nestle
responded by asserting that Rolwing’s theory of the case clearly comprehended the
possibility of damages in excess of $5 million. The interest due on Nestle’s payment
to the class, calculated at an annualized rate of nine percent as required by Missouri
law, see Mo. Rev. Stat. § 408.020, would exceed $2 million for each day that the
payment was late. If payment had been due on December 12 as Rolwing alleges,
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Nestle claims it would be exposed to damages well in excess of the $5 million
threshold.
To counter any attempt at removal, however, Rolwing’s complaint included a
prayer for relief requesting “judgment against defendant in an amount that is fair and
reasonable in excess of $25,000, but not to exceed $4,999,999.” The prayer stated
further: “Plaintiff and the class do not seek—and will not accept—any recovery of
damages (in the form of statutory interest) and any other relief, in total, in excess of
$4,999,999.” Rolwing did this, according to his complaint, expressly so as “not to
provide any United States District Court with jurisdiction under the terms of the Class
Action Fairness Act of 2005 . . . or any other provision(s) of law.” Rolwing also
included two stipulations with his complaint: one stating that as named plaintiff and
putative class representative he would not seek or accept any recovery in excess of
$4,999,999 on his own behalf or on the behalf of the class, and a second signed by
his counsel stating that no attorneys’ fees would be sought or accepted other than on
a contingency basis out of the maximum recovery of $4,999,999 provided for by the
other stipulation. As with the complaint’s prayer for relief, both stipulations stated
that the limitation on damages sought was for the purpose of defeating federal
jurisdiction.
The district court granted Rolwing’s motion to remand on the basis of this
disclaimer of damages and denied as moot a second motion to remand filed by
Rolwing on the basis of the securities exception in 28 U.S.C. § 1332(d)(9)(C). Nestle
filed a petition pursuant to 28 U.S.C. § 1453(c) requesting permission to appeal the
district court’s remand order, which we granted.
II. DISCUSSION
CAFA provides for federal subject matter jurisdiction over qualifying class
actions where the aggregate amount in controversy exceeds $5 million. 28 U.S.C.
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§ 1332(d). Such class actions generally are removable, and the usual one-year time
limit on diversity-premised removal is inapplicable. 28 U.S.C. § 1453. Certain class
actions dealing either with securities or claims relating to business governance arising
out of state law are excepted from this general rule and are not removable. 28 U.S.C.
§ 1453(d). The courts of appeals are authorized to accept an appeal from an order
granting or denying a motion to remand a class action. 28 U.S.C. § 1453(c).
“We review de novo a district court’s order to remand a removed case for lack
of subject matter jurisdiction.” Bell v. Hershey Co., 557 F.3d 953, 956 (8th Cir.
2009). In the CAFA context, the party seeking removal bears the burden of proving
by a preponderance of the evidence that the jurisdictional requirements for removal
are met. Id. at 956-59. If the removing party meets this burden, the party seeking
remand must establish to a legal certainty that the requirements for federal
jurisdiction are not met. Id. at 959. Thus, for a remand to be justified, Rolwing must
show that it is legally certain that recovery in this case cannot exceed $5 million. See
id.
Rolwing has maintained throughout these proceedings that the disclaimer of
damages greater than $4,999,999 in his prayer for relief and the accompanying
stipulations makes it legally certain that the amount in controversy cannot exceed $5
million. Nestle counters that (1) Missouri law (which governed the merger agreement
and therefore would control the suit) would not give effect to the disclaimer, and (2)
Rolwing’s purported disclaimer of part of the class’s potential recovery is
unenforceable because it “was inconsistent with the interests of and in breach of his
fiduciary duties to the putative class.” Nestle contends that, absent certainty that the
disclaimer will be enforced, it is not a legal certainty that the amount in controversy
is not in excess of $5 million, rendering remand inappropriate.
We have previously stated that a binding stipulation limiting damages sought
to an amount not exceeding $5 million can be used to defeat CAFA jurisdiction. Bell,
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557 F.3d at 958 (“In order to ensure that any attempt to remove would have been
unsuccessful, Bell could have included a binding stipulation with his petition stating
that he would not seek damages greater than the jurisdictional minimum on
remand.”). Stipulations of this sort, when filed contemporaneously with a plaintiff’s
complaint and not after removal, have long been recognized as a method of defeating
federal jurisdiction in the non-CAFA context. See, e.g., De Aguilar v. Boeing Co.,
47 F.3d 1404, 1412 (5th Cir. 1995); In re Shell Oil Co., 970 F.2d 355, 356 (7th Cir.
1992) (per curiam) (“Litigants who want to prevent removal must file a binding
stipulation or affidavit with their complaints.”).
Nestle first argues that Rolwing’s prayer for relief and the stipulations are not
enforceable under Missouri law and, therefore, not binding on the class. While it is
unclear what effect, if any, Missouri law would give to the prayer for relief in
Rolwing’s complaint, see Mo. Rev. Stat. § 509.050.1(2) (prohibiting the specific
pleading of damages “except to determine . . . jurisdictional authority,” and providing
that specific damage pleadings under that exception “shall not affect the conduct of
trial with regard to stating, proving, or arguing damages”), it is not necessary for us
to resolve this question. Instead, we conclude that the stipulations are independently
enforceable under the doctrine of judicial estoppel and, therefore, binding within the
meaning of Bell.
Under Missouri law, “[t]he doctrine of judicial estoppel provides that ‘[w]here
a party assumes a certain position in a legal proceeding, and succeeds in maintaining
that position, he may not thereafter, simply because his interests have changed,
assume a contrary position, especially if it be to the prejudice of the party who has
acquiesced in the position formerly taken by him.’” Taylor v. State, 254 S.W.3d 856,
858 (Mo. 2008) (second alteration in original) (quoting Zedner v. United States, 547
U.S. 489, 504 (2006)). According to this rule, by defeating removal through asserting
the position that he will not accept more than $4,999,999 in damages on behalf of the
class he is seeking to represent, Rolwing is estopped from later accepting damages
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that exceed that amount. Similarly, by taking the position that he would only accept
fees on a contingency basis out of damages not exceeding $4,999,999, Rolwing’s
counsel is estopped from accepting any other fee award. “Stipulations are
‘controlling and conclusive, and courts are bound to enforce them.’” Zipper v. Health
Midwest, 978 S.W.2d 398, 410 (Mo. Ct. App. 1998) (quoting Pierson v. Allen, 409
S.W.2d 127, 130 (Mo. 1966)). Therefore, we are confident that Missouri courts will
apply judicial estoppel to enforce the terms of the stipulations.
Nestle’s second argument is that the stipulations are not enforceable because,
in disclaiming a significant portion of the putative class’s potential recovery, Rolwing
has violated his fiduciary duty to the putative class. Nestle points, in particular, to
Back Doctors Ltd. v. Metropolitan Property & Casualty Insurance Co., 637 F.3d 827
(7th Cir. 2011), in which the Seventh Circuit stated that, in a putative class action, a
plaintiff “has a fiduciary duty to its fellow class members. A representative can’t
throw away what could be a major component of the class’s recovery. Either a state
or a federal judge might insist that some other person, more willing to seek [damages
in excess of the jurisdictional minimum], take over as representative.” Id. at 830-31.
Nestle contends that, because the damage disclaimer was a bad-faith renunciation of
“a major component of the class’s recovery,” a court might not certify Rolwing as
class representative, might not certify Rolwing’s counsel as class counsel, or might
refuse to enforce Rolwing’s damage disclaimer against the class. Nestle argues that,
because of these possibilities, Rolwing has not met his legal certainty burden.
As an initial matter, we are bound to consider only jurisdictional facts present
at the time of removal and not those occurring subsequently, see St. Paul Mercury
Indem. Co. v. Red Cab Co., 303 U.S. 283, 293 (1938), such as a hypothetical future
substitution of class representative, substitution of class counsel, or other non-
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enforcement of the damage disclaimer because of bad faith.2 At any rate,
notwithstanding the language cited by Nestle, Back Doctors actually supports remand
in this case. In Back Doctors, the actual damages at issue were approximately $2.9
million. The initial complaint filed in Illinois state court neither requested punitive
damages nor disclaimed them. The defendant removed under CAFA, arguing that the
amount in controversy was in excess of $5 million because of the potential for an
award of punitive damages. The plaintiff then argued that remand was warranted
because it had not requested punitive damages. Applying the same legal certainty
standard we applied above, Back Doctors, 637 F.3d at 829-30, the Seventh Circuit
found that the plaintiff had failed to establish to a legal certainty that he could not
recover in excess of the jurisdictional minimum under CAFA because his failure to
request punitive damages did not conclusively establish that they could not be
awarded, id. at 831.
However, the court went on to explain that “[i]f the Supreme Court of Illinois
had established . . . that omission of a request [for punitive damages] from the initial
pleading forbids a punitive award, then remand would be appropriate” and that a
“plaintiff in Illinois can limit the relief to an amount less than the jurisdictional
minimum, and thus prevent removal, by filing a binding stipulation or affidavit with
the complaint.” Id. In other words, contrary to Nestle’s view of the case, the Seventh
Circuit, in spite of its concern about the potential conflict of interest inherent in
damage disclaimers in pre-certification class actions, explicitly endorsed the method
used by Rolwing in this case to defeat CAFA jurisdiction.
2
We note that, should circumstances change in the manner suggested by Nestle,
removals under CAFA are not subject to the one-year limitation period in 28 U.S.C.
§ 1446(c)(1). Under CAFA, a party can remove the case any time “within 30 days
after [its receipt], through service or otherwise, of a copy of an amended pleading,
motion, order or other paper from which it may first be ascertained that the case is
one which is or has become removable.” 28 U.S.C. § 1446(b)(3).
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Because we conclude that Missouri’s well-established judicial estoppel
doctrine makes these stipulations binding, Rolwing has shown that it is legally
impossible for the amount in controversy in this case to meet CAFA’s threshold, and
remand based on CAFA’s amount-in-controversy requirement was appropriate.3
III. CONCLUSION
For the foregoing reasons, we affirm the judgment of the district court.
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3
Because we decide the case on this basis, we need not address Rolwing’s
arguments for remand on the basis of class numerosity (first raised on appeal) or
CAFA’s securities exception.
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