Liberty Mutual Fire Insurance Co. v. EZ-FLO International, Inc. ( 2017 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
LIBERTY MUTUAL FIRE INSURANCE No. 17-56523
COMPANY, as Subrogee of Alexander
Zahri; AUTO CLUB INDEMNITY D.C. No.
COMPANY; CALIFORNIA CAPITAL 5:17-cv-00228-
INSURANCE COMPANY; THE MWF-SP
CINCINNATI INSURANCE COMPANY;
CSAA INSURANCE EXCHANGE; ERIE
INSURANCE COMPANY; FIRST OPINION
AMERICAN SPECIALTY INSURANCE
COMPANY; INTERINSURANCE
EXCHANGE OF THE AUTOMOBILE
CLUB; LIBERTY INSURANCE
CORPORATION; LIBERTY LLOYDS OF
TEXAS INSURANCE COMPANY;
LIBERTY MUTUAL MID-ATLANTIC
INSURANCE COMPANY; LM
INSURANCE CORPORATION;
MERCURY CASUALTY COMPANY;
RESIDENCE MUTUAL INSURANCE
COMPANY; SAFECO INSURANCE
COMPANY OF AMERICA; SAFECO
INSURANCE COMPANY OF ILLINOIS;
SAFECO INSURANCE COMPANY OF
INDIANA; SAFECO INSURANCE
COMPANY OF OREGON; THE FIRST
LIBERTY INSURANCE CORPORATION;
UNITED SERVICES AUTOMOBILE
ASSOCIATION; USAA CASUALTY
INSURANCE COMPANY; USAA
2 LIBERTY MUTUAL FIRE INS. V. EZ-FLO INT’L
GENERAL INDEMNITY COMPANY;
USAA TEXAS LLOYDS COMPANY;
WESTFIELD INSURANCE COMPANY;
WESTFIELD NATIONAL INSURANCE
COMPANY,
Plaintiffs-Appellees,
v.
EZ-FLO INTERNATIONAL, INC.,
Defendant-Appellant.
Appeal from the United States District Court
for the Central District of California
Michael W. Fitzgerald, District Judge, Presiding
Submitted December 14, 2017
Pasadena, California
Filed December 14, 2017
Before: Stephen Reinhardt, Ronald Lee Gilman, *
and Kim McLane Wardlaw, Circuit Judges.
Opinion by Judge Gilman
*
The Honorable Ronald Lee Gilman, United States Circuit Judge
for the U.S. Court of Appeals for the Sixth Circuit, sitting by designation.
LIBERTY MUTUAL FIRE INS. V. EZ-FLO INT’L 3
SUMMARY **
Class Action Fairness Act
The panel affirmed the district court’s order, remanding
to state court a complaint brought by 26 insurance
companies in their capacity as subrogees of 145 insured
homeowners against a defendant manufacturer, because
there was no jurisdiction under the Class Action Fairness
Act (“CAFA”) to qualify as a “mass action.” 28 U.S.C.
§ 1332(d)(2).
Under CAFA, a defendant in a civil action suit may
remove a “mass action” from state to federal court if the
aggregate amount in controversy exceeds $5 million. A
“mass action” is defined as “any civil action . . . in which
monetary relief claims of 100 or more persons are proposed
to be tried jointly on the ground that the plaintiffs’ claims
involve common questions of law or fact.”
The panel held that, based on Mississippi ex rel. Hood v.
AU Optronics Corp., 134 S. Ct. 736 (2014), the lawsuit filed
by 26 insurance companies, acting as subrogees of the 145
insureds, did not satisfy CAFA’s numerosity requirement.
Specifically, the panel held that under Hood, the word
“persons” in CAFA’s phrase “100 or more persons” is
synonymous with named plaintiffs. The panel further held
that “plaintiffs” meant parties who actually brought suit, and
it did not mean real parties in interest. The panel concluded
that the 145 insureds were not plaintiffs in this case, and this
fact was dispositive.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
4 LIBERTY MUTUAL FIRE INS. V. EZ-FLO INT’L
COUNSEL
Michael J. Hassen (argued) and Christopher H. Doyle, Jeffer
Mangels Butler & Mitchell LLP, San Francisco, California;
Michael Phillips, EZ-FLO International Inc., Ontario,
California; for Defendant-Appellant.
Timothy E. Cary (argued), Law Offices of Robert A.
Stutman P.C., Corona, California; Hal J. Kleinman, Law
Offices of Robert A. Stutman P.C., Fort Washington,
Pennsylvania; for Plaintiffs-Appellees.
OPINION
GILMAN, Circuit Judge:
Under the Class Action Fairness Act of 2005 (CAFA), a
defendant in a civil suit may remove a “mass action” from
state to federal court if the aggregate amount in controversy
exceeds $5,000,000. 28 U.S.C. § 1332(d)(2), (11). A “mass
action” is defined as “any civil action . . . in which monetary
relief claims of 100 or more persons are proposed to be tried
jointly on the ground that the plaintiffs’ claims involve
common questions of law or fact.” Id. § 1332(d)(11)(B)(i).
This case presents the narrow question of whether a lawsuit
filed by 26 insurance companies (the Plaintiffs), in their
capacity as subrogees of 145 insured homeowners, qualifies
as a mass action. The district court answered in the negative.
For the reasons set forth below, we AFFIRM the judgment
of the district court.
LIBERTY MUTUAL FIRE INS. V. EZ-FLO INT’L 5
I. BACKGROUND
A. Factual background
The defendant, EZ-FLO International, Inc. (EZ-FLO),
manufactures supply lines that connect water pipes to
plumbing fixtures. These supply lines consist of flexible
tubing on the inside, a protective covering of braided wire
on the outside, and plastic nuts on both ends that connect the
supply lines to adjacent plumbing. Underlying this lawsuit
is the Plaintiffs’ allegation that the plastic nuts are defective
and allow water to leak out of the supply lines. The Plaintiffs
made payments to their insured homeowners for damages
caused by the alleged defect. They then filed suit against
EZ-FLO as subrogees of those insureds.
B. Procedural background
The Plaintiffs filed suit in the Superior Court of
California, County of San Bernardino. When they amended
their complaint to seek over $5,000,000 in damages
allegedly suffered by their 145 insureds, EZ-FLO filed a
notice of removal pursuant to CAFA, 28 U.S.C. § 1332(d).
The Plaintiffs then moved to remand. In granting that
motion, the district court held that it lacked jurisdiction
under 28 U.S.C. § 1332(d) because the amended complaint
“does not include more than 100 named plaintiffs.” EZ-FLO
then filed a petition for leave to appeal pursuant to 28 U.S.C.
§ 1453(c), which a prior panel of this court granted.
II. ANALYSIS
At issue in this appeal is whether a lawsuit filed by
26 insurance companies, acting as subrogees of their
145 insureds, involves “claims of 100 or more persons”
within the meaning of CAFA, 28 U.S.C.
6 LIBERTY MUTUAL FIRE INS. V. EZ-FLO INT’L
§ 1332(d)(11)(B)(i). We review this question de novo. See
Corber v. Xanodyne Pharm., Inc., 771 F.3d 1218, 1222 (9th
Cir. 2014) (en banc) (specifying de novo review with regard
to a motion to remand). The answer is supplied by
Mississippi ex rel. Hood v. AU Optronics Corp., 134 S. Ct.
736 (2014).
A. Under Hood, the word “persons” in CAFA’s phrase
“100 or more persons” is synonymous with named
plaintiffs.
In Hood, the State of Mississippi sued manufacturers of
liquid crystal displays (LCDs) for alleged violations of
Mississippi antitrust and consumer-protection statutes.
Mississippi brought the suit ex rel. (that is, on the relation
of) its citizens in one of its state trial courts, seeking
restitution both for itself and for its citizens who had
purchased the defendants’ LCDs. Although the State’s
citizens were not named plaintiffs, the defendants removed
the case to federal court under CAFA, arguing that the
citizens should be counted toward the “100 or more persons”
required for a mass action.
The Supreme Court unanimously disagreed, holding that
the suit was not a mass action because “a ‘mass action’ must
involve monetary claims brought by 100 or more persons
who propose to try those claims jointly as named plaintiffs.”
Hood, 134 S. Ct. at 739 (emphasis added). In so holding, the
Court rejected the defendant’s arguments that real parties in
interest should count for the purpose of ascertaining CAFA
jurisdiction. Id. at 746 (“Congress repeatedly used the word
‘plaintiffs’ to describe the 100 or more persons whose claims
must be proposed for a joint trial. That word refers to actual,
named parties—a concept inherently at odds with the
background inquiry into unnamed real parties in interest,
who by definition are never plaintiffs.”).
LIBERTY MUTUAL FIRE INS. V. EZ-FLO INT’L 7
The Supreme Court’s conclusion that the word “persons”
in the phrase “100 or more persons” is synonymous with
named plaintiffs flowed from a careful statutory analysis. To
start with, the Court noted that a sister provision to the mass-
action provision—namely, the class-action provision—
explicitly permits the numerosity requirement for class
members to be satisfied by counting unnamed parties. Id. at
742. It further noted that, in the mass-action provision,
“Congress chose not to use the phrase ‘named or unnamed.’”
Id. The Court deemed this omission “intentional.” Id.(citing Dean v. United States, 556 U.S. 568, 573 (2009)
(“[W]here Congress includes particular language in one
section of a statute but omits it in another section of the same
Act, it is generally presumed that Congress acts intentionally
and purposely in the disparate inclusion or exclusion.”
(internal quotation marks omitted))).
The Supreme Court also interpreted the word “persons”
in § 1332(d)(11)(B)(i) in the light of similar language in
Rule 20 of the Federal Rules of Civil Procedure, which
governs party joinder, because § 1332(d)(11)(B)(i) “use[s]
the terms ‘persons’ and ‘plaintiffs’ just as they are used in
. . . Rule . . . 20.” Id. In so doing, the Court observed:
Where § 1332(d)(11)(B)(i) requires that the
“claims of 100 or more persons [must be]
proposed to be tried jointly on the ground that
the plaintiffs’ claims involve common
questions of law or fact,” Rule 20 provides
that “[p]ersons may join in one action as
plaintiffs if they assert any right to relief
jointly . . . and any question of law or fact
common to all plaintiffs will arise in the
action.”
8 LIBERTY MUTUAL FIRE INS. V. EZ-FLO INT’L
Id. From this parallel use of the term “persons,” the Court
reasoned that, “just as it is used in Rule 20, the term
‘persons’ in § 1332(d)(11)(B)(i) refers to the individuals
who are proposing to join as plaintiffs in a single action.” Id.
(presuming “that ‘Congress is aware of existing law when it
passes legislation’” (internal quotation marks omitted)
(quoting Hall v. United States, 566 U.S. 506, 516 (2012))).
Interpreting the words “persons” and “plaintiffs” as
synonyms also gives the provision its most sensible
meaning. “It is difficult to imagine how the claims of one
set of unnamed individuals could be proposed for joint trial
on the ground that the claims of some completely different
group of named plaintiffs share common questions.” Id. For
all of these reasons, the Supreme Court concluded that “the
‘100 or more persons’ and the proposed ‘plaintiffs’” are “one
and the same.” Id.B. “Plaintiffs” means parties who actually bring suit; it
does not mean real parties in interest.
Having determined that “the ‘100 or more persons’ and
the proposed ‘plaintiffs’” are “one and the same,” the
Supreme Court then turned to the meaning of the latter term,
starting with how it is defined in various dictionaries. “The
term ‘plaintiff,’” the Court said, “is among the most
commonly understood legal terms of art: It means a ‘party
who brings a civil suit in a court of law.’” Id. at 743 (quoting
Black’s Law Dictionary 1267 (9th ed. 2009)). A plaintiff, in
other words, is “‘one who commences a personal action or
lawsuit,’ or ‘the complaining party in any litigation.’” Id.
(quoting Webster’s Third New International Dictionary
1729 (1961)). “It certainly does not mean ‘anyone, named
or unnamed, whom a suit may benefit.’” Id.
LIBERTY MUTUAL FIRE INS. V. EZ-FLO INT’L 9
EZ-FLO tries to distinguish Hood on the ground that,
whereas the Mississippi citizens in that case were unnamed,
the insureds here are identified in the case caption by
reference to an attached exhibit. But this distinction is
irrelevant in light of Hood. Even if the insureds are in some
sense “named” in the complaint, they are not “named
plaintiffs” as Hood requires. See Hood, 134 S. Ct. at 739(emphasis added) (concluding that “a ‘mass action’ must
involve monetary claims brought by 100 or more persons
who propose to try those claims jointly as named plaintiffs”);
see also United States ex rel. Eisenstein v. City of New York,
556 U.S. 928, 935 (2009) (“A person or entity can be named
in the caption of a complaint without necessarily becoming
a party to the action.” (citing 5A Charles Alan Wright &
Arthur Miller, Federal Practice and Procedure § 1321 (3d ed.
2004))); Fed. Sav. & Loan Ins. Corp. v. Tullos-Pierremont,
894 F.2d 1469, 1475 n.9 (5th Cir. 1990) (explaining that
although Rule 10(a) of the Federal Rules of Civil Procedure
“states that the caption of the complaint ‘shall include the
names of all the parties,’ this does not necessarily mean that
all named in the caption are parties for all purposes merely
by virtue of being thus listed”).
Our conclusion that the insureds are not plaintiffs
follows inexorably from the fact that they have not brought
this lawsuit. Nor have they filed, served, or been served with
any papers in this case. The insureds also have made no
arguments and taken no positions, and there is no indication
in the record that they have any right to control this lawsuit’s
prosecution. Moreover, EZ-FLO’s counsel readily
conceded at oral argument that the only “plaintiffs” in this
lawsuit are the 26 insurance companies.
The fact that the insureds are not named plaintiffs is
dispositive. Nonetheless, EZ-FLO argues in its brief that the
10 LIBERTY MUTUAL FIRE INS. V. EZ-FLO INT’L
insureds should be considered as plaintiffs for the purpose
of analyzing jurisdiction under CAFA’s mass-action
provision because, in subrogation suits, “the insurance
compan[ies] depend[] upon [the insureds’] rights and stand[]
in their shoes.” But the dynamic in which one party
figuratively stands in the shoes of another is hardly unique
to subrogation suits. It is, in fact, a defining feature of ex rel.
suits as well—the context in which Hood arose. Compare
Chubb Custom Ins. Co. v. Space Systems/Loral, Inc.,
710 F.3d 946, 957 (9th Cir. 2013) (explaining that “the
insurer (the subrogee) ‘stands in the shoes’ of the insured
(the subrogor)”), with United States ex rel. Atkins v.
McInteer, 470 F.3d 1350, 1360 (11th Cir. 2006) (“The
relator stands in the government’s shoes . . . .”), and United
States ex rel. Kelly v. The Boeing Co., 9 F.3d 743, 748 (9th
Cir. 1993) (“If the government declines to prosecute the
alleged wrongdoer, the qui tam plaintiff effectively stands in
the shoes of the government.”).
In effect, EZ-FLO asks us to apply a real-party-in-
interest test. But Hood makes clear that we cannot look past
the case caption to count up the real parties in interest or
define “plaintiffs” in such broad terms as to effectively do
so. See Hood, 134 S. Ct. at 746 (concluding that “the word
‘plaintiffs’” in § 1332(d)(11)(B)(i) “refers to actual, named
parties”).
Finally, we note that even if Hood had not forbidden the
use of a real-party-in-interest test, the insureds would likely
not qualify as real parties in interest here. “If the subrogee
has paid an entire loss suffered by the insured, it is the only
real party in interest . . . .” United States v. Aetna Cas. &
Sur. Co., 338 U.S. 366, 380–81 (1949). This circumstance
apparently fits the present case, with the Plaintiffs’ counsel
representing at oral argument that “the only losses that are at
LIBERTY MUTUAL FIRE INS. V. EZ-FLO INT’L 11
issue in this case are the losses that have been paid by the
insurance companies.” The insureds, he said, “have no
financial interest whatsoever” in this lawsuit. As he later put
it more colloquially, they have “no skin in the game.”
EZ-FLO, of course, is not bound by opposing counsel’s
representations. But a contrary finding on whether the
insureds are even in part real parties in interest would do EZ-
FLO no good in light of Hood. To put it bluntly, EZ-FLO’s
goose is cooked simply by the fact (as admitted by its own
counsel) that the insureds are not named plaintiffs in this
case.
This leaves EZ-FLO with the plaintive argument that
CAFA’s numerosity requirement “elevate[s] form over
substance.” Perhaps it does. But that is what the Supreme
Court in Hood determined that Congress had intended. See
Hood, 134 S. Ct. at 745 (“[T]he Court of Appeals appeared
to find [a real-party-in-interest] inquiry necessary on the
basis of what it understood to be a background principle:
that federal courts look to the substance of the action and not
only at the labels that the parties may attach. This was
error.” (internal quotation marks and citation omitted)).
Based on Hood, we conclude that CAFA’s numerosity
requirement is not satisfied in the present case.
III. CONCLUSION
For all of the reasons set forth above, we AFFIRM the
judgment of the district court.