Jose Mondragon v. Capital One Auto Finance ( 2013 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
JOSE MONDRAGON, individually and No. 13-56699
on behalf of all others similarly
situated, D.C. No.
Plaintiff-Appellee, 3:13-cv-00363-
H-RBB
v.
CAPITAL ONE AUTO FINANCE, a OPINION
Division of Capital One, N.A.,
Defendant-Appellant,
and
RON BAKER CHEVROLET, a
California Corporation,
Defendant.
Appeal from the United States District Court
for the Southern District of California
Marilyn L. Huff, District Judge, Presiding
Argued and Submitted
November 5, 2013—Pasadena, California
Filed November 27, 2013
Before: Alfred T. Goodwin, Raymond C. Fisher,
and Richard R. Clifton, Circuit Judges.
Opinion by Judge Clifton
2 MONDRAGON V. CAPITAL ONE
SUMMARY*
Class Action Fairness Act
The panel vacated the district court’s order remanding a
putative class action lawsuit to California state court under
the Class Action Fairness Act’s “local controversy” exception
to federal jurisdiction, 28 U.S.C. § 1332(d)(4)(A), and
remanded for further proceedings.
The panel held that there must ordinarily be facts in
evidence to support a finding that two-thirds of putative class
members are local state citizens, which is one of the local
controversy exception’s requirements, if that question is
disputed before the district court. A pure inference regarding
the citizenship of prospective class members may be
sufficient if the class is defined as limited to citizens of the
state in question, but otherwise such a finding should not be
based on guesswork. The panel vacated the district court’s
remand order and remanded the case to the district court with
instructions to allow plaintiff an opportunity, if he so chooses,
to renew his motion to remand and to gather evidence to
prove that more than two-thirds of putative class members
were citizens of California.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
MONDRAGON V. CAPITAL ONE 3
COUNSEL
Hunter R. Eley (argued), William H. Edmonson, and Johari
N. Townes, Doll Amir & Eley LLP, Los Angeles, California;
David N. Anthony, Alan D. Wingfield, and Nicholas R.
Klaiber, Troutman Sanders LLP, Richmond, Virginia, for
Defendant-Appellant.
Christopher P. Barry (argued) and Lacee B. Smith, Rosner,
Barry & Babbitt, LLP, San Diego, California, for Plaintiff-
Appellee.
OPINION
CLIFTON, Circuit Judge:
This case presents another issue under the Class Action
Fairness Act of 2005 (“CAFA”), Pub. L. No. 109-2, 119
Stat. 4. Defendant-Appellant Capital One Auto Finance
appeals the district court’s order remanding a putative class
action lawsuit to California state court under CAFA’s “local
controversy” exception to federal jurisdiction, 28 U.S.C.
§ 1332(d)(4)(A). Plaintiff Jose Mondragon, as the party
seeking remand to state court, bears the burden of proving
that the exception applies. Plaintiff submitted no evidence
regarding the disputed issue, the citizenship of prospective
class members. Nevertheless, the district court held that
Plaintiff had satisfied his burden based solely on an inference
from the class definition that the requirements for the local
controversy exception were satisfied. We disagree, vacate the
remand order and remand for further proceedings.
4 MONDRAGON V. CAPITAL ONE
We conclude that there must ordinarily be facts in
evidence to support a finding that two-thirds of putative class
members are local state citizens, which is one of the local
controversy exception’s requirements, if that question is
disputed before the district court. A pure inference regarding
the citizenship of prospective class members may be
sufficient if the class is defined as limited to citizens of the
state in question, but otherwise such a finding should not be
based on guesswork. In reaching this conclusion, we join the
other circuits that have considered the issue.
I. BACKGROUND
Plaintiff Jose Mondragon filed this putative class action
against defendants Capital One Auto Finance and Ron Baker
Chevrolet in the San Diego County Superior Court, alleging
violations of various provisions of California state law1
related to automobile finance contract disclosures. Capital
One removed the case to the U.S. District Court for the
Southern District of California based on CAFA, 28 U.S.C.
§§ 1332(d), 1453(b).
Through CAFA, Congress broadened federal diversity
jurisdiction over class actions by, among other things,
replacing the typical requirement of complete diversity with
one of only minimal diversity, see id. § 1332(d)(2), and
allowing aggregation of class members’ claims to satisfy a
minimum amount in controversy of $5 million, see id.
§ 1332(d)(6). However, Congress also provided exceptions
1
The operative complaint alleged violations of the Consumers Legal
Remedies Act, Cal. Civ. Code § 1750, et seq., the Automobile Sales
Finance Act, Cal. Civ. Code § 2981, et seq., and the Unfair Competition
Law, Cal. Bus. & Prof. Code § 17200, et seq.
MONDRAGON V. CAPITAL ONE 5
allowing certain class actions that would otherwise satisfy
CAFA’s jurisdictional requirements to be remanded to state
court. Among these is the exception commonly referred to as
the local controversy exception, set forth in 28 U.S.C.
§ 1332(d)(4)(A).2 One of the requirements of the local
2
In its entirety, the local controversy exception reads:
A district court shall decline to exercise jurisdiction
under paragraph (2)—
(A)
(i) over a class action in which—
(I) greater than two-thirds of the members of
all proposed plaintiff classes in the aggregate
are citizens of the State in which the action
was originally filed;
(II) at least 1 defendant is a defendant—
(aa) from whom significant relief is
sought by members of the plaintiff class;
(bb) whose alleged conduct forms a
significant basis for the claims asserted
by the proposed plaintiff class; and
(cc) who is a citizen of the State in which
the action was originally filed; and
(III) principal injuries resulting from the
alleged conduct or any related conduct of each
defendant were incurred in the State in which
the action was originally filed; and
(ii) during the 3-year period preceding the filing of
that class action, no other class action has been
6 MONDRAGON V. CAPITAL ONE
controversy exception is that “greater than two-thirds of the
members of all proposed plaintiff classes in the aggregate are
citizens of the State in which the action was originally filed.”
Id. § 1332(d)(4)(A)(i)(I).
Shortly after the case was removed to federal court,
Mondragon moved to remand it to state court under the local
controversy exception. Mondragon did not present any
evidence of the citizenship of the putative class members.
Instead, he sought to rely entirely on his proposed class
definitions, arguing that the court should infer from those
definitions that more than two-thirds of the class members
were citizens of California.
Mondragon’s putative class action complaint alleged
violations of California law against three classes, only two of
which remain in the case. The Second Amended Complaint
defined the two remaining classes as:
“CLASS 1:” All persons who, in the four
years prior to the filing of this complaint, (1)
purchased a vehicle from Ron Baker for
personal use to be registered in the State of
California, and (2) signed a [Retail
Installment Sale Contract (RISC)] that failed
to separately disclose, on the RISC, the
amounts paid for license fees and/or the
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).
MONDRAGON V. CAPITAL ONE 7
amounts paid for registration, transfer, and/or
titling fees.
...
“CLASS 3:” All persons who, in the four
years prior to the filing of this complaint, (1)
purchased a vehicle in California for personal
use to be registered in the State of California,
(2) signed a RISC that failed to separately
disclose on the RISC the amounts paid for
registration/transfer/titling fees, and (3) whose
RISC was assigned to Capital One.
Mondragon argued that these definitions, limiting putative
class members to those consumers who purchased and
registered cars in California, were sufficient to establish that
this action fell within CAFA’s local controversy exception.
The district court agreed, concluding that the “class
allegations sufficiently show that at least two-thirds of the
potential class members will be California citizens. As such,
Plaintiff has satisfied his burden of proving that CAFA’s
local controversy exception applies.” The district court thus
granted Mondragon’s motion to remand the case to state
court.
Capital One filed in this court a petition for permission to
appeal the district court’s remand order, pursuant to
28 U.S.C. § 1453(c). This court granted the petition for
permission to appeal.3
3
Capital One also filed a motion for a stay of the ongoing state
proceedings, which was also granted by this court.
8 MONDRAGON V. CAPITAL ONE
II. DISCUSSION
We review a district court’s remand order de novo.
Abrego Abrego v. Dow Chem. Co., 443 F.3d 676, 679 (9th
Cir. 2006) (per curiam).
We have previously held that the burden of proof for
establishing the applicability of an exception to CAFA
jurisdiction rests on the party seeking remand, which in this
case, as in most cases, is the plaintiff. See Serrano v. 180
Connect, Inc., 478 F.3d 1018, 1024 (9th Cir. 2007).
Mondragon must thus establish that greater than two-thirds of
prospective class members were citizens of California as of
the date the case became removable, which the district court
determined was January 15, 2013. See 28 U.S.C.
§ 1332(d)(4)(A)(i)(I) (two-thirds requirement); id.§ 1332(d)(7) (“Citizenship of the members of the proposed
plaintiff classes shall be determined for purposes of
paragraphs (2) through (6) as of the date of the filing of the
complaint or amended complaint, or, if the case stated by the
initial pleading is not subject to Federal jurisdiction, as of the
date of service by plaintiffs of an amended pleading, motion,
or other paper, indicating the existence of Federal
jurisdiction.”).
Mondragon argues that more than two-thirds of the
members of a class defined to be limited to persons who
“purchased a vehicle in California for personal use to be
registered in the State of California” will necessarily be
California citizens. Mondragon presented no evidence to the
district court to support that proposition, however, even after
Capital One challenged it.
MONDRAGON V. CAPITAL ONE 9
Where facts are in dispute, the statute requires district
courts to make factual findings before granting a motion to
remand a matter to state court. The statute in question
provides that a case shall be remanded if, among other things,
greater than two-thirds of the prospective class members are
citizens of the state where the action was filed. 28 U.S.C.
§ 1332(d)(4)(A)(i)(I). The statute does not say that remand
can be based simply on a plaintiff’s allegations, when they
are challenged by the defendant. Cf. Coleman v. Estes
Express Lines, Inc., 631 F.3d 1010, 1015 (9th Cir. 2011)
(holding that a court may look beyond the allegations of the
complaint when deciding a defendant’s citizenship under
§ 1332(d)(4)(A)(i)(II)(cc)). A district court makes factual
findings regarding jurisdiction under a preponderance of the
evidence standard. See, e.g., Valdez v. Allstate Ins. Co.,
372 F.3d 1115, 1117 (9th Cir. 2004). A complete lack of
evidence does not satisfy this standard.
Joining the other three circuits that have considered the
issue, we conclude that there must ordinarily be at least some
facts in evidence from which the district court may make
findings regarding class members’ citizenship for purposes of
CAFA’s local controversy exception. See In re Sprint Nextel
Corp., 593 F.3d 669, 673–76 (7th Cir. 2010); Preston v. Tenet
Healthsystem Mem’l Med. Ctr., Inc., 485 F.3d 793, 798–802
(5th Cir. 2007); Evans v. Walter Indus., Inc., 449 F.3d 1159,
1165–66 (11th Cir. 2006). By failing to produce any evidence
regarding citizenship in the face of Capital One’s challenge
to his jurisdictional allegations, Mondragon has failed to
satisfy his burden of proof.
As recognized by the other circuits, a burden of proof
usually requires the party bearing the burden to present
evidence upon which the district court may rely to find that
10 MONDRAGON V. CAPITAL ONE
the party has met its burden. Mondragon’s arguments for
allowing a district court to make the required factual finding
where no evidence has been presented are unpersuasive. As
the Seventh Circuit noted, such freewheeling discretion
amounts to no more than “guesswork. Sensible guesswork,
based on a sense of how the world works, but guesswork
nonetheless.” Sprint, 593 F.3d at 674. A jurisdictional finding
of fact should be based on more than guesswork.
We acknowledge that our holding may result in some
degree of inefficiency by requiring evidentiary proof of
propositions that appear likely on their face. The inference
drawn by the district court in this case was understandable. It
is likely that most of the prospective class members—we
would guess more than two-thirds of them—were California
citizens at the time the lawsuit was filed. But it is also likely
that some of them were not. We imagine that some
automobiles were purchased and registered in California by
members of the military, by out-of-state students, by owners
of second homes, by other temporary residents who
maintained legal citizenship in other states, and by persons
who live in California but are not U.S. citizens. That a
purchaser may have a residential address in California does
not mean that person is a citizen of California. See, e.g.,
Kanter v. Warner-Lambert Co., 265 F.3d 853, 857 (9th Cir.
2001). In addition, the proposed class reaches back to cover
purchases made as long as four years before the filing of the
complaint, which could mean five years or more prior to the
date on which the case became removable, and we imagine
that at least some purchasers who were California citizens at
the time of purchase subsequently moved to other states, such
that they were not California citizens as of January 15, 2013.
There is simply no evidence in the record to support a finding
MONDRAGON V. CAPITAL ONE 11
that the group of citizens outnumbers the group of non-
citizens by more than two to one.
The Seventh Circuit acknowledged a similar circumstance
in Sprint. In that case, it was probably even more likely that
the proposed class consisted overwhelmingly of Kansas
citizens, for the class as defined included only people who
had a Kansas cell phone number, a Kansas billing address,
and paid a Kansas fee. 593 F.3d at 671. Nonetheless, the
court vacated a remand order and sent that case back to the
district court for further proceedings because the plaintiffs
had not submitted any evidence of citizenship. Id. at 673,
676.4
Similarly, in this case, we suspect that, if he decides to
expend the effort, Mondragon will be able to gather and
submit evidence to support his contention that more than two-
thirds of prospective class members were citizens of
California at the time the case became removable, thereby
justifying a remand to state court and landing the case back
in the same place it was before this appeal. Any such
inefficiency is largely of the parties’ own making, though.
Mondragon could have limited the class by defining it to
consist only of California citizens,5 or he could have
4
The subsequent history of the case illustrated the inefficiency of the
holding. After jurisdictional discovery (including surveys of the class and
expert testimony) that lasted almost one year, the district court again
remanded the case to state court. See In re Text Messaging Antitrust Litig.,
Nos. 08 C 7082, 09 C 2192, 2011 WL 305385, at *3 (N.D. Ill. Jan. 21,
2011).
5
The Seventh Circuit suggested that the class in Sprint could be defined
as limited to Kansas citizens. 593 F.3d at 676. Capital One argues that this
alternative was available to Mondragon, accepting that it would be
12 MONDRAGON V. CAPITAL ONE
proceeded in federal court once Capital One chose to remove
the case. Likewise, Capital One could have allowed the case
to proceed in state court initially or once the district court had
entered its remand order. Instead, both parties chose to assert
their rights to the utmost, and that is their prerogative.
Perhaps recognizing that Mondragon will probably be
able to prove that this class action is subject to remand under
the local controversy exception, Capital One argues that we
should remand the case to the district court with instructions
to deny the motion to remand, requiring the case to continue
in federal court without giving Mondragon another
opportunity to establish the facts that would require remand.
Capital One contends that we should preclude Mondragon
from what it calls “another bite at the apple” because of the
inefficiency and delay that will result from permitting the
district court to revisit the issue. But that inefficiency and
delay is at least equally attributable to Capital One for
insisting that Mondragon affirmatively prove with evidence
a proposition that seems likely to be true. Moreover, at the
time that Mondragon presented its motion to remand to the
district court, there was no guidance from this court on the
relevant issue, and there were district court rulings that
supported Mondragon’s position. We instruct the district
court to allow Mondragon an opportunity, if he chooses to do
so, to renew his motion to remand and to take jurisdictional
discovery tailored to proving that more than two-thirds of the
putative class are citizens of California.
appropriate to remand an action with a class so defined to state court even
without additional evidence as to the citizenship of prospective class
members. We agree.
MONDRAGON V. CAPITAL ONE 13
As a final note, we observe that a party with the burden of
proving citizenship may rely on the presumption of
continuing domicile, which provides that, once established,
a person’s state of domicile continues unless rebutted with
sufficient evidence of change. This presumption has been
widely accepted, including by this circuit. See Lew v. Moss,
797 F.2d 747, 751 (9th Cir. 1986); see also, e.g., Anderson v.
Watts, 138 U.S. 694, 706 (1891); Hollinger v. Home State
Mut. Ins. Co., 654 F.3d 564, 571 (5th Cir. 2011) (per curiam);
13E Charles Alan Wright & Arthur R. Miller, Federal
Practice and Procedure § 3612 & nn. 32–33 (3d ed. 2013). In
addition, numerous courts treat a person’s residence as prima
facie evidence of the person’s domicile. See, e.g., Anderson,
138 U.S. at 706 (“The place where a person lives is taken to
be his domicile until facts adduced establish the
contrary . . . .”); Hollinger, 654 F.3d at 571 (“Evidence of a
person’s place of residence . . . is prima facie proof of his
domicile.”); 13E Wright & Miller, supra, § 3612 & n.28 (“It
is assumed . . . that a person’s current residence is also his
domicile . . . .”). It does not appear that this circuit has yet
adopted this presumption. Because the issue is not squarely
presented by this appeal, we decline to reach that issue here.
The burden of proof placed upon a plaintiff should not be
exceptionally difficult to bear. We do not think, as the
Seventh Circuit suggested, that evidence of residency can
never establish citizenship. We agree with the observation of
the Fifth Circuit that a court should consider “the entire
record” to determine whether evidence of residency can
properly establish citizenship. Preston, 485 F.3d at 800.
Factual findings made by a district court after considering the
entire record will be, as usual, subject to clear error review.
See, e.g., Chapman v. Deutsche Bank Nat’l Trust Co.,
651 F.3d 1039, 1043 (9th Cir. 2011) (per curiam). As a
14 MONDRAGON V. CAPITAL ONE
general proposition, district courts are permitted to make
reasonable inferences from facts in evidence, and that is true
in applying the local controversy exception under CAFA, as
well. And, even under CAFA, the jurisdictional allegations in
the complaint can be taken as a sufficient basis, on their own,
to resolve questions of jurisdiction where no party challenges
the allegations. See, e.g., Uston v. Grand Resorts, Inc.,
564 F.2d 1217, 1218 (9th Cir. 1977) (per curiam).
III. CONCLUSION
We vacate the district court’s remand order and remand
the case with instructions to allow Mondragon an
opportunity, if he so chooses, to renew his motion to remand
and to gather evidence to prove that more than two-thirds of
putative class members are citizens of California.
VACATED and REMANDED.