On Tuesday, the Seventh Circuit decided Myrick v. Wellpoint, Inc., Nos. 12-3882, 13-2230, 2014 WL 4073065 (Aug. 19, 2014), which held that plaintiffs were required to produce evidence—and not merely assumptions—about the citizenship of class members to establish the “home-state exception” to CAFA jurisdiction under 28 U.S.C. § 1332(d)(4). The case arose when a health insurer offering policies in Illinois was bought out in 2001 and, in 2002, withdrew from the Illinois market and canceled all of its Illinois policies.
Plaintiffs filed suit in Illinois state court, alleging that the cancellation violated Illinois law, and sought to certify a class of all former policyholders. Defendants removed the case to federal court pursuant to CAFA, as the proposed class had the requisite size, amount in controversy, and minimal diversity.
Plaintiffs moved for remand under 28 U.S.C. § 1332(d)(4) on the basis that two-thirds of the proposed class were Illinois citizens. Plaintiffs introduced no evidence as to the actual citizenship of the class members, but asked the court to so-conclude on the basis of two assumptions: (i) the insurance policies were only issued to persons who represented they resided in Illinois—or, for group policies, to employers who represented that most beneficiaries resided in Illinois; and (ii) in the years following the cancellation of their policies in 2002, class members moved out of Illinois at no more than 2% per year (the Census Bureau’s national average). Id. at *1.
The district court denied the motion for remand. The Seventh Circuit affirmed. It held that plaintiffs were required to present evidence to demonstrate the citizenship of class members and could not rely on assumptions about the “residence” of members (which might differ from members’ “citizenship” for purposes of diversity jurisdiction). The Seventh Circuit likewise rejected plaintiffs’ complaints about the cost of proving citizenship, concluding that “lawyers who launch class actions are not in a good position to complain about the expenses they entail; plaintiffs and their counsel must be prepared to meet them or be deemed inadequate representatives.” Id. at *3. The court suggested the use of statistical sampling as a cost-effective method to estimate class members’ citizenship. Id.
Another interesting note about this case is that it represents a “zombie” class action—one that won’t go away even after a court kills it. The same firm that filed Myrick had filed an identical putative class action against the same defendants two years earlier. In that proceeding, the district court denied class certification and later entered judgment against the named plaintiffs on the merits. Id. at *4. Instead of appealing, the plaintiffs filed Myrick—a tactic the Seventh Circuit described as being “in the hope that a different forum would produce a different answer,” id. The court concluded with a rebuke of the tactic: “Counsel should thank their lucky stars that the district court did not sanction them under 28 U.S.C. § 1927 for filing a second suit rather than pursuing the first through appeal.” Id. at *5.
Editor’s Note: The editors would like to thank our colleague, bankruptcy attorney Lars Fuller, for tipping us off to this decision.