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Hargett v. Revclaims, LLC

United States Court of Appeals, Eighth Circuit

April 14, 2017

Tammy Hargett, Individually and on behalf of all others similarly situated Plaintiff- Appellee
v.
Revclaims, LLC Defendant St. Bernard's Hospital, Inc.; St. Bernard's Community Hospital Corporation; Baptist Health; White River Health System, Inc. Defendants-Appellants John Does 1-100 Defendant Tammy Hargett, Individually and on behalf of all others similarly situated Plaintiff- Appellee
v.
Revclaims, LLC Defendant-Appellant John Does 1-100; Baptist Health; St. Bernard's Hospital, Inc.; St. Bernard's Community Hospital Corporation; White River Health System, Inc. Defendants

          Submitted: March 10, 2017

         Appeals from United States District Court for the Eastern District of Arkansas - Jonesboro

          Before SMITH, [1] BOWMAN, and SHEPHERD, Circuit Judges.

          SMITH, Circuit Judge.

         The Class Action Fairness Act of 2005 (CAFA) broadened federal jurisdiction over class actions but excepted controversies that are primarily local in nature. District courts must decline to exercise jurisdiction over these matters. Congress has defined the features of a local controversy. As relevant to this appeal, a class action is a local controversy if local citizens predominate over non-locals in the class membership-that is, if more than two-thirds of the class members are "citizens of the State in which the action was originally filed." 28 U.S.C. § 1332(d)(4)(A)(i)(I). We have long held that "resident" does not mean "citizen" in 28 U.S.C. § 1332(a). The issue in this case is whether this citizenship/residency distinction also applies to § 1332(d)(4). In other words, does "citizen" mean the same thing in § 1332(d)(4) that it means in the rest of 28 U.S.C. § 1332? We hold that it does, and that the district court therefore erred in remanding this case based on the class members' Arkansas residency rather than citizenship.

         I. Background

         Tammy Hargett was injured in a car wreck. Hargett received medical treatment from St. Bernard's Hospital. St. Bernard's required Hargett to assign her rights as a Medicaid Beneficiary to the hospital. The hospital contracted with RevClaims, LLC to pursue any claim Hargett might have against the driver responsible for her injuries. This was in lieu of collecting a reduced but certain payment from Arkansas Medicaid, which insured Hargett. Hargett contends that this practice violates Arkansas law. She sued St. Bernard's, RevClaims, and several other hospitals in Arkansas state court on behalf of a class comprising "[a]ll persons who were Arkansas Medicaid-eligible beneficiaries" who were treated at one of the defendant hospitals and who had similar liens placed on their third-party claims by RevClaims. Hargett also alleged that "hundreds, if not thousands, of people geographically dispersed across Arkansas have been damaged by Defendants' actions."

         The defendants removed the suit to federal court under CAFA, 28 U.S.C. § 1332(d). Hargett moved to remand. She urged the district court to "decline to exercise jurisdiction" under CAFA's local-controversy exception. 28 U.S.C. § 1332(d)(4). The district court concluded that Hargett's suit met all the exception's requirements, including the requirement that more than two-thirds of the proposed class be citizens of the state where the suit was filed-in this case, Arkansas. See 28 U.S.C. § 1332(d)(4)(A)(i)(I). As the district court explained:

In establishing the local controversy exception, Plaintiff has defined the class as all persons who were Arkansas residents at the time the medical services which form the basis of the Complaint were provided to them. By restricting the class members to Arkansas residents (specifically, "people geographically disbursed across Arkansas;" Document 2, para. 48), Plaintiffs have sufficiently satisfied their burden of establishing that more than 2/3 of the class members are citizens of Arkansas.

         "For clarity, " though, the district court directed Hargett "to immediately amend her complaint to explicitly restrict the proposed class definition as to only include Arkansas citizens." Hargett filed an amended complaint defining the proposed class as "[a]ll Arkansas citizens who were Arkansas Medicaid-eligible beneficiaries . . . ." (emphasis added). Then the case was remanded. The hospitals and RevClaims sought permission to appeal under 28 U.S.C. 1453(c)(1), which we granted.

         II. Discussion

         We have jurisdiction to accept appeals from class-action remands. 28 U.S.C. § 1453(c)(1). The authorizing statute leaves to the "informed discretion of the reviewing court" precisely how to exercise this jurisdiction. Coll. of Dental Surgeons of P.R. v. Conn. Gen. Life Ins. Co., 585 F.3d 33, 39 (1st Cir. 2009). We accepted this appeal to address a novel and important CAFA issue: How does the "resident" versus "citizen" distinction we have observed in other parts of 28 U.S.C. § 1332 play out in the local-controversy exception?

         In conducting this review, we are guided by five principal considerations. First, CAFA reflects Congress's desire for broad diversity jurisdiction over class actions. Westerfeld v. Indep. Processing, LLC, 621 F.3d 819, 822 (8th Cir. 2010). The local-controversy exception is narrow. Id. Once a removing defendant has established CAFA's jurisdictional requirements, the burden shifts to the plaintiff to establish that the local-controversy exception applies. Id. This means that the district court "should resolve any doubt about the applicability of CAFA's local-controversy exception against . . . the party who seeks remand." Id. at 823.

         Second, apart from the local-controversy exception, the term "citizen" in 28 U.S.C. § 1332 has long meant something different from "resident." As we said recently, "it is simply incorrect to say [a party]'s Arkansas residency establishes Arkansas citizenship for the purpose of" § 1332(a)(1). Reece v. Bank of N.Y. Mellon, 760 F.3d 771, 777 (8th Cir. 2014). We explained why: "Citizenship requires permanence." Id. at 778. Residency is a more fluid concept. See id. Unlike citizenship, residency does not require an intent to make a place home. See Ellis v. Se. Constr. Co., 260 F.2d 280, 281 (8th Cir. 1958). ...


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