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Atwood v. Peterson

United States Court of Appeals, Eighth Circuit

August 30, 2019

Douglas E. Atwood, Individually and on behalf of others similarly situated Plaintiff- Appellant
Stephen J. Peterson; Michelle Brooks; Walgreen Co. Defendants - Appellees Arkansas Grocers & Retail Merchants Association Amicus on Behalf of Appellee(s)

          Submitted: June 19, 2019

          Appeal from United States District Court for the Eastern District of Arkansas - Little Rock

          Before LOKEN and WOLLMAN, Circuit Judges. [1]

          PER CURIAM.

         Arkansas citizen Douglas E. Atwood filed a class action complaint in state court against Walgreen Company (Walgreens), an Illinois corporation, and Stephen J. Peterson and Michelle Brooks, who are Arkansas citizens and who serve as the district managers responsible for the forty-three Walgreens stores located in Arkansas. Atwood claimed that the Walgreens Balance Rewards program (the program) violated Arkansas's statutory prohibition on price discrimination in the sale of manufactured products. The defendants removed the case to federal district court, alleging jurisdiction under the Class Action Fairness Act of 2005 (CAFA). Atwood moved to remand based on the local controversy exception to CAFA jurisdiction. The district court[2] denied Atwood's motion to remand and later granted the defendants' motion to dismiss. Atwood appeals, arguing that the court erred in considering extrinsic evidence to decide whether it had jurisdiction, in denying his motion to remand, and in dismissing his complaint on the merits. We affirm.

         Atwood alleged that the program was implemented in all Arkansas Walgreens stores in September 2012. Membership is free and does not require an initial purchase, but customers must provide identifying information, including their names, addresses, telephone numbers, and email addresses. After signing up, customers may use their rewards cards to receive discounts on certain products.

         In April 2015, Atwood and another customer went to three different Arkansas Walgreens stores and purchased the same products. Atwood paid more for the products than the unidentified customer because he did not present a rewards card at checkout and the unidentified customer did. Based on those transactions, Atwood alleged that the program violated Arkansas Code § 4-75-501, which stated:[3]

(a) It shall be unlawful for any person, company, corporation, or association engaged in the sale of any manufactured product . . . to:
(2) Willfully refuse or fail to allow to any person . . . making purchases of the manufactured product . . . all rebates and discounts which are granted by them to other purchasers, for cash, of like quantities of the manufactured product . . . .

         Although the complaint alleged damages and diversity of parties sufficient to establish federal jurisdiction under CAFA, see 28 U.S.C. § 1332(d)(2), Atwood asserted that the local controversy exception to CAFA jurisdiction applied, see id. § 1332(d)(4). Specifically, the complaint alleged that Arkansas citizens Peterson and Brooks implemented the unlawful program and that they were "independently and jointly and severally liable." Atwood claimed that the Arkansas district managers were significant defendants under CAFA because their conduct formed a "significant basis" for his claim and because he sought "significant relief" from them. See id. § 1332(d)(4)(A)(i)(II)(aa)-(bb).

         Defendants were required to file a notice of removal under CAFA within "30 days after receipt . . . of the initial pleading." 28 U.S.C. § 1446(b)(2)(B). The defendants' timely notice of removal argued that the local controversy exception did not apply and that the district managers had been fraudulently joined to defeat diversity jurisdiction. In support, the defendants submitted affidavits from Peterson, Brooks, and a Walgreens vice president. The vice president averred that district managers do not decide which products to offer in the program, nor do they decide the extent of the discount. Those decisions, according to the vice president, are made at the corporate level, with the district managers having no discretion to vary the products or the prices. The district managers stated that they "receive[] pricing information directly from Walgreens corporate headquarters each week that lists the products to be included in the . . . program and the prices at which those products are to be offered."

         In his motion to remand, Atwood reiterated his argument that federal jurisdiction under CAFA was precluded by the local controversy exception. He further argued that, in deciding whether to remand, the district court could consider only the allegations in the complaint and could not consider extrinsic evidence, such as the defendants' affidavits. During a hearing on the motion, plaintiff's counsel claimed that it did not matter whether Peterson and Brooks created the program or whether they had any discretion to vary the products or prices, arguing that the Arkansas statute imposed liability on them as persons "engaged in the sale" of manufactured products. Counsel acknowledged that the same theory of liability applied to both the district managers and to Walgreens, but argued that Peterson and Brooks were nonetheless significant defendants because they could be held individually liable for all statutory violations.[4]

         The district court overruled Atwood's objection to the consideration of extrinsic evidence and denied the motion to remand. It relied on the above-described affidavits in finding that the district managers were not significant defendants under CAFA and in concluding that they had been fraudulently joined in an attempt to defeat diversity jurisdiction. The court later granted the defendants' motion to dismiss, holding that the allegations set forth within the complaint did not fall within the scope of the Arkansas statute because Walgreens offered the discounted prices to Atwood, "but he refused to sign up for the free program, essentially declining the discounted price." D. Ct. Order of Dec. 14, 2015, at 3.

         Congress enacted CAFA in 2005 to curb perceived "abuses of the class action device" by providing for "[f]ederal court consideration of interstate cases of national importance." Westerfeld v. Indep. Processing, LLC, 621 F.3d 819, 822 (8th Cir. 2010) (quoting CAFA, Pub. L. No. 109-2, ยง 2, 119 Stat. 4 (2005)). Under CAFA, federal courts have jurisdiction over class actions in which the amount in controversy exceeds $5 million in the aggregate, there is minimal diversity among the parties, and there are at least 100 ...

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