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Vitale v. D.R. Horton, Inc.

United States District Court, D. Hawaii

August 9, 2016

CHARLES VITALE and NINA VITALE, Individually and in their Representative Capacities and on Behalf of a Class of All Persons Similarly Situated, Plaintiffs,
D.R. HORTON, INC.; D.R. HORTON-SCHULER HOMES, LLC; et al., Defendants.


          Derrick K. Watson United States District Judge.


         Defendants removed this action, brought by a putative class of Hawai‘i home-buyers, pursuant to the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d). The parties do not dispute that CAFA’s minimal diversity requirements have been met. This action, however, consists solely of state-law claims that a Hawai‘i homebuilder and its mainland parent corporation developed and sold homes in Hawai‘i with a defective condition to a putative class predominantly composed of Hawai‘i citizens. Consequently, CAFA’s mandatory “local controversy” exception requires the Court to decline to exercise jurisdiction over this matter. 28 U.S.C. § 1332(d)(4)(A). Accordingly, this case is remanded to state court.


         D.R. Horton, Inc. (“Horton Inc.”) and D.R. Horton-Schuler Homes, LLC (“Horton LLC”) developed, constructed, and sold thousands of single-family homes and condominiums in the State of Hawai'i that Plaintiffs allege contain defective, embedded hurricane straps. Complaint ¶¶ 5-6 (attached to Notice of Removal, Dkt. No. 1-2). The named Plaintiffs filed this action on July 13, 2015 in Hawai'i state court on behalf of themselves and a class of similarly situated home-purchasers. The class is defined as: “All individuals and entities that own Horton Homes constructed with hurricane straps embedded in the foundations substantially completed on or after July 13, 2005 in the State of Hawai'i, and all homeowners associations whose members consist of such individual and entity homeowners.” Complaint ¶ 24. Plaintiffs have identified 3, 300 putative class members, over 2, 900 of whom they claim are citizens of the State of Hawai‘i. Declaration of Graham B. LippSmith (“LippSmith Decl.”) ¶ 4.

         Defendants removed this action on August 10, 2015 (Dkt. No. 1). They based removal on the Court’s original subject matter jurisdiction under CAFA, asserting that CAFA’s minimal diversity requirement had been met because “Plaintiffs are domiciled in and citizens of Hawaii” and “Defendant Horton Inc. is a Delaware corporation” with a principal place of business in Texas.[1] Dkt. No. 1, ¶ 4.a. The case was stayed by stipulation of the parties on August 20, 2015 (Dkt. No. 8), and the stay was officially lifted as of March 30, 2016. Dkt. No. 10. On April 10, 2016, Defendants filed a Motion to Dismiss Plaintiffs’ Complaint for Lack of Standing. Dkt. No. 11. On June 14, 2016, the Court alerted the parties to its concerns regarding the Court’s subject matter jurisdiction under CAFA Sections 1332(d)(3) and (d)(4) and ordered briefing on the matter.


         I. The Court’s Obligation to Ensure Its Own Jurisdiction

         As a preliminary matter, the Court briefly addresses its perpetual obligation to ensure its own subject matter jurisdiction, in light of Defendants’ erroneous assertion that the Court may not consider CAFA’s jurisdictional exceptions sua sponte.[2] Defendants’ assertion is plainly without merit. See, e.g., Bey v. SolarWorld Indus. Am., Inc., 904 F.Supp.2d 1103, 1108 (D. Or. 2012) (Rejecting defendant’s argument that “the Court may not raise the § 1332(d)(4) exceptions sua sponte, ” while likening CAFA exceptions to abstention cases where “federal courts have consistently held that they may raise abstention concerns sua sponte, ” and that similar “reasoning applies all the more strongly in the context of the § 1332(d)(4) exceptions[.]”); id. at 1109 (“Congress has specifically directed the courts to decline jurisdiction if a purported class action is overwhelmingly a state controversy. There is no precedent prohibiting the Court from raising the applicability of the § 1332(d)(4) exceptions on its own, relatively early in the case, as courts often do with abstention concerns.”); Reddick v. Glob. Contact Sols., LLC, 2015 WL 5056186, at *3-*4 (D. Or. Aug. 26, 2015) (“The question of who bears the burden of persuasion under CAFA in connection with a motion to remand is immaterial to this court’s sua sponte determination of whether it may properly exercise federal subject-matter jurisdiction.”). Even the very cases cited by Defendants offer no support for the assertion. At best, those cases hold that district courts need not raise CAFA jurisdictional concerns sua sponte, not that they cannot. See Barfield v. Sho-Me Power Electric Co-op, 2015 WL 5022836 at *5 (W.D. Mo. Aug. 21, 2015); Kuxhausen v. BMS Financial Services, NA LLC, 707 F.3d 1136, 1140 n.1 (9th Cir. 2013).

         Indeed, the Court is generally obligated to ensure its own subject matter jurisdiction at each stage of the proceeding. See, e.g., Grupo Dataflux v. Atlas Glob. Grp., L.P., 541 U.S. 567, 593 (2004) (“[B]y whatever route a case arrives in federal court, it is the obligation of both district court and counsel to be alert to jurisdictional requirements.”); United States v. Southern California Edison Co., 300 F.Supp.2d 964, 972 (E.D. Cal. 2004) (district courts have an “independent obligation to address [subject-matter jurisdiction] sua sponte”) (internal quotation marks omitted). Moreover, remand is required if the Court lacks subject matter jurisdiction at any time. See, e.g., 28 U.S.C. § 1447(c) (“If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.”); Ins. Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 (1982) (holding that a party does not waive subject-matter jurisdiction “by failing to challenge [it] early in the proceedings”); Singer v. State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 376 (9th Cir. 1997) (“This is not to say that a defect in jurisdiction can be avoided by waiver or stipulation to submit to federal jurisdiction. It cannot.”); Berg v. United Air Lines, Inc., 2012 WL 3138022, at *2 (N.D. Cal. Aug. 1, 2012) (“[T]he Court is duty-bound to police its own removal jurisdiction sua sponte, despite neither party having raised the issue.”) (citing United Investors Life Ins. Co. v. Waddell & Reed Inc., 360 F.3d 960, 967 (9th Cir. 2004)); cf. Kelton Arms Condo. Owners Ass’n, Inc. v. Homestead Ins. Co., 346 F.3d 1190, 1192-93 (9th Cir. 2003) (holding that a court may not sua sponte remand for procedural defects in removal but noting a distinction between procedural and jurisdictional defects and that a “district court must remand if it lacks jurisdiction”).

         With this continuing obligation in mind, the Court turns to the mandatory exceptions to CAFA jurisdiction.

         II. CAFA Mandates This Court’s Declination of Jurisdiction

         CAFA vests federal district courts with original jurisdiction of any class action in which minimal diversity of citizenship exists between at least one member of the putative class and at least one defendant, the class consists of at least 100 members, and the matter in controversy exceeds $5, 000, 000. The parties do not dispute that these three conditions have been met here.

         CAFA, however, also includes both mandatory and permissive jurisdictional exceptions. Because the Court finds the mandatory “local controversy” exception applicable here, CAFA’s compulsory declination provision requires remand to state court. See 28 U.S.C. § 1332(d)(4)(A).[3]

         A. Citizenship of Two-Thirds or More of Members of the Class

         The Court first addresses the citizenship requirement of CAFA’s mandatory declination provisions, which require proof, by a preponderance of the evidence, that two-thirds or more of the members of the proposed class are citizens of Hawai‘i. See 28 U.S.C. §§ 1332(d)(4)(A)(i)(I) and (d)(4)(B); see also Mondragon v. Capital One Auto Fin., 736 F.3d 880, 884 (9th Cir. 2013) (“A ...

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