After Spokeo: A Trend Toward State Court Remand

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In Medellin v. Ikea U.S.A .West, Inc., No. 15-55174 (9th Cir. Jan. 13, 2017) (slip op. available here), an unpublished ruling, the Ninth Circuit Court of Appeals recently endorsed plaintiffs’ most recent strategy for avoiding Article III standing requirements after Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1549 (2016). In Spokeo, the United States Supreme Court held that a plaintiff cannot “allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.” Id. at 1549. Without Article III standing, a federal court lacks subject matter jurisdiction and the case may be remanded to state court, where plaintiffs frequently fare better. In Medellin, rather than appealing the denial of class certification, the plaintiff requested that the case be remanded to state court. The Ninth Circuit vacated the district court’s order decertifying the class and remanded with instructions that the lower federal court dismiss the action without prejudice for lack of standing.

Medellin arose in 2012 when the plaintiff alleged that Ikea violated the Song-Beverly Credit Card Act by illegally collecting her and other consumers’ zip code information. The complaint was originally filed in state court and then removed under the Class Action Fairness Act. In 2012, the court certified a class, but then decertified it in 2014, concluding that, based on the evidence presented, individual cashiers may not have asked for zip code information and that customers knew that providing zip code information was voluntary. The plaintiff appealed the denial of class certification, but changed course after the Spokeo decision. Rather than pursuing an appeal of the decertification order, the plaintiff “admitted” that she did not have standing under Spokeo and requested that the court remand the case to state court. The Ninth Circuit agreed and remanded the case, instructing the district court to dismiss the action without prejudice based on the plaintiff’s concession that “she alleged only a bare procedural violation of the statute and suffered no other cognizable harm.” Slip op. at 2.

Judge Maxine M. Chesney reached a similar result in a Fair Credit Reporting Act (FCRA) case, partially granting a plaintiff’s motion to remand that was pending in the Northern District of California, Benton v. Clarity Services, Inc., Case No. 16-cv-06583-MMC (N.D. Cal. Jan. 24, 2017). The court severed the claims for which the court found that plaintiff lacked standing under Spokeo and remanded only those claims to state court. Courts in the Third Circuit also have opted for remand over dismissal when jurisdiction is lacking based on Spokeo. For example, in Mocek v. Allsaints USA Ltd., No. 2016-cv-08484 (N.D. Ill. Dec. 7, 2016), an Illinois district court judge remanded a FACTA case to state court, instead of dismissing it outright. The court noted that, “as a general matter, federal courts should interpret the removal statutes narrowly and presume that the plaintiff may choose his or her forum.” Id. at 5. The court also relied on 28 U.S.C. section 1447(c) which provides that “if at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.” In Mocek, the court went even further and awarded attorneys’ fees to the plaintiff, finding that “defendant tried to have it both ways by asserting, then immediately disavowing, federal jurisdiction, apparently in hopes of achieving outright dismissal, with prejudice rather than the remand required under section 1447(c) . . . In short, it should have been obvious to defendant, based on well-settled law, that with no party asking for the merits of the plaintiff’s claim to be decided in federal court, and both sides arguing against federal jurisdiction, the only possible outcome was for the case to end up right where it started: in state court.” Id. Similarly, in In re Michaels Stores, Inc., Fair Credit Reporting Act (FCRA) Litigation, MDL No. 2615 (D.N.J. Jan. 24, 2017), a district court in New Jersey found that the plaintiffs lacked standing under Spokeo to pursue their FCRA claim in federal court, but remanded the California action to California state court, relying on section 1447(c). Id. at 20 (stating, “Having found that this Court lacks subject matter jurisdiction over Plaintiffs’ claims, I must remand this removed case to the California state court. See 28 U.S.C. § 1447(c) . . . .”).

In sum, a trend may be developing whereby federal courts are remanding statutory claims to state courts after Spokeo instead of dismissing them for lack of jurisdiction. However, plaintiffs need to be aware that proceeding in state court after remand could prove to be a double-edged sword. While jurisdiction will be established in the absence of Article III requirements, certain state statutes, such as California’s Consumer Legal Remedies Act, still require a showing of actual harm. Moreover, in conceding that there is no concrete harm or actual harm in order to avoid federal jurisdiction, the plaintiff may risk undercutting the value of any statutory penalty that could be negotiated in settlement or awarded by the court.

Authored By:
Jordan Lurie, Of Counsel