“Home State” Exception to Class Action Fairness Act Jurisdiction Does Not Apply Where the “Primary Thrust” of the Case Is Liability Against an Out-of-State Defendant, Fifth Circuit Holds

In Madison v. ADT LLC, No. 21-90028 (5th Cir. Aug. 24, 2021), the panel holds that the district court should have disregarded the nominal in-state defendant when evaluating the “home state” exception to the Class Action Fairness Act (CAFA), 28 U.S.C. § 1332(d)(4)(B). It holds that primary defendants include those at whom a lawsuit is actually directed.

CAFA broadens the definition of diversity jurisdiction to include incomplete diversity between parties in class or “mass” action cases. In deference to local interests, though, CAFA excludes cases that are strongly identified with a locality, i.e., the “home state” exception.

The home state exception has three conditions: that “greater than two-thirds of the members of all proposed plaintiff classes in the aggregate are citizens of the State in which the action was originally filed,” that the “principal injuries resulting from the alleged conduct or any related conduct of each defendant were incurred in the State,” and – relevant to this case – at least one defendant “whose alleged conduct forms a significant basis for the claims” and “significant relief” is sought against them.

In this case, clearly seeking to bring itself within this exception, the plaintiffs pled a case solely against an employee of ADT. Defendant “Aviles was an ADT LLC (‘ADT’) employee who installed ADT’s home-security surveillance systems and used his access privileges to spy on customers in their homes. Taylor Madison and Angie Dickson, now also representing a class of plaintiffs, sued Aviles in [Texas] state court seeking millions in damages.” ADT intervened as a defendant and removed the case to federal court in the Northern District of Texas. Plaintiffs successfully won a remand under the home state exception.

The Fifth Circuit granted review and reversed the remand order. (Although remands of removal are generally not appealable, ADT sought an appeal pursuant to 28 U.S.C. § 1453(c) that allows permissive review of remand orders under CAFA.)

“Aviles, who was sued by the plaintiffs, is a ‘primary defendant,’ of course. The issue here is whether ADT, a non-citizen of Texas, is also a ‘primary defendant’ under CAFA. If ADT is not a primary defendant, the district court was right to remand to the state court, but if ADT is a primary defendant, the district court was required to retain jurisdiction.”

The panel notes the paucity of authority on this issue but cites to the Third Circuit’s analysis in Vodenichar v. Halcón Energy Props, Inc., 733 F.3d 497 (3d Cir. 2013), and the Fifth Circuit’s brush with the topic in Watson v. City of Allen, Tex., 821 F.3d 634 (5th Cir. 2016). “[T]here is much to commend the Vodenichar emphasis on the ‘real target’ of the litigation and Watson’s description of the controversy’s ‘primary thrust.’ Whether ADT is vicariously or secondarily liable is a relevant factor, certainly, but it does not necessarily control a court’s determination, or the analysis would often be at odds with the Supreme Court’s admonition ‘against adopting rules in the CAFA context that would ‘exalt form over substance.’’”

So here, “Madison and Dickson claim to represent a class of plaintiffs seeking millions in recovery for the invasion of their privacy, although, as of yet, they have asserted claims against only the offending employee (who is imprisoned). But the thrust of this suit is to gain access to ADT’s deep pockets, and ADT, having properly intervened, must be considered a primary defendant under CAFA.” Thus, the home state exception did not apply.

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