Opinion
2:23-cv-03295-SPG-JPR
08-25-2023
CORRINE FUENTES, individually and on behalf of all others similarly situated Plaintiff, v. HOUSING AUTHORITY OF THE CITY OF LOS ANGELES, and DOES 1-25, Defendant.
ORDER GRANTING PLAINTIFF'S MOTION TO REMAND [ECF NO. 18]
HON. SHERILYN PEACE GARNETT UNITED STATES DISTRICT JUDGE
Before the Court is Plaintiff Corrine Fuentes's Motion to Remand or, Alternatively, to Initially Compel Defendant to Produce Jurisdictional Discovery (“Motion”). (ECF No. 19 (“Mot.”)). Defendant Housing Authority of the City of Los Angeles (“Defendant” or “HACLA”) opposes the motion. (ECF No. 31 (“Opp.”)). Having considered the parties' submissions, the relevant law, the record in this case, and the hearing on the Motion, the Court GRANTS the Motion.
I. BACKGROUND
On March 24, 2023, Plaintiff Corrine Fuentes filed a class action complaint (“Complaint”) in the Los Angeles County Superior Court against Defendant. (ECF No. 31, “Compl.”). The Complaint alleges that, during a year-long data breach of Defendant's computer system, hackers gained unauthorized access to the private identifying information (“PII”), including full names, social security numbers, dates of birth, and financial account numbers, of Plaintiff and other individuals who receive Defendant's housing services. (Id. ¶¶ 12-13). Defendant discovered the data breach on December 31, 2022. (Id. ¶ 9). Plaintiff and others did not receive notice of the data breach until March 2023. (Id. ¶ 16). Plaintiff alleges the notices were untimely and deficient because, among other failures, they failed to provide basic details concerning the breach, security measures used to store the PII, and whether the PII has been further disseminated. (Id. ¶ 17). Additionally, Plaintiff alleges that, because of Defendant's failure to prevent the breach, timely identify and report the breach, and timely notify affected parties, she and the class of individuals she seeks to represent have been harmed. (Id. ¶¶ 29-30). The Complaint asserts six state law causes of action against Defendant and Does 1-25 and defines the proposed class as follows: “[a]ll adult and minor residents of California whose PII was compromised as a result of the data breach into HACLA's computer network announced on or about March 10, 2023.” (Compl. ¶ 38).
On May 2, 2023, Defendant timely removed this case to the district court pursuant to 28 U.S.C. §§ 1332(d) and 1453. (ECF 3 (“NOR”)). Defendant's Notice of Removal (“NOR”) asserts this Court has subject matter jurisdiction over the dispute under the Class Action Fairness Act (“CAFA”) because this case is “a civil putative class action wherein: (1) there are 100 or more members in Plaintiff's proposed class; (2) there is minimal diversity between at least one class member and one defendant; and (4) the aggregate amount in controversy exceeds $5,000,000.” (Id. ¶ 15). Defendant has also attached to the NOR, as Exhibits C and D, two separate unserved complaints for two separate civil suits that have been or will be brought against Defendant by plaintiffs other than Plaintiff in this case. See (id. ¶ 10, ECF Nos. 3-3, 3-4). Based on these two complaints, as well as certain documents in Defendant's possession the nature of which Defendants have not specified, see (NOR ¶¶ 11-12), Defendant asserts that the potential class includes “thousands of out of state citizens that receive benefits from Defendant, who are potential members of the class.” (Id. ¶¶ 9-11).
On May 31, 2023, Plaintiff filed the present Motion requesting the case be remanded back to the Los Angeles County Superior Court or, alternatively, that the Court compel Defendant to produce jurisdictional discovery. (ECF No. 19 (“Mot.”)). Defendant opposed, (ECF No. 31 (“Opp.”)), and Plaintiff timely replied. (ECF No. 36 (“Reply”)).
II. LEGAL STANDARD
A civil action brought in state court may be removed by a defendant to the district court if, at the time of removal, the case is one over which the district court has original jurisdiction. 28 U.S.C. § 1441(a). CAFA confers original jurisdiction to the district courts in any class action in which any member of a class of plaintiffs is a citizen of a state different from any defendant, the amount in controversy exceeds $5,000,000, and the number of members of all proposed plaintiff classes is at least 100. 28 U.S.C. § 1332(d). “Through CAFA, Congress broadened federal diversity jurisdiction over class actions by, among other things, replacing the typical requirement of complete diversity with one of only minimal diversity.” Mondragon v. Cap. One Auto Fin., 736 F.3d 880, 882 (9th Cir. 2013) (citing § 1332(d)(2)).
When removing a case to federal court under CAFA, the removing defendant bears the burden of establishing federal jurisdiction. Emrich v. Touche Ross & Co., 846 F.2d 1190, 1195 (9th Cir. 1988). The removing defendant's notice of removal need only include “a short and plain statement of the grounds for removal,” 28 U.S.C. § 1446(a), and the allegations of minimal diversity may be based on “information and belief.” Ehrman v. Cox Commc'ns, Inc., 932 F.3d 1223, 1227 (9th Cir. 2019). “The pleading ‘need not contain evidentiary submissions.'” Id. (quoting Dart Cherokee Basin Operating Co. v. Owens, 135 S.Ct. 547, 551 (2014)).
Once removed, a plaintiff may seek remand by making either a “facial” or “factual” attack on the defendant's jurisdictional allegations in the notice of removal. Harris v. KM Indus., Inc., 980 F.3d 694, 699-700 (9th Cir. 2020). “A facial attack accepts the truth of the defendant's allegations but asserts that they are insufficient on their face to invoke federal jurisdiction.” Id. (internal quotations omitted). “A factual attack contests the truth of the allegations themselves.” Id. Where a plaintiff seeks remand of the action by mounting a “factual” challenge to the removing defendant's jurisdictional allegations, the burden is on the removing defendant to provide “competent proof” showing by a preponderance of the evidence that the jurisdictional requirements are satisfied. Id. at 701. For minimal diversity, the removing defendant should “be able to allege affirmatively the actual citizenship of the relevant parties.” Kanter v. Warner-Lambert Co., 265 F.3d 853, 857 (9th Cir. 2001). Although a plaintiff may present evidence in support of a factual attack, the plaintiff “need only challenge the truth of defendant's jurisdictional allegations by making a reasoned argument as to why any assumptions on which they are based are not supported by the evidence.” KM Indus., 980 F.3d at 700. When determining jurisdiction based on a factual attack, the court may view evidence beyond the complaint and need not presume the truthfulness of the removing parties' allegations. See Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004).
III. DISCUSSION
The Motion contends that this case should be remanded back to the Los Angeles County Superior Court because Defendant has failed to satisfy its statutory burden of showing minimal diversity to invoke federal jurisdiction under CAFA. See (Mot. at 6). Specifically, Plaintiff argues that Defendant has failed to provide competent proof of its assertion that the proposed class includes citizens of states other than California. See (id. at 5). Plaintiff also argues that, even if Defendant established minimal diversity, the home state exception under 28 U.S.C. § 1332(d)(3) and 1332(d)(4)(B) renders CAFA federal jurisdiction improper. (Mot. at 9-16). In the alternative, Plaintiff requests jurisdictional discovery. (Id. at 17-18).
Neither party disputes that Plaintiff's motion to remand is timely and that the putative class action satisfies CAFA's requirements for amount-in-controversy and numerosity.
Congress has provided exceptions to CAFA jurisdiction, which allow, and in some circumstances require, the district court to decline to exercise jurisdiction. 28 U.S.C. § 1332(d)(3)-(4); see King v. Great American Chicken Corp., Inc., 903 F.3d 875, 878 (9th Cir. 2018) (“The statute includes a number of exceptions that require a federal district court to decline jurisdiction even if the above requirements were met.”). The purpose of the exceptions is to allow truly intrastate class actions to be heard in state court. Adams v. W. Marine Prods., Inc., 958 F.3d 1216, 1220 (9th Cir. 2020). “[T]he party seeking remand bears the burden to prove an exception to CAFA's jurisdiction.” Serrano v. 180 Connect, Inc., 478 F.3d 1018, 1021-22 (9th Cir. 2007). Here, because the Court determines Defendant has failed to establish minimal diversity, it does not reach Plaintiff's alternative argument that an exception to CAFA jurisdiction applies.
A. Type of Jurisdictional Challenge
As an initial matter, the parties dispute whether Plaintiff mounts a facial or factual challenge to the jurisdictional allegations in Defendant's notice of removal. See (Opp. at 10 (“Plaintiff raises a facial challenge to [Defendant's] jurisdictional allegations ....); Reply at 5-6 (“Here, Plaintiff explicitly questions the factual basis of Defendant's jurisdictional allegations ....”). In the Motion, Plaintiff alleges that there is no minimal diversity and challenges the evidence supporting Defendant's notice of removal, namely the reasonableness of Defendant's assertion that non-citizens are included in the putative class based on its statement that “thousands of out of state citizens received benefits from Defendant, who are potential members of the class.” See (Mot. at 16; NOR ¶ 11). In opposition, however, Defendant refers to this as a “facial challenge” because, in Defendant's view, Plaintiff is attacking the “legal adequacy of [Defendant's] notice of removal. (Opp. at 10). In reply, Plaintiff contradicts Defendant's position, arguing that “Plaintiff explicitly questions the factual basis of Defendant's jurisdictional allegations,” requiring the stronger evidentiary showing of “competent proof” of minimal diversity. (Reply at 6). The Court agrees that Plaintiff has mounted a factual attack on Defendant's claims to CAFA jurisdiction. Plaintiff has not accepted the truth of Defendant's jurisdictional allegations. See Leite v. Crane Co., 749 F.3d 1117, 1121 (9th Cir. 2014) (“A facial attack accepts the truth of the plaintiff's allegations but asserts that they are insufficient on their face to invoke federal jurisdiction.” (internal quotations omitted)). The fact that Plaintiff has not “provided any facts to support her challenge to [Defendant's] allegation that it ‘has thousands of out of state citizens that receive benefits from Defendant,” see (Opp. at 10), does not preclude Plaintiff's challenge from being factual. This is because a plaintiff may mount a factual attack without introducing evidence outside the pleadings where he or she “challenge[s] the truth of the defendant's jurisdictional allegations by making a reasoned argument as to why any assumptions on which they are based are not supported by evidence.” KM Indus., 980 F.3d at 700. Here, although Plaintiff does not introduce extrinsic evidence, Plaintiff explicitly questions the reasonableness and truth of Defendant's allegations regarding the residence of its “805,514 possible recipients whose data may have been compromised” that Defendants contend include “thousands of out of state citizens.” (Mot. at 13, 16; NOR ¶¶ 11-12). Based on the facts of this case, Plaintiff's challenge constitutes a factual attack. The Court will therefore apply the higher evidentiary standard requiring the Defendant to submit “competent proof” that shows, by a preponderance of the evidence, that the jurisdictional requirements are satisfied. KM Indus., 980 F.3d at 701.
Plaintiff claims she cannot introduce evidence outside of the pleadings because the information about the citizenship of the potentially-affected class members is “solely within [Defendant's] possession.” (Mot. at 17). In another related case, the Court ordered jurisdictional discovery in part because the evidence to support jurisdiction was in Defendant HACLA's possession. Harris by & through T.H. v. Hous. Auth. of City of Los Angeles, Case No. 2:23-cv-04339-SPG-JPR, 2023 WL 5165547, at *3 (C.D. Cal. Aug. 11, 2023). However, the Court need not order such discovery here because, as discussed below, Defendant has failed to provide competent proof of minimal diversity.
For instance, Plaintiff argues Defendant does not elaborate on (1) who qualifies as a “recipient that received benefits” from HACLA, (2) at what time such recipients claimed and received benefits from HACLA, (3) whether such recipients submit PII in exchange for receiving benefits, (4) whether any PII submitted by such recipients was among the information compromised in the data breach, or (5) what types of documents reviewed by Defendant evince the existence and identity of such recipients. (Mot. at 13).
B. Minimal Diversity
Minimal diversity under CAFA requires that “any member of a class of plaintiffs is a citizen of a State different from any defendant.” 28 U.S.C. § 1332(d)(2)(A). “[T]he diversity jurisdiction statute, 28 U.S.C. § 1332, speaks of citizenship, not of residency.” Kanter, 265 F.3d at 857. A state-chartered public agency's citizenship “is governed by 28 U.S.C. § 1332,” which provides that a corporation is a citizen of “every State and foreign state by which it has been incorporated and of the State or foreign state where it has its principal place of business.” Rouse v. Wachovia Mortg., FSB, 747 F.3d 707, 709, n.2 (9th Cir. 2014) (describing the difference between the citizenship of a state-chartered bank and a national bank) (quoting 28 U.S.C. § 1332(c)(1)). For a natural person to be a citizen of a state, they “must first be a citizen of the United States.” Kanter, 265 F.3d at 857. Then, a natural person's state citizenship is determined not by her state of residency, but by her state of domicile namely, “her permanent home, where she resides with the intention to remain or to which she intends to return.” Id.
Here, Defendant does not dispute that it is a citizen of California and that it “maintains its principal place of business in Los Angeles, California.” See (Compl. ¶ 4; Opp. at 14); see also Rouse, 747 F.3d at 709 n.2. However, the parties dispute whether the putative class includes at least one individual who is not a citizen of California. Defendant argues that CAFA federal jurisdiction is proper because the Court can assume that at least some putative class members are not citizens of California because, allegedly, “thousands of out of state citizens” receive benefits from HACLA. See (Opp. at 9; NOR ¶ 11-12). Defendant also has submitted the declaration of a HACLA administrator, Patricia Mendoza, who represents that HACLA “lacks data” regarding how many notices were mailed to “California citizens,” but, “[h]istorically,” approximately 20% of the persons living in the “public housing assistance units” are not United States citizens, and “many persons” who received the mailed notices [a]re not United States citizens.” (ECF No. 311 (“Mendoza Deci.”) ¶¶ 12-13) ¶¶ 12-13).
Plaintiff argues that Defendant has failed to meet its burden of demonstrating minimai diversity because the Defendant “does not identify the state of citizenship of any diverse piaintiff,” even though it ciaims that “thousands of out of state citizens . . . receive benefits from Defendant.” (Repiy at 4, 6). Piaintiff aiso chaiienges as unreasonabie Defendant's assumption based on the Mendoza deciaration that minimai diversity is demonstrated by Defendants' aiiegations regarding the maiied notices and HACLA's “historica[i]” data. (Repiy at 5-6). In particuiar, Piaintiff argues that the Mendoza deciaration faiis to identify how many of the iast known maiiing addresses in its possession of potentiai ciass members are iocated in Caiifornia, has faiied to provide any data to support the deciaration's assumption that some potentiai ciass members never iived at their maiiing address, and has faiied to identify how many notices were sent to P.O. boxes. (Id. at 6; see also Mendoza Deci. ¶ 13).
From its review of the parties' submissions, the Court finds Defendant's representations regarding non-Caiifornia citizens to be too conciusory to provide a basis for estabiishing minimai diversity. To demonstrate minimai diversity, the Defendant must “aiiege affirmativeiy the actuai citizenship of the reievant parties,” see Kanter, 265 F.3d at 857, and bears the burden to prove by a preponderance of the evidence that its assumptions regarding citizenship are reasonabie. See KM Indus., 980 F.3d at 701. Here, aithough Defendant asserts that “some of the Caiifornia residents were not Caiifornia citizens at the time the Compiaint was fiied but were potentiaiiy affected by the data [breach],” see (Opp. at 9), Defendant has not offered competent proof to support what amounts to its mere specuiation. Defendant's generaiized aiiegation in the Mendoza Deciaration that “many persons” who received the maiiing notices were not U.S. citizens does not provide a basis for jurisdiction, nor does the reference in the NOR to an amorphous group of “thousands of out of state citizens.” (Mendoza Deci. ¶ 13; NOR ¶ 11); Beauford v. E.W.H. Grp. Inc., No. 1:09-CV-00066-AWI-SMS, 2009 WL 1808468, at *4 (E.D. Cai. June 24, 2009) (declining to find minimal diversity even when the defendant performed a review of its vehicle sales that “yielded two class members from the state of Texas”). Defendant argues that a reasonable assumption from the allegations in the NOR is that at least one putative class member resides within California but is not a United States citizen. See (Opp. at 9) (“This shows that some of the California residents who were potentially affected, who are members of Plaintiff's proposed class definition, are not California citizens.” (emphasis in original)). While the Court agrees that non-U.S. citizens would qualify as diverse for jurisdictional purposes, Defendant's “historical[]” allegation that 20% of public housing residents are non-citizens does not constitute compelling proof that it is more likely than not that a putative class member is not a citizen of California. (Mendoza Decl. ¶ 12); see Diva Limousine, Ltd. v. Uber Techs., Inc., 392 F.Supp.3d 1074, 1083 (N.D. Cal. 2019) (finding no minimal diversity because the defendant did not affirmatively allege plaintiff companies' citizenship and only supported its allegation that at least one of the plaintiff companies was not a citizen of California based on the statistic that “84 percent of the approximately 17,300 . . . [related] companies in the United States have their principal place of business in states other than California, and that the overwhelming majority of these companies . . . are also incorporated in states other than California” (internal citations omitted)).
The Court has no concrete allegations before it and thus cannot base federal jurisdiction upon such conjecture especially when the present action raises issues that appear to be primarily local to California. Ultimately, Defendant asks the Court to make too great an inference on this record without providing the Court a sufficient factual foundation from the documents purportedly in Defendant's possession. See NOR ¶ 11 (“Counsel for Defendant has reviewed documents from Defendant that show that Defendant has thousands of out of state citizens that receive benefits from Defendant, who are potential members of the class in the attached Complaints, and that creates minimal diversity under CAFA”); Tapia v. Panda Express, LLC, Case No. CV 16-2323 DSF (RAOx), 2016 WL 10987316, at *1 (C.D. Cal. June 7, 2016) (“This information is in the sole possession of Defendants and Defendants are well-aware of whether this case is subject to mandatory remand”); see also Harris by & through T.H., 2023 WL 5165547, at *3. For example, according to Defendant, it has access to a mailing list that could inform Plaintiff and the Court whether any of the 805,514 notices were mailed out of state or to individuals who could not verify their U.S. citizenship in response to HACLA's housing eligibility questionnaire. See (Mendoza Decl. ¶¶ 5-10, 12). Defendant, however, has not affirmatively alleged that even one of these 805,514 individuals is diverse, nor provided competent proof of such diversity, and thus fails to meet its burden to demonstrate CAFA federal jurisdiction.
Even if Defendant had alleged sufficient facts to show minimal diversity, the Court is still not persuaded that exercising CAFA federal jurisdiction would be warranted. Congress provided exceptions to CAFA jurisdiction “to allow truly intrastate class actions to be heard in state court.” Adams v. W. Marine Prod., Inc., 958 F.3d 1216, 1220 (9th Cir. 2020). The “home state exception” accords two bases for remand: one mandatory under 28 U.S.C. § 1332(d)(4)(B) (more than two-thirds local putative class members) and one discretionary under 28 U.S.C. § 1332(d)(3) (more than one-third local putative class members). Id. While the Court would require more facts before it could determine the applicability of the home state exception, id. at 1222, based on the facts and circumstances of this case and nature of the proposed class, it appears likely that at least one-third of the putative class members if not more than two-thirds of the putative class are California citizens. See Harris by & through T.H., 2023 WL 5165547, at *3 (noting that “it is not unlikely that [jurisdictional] discovery will reveal a similarly ‘substantial cushion'” regarding the last-known mailing addresses that would justify “either the mandatory or discretionary home state exception”).
IV. CONCLUSION
For the foregoing reasons, the Court GRANTS the Motion to Remand. It is ORDERED that this case is REMANDED to the Superior Court of California, County of Los Angeles, forthwith.
IT IS SO ORDERED.