Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—D.D.C.: Consumer group’s suit challenging bread maker’s marketing practices remanded, (Apr 10, 2014)

By Jody Coultas, J.D.

A District of Columbia Consumer Protection Procedures Act (DCCPPA) case filed by the National Consumer League (NCL) on behalf of consumers against Flowers Bakeries, LLC was remanded on the grounds that the federal district court in Washington, D.C. lacked subject matter jurisdiction (National Consumer League v. Flowers Bakeries, LLC, April 8, 2014, Huvelle, E.).

The NCL, a non-profit consumer organization, alleged that Flowers, a manufacturer of food products, fraudulently and deceptively marketed its Nature’s Own Honey Wheat Bread and Whitewheat Bread in violation of the DCCPPA. Flowers removed the case to federal court, and the NCL sought remand.

Timeliness of motion to remand. Flowers argued that remand should be denied on the grounds that it was not timely filed. A motion to remand on the basis of any defect other than lack of subject matter jurisdiction must be made within thirty days after the filing of the notice of removal. NCL filed its motion, which Flowers argued alleged only procedural defects in the notice of removal, thirty-four days after the case was removed. However, the motion to remand presented a challenge to the court’s subject matter jurisdiction. Therefore, the motion was not dismissed on the basis of timeliness.

Diversity jurisdiction. A civil action filed in state court may only be removed to a federal court if the case could originally have been brought in federal court. Federal courts have diversity jurisdiction when there is complete diversity among the parties and the amount in controversy is greater than $75,000. NCL brought a private attorney general suit to enforce the rights of the general public. The D.C. Circuit has yet to address the question of how to calculate the amount in controversy for purposes of determining diversity in such suits, but the removal statute is construed narrowly in favor of remand.

Because the jurisdiction amount in controversy was not satisfied, the court granted remand. Flowers argued that more than 300,000 units of Nature’s Own bread were sold within the District of Columbia, resulting in the potential for hundreds of millions of dollars in statutory damages. However, the private attorney general suit sought damages for individual consumers, rather than disgorgement of profits, and did not seek to establish a common fund. The non-aggregation principal holds that separate and distinct claims of two or more plaintiffs cannot be aggregated in order to satisfy the jurisdictional amount requirement, except in cases where the plaintiffs have a common and undivided interest. So long as individual consumers are eligible to recover individual damages, the consumers do not have a “common and undivided interest” that may be aggregated.

The amount in controversy could not be met by showing that a non-party would be entitled to more than $75,000 in damages, according to the court. Flowers argued that because one consumer purchased more than fifty loaves of Nature’s Own, the amount in controversy was met. Court may aggregate the damages of a single individual when calculating the amount in controversy only if the consumer is a party to the lawsuit.

The settlement demand letter, which demanded over $75,000, sent by NCL to Flowers was not a reasonable calculation of the amount in controversy, according to the court. Holding otherwise would allow an end-around the non-aggregation principle and unduly discourage settlements in DCCPPA case. Flowers argued that the NCL’s demand letter demonstrated that it valued the litigation at an amount greater than $75,000. Even if the settlement demand was taken into account by the court, it did not provide sufficient evidence that the amount in controversy exceeded $75,000. If NCL prevailed at trial, non-party consumers may be entitled to more than $75,000. NCL would only be entitled to attorney’s fees and any damages for products that it purchased. Therefore, the demand letter was insufficient to prove the amount in controversy.

CAFA. Under the Class Action Fairness Act (CAFA), federal courts have original jurisdiction over cases where minimal diversity is satisfied, the number of putative class members is greater than one hundred, and the total amount in controversy as to all plaintiffs is greater than $5 million. The CAFA mass action provision provides for federal jurisdiction in “any civil action … in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact.”

Removal of the case under CAFA was inappropriate, according to the court. Courts in the jurisdiction have previously held that DCCPPA private attorney general actions are not “class action” under CAFA. CAFA defines a “class action” as a case filed under Rule 23 of the Federal Rules of Civil Procedure or similar State statute or rule of judicial procedure authorizing an action to be brought by one or more representative persons as a class action. Private attorney general statutes do not include any of the Rule 23 requirements of adequacy of representation, numerosity, commonality, or typicality, which CAFA demands. The U.S. Supreme Court has held that actions brought on behalf of the public, albeit in the context of parens patriae suits filed by states’ attorneys general, do not satisfy the “100 or more persons” requirement of CAFA. This ruling applied here, as NCL was the only named plaintiff.

The case is No. 13-1725 (ESH).

Attorneys: Tracy Diana Rezvani (Rezvani Volin & Rotbert PC) for National Consumers League. Cheryl Anne Falvey (Crowell & Moring LLP) for Flowers Bakeries, LLC.

Companies: National Consumer League; Flowers Bakeries, LLC

Cases: Advertising StateUnfairTradePractices DistrictofColumbiaNews