Reinsurance Focus

Homeland Insurance Company recently appealed to the Fifth Circuit Court of Appeals a district court’s remand of a class action to Louisiana state court. The action arose when a medical doctor brought a putative class action in Louisiana state court on behalf of Louisiana medical providers against a number of Louisiana and non-Louisiana PPO providers. One defendant agreed to settle, but before the settlement was approved, another defendant removed to federal court under CAFA. The settling defendant moved for (and was granted) remand to state court based on the local controversy exception to the Class Action Fairness Act. Subsequently, another of the defendants (Homeland Insurance) filed the instant motion to appeal the remand.

The Court of Appeals affirmed the remand order under the local controversy exception, finding that (a) at least two-thirds of the class (business entities incorporated in the state) are Louisiana citizens; (b) at least one of the defendants was a “local” defendant; (c) the principal injuries occurred in Louisiana, and (d) no other class action has been filed alleging similar facts against any of the defendants in the prior three years. Two key facts are important to consider. First, the Court of Appeals noted that even inactive corporations are still citizens of the state in which they were incorporated. Second, class arbitration does not count as a class action for purposes of the CAFA local controversy exception. Williams v. Homeland Ins. Co. of New York, No. 11-30646 (5th Cir. Sept. 19, 2011).

This post written by John Black.

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