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Saskatchewan Mutual Insurance Co. v. CE Design, Ltd.

United States Court of Appeals, Seventh Circuit

July 26, 2017

Saskatchewan Mutual Insurance Co., Plaintiff-Appellant,
CE Design, Ltd., Defendant-Appellee.

          Argued January 5, 2017

         Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 15 C 4921 - John Z. Lee, Judge.

          Before Wood, Chief Judge, and Manion and Williams, Circuit Judges.

          WOOD, Chief Judge.

         Saskatchewan Mutual Insurance (SMI) is trying to enforce a Canadian judgment against CE Design in federal court. That judgment resulted from CE Design's unsuccessful effort to enforce an earlier Illinois judgment against SMI in Saskatchewan. The question before us is whether the federal courts-the third set of tribunals that have played host to this decade-long legal battle-have jurisdiction over the latest round. We conclude that the answer is no-an outcome that is especially appropriate given the comity concerns that pervade this litigation.


         CE Design is an Illinois corporation whose business now appears to center on litigating claims under the federal Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227. It brought the present suit as a class action in Illinois state court against Homegrown Advertising, which was then a Canadian marketing firm; the complaint accused Homegrown of sending junk faxes to CE Design in violation of Illinois law and the TCPA. The two sides settled in February 2007 for $5 million plus interest and costs. Several points about the settlement are noteworthy. First, Homegrown failed to notify its insurer, SMI, about the litigation, and instead hired its own counsel in Illinois. SMI learned of the case only in May 2006. Second- and one suspects related to point one-the February 2007 settlement was structured to be enforceable only against Homegrown's commercial liability policy with SMI.

         In March 2007, CE Design (to which Homegrown had assigned all its rights under the policy) filed a citation to discover assets in the Lake County, Illinois, circuit court in an effort to recover some or all of the judgment from SMI. At that point Rod Rath, SMI's Canadian attorney, wrote a letter to the circuit court advising that SMI was denying coverage. SMI took no other steps to fight the citation on the merits. On May 3, 2007, the Illinois court entered judgment for CE Design. Skirmishes over the settlement have continued in the state courts since that time. (Years later, Homegrown was dissolved under the law of Saskatchewan, but that is of no moment, since CE Design has been the real party in interest since the assignment.)

         Our concern is with a subplot of the wider story. As the state court litigation unfolded, CE Design decided to try another tack: enforcement of the Illinois judgment in Saskatchewan, where SMI is based. The gambit failed. On January 8, 2008, the Queen's Bench, which is the court of first instance in the province, concluded that SMI had not received sufficient notice of the Illinois judgment and thus that it was unenforceable. The Saskatchewan court also awarded SMI "costs ... in respect of this application ... [of] $1, 000." That is where matters stood for seven years, but more was to come. In June 2015, SMI revived the issue by filing a motion to enforce the Saskatchewan judgment in federal district court. We can assume that SMI is interested in more than the $1, 000 (Canadian) to which the Saskatchewan judgment entitled it; recognition and enforcement of the Saskatchewan judgment may undermine the Lake County settlement. Or it may not. We may reach that potentially difficult question only if the district court had subject-matter jurisdiction over SMI's action. We thus turn immediately to that issue, as did the district court.

         Two possible bases for jurisdiction have been advanced: the Class Action Fairness Act (CAFA), 28 U.S.C. § 1332(d), and the alienage branch of diversity jurisdiction, 28 U.S.C. § 1332(a)(2). The district court found CAFA inapplicable because the class is the defendant in this suit, and this court has held that CAFA applies only to plaintiff classes. Travelers Prop. Cas. v. Good, 689 F.3d 714, 723 (7th Cir. 2012). As for diversity jurisdiction, the court concluded that no individual class member could satisfy the $75, 000 amount- in-controversy requirement, and none of the exceptions to the general prohibition on aggregating claims applied. See Snyder v. Harris, 394 U.S. 332 (1969). Those rulings ended the case in the district court.


         We begin with CAFA, which authorizes federal courts to hear class actions "if the class has more than 100 members, the parties are minimally diverse, and the 'matter in controversy exceeds the sum or value of $5, 000, 000.'" Standard Fire Ins. Co. v. Knowles, 133 S.Ct. 1345, 1348 (2013) (quoting § 1332(d)(2)). SMI easily satisfies the first two requirements. The proposed class has 23, 541 members, and there is minimal diversity because CE Design is incorporated in and has its principal place of business in Illinois, and SMI is an insurance company organized under the law of Saskatchewan. The amount in controversy is less clear cut. The settlement was for exactly $5 million, a sum which by definition does not exceed $5 million. Nor would the $1, 000 (Canadian) award change things, since the Queen's Bench said it was for "costs, " and CAFA applies only when "the matter in controversy exceeds the sum or value of $5, 000, 000, exclusive of interest and costs." § 1332(d)(2).

         These questions, however, are beside the point. Even if we thought that the amount-in-controversy requirement had been satisfied, SMI faces a more fundamental obstacle: CAFA "applies only where there is a plaintiff class, not a defendant class." Good, 689 F.3d at 723. As the case reached the federal court, SMI is the plaintiff and the class is the defendant. A straightforward application of Good takes CAFA jurisdiction off the table. Good's striking resemblance to this case underscores the point. There, a retailer settled with a class for $16 million plus costs but stipulated that the sum could be paid only from its insurance policies. The class then tried to enforce the settlement against the insurer in Illinois court, and the insurer tried to block the effort by filing a separate action for a declaratory judgment of non-coverage in federal court. In the latter case, the insurer alleged diversity and CAFA jurisdiction. We concluded that neither one was available and dismissed for lack of jurisdiction. Id. at 716-17, 723, 726.

         Good's application of CAFA is fully in line with the statutory text. Although Federal Rule of Civil Procedure 23 allows "[o]ne or more members of a class [to] sue or be sued as representative parties" on behalf of a class, the key jurisdictional language in CAFA speaks only of plaintiff classes. Compare Fed.R.Civ.P. 23(a) (emphasis added) with 28 U.S.C. § 1332(d)(2). Nowhere in section 1332(d)(2) does the phrase "defendant class" appear, and references to the "defendant" or "defendants" consistently place them in opposition to the "class." See, e.g., § 1332(d)(2)(A) ("any member of a class of plaintiffs is a citizen of a State different from any defendant"). If we had any remaining doubts, the enacted findings that accompanied CAFA would resolve them. Congress stressed that "abuses of the class action device" harmed "the free flow of interstate commerce, " and that state courts were "bias[ed] against out-of-State defendants." Class Action Fairness Act of 2005, Pub. L. 109-002, 119 Stat 4 (2005); see also Edward A. Purcell, Jr., The Class Action Fairness Act in Perspective: The Old and the New in Federal Jurisdictional Reform, 156 U. Pa. L. Rev. 1823, 1876-77 (2008) ("CAFAs greatest practical significance lay in the way it tilted the playing field even more sharply in favor of corporate defendants ... ."). It is true, as SMI stresses, that Congress wanted ...

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