Seventh Circuit: Class Representative's Individual State-court Suit Removable under CAFA | Practical Law

Seventh Circuit: Class Representative's Individual State-court Suit Removable under CAFA | Practical Law

In Addison Automatics, Incorporated v. Hartford Casualty Insurance Company, the US Court of Appeals for the Seventh Circuit held that a class representative's state-court lawsuit, which the representative claimed to bring in its individual capacity, was in substance a class action and was therefore properly removed to federal court under the Class Action Fairness Act (CAFA).

Seventh Circuit: Class Representative's Individual State-court Suit Removable under CAFA

by Practical Law Litigation
Published on 04 Oct 2013 • USA (National/Federal)
In Addison Automatics, Incorporated v. Hartford Casualty Insurance Company, the US Court of Appeals for the Seventh Circuit held that a class representative's state-court lawsuit, which the representative claimed to bring in its individual capacity, was in substance a class action and was therefore properly removed to federal court under the Class Action Fairness Act (CAFA).
In an October 2, 2013 opinion, Addison Automatics, Incorporated v. Hartford Casualty Insurance Company, the US Court of Appeals for the Seventh Circuit held that a class representative's state-court lawsuit, which the representative claimed to bring in its individual capacity, was in substance a class action and was therefore properly removed to federal court under the Class Action Fairness Act (CAFA).
Addison originally filed a class action in state court against Domino Plastics Company for violating federal and state consumer laws. Domino's liability insurer, Hartford Casualty Insurance Company, refused to defend the suit. As a result, Addison and Domino agreed that the state court should certify a class and enter judgment against Domino, which Addison would seek to recover from Hartford. The parties' settlement agreement assigned Domino's claims against Hartford "to the Class (as represented by Plaintiff and its attorneys)." In an order, the state court approved the settlement and recognized that Domino's assignment was to the class and not to Addison individually.
Next, Addison filed a lawsuit against Hartford in state court, seeking a declaratory judgment holding Hartford liable for the judgment against Domino. Addison alleged that it was suing both individually and as a representative of a certified class. After Hartford removed the case to federal court, Addison dismissed the case voluntarily.
Addison then filed another lawsuit against Hartford in state court. This time, Addison's complaint asserted that Addison was the only plaintiff and that the case was not a class action under FRCP 23 or any state equivalent. Hartford removed the case to federal court under 28 U.S.C. § 1453.
The district court remanded the case to state court, finding that the suit did not fit the definition of a class action under CAFA because the complaint asserted that Addison was suing as an individual plaintiff. Hartford appealed.
The Seventh Circuit reversed, finding that the action was in substance a class action that was properly removed to federal court because:
  • The settlement approved in state court made clear that Addison had standing to pursue relief from Hartford only in its capacity as class representative.
  • Addison owed continuing fiduciary obligations to the class.
The Seventh Circuit explained that if Addison could seek relief on its own, the interests of the class would be in danger. The class members would be left to pursue claims that they were entitled to expect Addison to prosecute on their behalf. The court analogized the risk to one recognized in the context of class counsel who sacrifice the interests of the class to obtain more generous compensation for themselves.
Court documents: