Plaintiffs originally filed a class action in the Superior Court of New Jersey against six automobile insurance providers. Three New Jersey insurers were voluntarily dismissed; at the time of removal, the remaining defendants were Allstate NJ, a New Jersey corporation, and GEICO and Liberty, which were not. The proposed class for equitable relief includes “all persons currently insured by Defendants under a policy issued in New Jersey” (with a damages sub-class). In applying the Local Controversy Exception, the U.S. Third Circuit found that the district court erred in considering the three New Jersey defendants who had been dismissed: “the local controversy exception applies only to defendants remaining in an action.” The Third Circuit then followed the other Circuits in determining that once jurisdiction is established, the burden shifts to the plaintiffs to establish the exception for purposes of remand. The Court, however, rejected the argument that “every member of the proposed plaintiff class must assert a claim against the local defendant. Because only Allstate NJ insureds can assert claims against Allstate NJ – the only local defendant presently in the action – many members of the proposed plaintiff class would not assert claims against the local defendant in this case.” Rather, the exception “does not require that the local defendant’s alleged conduct form a basis of each claim asserted; it requires the alleged conduct to form a significant basis of all the claims asserted. While assessing the quantity of claims based on the local defendant’s alleged conduct may be useful to the analysis, the significant basis provision does not establish an absolute quantitative requirement. Nor is it necessary to imply such a quantitative requirement to make sense of the provision, for a party’s conduct may form a significant basis of an entire set of claims even if some claims within the set are not based on that conduct.” The Court then rejected Liberty’s argument that the “principle injuries” provision was not satisfied. “Liberty argues that the District Court must interpret this provision to require that principal injuries resulting from the alleged conduct and any related conduct of each defendant be incurred in the state in which the action was originally filed.” To the contrary: “The provision invokes ‘the alleged conduct or any related conduct’ in the disjunctive. As such, it is satisfied either 1) when principal injuries resulting from the alleged conduct of each defendant were incurred in the state in which the action was originally filed, ‘or’ 2) when principal injuries resulting from any related conduct of each defendant were incurred in that state. In the instant case, the alleged conduct comprises the failure to insure or pay for diminished value claims in New Jersey. Plaintiffs are all citizens of New Jersey, the insurance policies were issued in New Jersey, and the putative class would be comprised of members with insurance policies issued in New Jersey. To the extent there are any injuries resulting from the alleged conduct, those injuries were incurred in New Jersey. Hence, the principal injuries provision is satisfied.” Kaufman v. Allstate New Jersey, 561 F.3d 144 (3d Cir. 2009).
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