United States District Court, D. New Jersey
August 8, 2005.
PETER C. HARVEY, Attorney General of State of New Jersey, and JEFFREY C. BURSTEIN, Acting Director of New Jersey Division of Consumer Affairs, Plaintiffs,
BLOCKBUSTER, INC., Defendant.
The opinion of the court was delivered by: MARY COOPER, District Judge
The plaintiffs brought this action in state court to recover
civil penalties and for a permanent injunction under the New
Jersey Consumer Fraud Act ("NJCFA") and regulations promulgated
thereunder. (Compl., at 2-12.) The defendant Blockbuster, Inc.
("BBI"), which is a Delaware corporation with its principal place
of business in Texas removed the action to this Court under (i)
28 U.S.C. § ("Section") 1332(a)(1), and (ii) the Class Action Fairness Act, Sections 1332(d)(1)(B) and (2)(A). (Rmvl.
Not., at 2-6.)*fn1
The plaintiffs move to remand the action and for an award of
costs and expenses incurred from the removal. The Court, under
Federal Rule of Civil Procedure ("Rule") 78, will decide the
motion without oral hearing and on the papers. The Court will
grant only the part of the motion seeking remand.
BBI is "engaged in the retail rental and/or sale of merchandise
to consumers in th[e] State [of New Jersey] and elsewhere
including, but not limited to, DVDs, VHS tapes and video and
computer games." (Compl., at 3; see Ans., at 2.) The plaintiffs
(1) Peter C. Harvey, Attorney General of the State of New
Jersey, and (2) Jeffrey C. Burstein, Acting Director of the New
Jersey Division of Consumer Affairs brought this action in New
Jersey Superior Court, Mercer County. (Compl., at 1-2.) They
allege that BBI violated the NJCFA by "[f]ailing to clearly and
conspicuously disclose the terms of `The End of Late Fees' [or]
`No More Late Fees' policy in its advertisements, in-store
signage and through store personnel." (Id. at 9.)
BBI removed the action under Section 1332(a)(1) and Sections
1332(d)(1)(B) and (2)(A). The plaintiffs move: (1) to remand, arguing that jurisdiction is lacking under (a) Section 1332(d)
since this is not a class action, and (b) all of Section 1332
since the action lacks diversity of citizenship; and, (2) for an
award of costs and expenses incurred from the removal pursuant to
Section 1447(c). (Pl. Br., at 4-6.)*fn2
BBI argues in opposition that this is a class action and
there is jurisdiction under Section 1332(d) because: (1) the
plaintiffs are acting in a representative capacity; and, (2)
Congress rejected an amendment creating an exception for
consumer-fraud actions brought by attorneys general even though
Section 1332(d) excludes actions wherein a state official is the
primary defendant, see 28 U.S.C. § 1332(d)(5)(A) and thus
intended to treat this type of action as a class action. (Def.
Br., at 1-6.) BBI also argues that the New Jersey citizenship of
the named plaintiffs and unnamed New Jersey citizens benefiting
from any relief awarded should be considered for the purposes of
determining jurisdiction under Section 1332. (Id. at 10;
5-13-05 Def. Letter, at 1-2.) DISCUSSION
I. Section 1332(a)(1); Sections 1332(d)(1)(B) & (2)(A)
A. Section 1332(a)(1)
The Court has jurisdiction under Section 1332(a)(1) "of all
civil actions where the matter in controversy exceeds the sum or
value of $75,000, exclusive of interest and costs, and is between
. . . citizens of different States." An action is not properly
removed thereunder unless there is "complete diversity" between
each plaintiff and each defendant. CGB Occ. Therapy v. RHA
Health Servs., 357 F.3d 375, 381 n. 6 (3d Cir. 2004).
B. Sections 1332(d)(1)(B) & (2)(A)
The Court has jurisdiction under Section 1332(d), in relevant
part, "of any civil action in which the matter in controversy
exceeds the sum or value of $5,000,000, exclusive of interest and
costs, and is a class action in which any member of a class of
plaintiffs is a citizen of a State different from any defendant."
28 U.S.C. § 1332(d)(2)(A). A "class action" is defined as a
"civil action filed under [R]ule 23 . . . or similar State
statute or rule of judicial procedure authorizing an action to be
brought by 1 or more representative persons as a class action."
28 U.S.C. § 1332(d)(1)(B). Thus, an action is not properly
removed thereunder unless (1) it meets the definition of a class
action, and (2) there is "minimal diversity" of citizenship.
Knudsen v. Liberty Mut. Ins. Co., 411 F.3d 805, 806 (7th Cir. 2005). See S.Rep. No. 109-14, at 28 (2005) (using
phrase "balanced diversity").*fn3
C. Burden Of Demonstrating Propriety Of Removal
A defendant removing an action generally bears the initial
burden of demonstrating that an action should not be remanded to
state court. Dev. Fin. Corp. v. Alpha Hous. & Health Care,
54 F.3d 156, 158 (3d Cir. 1995). But it appears that the party
opposing removal under Section 1332(d) bears the initial burden
of demonstrating that an action should be remanded. See S.Rep.
109-14, at 42-44. See also 151 Cong.Rec. H723-01, at H727 &
H732 (2005) (statements of Reps. Sensenbrenner and
Goodlatte).*fn4 II. Part Of Motion Seeking Remand
A. Whether Action Is Class Action Under Sections 1332(d)(1)(B)
Several attorneys general as Section 1332(d) does not exempt
actions brought by state officials expressed concern in a
letter to the Senate that Section 1332(d) might adversely affect
their ability to pursue claims on behalf of consumers:
State Attorneys General frequently investigate and
bring actions against defendants who have caused harm
to our citizens, usually pursuant to the Attorney
General's parens patriae authority under our
respective state consumer protection and antitrust
statutes. In some instances, such actions have been
brought with the Attorney General acting as the class
representative for the consumers of the state. We are
concerned that certain provisions of [Section
1332(d)] might be misinterpreted to impede the
ability of the Attorneys General to bring such
actions, thereby interfering with one means of
protecting our citizens from unlawful activity and
its resulting harm. . . . [Section 1332(d)] therefore
should be amended to clarify that it does not apply
to actions brought by any State Attorney General on
behalf of his or her respective state or its
151 Cong.Rec. S999-02, at S1003 (2005). A proposed amendment to
explicitly exempt an action brought by an attorney general from
the reach of Section 1332(d) was defeated in the Senate. See
151 Cong.Rec. S1157-02, at S1157-58 (2005).
BBI construes the defeat of the proposed amendment as an
indication that an action brought under NJCFA by state officials
may be considered to be a class action under Section 1332(d). But
the debate underlying that defeat reveals that: the amendment [was] not necessary. . . . State
attorneys general have authority under the laws of
every State to bring enforcement actions to protect
their citizens. Sometimes these laws are parens
patriae cases, similar to class actions in the
sense that the State attorney general represents the
people of that State. In other instances, their
actions are brought directly on behalf of that
particular State. But they are not class actions;
rather, they are very unique attorney general
lawsuits authorized under State constitutions or
One reason this amendment is not necessary is because
our bill will not affect those lawsuits. Our bill
provides class actions under that term "class action"
as defined to mean any civil action filed in a
district court of the United States under rule 23 of
the Federal Rules of Civil Procedure or any civil
action removed to a district court that was
originally filed under State statute or rule
authorizing an action to be brought by one or more
representatives as a class action.
The key phrase there is "class action." Hence,
because almost all civil suits brought by State
attorneys general are parens patriae suits,
similar representative suits or direct enforcement
actions, it is clear they do not fall within this
definition. That means that cases brought by State
attorneys general will not be affected by this bill.
151 Cong.Rec. S1157-02, at S1163 (statement of Sen. Grassley)
(emphasis added). The point was made several times that:
this amendment, which excludes from the scope of this
legislation any "civil action brought by or on behalf
of, the Attorney General of any State," is
. . .
State attorneys general have authority under the laws
of every State in this country to bring enforcement
actions to protect their citizens. These suits, known
commonly as parens patriae cases, are similar to
class actions to the extent that the attorney general
represents a large group of people. But let me be perfectly clear that they are not
There is no certification process, there are no
representative class members named in the complaint,
and plaintiffs' attorneys who stand to gain millions
of dollars in fees. Rather, they are unique lawsuits
authorized under State constitutions or State
statutes that are brought on behalf of the citizenry
of a particular State. These actions are brought
typically in consumer protection matters under State
law and usually involve local disputes. As such,
[Section 1332(d)] in no way affects these lawsuits.
. . . [T]he bill applies only to class actions, and
not parens patriae actions. Class actions being
those lawsuits filed in Federal district court under
rule 23 of the Federal rules of civil procedure or
lawsuits brought in State court as a class action.
Neither of these conditions are met when compared to
the nature of a parens patriae action, and
consequently, are excluded from the reach of this
151 Cong.Rec. S1157-02, at S1163-64 (statement of Sen. Hatch)
(emphasis added). Thus, as to "statutes that are typical of every
State deceptive trade practice acts and consumer protection
statutes which . . . specifically authorize the attorney
general to seek remedies on behalf of aggrieved consumers," it
was Congress's intent that "[t]his bill certainly . . . not
encroach on that authority." Id. at S1162 (statement of Sen.
Cornyn). See id. at S1160 (statement of Sen. Specter stating
The plaintiffs have met their initial burden of showing that
jurisdiction under Section 1332(d) is lacking since the action is
not a class action as defined by the statute. (Pl. Br., at 3-5.) BBI has failed to rebut this argument. The complaint reveals that
the plaintiffs seek civil penalties and a permanent injunction
under the NJCFA, and "is based on [the State's] parens
patriae power." Cosentino v. Philip Morris Inc., No.
MDL-L-5135-97, 1998 WL 34168879, at *3 (N.J.Super.Ct. Oct. 22,
1998) (concerning action brought by attorney general under
NJCFA). The Court lacks jurisdiction under Section 1332(d).
B. Diversity Of Citizenship Under All Of Section 1332
Whether the diversity of citizenship between the plaintiffs and
BBI is either complete or minimal is a secondary issue. The first
issue is whether the action can be viewed as being between
citizens of different states.
BBI argues that Section 1332(d) was intended to bring about
broad changes for assessing jurisdiction under Section 1332.
(Def. Br., at 2.) But "these general sentiments do not provide
carte blanche for federal jurisdiction." Pritchett v. Off.
Depot, 404 F.3d 1232, 1237 n. 6 (10th Cir. 2005) (granting
motion to remand action because it was commenced before Section
1332(d) enacted). Furthermore, "for purposes of the citizenship
element of this analysis, [Section 1332(d)] does not alter
current law regarding how the citizenship of a person is
determined." S.Rep. No. 109-14, at 36. See 151 Cong.Rec.
H723-01, at H729 (statement of Rep. Sensenbrenner that "for
purposes of the citizenship element of this analysis, [Section
1332(d)] does not alter current law.") 1. Citizenship of state or alter ego
It has been, for at least seventy-six years:
well settled that a suit between a state and a
citizen or a corporation of another state is not
between citizens of different states; and that [a
federal court] has no jurisdiction of it, unless it
arises under the [federal] Constitution, laws or
State Hwy. Comm'n v. Utah Constr. Co., 278 U.S. 194, 200
(1929). See Stone v. S.C., 117 U.S. 430, 433 (1886) (stating
"[t]here is no statute which authorizes the removal of a suit
between a state and citizens on the ground of citizenship, for a
state cannot, in the nature of things, be a citizen of any
state"); Brown v. Francis, 75 F.3d 860, 865 (3d Cir. 1996)
(stating same). It follows that "neither a state nor its alter
ego is a citizen for purposes of diversity jurisdiction." Harris
v. Pa. Tpk. Comm'n, 410 F.2d 1332
, 1333 n. 1 (3d Cir. 1969).
Thus, "a suit between a state, or its alter ego, and a citizen of
another state is not a suit between citizens of different states
and diversity jurisdiction does not exist." Id.
2. Whether state official is state's alter ego*fn5
"A suit by an agent of the state as a nominal party in behalf
of the state presents a controversy to which the state is a
party, and cannot be removed to [federal] court as a controversy between citizens." Robertson v. Jordan River Lumber Co.,
269 F. 606, 607 (5th Cir. 1921) (directing remand of action brought by
Mississippi revenue agent concerning title to Mississippi land).
See Gunter v. Ago Int'l, 533 F.Supp. 86, 88 (N.D. Fla. 1981)
(stating official acting on behalf of state is generally alter
ego of state and not citizen for diversity purposes). Thus,
"[w]hen a state official is a party to a proceeding over which
diversity jurisdiction is alleged, whether the respective state
is itself the real party in interest is a question to be
determined from the essential nature of the proceeding." Nuclear
Eng'g Co. v. Scott, 660 F.2d 241, 250 (7th Cir. 1981) (cite and
The state is the real party in interest when an action concerns
a type of "injury" that the state either has addressed or would
likely attempt to address through its laws to further the
"well-being of its populace." Snapp & Son, Inc. v. P.R.,
458 U.S. 592, 602, 605, 607 (1982). The action cannot be "personal"
to the named official. N.E. Fed. Cred. Un. v. Neves,
837 F.2d 531, 533 (1st Cir. 1988) (directing remand in action brought
against state tax assessor seeking to levy credit union account).
Thus, an attorney general or other official is considered to be a
state's alter ego, and that official's citizenship is not
considered "for diversity purposes[,] when he seeks to enforce a
state law claim on behalf of the state." Aldens, Inc. v.
Packel, 524 F.2d 38, 52 (3d Cir. 1975). See Burch v. Snider,
461 F.Supp. 598, 601-02 (D. Md. 1978) (stating same in dismissing
claim brought by Maryland attorney general for lack of Section
1332 jurisdiction). See also Glenmede Tr. Co. v. Dow Chem.
Co., 384 F.Supp. 423, 431 (E.D. Pa. 1974) (stating same in
remanding action concerning charitable trust where Pennsylvania
attorney general named defendant).
3. This action
That the plaintiffs brought this action "in [their] official
capacit[ies] on behalf of the State of [New Jersey] is abundantly
clear from an examination of the complaint," which asserts claims
for enforcement of the NJCFA. Nuclear Eng'g, 660 F.2d at 250
(reversing district court's denial of motion to remand action
brought by Illinois attorney general against waste facility for
violating Illinois environmental law). The attorney general also
is authorized to bring an action under NJCFA and seek relief
thereunder. See N.J.S.A. § 56:8-2, et seq.
BBI's argument that its citizenship is diverse from that of the
unnamed New Jersey citizens who may benefit from the action and
thus there is jurisdiction under Section 1332 is without merit.
The action seeks, inter alia, to permanently enjoin BBI from
allegedly violating NJCFA, which would directly benefit all New
Jersey consumers, and thus "it is obvious that the State's
interest in this lawsuit extends beyond vindicating the rights of one individual." Brooks v. Tyger Constr. Co., No. 90-24, 1990
WL 488977, at *2 (M.D.N.C. Apr. 30, 1990) (granting motion to
remand action brought by North Carolina Labor Commissioner to
enforce state workplace-safety law, even though action arose due
to certain employee's discharge). See Ill. v. Hunt Int'l Res.
Corp., 481 F.Supp. 71, 74 (N.D. Ill. 1979) (granting motion to
remand action brought by Illinois attorney general concerning
state consumer-fraud-law violation; rejecting argument that
citizenship of unknown class members should be considered);
Kansas v. Home Cable, 35 F.Supp.2d 783, 784-86 (D. Kan. 1998)
(granting motion to remand action brought by Kansas attorney
general to enforce state consumer-protection law; rejecting
argument that citizenship of actual aggrieved consumers should be
The plaintiffs, as they bring the action on behalf of the
interests of New Jersey citizens in general, are "the alter
ego[s] of the State. Therefore, [they are] not citizen[s] for
purposes of 28 U.S.C. § 1332." Hunt Int'l, 481 F.Supp. at 74.
See Eure v. NVF Co., 481 F.Supp. 639, 641 (E.D.N.C. 1979)
(granting motion to remand action brought by North Carolina
secretary of state for injunctive relief under state law concerning stock purchase); Olsen v. Doerfler, 225 F.Supp. 540,
541 (E.D. Mich. 1963) (granting motion to remand action brought
by Michigan county attorney to enjoin sale of material under
state obscenity law). The Court lacks jurisdiction under Section
1332 because this is not an action between citizens of different
C. Conclusion As To Part Of Motion Seeking Remand
The Court lacks jurisdiction here under Section 1332(d) because
the action is not a class action pursuant to the statute. The
Court also lacks jurisdiction under Section 1332 overall because
this is not an action between citizens of different states;
rather, it is between a state and a citizen of another state. The
part of the motion seeking remand of the action to state court
will be granted.
III. Part Of Motion Seeking Costs and Expenses
Section 1447(c) provides that an "order remanding the case may
require payment of just costs and any actual expenses, including
attorney fees, incurred as a result of the removal." The Court
has broad discretion over whether to require payment of costs and
expenses. See Mints v. Educ. Testing Serv., 99 F.3d 1253,
1260 (3d Cir. 1996).
BBI, although not successful, provided a good-faith argument
for removal. The issues here are replete with uncertainty and
complexity because Section 1332(d) was enacted less than six months ago and, thus, explanatory case law is lacking. See
Schwartz v. Liberty Mut. Ins. Co., No. 01-2049, 2001 WL
1622209, at *7 (E.D. Pa. Dec. 18, 2001) (granting part of motion
seeking remand of action removed under Section 1332, but denying
part seeking costs); Penn v. Wal-Mart Stores,
116 F.Supp.2d 557, 570 (D.N.J. 2000) (same); Gul v. Pamrapo Sav. Bank,
64 F.Supp.2d 370, 373 (D.N.J. 1999) (same in action removed under
National Labor Relations Act). Thus, the Court will deny the part
of the motion seeking costs and expenses.
The plaintiffs have demonstrated that the Court lacks
jurisdiction here under Section 1332(d). In addition, BBI has
failed to demonstrate that jurisdiction under Section 1332
overall exists. However, the plaintiffs are not entitled to an
award of costs and expenses under the circumstances. Thus, the
Court will grant only the part of the motion seeking remand of
the action to state court.
The Court will issue an appropriate order and judgment.