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Sanchez v. Aviva Life and Annuity Co.

July 16, 2009


The opinion of the court was delivered by: Frank C. Damrell, Jr. United States District Judge


This matter is before the court on plaintiff Ernest P. Sanchez' ("plaintiff") motion to remand this class action, alleging defendants misrepresented and sold sham investments to plaintiff and others similarly situated.*fn1 On May 27, 2009, defendant Aviva Life and Annuity Company ("Aviva") removed this action on the basis of the Class Action Fairness Act of 2005 ("CAFA"). Under CAFA, a federal court has "original jurisdiction" over civil maters in which: the aggregate amount in controversy exceeds the sum or value of $5,000,000.00 (exclusive of interest and costs); the aggregate number of putative class members is 100 or greater; and any member of the putative class is a citizen of a state different from that of any defendant. 28 U.S.C. § 1332(d). Plaintiff concedes that these basic requirements are met in this case, but argues that remand is warranted because (1) Aviva's notice of removal is procedurally defective for failure to join all defendants who had been served; (2) the mandatory, "local controversy" exception to CAFA jurisdiction applies; and/or (3) the discretionary, "interests of justice" exception to CAFA jurisdiction applies.

For the reasons set forth below, the court DENIES plaintiff's motion. Aviva's notice of removal is not procedurally defective since CAFA expressly permits any defendant to remove an action without the consent or joinder of the other defendants (28 U.S.C. § 1453(b)), and plaintiff has not met his burden to show that either of the above exceptions to CAFA jurisdiction applies in this case.


The putative class, consisting of hundreds of members, allege they were defrauded of tens of millions of dollars through a real estate "Ponzi" scam masterminded by defendant Lawrence Leland Loomis ("Loomis"). (Compl., filed May 27, 2009, ¶s 1, 25(a).) Beginning in 2006, plaintiff, on his own behalf and on behalf of the class, alleges defendants Loomis, Loomis Wealth Solutions, Inc. ("LWS") and Aviva developed a multi-step investment scheme called the "Income Advantage Plan." (Id. at ¶s 13, 15.) During the first phase of the Plan, Loomis and LWS offered free seminars to potential investors and allegedly sold them "free" life insurance from Aviva at no cost because the Income Advantage Plan would pay all of their premiums. (Id. at ¶s 14-15.) Investors allegedly had to purchase an Aviva life insurance policy to become eligible to participate in the second phase of the Plan. (Id. at ¶s 13, 15, 19-20, 24.) During the second phase of the Plan, Loomis and LWS sold investors, who had purchased Aviva life insurance policies, shares of defendant NARAS Secured Fund #2, LLC ("Naras"), which was allegedly administered, funded and managed by defendants Lismar Financial Services ("Lismar") or Nationwide Lending Group ("Nationwide"). (Id. at ¶ 19.) Plaintiff asserts "defendants represented that the pooled money in the NARAS Fund was to be loaned out to subprime borrowers at 14%. This supposedly enabled [d]efendants to return 12% to investors, clearing a modest 2% as profit for the NARAS fund." (Id. at ¶ 20.) In or around 2008, investors allegedly learned their investments "were gone," and that they would have to pay their own premiums to maintain their Aviva life insurance policies. (Id. at ¶ 22.)

Based on these essential allegations, plaintiff commenced this putative class action on April 15, 2009 in Sacramento County Superior Court, alleging causes of action for breach of fiduciary duty, negligence, rescission for mistake and fraud, violation of the California Business and Professions Code § 17200 et seq. and violation of the Consumer Legal Remedies Act ("CLRA"), Cal. Civ. Code § 1750 et seq., against Loomis, LWS, Lismar, Nationwide, Naras and Aviva. Plaintiff sought on behalf of himself and the class, compensatory and punitive damages, rescission, restitution and injunctive relief, together with costs and attorneys' fees. To date, service of the summons and complaint has been effected only upon Aviva and Lismar.


With the enactment of CAFA, Congress adopted a new policy that broadened federal diversity jurisdiction over class actions, with any doubts resolved in favor of retaining federal jurisdiction. Lowery v. Ala. Power Co., 483 F.3d 1184, 1193 (11th Cir. 2007) (holding that "Congress enacted CAFA to address inequitable state court treatment of class actions and to put an end to certain abusive practices by plaintiffs' class counsel . . . [by] broadening federal diversity jurisdiction over class actions with interstate implications"). Indeed, the legislative history of CAFA instructs that CAFA's jurisdictional provisions "should be read broadly, with a strong preference that interstate class actions should be heard in a Federal court if removed by any defendant." In re Textainer Partnership Sec. Litig., 2005 WL 1791559, *3 (N.D. Cal. July 27, 2005) (internal quotations and citations omitted). Thus, courts recognize that if the propriety of federal court jurisdiction is uncertain, courts should "err in favor of exercising jurisdiction over the case." Id. Therefore, under CAFA, any doubt about federal jurisdiction is resolved in favor of removal.

A defendant has the burden of establishing removal jurisdiction under CAFA (Abrego Abrego v. Dow Chem. Co., 433 F.3d 676, 685 (9th Cir. 2006); however, a plaintiff seeking remand bears the burden of establishing that an exception to CAFA jurisdiction applies. Serrano v. 180 Connect, Inc., 478 F.3d 1018, 1019 (9th Cir. 2007) (reversing district court and joining all sister circuits to have addressed this issue in holding that the party seeking remand bears the burden of establishing the exceptions to CAFA jurisdiction).


1. Adequacy of Notice of Removal

Plaintiff contends Aviva's removal is procedurally defective because it lacks the consent/joinder of co-defendant, Lismar, who had been served at the time of the notice of removal. Plaintiff is incorrect. Under CAFA, the consent or joinder of other defendants to removal of a putative class action is not required.

28 U.S.C. § 1453(b) ("A class action may be removed . . . by any defendant without the consent of all defendants."); Abrego, 443 F.3d at 681 (noting that Section 1453(b) "overrides the judge-created requirement that each defendant consent to removal"). Therefore, the lack of consent or joinder by Lismar in Aviva's notice of removal is of no consequence and does not defeat removal as a matter of law. United Steel v. Shell Oil Co., 549 F.3d 1204, 1207-08 (9th ...

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