Justia.com Opinion Summary:
After a merger between Nestle and Ralston Purina, plaintiff, a book-entry shareholder, filed this putative class action in Missouri state court on behalf of himself and all other Ralston Purina book-entry shareholders at the time of the execution of the merger agreement. Plaintiff claimed that Nestle was required to pay the class on a certain date, Nestle's payment was delinquent, and therefore the class was entitled to interest on the payment. Nestle subsequently appealed the district court's order remanding the putative class action to the state courts of Missouri. Because at the time the case was removed it did not meet the amount in controversy requirements for federal subject matter jurisdiction under the Class Action Fairness Act of 2005 (CAFA), 28 U.S.C. 1332(d), 1453, 1711-15, the court affirmed the order of the district court.Receive FREE Daily Opinion Summaries by Email
Civil case - Class Action Fairness Act of 2005. Plaintiffs' stipulation limiting damages is enforceable and binding under Missouri's well- established judicial estoppel doctrine and it was therefore legally impossible for the amount in controversy in this case to meet CAFA's $5 million threshold requirement; as a result, the district court did not err in remanding the case back to the Missouri state court. [ February 01, 2012
United States Court of Appeals
FOR THE EIGHTH CIRCUIT
John M. Rolwing,
Nestle Holdings, Inc.,
* Appeal from the United States
* District Court for the
* Eastern District of Missouri.
Submitted: December 14, 2011
Filed: February 2, 2012
Before MURPHY, BOWMAN, and GRUENDER Circuit Judges.
GRUENDER, Circuit Judge.
Nestle Holdings, Inc. (âNestleâ) appeals the district courtâs1 order remanding
this putative class action to the jurisdiction of the state courts of Missouri. Because
at the time the case was removed it did not meet the requirements for federal subject
matter jurisdiction under the Class Action Fairness Act of 2005 (âCAFAâ), 28 U.S.C.
Â§Â§ 1332(d), 1453, 1711-15, we affirm the order of the district court.
The Honorable Thomas C. Mummert, United States Magistrate Judge for the
Eastern District of Missouri, to whom the case was referred by consent of the parties
pursuant to 28 U.S.C. Â§ 636(c).
On January 15, 2001, Nestle agreed to a merger with Ralston Purina Company
that provided for the cash purchase of Ralston Purinaâs common stock by Nestle. The
merger agreement contained a choice-of-law provision selecting Missouri law as
controlling its terms. The merger was completed on December 12, 2001. On
December 18, 2001, Nestle paid Ralston Purina book-entry shareholders a total of
$8,880,809,766.50 for their 265,098,799 outstanding common shares of Ralston
Ralston Purina book-entry shareholder John M. Rolwing filed this putative
class action in Missouri state court on March 30, 2011, on behalf of himself and all
other Ralston Purina book-entry shareholders at the time of the execution of the
merger agreement (âthe classâ). Rolwing claims that Nestle was required to pay the
class on December 12, that Nestleâs December 18 payment was delinquent, and that
the class is entitled to interest on the delinquent payment. Nestle removed the case
to federal court on May 17, 2011, invoking CAFA-provided jurisdiction under 28
U.S.C. Â§ 1332(d). It then filed a motion to dismiss on the basis of a prior resolution
by the state courts of Ohio of a putative class action, brought by the same attorney on
behalf of a different named plaintiff in that state, that claimed damages under the
same theory for the same class.
Before the district court could rule on Nestleâs motion to dismiss, Rolwing
moved to remand the case to Missouri state court, arguing that the amount in
controversy was not in excess of $5 million, as required by Â§ 1332(d). Nestle
responded by asserting that Rolwingâs theory of the case clearly comprehended the
possibility of damages in excess of $5 million. The interest due on Nestleâs payment
to the class, calculated at an annualized rate of nine percent as required by Missouri
law, see Mo. Rev. Stat. Â§ 408.020, would exceed $2 million for each day that the
payment was late. If payment had been due on December 12 as Rolwing alleges,
Nestle claims it would be exposed to damages well in excess of the $5 million
To counter any attempt at removal, however, Rolwingâs complaint included a
prayer for relief requesting âjudgment against defendant in an amount that is fair and
reasonable in excess of $25,000, but not to exceed $4,999,999.â The prayer stated
further: âPlaintiff and the class do not seekâand will not acceptâany recovery of
damages (in the form of statutory interest) and any other relief, in total, in excess of
$4,999,999.â Rolwing did this, according to his complaint, expressly so as ânot to
provide any United States District Court with jurisdiction under the terms of the Class
Action Fairness Act of 2005 . . . or any other provision(s) of law.â Rolwing also
included two stipulations with his complaint: one stating that as named plaintiff and
putative class representative he would not seek or accept any recovery in excess of
$4,999,999 on his own behalf or on the behalf of the class, and a second signed by
his counsel stating that no attorneysâ fees would be sought or accepted other than on
a contingency basis out of the maximum recovery of $4,999,999 provided for by the
other stipulation. As with the complaintâs prayer for relief, both stipulations stated
that the limitation on damages sought was for the purpose of defeating federal
The district court granted Rolwingâs motion to remand on the basis of this
disclaimer of damages and denied as moot a second motion to remand filed by
Rolwing on the basis of the securities exception in 28 U.S.C. Â§ 1332(d)(9)(C). Nestle
filed a petition pursuant to 28 U.S.C. Â§ 1453(c) requesting permission to appeal the
district courtâs remand order, which we granted.
CAFA provides for federal subject matter jurisdiction over qualifying class
actions where the aggregate amount in controversy exceeds $5 million. 28 U.S.C.
Â§ 1332(d). Such class actions generally are removable, and the usual one-year time
limit on diversity-premised removal is inapplicable. 28 U.S.C. Â§ 1453. Certain class
actions dealing either with securities or claims relating to business governance arising
out of state law are excepted from this general rule and are not removable. 28 U.S.C.
Â§ 1453(d). The courts of appeals are authorized to accept an appeal from an order
granting or denying a motion to remand a class action. 28 U.S.C. Â§ 1453(c).
âWe review de novo a district courtâs order to remand a removed case for lack
of subject matter jurisdiction.â Bell v. Hershey Co., 557 F.3d 953, 956 (8th Cir.
2009). In the CAFA context, the party seeking removal bears the burden of proving
by a preponderance of the evidence that the jurisdictional requirements for removal
are met. Id. at 956-59. If the removing party meets this burden, the party seeking
remand must establish to a legal certainty that the requirements for federal
jurisdiction are not met. Id. at 959. Thus, for a remand to be justified, Rolwing must
show that it is legally certain that recovery in this case cannot exceed $5 million. See
Rolwing has maintained throughout these proceedings that the disclaimer of
damages greater than $4,999,999 in his prayer for relief and the accompanying
stipulations makes it legally certain that the amount in controversy cannot exceed $5
million. Nestle counters that (1) Missouri law (which governed the merger agreement
and therefore would control the suit) would not give effect to the disclaimer, and (2)
Rolwingâs purported disclaimer of part of the classâs potential recovery is
unenforceable because it âwas inconsistent with the interests of and in breach of his
fiduciary duties to the putative class.â Nestle contends that, absent certainty that the
disclaimer will be enforced, it is not a legal certainty that the amount in controversy
is not in excess of $5 million, rendering remand inappropriate.
We have previously stated that a binding stipulation limiting damages sought
to an amount not exceeding $5 million can be used to defeat CAFA jurisdiction. Bell,
557 F.3d at 958 (âIn order to ensure that any attempt to remove would have been
unsuccessful, Bell could have included a binding stipulation with his petition stating
that he would not seek damages greater than the jurisdictional minimum on
remand.â). Stipulations of this sort, when filed contemporaneously with a plaintiffâs
complaint and not after removal, have long been recognized as a method of defeating
federal jurisdiction in the non-CAFA context. See, e.g., De Aguilar v. Boeing Co.,
47 F.3d 1404, 1412 (5th Cir. 1995); In re Shell Oil Co., 970 F.2d 355, 356 (7th Cir.
1992) (per curiam) (âLitigants who want to prevent removal must file a binding
stipulation or affidavit with their complaints.â).
Nestle first argues that Rolwingâs prayer for relief and the stipulations are not
enforceable under Missouri law and, therefore, not binding on the class. While it is
unclear what effect, if any, Missouri law would give to the prayer for relief in
Rolwingâs complaint, see Mo. Rev. Stat. Â§ 509.050.1(2) (prohibiting the specific
pleading of damages âexcept to determine . . . jurisdictional authority,â and providing
that specific damage pleadings under that exception âshall not affect the conduct of
trial with regard to stating, proving, or arguing damagesâ), it is not necessary for us
to resolve this question. Instead, we conclude that the stipulations are independently
enforceable under the doctrine of judicial estoppel and, therefore, binding within the
meaning of Bell.
Under Missouri law, â[t]he doctrine of judicial estoppel provides that â[w]here
a party assumes a certain position in a legal proceeding, and succeeds in maintaining
that position, he may not thereafter, simply because his interests have changed,
assume a contrary position, especially if it be to the prejudice of the party who has
acquiesced in the position formerly taken by him.ââ Taylor v. State, 254 S.W.3d 856,
858 (Mo. 2008) (second alteration in original) (quoting Zedner v. United States, 547
U.S. 489, 504 (2006)). According to this rule, by defeating removal through asserting
the position that he will not accept more than $4,999,999 in damages on behalf of the
class he is seeking to represent, Rolwing is estopped from later accepting damages
that exceed that amount. Similarly, by taking the position that he would only accept
fees on a contingency basis out of damages not exceeding $4,999,999, Rolwingâs
counsel is estopped from accepting any other fee award. âStipulations are
âcontrolling and conclusive, and courts are bound to enforce them.ââ Zipper v. Health
Midwest, 978 S.W.2d 398, 410 (Mo. Ct. App. 1998) (quoting Pierson v. Allen, 409
S.W.2d 127, 130 (Mo. 1966)). Therefore, we are confident that Missouri courts will
apply judicial estoppel to enforce the terms of the stipulations.
Nestleâs second argument is that the stipulations are not enforceable because,
in disclaiming a significant portion of the putative classâs potential recovery, Rolwing
has violated his fiduciary duty to the putative class. Nestle points, in particular, to
Back Doctors Ltd. v. Metropolitan Property & Casualty Insurance Co., 637 F.3d 827
(7th Cir. 2011), in which the Seventh Circuit stated that, in a putative class action, a
plaintiff âhas a fiduciary duty to its fellow class members. A representative canât
throw away what could be a major component of the classâs recovery. Either a state
or a federal judge might insist that some other person, more willing to seek [damages
in excess of the jurisdictional minimum], take over as representative.â Id. at 830-31.
Nestle contends that, because the damage disclaimer was a bad-faith renunciation of
âa major component of the classâs recovery,â a court might not certify Rolwing as
class representative, might not certify Rolwingâs counsel as class counsel, or might
refuse to enforce Rolwingâs damage disclaimer against the class. Nestle argues that,
because of these possibilities, Rolwing has not met his legal certainty burden.
As an initial matter, we are bound to consider only jurisdictional facts present
at the time of removal and not those occurring subsequently, see St. Paul Mercury
Indem. Co. v. Red Cab Co., 303 U.S. 283, 293 (1938), such as a hypothetical future
substitution of class representative, substitution of class counsel, or other non-
enforcement of the damage disclaimer because of bad faith.2 At any rate,
notwithstanding the language cited by Nestle, Back Doctors actually supports remand
in this case. In Back Doctors, the actual damages at issue were approximately $2.9
million. The initial complaint filed in Illinois state court neither requested punitive
damages nor disclaimed them. The defendant removed under CAFA, arguing that the
amount in controversy was in excess of $5 million because of the potential for an
award of punitive damages. The plaintiff then argued that remand was warranted
because it had not requested punitive damages. Applying the same legal certainty
standard we applied above, Back Doctors, 637 F.3d at 829-30, the Seventh Circuit
found that the plaintiff had failed to establish to a legal certainty that he could not
recover in excess of the jurisdictional minimum under CAFA because his failure to
request punitive damages did not conclusively establish that they could not be
awarded, id. at 831.
However, the court went on to explain that â[i]f the Supreme Court of Illinois
had established . . . that omission of a request [for punitive damages] from the initial
pleading forbids a punitive award, then remand would be appropriateâ and that a
âplaintiff in Illinois can limit the relief to an amount less than the jurisdictional
minimum, and thus prevent removal, by filing a binding stipulation or affidavit with
the complaint.â Id. In other words, contrary to Nestleâs view of the case, the Seventh
Circuit, in spite of its concern about the potential conflict of interest inherent in
damage disclaimers in pre-certification class actions, explicitly endorsed the method
used by Rolwing in this case to defeat CAFA jurisdiction.
We note that, should circumstances change in the manner suggested by Nestle,
removals under CAFA are not subject to the one-year limitation period in 28 U.S.C.
Â§ 1446(c)(1). Under CAFA, a party can remove the case any time âwithin 30 days
after [its receipt], through service or otherwise, of a copy of an amended pleading,
motion, order or other paper from which it may first be ascertained that the case is
one which is or has become removable.â 28 U.S.C. Â§ 1446(b)(3).
Because we conclude that Missouriâs well-established judicial estoppel
doctrine makes these stipulations binding, Rolwing has shown that it is legally
impossible for the amount in controversy in this case to meet CAFAâs threshold, and
remand based on CAFAâs amount-in-controversy requirement was appropriate.3
For the foregoing reasons, we affirm the judgment of the district court.
Because we decide the case on this basis, we need not address Rolwingâs
arguments for remand on the basis of class numerosity (first raised on appeal) or
CAFAâs securities exception.