Tammy Hargett, Individually and on behalf of all others similarly situated v. Revclaims, LLC

United States Court of Appeals
For the Eighth Circuit
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No. 17-1339
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Tammy Hargett, Individually and on behalf of all others similarly situated
lllllllllllllllllllll Plaintiff - Appellee
v.
Revclaims, LLC
lllllllllllllllllllll Defendant
St. Bernard's Hospital, Inc.; St. Bernard's Community Hospital Corporation;
Baptist Health; White River Health System, Inc.
lllllllllllllllllllll Defendants - Appellants
John Does 1-100
lllllllllllllllllllll Defendant
___________________________
No. 17-1340
___________________________
Tammy Hargett, Individually and on behalf of all others similarly situated
lllllllllllllllllllll Plaintiff - Appellee
v.
Revclaims, LLC
lllllllllllllllllllll Defendant - Appellant

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John Does 1-100; Baptist Health; St. Bernard's Hospital, Inc.; St. Bernard's
Community Hospital Corporation; White River Health System, Inc.
lllllllllllllllllllll Defendants
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Appeals from United States District Court
for the Eastern District of Arkansas - Jonesboro
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Submitted: March 10, 2017
Filed: April 14, 2017
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Before SMITH, 1 BOWMAN, and SHEPHERD, Circuit Judges.
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SMITH, Circuit Judge.
The Class Action Fairness Act of 2005 (CAFA) broadened federal jurisdiction
over class actions but excepted controversies that are primarily local in nature. District
courts must decline to exercise jurisdiction over these matters. Congress has defined
the features of a local controversy. As relevant to this appeal, a class action is a local
controversy if local citizens predominate over non-locals in the class
membership—that is, if more than two-thirds of the class members are “citizens of the
State in which the action was originally filed.” 28 U.S.C. § 1332(d)(4)(A)(i)(I). We
have long held that “resident” does not mean “citizen” in 28 U.S.C. § 1332(a). The
issue in this case is whether this citizenship/residency distinction also applies to
§ 1332(d)(4). In other words, does “citizen” mean the same thing in § 1332(d)(4) that
it means in the rest of 28 U.S.C. § 1332? We hold that it does, and that the district
1The Honorable Lavenski R. Smith became Chief Judge of the United States
Court of Appeals for the Eighth Circuit on March 11, 2017.
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court therefore erred in remanding this case based on the class members’ Arkansas
residency rather than citizenship.
I. Background
Tammy Hargett was injured in a car wreck. Hargett received medical treatment
from St. Bernard’s Hospital. St. Bernard’s required Hargett to assign her rights as a
Medicaid Beneficiary to the hospital. The hospital contracted with RevClaims, LLC
to pursue any claim Hargett might have against the driver responsible for her injuries.
This was in lieu of collecting a reduced but certain payment from Arkansas Medicaid,
which insured Hargett. Hargett contends that this practice violates Arkansas law. She
sued St. Bernard’s, RevClaims, and several other hospitals in Arkansas state court on
behalf of a class comprising “[a]ll persons who were Arkansas Medicaid-eligible
beneficiaries” who were treated at one of the defendant hospitals and who had similar
liens placed on their third-party claims by RevClaims. Hargett also alleged that
“hundreds, if not thousands, of people geographically dispersed across Arkansas have
been damaged by Defendants’ actions.”
The defendants removed the suit to federal court under CAFA, 28 U.S.C.
§ 1332(d). Hargett moved to remand. She urged the district court to “decline to
exercise jurisdiction” under CAFA’s local-controversy exception. 28 U.S.C.
§ 1332(d)(4). The district court concluded that Hargett’s suit met all the exception’s
requirements, including the requirement that more than two-thirds of the proposed
class be citizens of the state where the suit was filed—in this case, Arkansas. See 28
U.S.C. § 1332(d)(4)(A)(i)(I). As the district court explained:
In establishing the local controversy exception, Plaintiff has defined the
class as all persons who were Arkansas residents at the time the medical
services which form the basis of the Complaint were provided to them.
By restricting the class members to Arkansas residents (specifically,
“people geographically disbursed across Arkansas;” Document 2, para.
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48), Plaintiffs have sufficiently satisfied their burden of establishing that
more than 2/3 of the class members are citizens of Arkansas.
“For clarity,” though, the district court directed Hargett “to immediately amend
her complaint to explicitly restrict the proposed class definition as to only include
Arkansas citizens.” Hargett filed an amended complaint defining the proposed class
as “[a]ll Arkansas citizens who were Arkansas Medicaid-eligible beneficiaries . . . .”
(emphasis added). Then the case was remanded. The hospitals and RevClaims sought
permission to appeal under 28 U.S.C. 1453(c)(1), which we granted.
II. Discussion
We have jurisdiction to accept appeals from class-action remands. 28 U.S.C.
§ 1453(c)(1). The authorizing statute leaves to the “informed discretion of the
reviewing court” precisely how to exercise this jurisdiction. Coll. of Dental Surgeons
of P.R. v. Conn. Gen. Life Ins. Co., 585 F.3d 33, 39 (1st Cir. 2009). We accepted this
appeal to address a novel and important CAFA issue: How does the “resident” versus
“citizen” distinction we have observed in other parts of 28 U.S.C. § 1332 play out in
the local-controversy exception?
In conducting this review, we are guided by five principal considerations. First,
CAFA reflects Congress’s desire for broad diversity jurisdiction over class actions.
Westerfeld v. Indep. Processing, LLC, 621 F.3d 819, 822 (8th Cir. 2010). The local-
controversy exception is narrow. Id. Once a removing defendant has established
CAFA’s jurisdictional requirements, the burden shifts to the plaintiff to establish that
the local-controversy exception applies. Id. This means that the district court “should
resolve any doubt about the applicability of CAFA’s local-controversy exception
against . . . the party who seeks remand.” Id. at 823.
Second, apart from the local-controversy exception, the term “citizen” in
28 U.S.C. § 1332 has long meant something different from “resident.” As we said
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recently, “it is simply incorrect to say [a party]’s Arkansas residency establishes
Arkansas citizenship for the purpose of” § 1332(a)(1). Reece v. Bank of N.Y. Mellon,
760 F.3d 771, 777 (8th Cir. 2014). We explained why: “Citizenship requires
permanence.” Id. at 778. Residency is a more fluid concept. See id. Unlike citizenship,
residency does not require an intent to make a place home. See Ellis v. Se. Constr. Co.,
260 F.2d 280, 281 (8th Cir. 1958). One could, for example, be a resident of multiple
states. Reece, 760 F.3d at 778. But one may be a citizen of just one state. Id.
A complaint or notice of removal resting on residency, then, will not establish
citizenship for diversity jurisdiction. Id. This rule is not new. In Pattiz v. Schwartz, for
example, we noted the “failure of the plaintiffs in their original and amended
complaints to allege diversity of citizenship rather than mere diversity of residence,”
and we invoked our repeated holding that this “does not satisfy the requirements for
federal diversity jurisdiction under 28 U.S.C. § 1332(a)(1).” 386 F.2d 300, 300–01
(8th Cir. 1968). The citizenship/residency distinction predates even the codification
of § 1332; it arises under Supreme Court precedent applying the Constitution’s
“judicial article,” Article III. See Bingham v. Cabot, 3 U.S. (3 Dall.) 382, 383 (1798)
(“A citizen of one state may reside for a term of years in another state, of which he is
not a citizen; for, citizenship is clearly not co-extensive with inhabitancy.”).
Third, “[w]here Congress uses terms that have accumulated settled meaning
under either equity or the common law, a court must infer, unless the statute otherwise
dictates, that Congress means to incorporate the established meaning of these terms.”
N.L.R.B. v. Amax Coal Co., 453 U.S. 322, 329 (1981). Given the history of the term
“citizen,” we infer that Congress incorporated its established meaning in § 1332(d)(4).
Fourth, at least one other circuit has read the historical citizenship/residency
distinction into § 1332(d)(4). In In re Sprint Nextel Corp., the Seventh Circuit refused
to conclude by sensible guesswork that a class of “all Kansas residents” who
purchased text messaging from a company was more than two-thirds Kansan by
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citizenship. 593 F.3d 669, 671, 674 (7th Cir. 2010). The court noted two ways the
plaintiffs could have established citizenship under § 1332(d)(4): (1) by presenting
evidence of citizenship; and (2) by defining the class “as all Kansas citizens” who
purchased the text messaging. Id. at 675–76. A later case interpreted Sprint as
“distinguishing residence from citizenship for the purpose of § 1332(d)(4).” Myrick
v. WellPoint, Inc., 764 F.3d 662, 664 (7th Cir. 2014).
Fifth, and finally, we recently followed the Seventh Circuit’s approach, albeit
without directly addressing the citizenship/residency issue embedded in that circuit’s
precedents. The question in Hood v. Gilster-Mary Lee Corp. was whether a class
comprising workers at a particular Missouri plant was more than two-thirds
Missourian by citizenship. 785 F.3d 263, 264–65 (8th Cir. 2015). The district court
allowed discovery and concluded, by extrapolating from last-known addresses and
affidavits, that more than two-thirds of the class were Missouri citizens. Id. at 265. We
reversed. In doing so, we reiterated Sprint’s two ways to establish predominantly local
citizenship: (1) sound evidence; and (2) defining the class as local citizens. Id. at 266.
We find Hood and Sprint persuasive, and we conclude that § 1332(a)’s
citizenship/residency distinction applies in § 1332(d)(4). “Citizen” means the same
thing in both subsections—and that meaning is not synonymous with “resident.” The
district court therefore erred in holding that merely alleging a proposed class of
Arkansas residents was sufficient to satisfy § 1334(d)(4). Hargett could have met her
burden by producing evidence or by defining her class to include only Arkansas
citizens. But merely alleging residency was not enough. (We accept the parties’
agreement that an Arkansas Medicaid beneficiary must be an Arkansas resident.)
Plaintiffs like Hargett remain free to meet their burden through evidence or
through a class explicitly limited to local citizens, but they are not free to rest on
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guesswork.2 The district court’s requirement that Hargett “clarify” her class definition
before remand suggests that it not only relied on guesswork, but also resolved doubt
in her favor. This was error.
Nor do we consider Hargett’s amended complaint, which redefined the class.
The district court cited no authority for ordering Hargett to restrict her class definition
through an amended complaint before remand. Hargett claims authority from Hood.
There, in setting out the ways a plaintiff can establish class citizenship, we said that
a plaintiff could “redefine the class as only local citizens.” Hood, 785 F.3d at 266.
This redefine language is not part of Hood’s holding. Moreover, Hood cited Sprint for
this language, yet Sprint does not speak of redefining a class; it speaks of defining a
class in the first instance (before removal) to include only local citizens. In re Sprint
Nextel Corp., 593 F.3d at 676. In any event, the concept of redefining a class to trigger
the local-controversy exception seems to violate § 1332(d)(7), which says that for
purposes of the local-controversy exception, class citizenship must be determined as
of the date of the pleading giving federal jurisdiction.
Finally, because we have a duty to inquire into our own jurisdiction, we add that
nothing we have said about residency and citizenship means that the district court
lacked jurisdiction. Cf. Mason v. Lockwood, Andrews & Newman, P.C., 842 F.3d 383,
395 (6th Cir. 2016). Hargett alleged in her complaint that she was an Arkansas
resident. But the defendants’ notice of removal alleged that Hargett was an Arkansas
citizen, and Hargett has not suggested otherwise. This allegation in the notice of
removal suffices to show federal jurisdiction. See Reece, 760 F.3d at 778 (allegation
of plaintiff’s citizenship in amended notice of removal established jurisdiction even
2We do not agree with Hargett that presumptions alone may transform a
challenged allegation of residency into the establishment of citizenship. See Mason
v. Lockwood, Andrews & Newnam, P.C., 842 F.3d 383, 397–99 (6th Cir. 2016)
(Kethledge, J., dissenting); Reece v. AES Corp., 638 F. App’x 755, 769–70 (10th Cir.
2016); Mondragon v. Capital One Auto Fin., 736 F.3d 880, 884 (9th Cir. 2013).
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though plaintiff’s complaint referred to residency, because plaintiff admitted
citizenship).
III. Conclusion
Accordingly, we reverse the district court’s remand order, and we remand this
case to the district court for further proceedings.
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