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United States District Court for the District of Maryland Grants Class Action Plaintiff’s Motion to Remand to State Court

Covert v. Automotive Credit Corp.
No. 13-1928 (D.Md. Sept. 12, 2013)

by Wayne C. Heavener, Associate
Semmes, Bowen & Semmes (www.semmes.com)

In Covert v. Automotive Credit Corporation, the United States District Court for the District of Maryland found that a defendant in a class action suit failed to establish removal jurisdiction. This case arose out of a suit filed on behalf of a putative class in the Circuit Court for Baltimore City. The defendant removed the action to United States District Court, where the plaintiff class sought to remand the proceedings back to state court. Writing for the Court, Judge Bredar found that the defendant failed to allege facts sufficient to invoke removal jurisdiction. Observing that removal jurisdiction is to be construed strictly, the Court granted the plaintiff class' motion for remand.

Kevin Covert's car was repossessed by Automotive Credit Corporation (ACC) after ACC deemed Mr. Covert to be in default. As a result, Mr. Covert filed a putative class action against ACC in the Circuit Court of Maryland for Baltimore City. Mr. Covert alleged breach of contract and violations of the Maryland Credit Grantor Closed End Credit Provisions and the Maryland Consumer Debt Collection Act. In particular, Mr. Covert alleged that ACC failed to send defaulting borrowers adequate repossession notices and unlawfully collected or sought deficiencies from borrowers. In response, ACC filed a motion to strike on the grounds that Mr. Covert failed to include an ad damnum clause. Shortly thereafter, Mr. Covert amended his complaint, claiming $50,000 for himself and a sum in excess of $75,000 on behalf of the putative class. ACC removed the case to the United States District Court for the District of Maryland on grounds of diversity jurisdiction under 28 U.S.C. § 1332(a) and the Class Action Fairness Act ("CAFA"). Mr. Covert moved to remand the proceeding to state court.

The District Court found that ACC failed to establish removal jurisdiction under either 28 U.S.C. § 1332(a) or CAFA. Noting that federal courts strictly construe issues of removal jurisdiction, the Court found that ACC failed to allege necessary jurisdictional facts for removal under CAFA. In order to seek removal under CAFA, a defendant must allege minimal diversity, an aggregate amount in controversy exceeding $5 million, and a class size greater than 100 persons. ACC failed to allege that the size of the putative class was greater than 100 persons, rendering its notice of removal defective. Importantly, though a defendant seeking removal may amend its notice within a thirty-day period, ACC failed to do so. The Court found that ACC's failure was more than a mere defect in its jurisdictional allegations, such that its notice was fatally defective beyond the thirty-day period.

Similarly, the Court found that ACC's notice of removal failed to establish jurisdiciton under 28 U.S.C. § 1332(a). In order to seek removal under section 1332(a), a defendant must allege diversity between the named parties, and an amount in controversy in excess of $75,000 for at least one member of the putative class. In order to support its notice of removal, ACC alleged that Mr. Covert sought damages of $50,000 and treble damages on behalf of all class members. The Court found, however, that Mr. Covert never sought more than $50,000. In fact, Mr. Covert asserted that the $50,000 was a post-trebling figure. Therefore, ACC failed to allege the minimum amount in controversy to seek removal under section 1332(a), and the case was remanded to the state court.


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