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: CAFA Law Blog - Information, cases and insights regarding the Class Action Fairness Act of 2005

Investors Check In, But They Don't Check Out Of Either Their Roach Motel Investment or Federal Court in this CAFA "Mass Action" Exception Case.

Galstaldi v. Sunvest Communities USA, L.L.C., ---F.R.D.---( 2/17/09 S.D. Fla.)

There's a big difference between a dilapidated bug and rodent infested apartment and a posh condo in a swanky complex with a world class spa, golf course, and sports complex. For over $300,000 a unit, plaintiffs said they thought they were buying the latter. (Go figure.) Defendants, Sunvest Communities and affiliates, sold Walter Galstaldi and the other plaintiffs pre-converted condominium units in sunny Orlando, Florida, home to the Happiest Place on Earth! 

Plaintiffs alleged Defendants promised posh cribs but walked away from the deal without converting any of the units or developing the property at all, leaving plaintiffs with nothing to check into but a $70,000,000 roach motel. 

This procedural story began how most CAFA stories begin - plaintiffs filed suit in state court and defendants removed to federal court pursuant to CAFA. Both plaintiffs and defendants agreed the case met the requirements of a 'mass action' under CAFA. 

The Galstaldi court citing Lowery v. Ala. Power Co., 483 F.3d 1184, 1202-03 (11th Cir.2007) stated: 'The following requirements must be met in order for a case to be removable as a ‘mass action' under CAFA: ‘(1) an amount in controversy requirement of an aggregate of $5,000,000 in claims; (2) a diversity requirement of minimal diversity; (3) a numerosity requirement that the action involve the monetary claims of 100 or more plaintiffs; and (4) a commonality requirement that the plaintiffs' claims involve common questions of law or fact.'' (Editors' Note:  See the CAFA Law Blog analysis of Lowery posted on May 15, 2007)

However, plaintiffs argued the case fit into the exception to mass actions under 1332(d)(11)(B)(ii)(I) which states that a 'mass action' shall not include any civil action in which 'all of the claims in the action arise from an event or occurrence in the State in which the action was filed, and that allegedly resulted in injuries in that State or in States contiguous to that State' because of the case's connections to Florida. 

Now, normally, it would not be such a good idea to point out to a court that you are accused of multiple acts of fraud by multiple victims in multiple jurisdictions, but doing so in this case kept defendants in federal court. Defendants prevailed with the argument that the above exception applies only to 'an event or occurrence' in the singular and as defendants were accused of fraud in multiple sales to multiple parties over a period of a year and a half, the exception did not apply.

The court agreed with defendants and found the 1332(d)(11)(B)(ii)(I) exception applies to 'an event or occurrence' in the singular. The court further found sales of condos to hundreds of individuals around the country over a period of one and a half years simply did not constitute 'an event or occurrence' and the exception did not apply and denied plaintiffs' motion to remand. 

By: I. Hafta Cafa

 

Full post as published by CAFA Law Blog - Information, cases and insights regarding the Class Action Fairness Act of 2005 on May 27, 2009 (boomark / email).