Anderjaska v. Bank of America, N.A.

Background

John Anderjaska, Chungyao Chen, Teena Colebrook, Joel Griffith, Art Heineman, Calvin Williams, and Charles Witte filed a proposed class action on behalf of themselves and others similarly situated in the Supreme Court of the State of New York for New York County. They sued Bank of America, N.A., Capital One, N.A., Citibank, N.A., J.P. Morgan Chase, N.A., and Wells Fargo Bank, N.A. The complaint asserted New York common-law claims for negligence, aiding and abetting, and fraudulent concealment, as well as claims under Article 9 of the New York Civil Practice Law and Rules.

The claims arose from an alleged fraudulent binary-options scheme involving payment processors and internet-based binary-options trading platforms. The plaintiffs alleged that they used credit cards, debit cards, and wire transfers through accounts with the defendant banks to deposit money with or pay the platforms. After having difficulty withdrawing funds, they allegedly sought chargebacks from the banks, which the banks refused.

The defendants removed the case to federal court, relying on the Class Action Fairness Act (CAFA), the Securities Litigation Uniform Standards Act (SLUSA), and the Edge Act. The plaintiffs moved to remand, meaning they asked the federal court to return the case to state court for lack of subject-matter jurisdiction.

CAFA Jurisdiction

The parties did not dispute that the general CAFA requirements were satisfied: the proposed class had at least 100 members, minimal diversity existed, and the amount in controversy exceeded $5 million. The dispute concerned CAFA’s exception for class actions involving a claim concerning a covered security.

The defendants’ notice of removal stated that the case involved covered securities for purposes of SLUSA jurisdiction. The plaintiffs argued that this statement should trigger judicial estoppel, a doctrine that can prevent a party from taking an inconsistent position when a court previously adopted the party’s earlier position. The plaintiffs maintained that the case did not actually involve covered securities.

The court declined to apply judicial estoppel. It explained that the defendants’ statement about covered securities was a legal position, not the type of factual position needed for the plaintiffs’ argument. The court also found that the defendants had relied on ambiguous allegations in the complaint, that the plaintiffs later clarified their position, and that no prior court had adopted the defendants’ assertion. The court therefore held that the plaintiffs’ estoppel argument failed.

Because the parties agreed that CAFA’s general requirements were met, the plaintiffs conceded that covered securities were not involved, and judicial estoppel did not apply, the court found that it had subject-matter jurisdiction under CAFA. Having found CAFA jurisdiction, the court declined to address the parties’ arguments concerning SLUSA and the Edge Act.

Request for Limited Discovery

The plaintiffs alternatively asked for limited and expedited discovery to determine whether CAFA’s local-controversy exception applied. That exception requires a federal court to decline jurisdiction in certain circumstances, including when more than two-thirds of the proposed class members are citizens of the state where the action was originally filed and at least one defendant is also a citizen of that state.

The court held that the exception could not apply here. The case was originally filed in New York, and all defendants were national banks. Under the governing rule, a national bank is a citizen only of the state identified in its articles of association as its main office. The court found that none of the defendants had its main office in New York. As a result, even if more than two-thirds of the proposed class members were New York citizens, the local-controversy exception would not apply. The court denied the request for limited jurisdictional discovery as futile.

Disposition

Judge Laura Taylor Swain denied the plaintiffs’ motion to remand and denied their request for limited jurisdictional discovery. The case remained in federal court and continued to be referred to Magistrate Judge Gorenstein for general pretrial management. The order resolved docket entry number 25.