Business Litigation I MAY 23, 2018

Removal Bid Founders for Lack of Article III Standing

A recent case from the Seventh Circuit provides a useful reminder about removal of a case to federal court.

Chicago-based SP Plus operates parking facilities at Dayton International Airport. Kathryn Collier and Benjamin Seitz used these parking and received receipts that included the expiration date of their credit or debit cards. They believed that printing that information violated the Fair and Accurate Credit Transaction Act (“FACTA”), 15 U.S.C. § 1681c(g)(l).

Collier and Seitz filed a class-action complaint in the Circuit Court of Cook County alleging that SP Plus willfully violated FACTA. They requested statutory and actual damages, asserting that actual damages exceeded $25,000. The complaint did not itemize any concrete harm they had suffered; neither had experienced credit-card fraud or identity theft.

SP Plus removed the action to federal court, arguing that the district court had federal-question jurisdiction because the claim arose under a federal statute. Shortly thereafter, SP Plus moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(1) for lack of Article III standing because the plaintiffs did not allege an injury in fact, thereby depriving the court of subject matter jurisdiction. Collier and Seitz moved to remand to state court, arguing that it was SP Plus’s responsibility to establish subject-matter jurisdiction and that, without it, 28 U.S.C. § 1447(c) required the district court to return their case to state court.

The district court denied the motion to remand, but granted Collier and Seitz leave to amend their complaint. When they failed to do so, the court dismissed the case with prejudice. Collier and Seitz took an appeal.

As the party invoking federal jurisdiction, SP Plus had to establish that all elements of jurisdiction—including Article III standing—existed at the time of removal.

To establish federal subject-matter jurisdiction, SP Plus also had to show that Collier and Seitz possessed Article III standing—specifically, that they suffered an injury beyond a statutory violation.

According to the appeals court, Collier and Seitz’s complaint did not sufficiently allege an actual injury. The mere reference to “actual damages” in the complaint’s prayer for relief failed to establish Article III standing.

SP Plus contended that the conclusory request for “actual damages” was unfair because it would allow Collier and Seitz to clarify what concrete injury they suffered “after it is too late” for removal.

The court was not persuaded by this argument. If, after remand Collier and Seitz were to amend their complaint to state an injury in fact, 28 U.S.C. § 1446(b)(3) would permit SP Plus to then remove the case to federal court. Even if Collier and Seitz did not amend, SP Plus could still remove if it received any “paper that affirmatively and unambiguously reveals that the predicates for removal are present.”

Thus, 28 U.S.C. § 1447(c) required the district court to remand to state court, because the complaint did not satisfy Article III’s requirements.

Additionally, the case should not have been dismissed with prejudice. As the appeals court noted, a suit dismissed for lack of jurisdiction cannot also be dismissed ‘with prejudice’ because that is a disposition on the merits, which only a court with jurisdiction may render.

Nor was dismissal with prejudice warranted as a sanction under Federal Rule of Civil Procedure 41(b) because Collier and Seitz opted not to amend their complaint. No finding of willfulness by the plaintiffs justified a dismissal on the merits.

The court vacated the dismissal and remanded with directions to return the case to state court.

The case is Collier and Seitz v. SP Plus Corporation, ___ F. 3d ___, 2018 WL 2186786 (7th Cir. 2018)