Keith and Janet Pearce, Florida residents, purchased a Personal Article Policy from State Farm to insure a diamond pendant. When the pendant was stolen, State Farm paid the replacement value but refused to refund the unearned premiums as required by the policy terms. The Pearces filed a putative class action lawsuit alleging breach of contract and unjust enrichment. Over the course of the litigation, they amended their complaints to name different State Farm entities as defendants, including State Farm Florida, State Farm Fire & Casualty Company, and State Farm Mutual Automobile Insurance Company. The district court determined that the contract was with State Farm Florida and dismissed claims against the other entities. Finding that only Florida residents remained as parties, the district court dismissed the remaining claims against State Farm Florida for lack of subject matter jurisdiction under the Class Action Fairness Act, or CAFA.
The Eleventh Circuit addressed four primary issues. First, regarding apparent agency, the court applied Florida law, which requires a representation by the principal, reliance by the third party, and a change in position. The court found that the Pearces failed to allege sufficient facts, noting that the mere use of State Farm logos and a copyright notice referencing State Farm Mutual did not constitute a representation that the parent company exercised substantial control over the subsidiary. Second, the court analyzed the contract language. It held that the Renewal Certificate, which served as the declarations, explicitly named State Farm Florida as the insurer. The court rejected the argument that the contract was ambiguous, stating that extrinsic evidence could not be used to create ambiguity where the plain language of the entire policy was clear. Third, the court addressed the unjust enrichment claim against non-parties. It concluded that the claim failed because the alleged inequity of retaining premiums was inextricably bound up with the contract terms, and the Pearces did not allege facts showing that it would be inequitable for the non-party to retain the benefit independent of the contract. Finally, the court addressed the jurisdictional dismissal. While CAFA jurisdiction is generally assessed at the time of filing and is not destroyed by post-filing events, there is an exception for frivolous attempts to invoke jurisdiction. The district court dismissed the case for lack of diversity after removing non-diverse defendants without first determining if the remaining parties were diverse or if the claims against the removed defendants were frivolous. The appellate court held that this procedural error required a remand for a new jurisdictional inquiry.
The case is remanded to the district court for a new jurisdictional inquiry. The court must determine whether the complaints alleged facts supporting CAFA jurisdiction at the time of filing and whether the claims against the dismissed State Farm entities were frivolous. If the court finds that diversity existed at the time of filing and the claims were not frivolous, the case may proceed in federal court despite the current lack of complete diversity among the remaining parties. If the claims are found to be frivolous, the district court may dismiss for lack of subject matter jurisdiction.
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