In Dancel v. Groupon, Inc., No. 19-1831 (7th Cir. Oct. 9, 2019), the Seventh Circuit split with the Eleventh Circuit regarding jurisdictional discovery to prove federal subject matter jurisdiction under the Class Action Fairness Act (“CAFA”).

This case involved a claim brought by Christine Dancel regarding the unauthorized use of Dancel’s image in Groupon promotional materials. Dancel sued Groupon, claiming that the e-commerce marketplace used an image from her Instagram account without authorization. After two years of litigation, Dancel moved to certify a class based on a new definition which included “[a]ll persons who maintained an Instagram Account and whose photograph (or photographs) from such account was (or were) acquired and used on a webpage for an Illinois business.” Unlike the original class definition, the class was not limited to Illinois residents.

Based on the revised class definition, Groupon removed the case to federal court under CAFA jurisdiction. Groupon, a corporate citizen of Delaware and Illinois, took the position that it met the CAFA minimal-diversity requirement because the new class “undoubtedly would include at least some undetermined number of non-Illinois and non-Delaware citizens as class plaintiffs.” However, Groupon did not identify a single diverse class plaintiff. Dancel opposed removal.

The Court allowed removal and the parties then litigated class certification. The district court denied class certification and Dancel received the Seventh Circuit’s permission to appeal the class certification decision. On appeal, Dancel attempted to relitigate her opposition to removal. The Seventh Circuit generally refused to consider her arguments, with the exception of subject matter jurisdiction.

In considering subject matter jurisdiction, the Seventh Circuit recognized that Groupon had the burden to demonstrate minimal diversity sufficient for jurisdiction under CAFA. Groupon’s “speculation” on minimal diversity was not sufficient. Groupon could not simply hypothesize that “‘undoubtedly’ a class member is a citizen of a state other than Illinois or Delaware.” Accordingly, the Seventh Circuit remanded the case to the district court for jurisdictional discovery to determine whether minimal diversity existed.

The Seventh Circuit recognized that its authorization of jurisdictional discovery created a split with the Eleventh Circuit, which had prohibited jurisdictional discovery in cases removed under CAFA. See Slip Op. 8 n.† (citing Lowery v. Alabama Power Co., 483 F.3d 1184, 1215 (11th Cir. 2007)). The Seventh Circuit noted that the Eleventh Circuit has since limited its holding, and at least a couple of Eleventh Circuit judges have indicated that Lowery should be overturned. Further, the Court noted that it found the Lowery reasoning “unpersuasive” and its holding “in tension with the Supreme Court’s recognition that ‘where issues arise as to jurisdiction or venue, discovery is available to ascertain the facts bearing on such issues.’” Id. (quoting Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 n.13 (1978)). Hence, the Seventh Circuit found it appropriate to remand for jurisdictional discovery.

In short, this case is important for any party claiming federal subject matter jurisdiction under CAFA because it holds that there must be a specific allegation of minimal diversity and it is possible to obtain jurisdictional discovery – at least in the Seventh Circuit – to demonstrate minimal diversity.