People ex rel. Foxx v. Facebook (In re Facebook, Inc., Consumer Privacy User Profile Litig.)

354 F.Supp.3d 1122

IN RE: FACEBOOK, INC., CONSUMER PRIVACY USER PROFILE LITIGATION

This Document Relates to: People of the State of Illinois, ex rel. Kimberly M. Foxx

v.Facebook

MDL No. 2843

Case No. 18-md-02843-VC

Case No. 18-cv-06486-VC

United States District Court, N.D. California.

Signed January 29, 2019

PRETRIAL ORDER NO. 15: ORDER GRANTING MOTION TO REMAND

VINCE CHHABRIA, United States District Judge

The question presented by this motion is whether a lawsuit against Facebook, filed in Illinois state court by the Cook County State's Attorney, asserting violations of Illinois law and seeking civil penalties along with statewide injunctive relief, was properly removed to federal court. The answer is no.

I.

In 2018, the media reported that Cambridge Analytica, a British political consulting firm, had obtained personal data on millions of Facebook users and exploited those data in connection with the 2016 presidential campaign. In response, dozens of lawsuits were filed in federal courts around the country. Most of the lawsuits were class actions brought by individual Facebook users on behalf of a proposed nationwide class of people whose data had been obtained by Cambridge Analytica or other third parties. All the lawsuits named Facebook as a defendant; some included Cambridge Analytica and other defendants as well.

When multiple similar federal lawsuits are filed around the country, the Judicial Panel on Multidistrict Litigation considers whether to transfer the cases for pretrial proceedings to a single federal judge. The purpose of a transfer is to promote efficiency and fairness by avoiding conflicting results and ensuring that multiple judges are not called upon to adjudicate the same pretrial issues. Assuming the lawsuits survive all the pretrial rulings and don't settle, the judge releases them back to the districts where they were originally filed for trials to be conducted.

The Panel has assigned several dozen cases arising from Facebook's data sharing to the undersigned federal district judge for pretrial purposes. There is a dispute about whether one of those cases should be part of the group: a lawsuit that was originally filed in Illinois state court, under the Illinois Consumer Fraud and Deceptive Business Practices Act, by Cook County State's Attorney Kimberly Foxx in the name of the "People of the State of Illinois." Foxx seeks a statewide injunction to require Facebook to better protect user data, as well as civil penalties for Facebook's prior conduct. The lawsuit does not seek restitution or damages for Facebook users based on past conduct.

A case can get into federal court, even when a lawsuit does not allege federal law violations, through diversity jurisdiction. Diversity jurisdiction exists when a party from one state brings claims under state law against a defendant from another state and the amount in controversy exceeds $ 75,000. 28 U.S.C. § 1332. If a case meeting this description is initially filed in state court, an out-of-state defendant may remove the case to federal court. Id. § 1441. A plaintiff who believes the case has been improperly removed because there is not actually diversity jurisdiction can file a motion to remand the case to state court. Id. § 1447.

Facebook removed the Foxx lawsuit from Illinois state court to federal court in the Northern District of Illinois, asserting federal jurisdiction based on diversity of citizenship (specifically, the County is a citizen of Illinois while Facebook is a citizen of California and Delaware). Foxx moved to remand the case to state court. The multidistrict litigation panel transferred the case before the remand motion was decided, so the motion is now pending before this Court.

II.

A case brought by a state, under state law, cannot be filed in or removed to federal court. This is so even if the defendant is from another state. Diversity jurisdiction is lacking in such a case because the state is not a citizen of anywhere. See Mississippi ex rel. Hood v. AU Optronics Corp. , 571 U.S. 161, 174, 134 S.Ct. 736, 187 L.Ed.2d 654 (2014) ; Postal Telegraph Cable Co. v. State of Alabama , 155 U.S. 482, 487, 15 S.Ct. 192, 39 L.Ed. 231 (1894). This rule also applies where the plaintiff itself is not the state, but one who has brought suit on behalf of the state, so long as the state is the "real party in interest." Whether a state is the real party in interest for diversity jurisdiction purposes is a question of federal law, although the inquiry is informed by state law. Cf. Regents of the Univ. of California v. Doe , 519 U.S. 425, 429 n.5, 117 S.Ct. 900, 137 L.Ed.2d 55 (1997) ; Dep't of Fair Employment & Housing v. Lucent Techs., Inc. , 642 F.3d 728, 738 (9th Cir. 2011).

When a case has been removed from state court, doubts about federal jurisdiction must be resolved in favor of remand. See Gaus v. Miles, Inc. , 980 F.2d 564, 566 (9th Cir. 1992). This is, in large part, because federal courts should not intrude upon the right of the states to resolve local disputes through their own judicial systems. See Franchise Tax Bd. v. Construction Laborers Vacation Trust for S. California , 463 U.S. 1, 21 n.22, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983) ; see also Healy v. Ratta , 292 U.S. 263, 270, 54 S.Ct. 700, 78 L.Ed. 1248 (1934) ("Due regard for the rightful independence of state governments, which should actuate federal courts, requires that they scrupulously confine their own jurisdiction to the precise limits which the statute has defined."). This is true regardless of whether the plaintiff is a private party or a government entity. But when an action has been brought by a state or one of its officials or subdivisions, the need to resolve doubts against the exercise of federal jurisdiction is particularly acute. "[C]onsiderations of comity" should make federal courts "reluctant to snatch cases which a State has brought from the courts of that State, unless some clear rule demands it." Franchise Tax Bd. , 463 U.S. at 21 n.22, 103 S.Ct. 2841.

Furthermore, although federal courts should always be careful before exercising removal jurisdiction, and should be even more careful when the case has been brought by a state or one of its officials, the concern is even more pronounced in the context of multidistrict litigation. When a case is folded into multidistrict litigation, it will almost inevitably be delayed. Its fate will be bound up in the fates of many others. The transferee judge may decide that certain claims should be prioritized or addressed first. The plaintiff may thus lose control over the direction of the lawsuit. And this is a serious concern if the plaintiff is a government entity or official – the multidistrict litigation process would intrude on state or local sovereignty. Therefore, where a case is originally filed in state court to vindicate a state's sovereign interests, federal courts should exercise the greatest possible caution before asserting jurisdiction. The purpose of the multidistrict litigation process is to make the adjudication of federal cases more efficient and fair, not to interfere with the ability of state courts to adjudicate claims brought under state law by state or local officials.

III.

In support of her remand motion, Foxx notes that although she is merely a county prosecutor (a "State's Attorney" in Illinois is the equivalent of a District Attorney in California and other states), her lawsuit was brought in the name of the People of Illinois, under the authority conferred upon her by the Illinois Consumer Fraud Act. See 815 Ill. Comp. Stat. 505/7(a). This, according to Foxx, means the lawsuit was effectively brought by the State of Illinois, and Illinois is the real party in interest for purposes of the diversity jurisdiction analysis.

In response, Facebook primarily offers four somewhat related arguments for why Illinois is not the real party in interest in Foxx's lawsuit. First, Facebook reads a 1901 Supreme Court case as standing for the proposition that a state cannot be the real party in interest unless the relief sought in the lawsuit would benefit only the state, as a distinct entity, without any benefit going to private parties or discrete parochial interests. Second, Facebook appears to contend that even if this is not always the rule, it should at least be the rule in a case brought by a subordinate official or entity (such as a county prosecutor), as opposed to the state's chief legal officer (usually the Attorney General). Third, Facebook argues that, as a matter of Illinois law, a subordinate official like the Cook County State's Attorney is not authorized to bring actions for statewide relief on behalf of the state, meaning that Illinois could not possibly be the real party in interest. Fourth, Facebook asserts that the civil penalties sought by Foxx would go to the Cook County treasury, and argues that a state cannot be considered the real party in interest if the penalties from an action by a county prosecutor do not go directly to the state.

A.

For its initial argument, Facebook primarily cites Missouri, Kansas & Texas Railway Co. v. Missouri Railroad & Warehouse Commissioners , 183 U.S. 53, 22 S.Ct. 18, 46 L.Ed. 78 (1901).¹ There, the Missouri Railroad Commission, a state regulatory body, ordered an out-of-state railway company to stop charging excessive rates for travel over a bridge in Missouri. Id. at 57, 22 S.Ct. 18. The company refused to comply, so the Railroad Commission sued the company in state court.

Id. The company attempted to remove the case to federal court, but the state trial court refused to honor the removal.² The dispute was adjudicated in the state court system, with the Missouri Supreme Court ultimately ruling against the railway company. Id.

The United States Supreme Court vacated the ruling, concluding that the railway company should have been permitted to remove the case to federal court on diversity jurisdiction grounds. Missouri Railroad , 183 U.S. at 61, 22 S.Ct. 18. The Court...