             United States Court of Appeals
                        For the Eighth Circuit
                    ___________________________

                            No. 16-1152
                    ___________________________

Douglas E. Atwood, Individually and on behalf of others similarly situated

                   lllllllllllllllllllllPlaintiff - Appellant

                                      v.

          Stephen J. Peterson; Michelle Brooks; Walgreen Co.

                  lllllllllllllllllllllDefendants - Appellees

                         ------------------------------

           Arkansas Grocers & Retail Merchants Association

             lllllllllllllllllllllAmicus on Behalf of Appellee(s)
                                   ____________

                Appeal from United States District Court
            for the Eastern District of Arkansas - Little Rock
                             ____________

                         Submitted: June 19, 2019
                          Filed: August 30, 2019
                                [Published]
                              ____________
Before LOKEN and WOLLMAN, Circuit Judges.1
                         ____________

PER CURIAM.

       Arkansas citizen Douglas E. Atwood filed a class action complaint in state
court against Walgreen Company (Walgreens), an Illinois corporation, and Stephen
J. Peterson and Michelle Brooks, who are Arkansas citizens and who serve as the
district managers responsible for the forty-three Walgreens stores located in
Arkansas. Atwood claimed that the Walgreens Balance Rewards program (the
program) violated Arkansas’s statutory prohibition on price discrimination in the sale
of manufactured products. The defendants removed the case to federal district court,
alleging jurisdiction under the Class Action Fairness Act of 2005 (CAFA). Atwood
moved to remand based on the local controversy exception to CAFA jurisdiction.
The district court2 denied Atwood’s motion to remand and later granted the
defendants’ motion to dismiss. Atwood appeals, arguing that the court erred in
considering extrinsic evidence to decide whether it had jurisdiction, in denying his
motion to remand, and in dismissing his complaint on the merits. We affirm.




      1
        This case was originally submitted on September 22, 2016, to a panel
consisting of Judges Wollman, Bright, and Kelly. Judge Bright died on December
12, 2016. The remaining judges on the panel requested the designation of a third
judge, and Judge Loken was so designated. This case was resubmitted to a panel
consisting of Judges Wollman, Loken, and Kelly on March 3, 2017. Judge Kelly
thereafter recused herself from further participation. The case was submitted for a
third time on June 19, 2019, and this opinion is being filed by a panel consisting of
Judges Wollman and Loken. See 8th Cir. R. 47E.
      2
       The Honorable James M. Moody, Jr., United States District Judge for the
Eastern District of Arkansas.

                                         -2-
       Atwood alleged that the program was implemented in all Arkansas Walgreens
stores in September 2012. Membership is free and does not require an initial
purchase, but customers must provide identifying information, including their names,
addresses, telephone numbers, and email addresses. After signing up, customers may
use their rewards cards to receive discounts on certain products.

      In April 2015, Atwood and another customer went to three different Arkansas
Walgreens stores and purchased the same products. Atwood paid more for the
products than the unidentified customer because he did not present a rewards card at
checkout and the unidentified customer did. Based on those transactions, Atwood
alleged that the program violated Arkansas Code § 4-75-501, which stated:3

      (a)    It shall be unlawful for any person, company, corporation, or
             association engaged in the sale of any manufactured
             product . . . to:

             (2)   Willfully refuse or fail to allow to any
                   person . . . making purchases of the manufactured
                   product . . . all rebates and discounts which are
                   granted by them to other purchasers, for cash, of like
                   quantities of the manufactured product . . . .

       Although the complaint alleged damages and diversity of parties sufficient to
establish federal jurisdiction under CAFA, see 28 U.S.C. § 1332(d)(2), Atwood
asserted that the local controversy exception to CAFA jurisdiction applied, see id.
§ 1332(d)(4). Specifically, the complaint alleged that Arkansas citizens Peterson and
Brooks implemented the unlawful program and that they were “independently and

      3
       In 2017, the Arkansas General Assembly passed a bill entitled “An Act
Concerning Arkansas Price Discrimination; to Allow Retailers to Offer Discounts to
Customers; and to Declare an Emergency,” which amended Arkansas Code § 4-75-
501. The statute now explicitly allows discounts and rebates that are “offered without
charge to all purchasers on an equal basis.”

                                         -3-
jointly and severally liable.” Atwood claimed that the Arkansas district managers
were significant defendants under CAFA because their conduct formed a “significant
basis” for his claim and because he sought “significant relief” from them. See id.
§ 1332(d)(4)(A)(i)(II)(aa)-(bb).

       Defendants were required to file a notice of removal under CAFA within “30
days after receipt . . . of the initial pleading.” 28 U.S.C. § 1446(b)(2)(B). The
defendants’ timely notice of removal argued that the local controversy exception did
not apply and that the district managers had been fraudulently joined to defeat
diversity jurisdiction. In support, the defendants submitted affidavits from Peterson,
Brooks, and a Walgreens vice president. The vice president averred that district
managers do not decide which products to offer in the program, nor do they decide
the extent of the discount. Those decisions, according to the vice president, are made
at the corporate level, with the district managers having no discretion to vary the
products or the prices. The district managers stated that they “receive[] pricing
information directly from Walgreens corporate headquarters each week that lists the
products to be included in the . . . program and the prices at which those products are
to be offered.”

       In his motion to remand, Atwood reiterated his argument that federal
jurisdiction under CAFA was precluded by the local controversy exception. He
further argued that, in deciding whether to remand, the district court could consider
only the allegations in the complaint and could not consider extrinsic evidence, such
as the defendants’ affidavits. During a hearing on the motion, plaintiff’s counsel
claimed that it did not matter whether Peterson and Brooks created the program or
whether they had any discretion to vary the products or prices, arguing that the
Arkansas statute imposed liability on them as persons “engaged in the sale” of
manufactured products. Counsel acknowledged that the same theory of liability
applied to both the district managers and to Walgreens, but argued that Peterson and



                                         -4-
Brooks were nonetheless significant defendants because they could be held
individually liable for all statutory violations.4

       The district court overruled Atwood’s objection to the consideration of
extrinsic evidence and denied the motion to remand. It relied on the above-described
affidavits in finding that the district managers were not significant defendants under
CAFA and in concluding that they had been fraudulently joined in an attempt to
defeat diversity jurisdiction. The court later granted the defendants’ motion to
dismiss, holding that the allegations set forth within the complaint did not fall within
the scope of the Arkansas statute because Walgreens offered the discounted prices to
Atwood, “but he refused to sign up for the free program, essentially declining the
discounted price.” D. Ct. Order of Dec. 14, 2015, at 3.

      Congress enacted CAFA in 2005 to curb perceived “abuses of the class action
device” by providing for “[f]ederal court consideration of interstate cases of national
importance.” Westerfeld v. Indep. Processing, LLC, 621 F.3d 819, 822 (8th Cir.
2010) (quoting CAFA, Pub. L. No. 109-2, § 2, 119 Stat. 4 (2005)). Under CAFA,
federal courts have jurisdiction over class actions in which the amount in controversy
exceeds $5 million in the aggregate, there is minimal diversity among the parties, and
there are at least 100 members in the class. 28 U.S.C. § 1332(d). As mentioned
above, there is no dispute that these requirements have been met.




      4
        When asked which Walgreens employees were not “engaged in the sale” of
manufactured products, counsel responded that although a person stocking shelves
would not necessarily be liable under the statute, the cashier would be. Counsel
argued that the district manager would also be liable, as the “person in charge of the
stores telling the checker what to do.” In a similar action claiming that a grocery
chain’s rewards program constituted price discrimination in violation of the statute
at issue here, the Pulaski County Circuit Court dismissed the district manager
defendants because they were not “engaged in the sale” of manufactured products.

                                          -5-
       Congress excepted local controversies from federal jurisdiction. Accordingly,
a district court must decline to exercise jurisdiction over a class action in which (1)
more than two-thirds of the class members in the aggregate are citizens of the state
in which the action was originally filed, (2) at least one defendant “from whom
significant relief is sought by members of the plaintiff class” and “whose alleged
conduct forms a significant basis for the claims asserted by the proposed plaintiff
class” is a citizen of the state in which the class action was originally filed, (3) the
principal injuries were incurred in the state in which the action was filed, and (4) no
other class action alleging similar facts was filed in the three years prior to the
commencement of the current class action. Id. § 1332(d)(4)(A).

       The burden of establishing this narrow exception lies with the party seeking
remand. Westerfeld, 621 F.3d at 822; see S. Rep. No. 109-14, at 39 (emphasizing that
the local controversy exception to CAFA jurisdiction “is a narrow exception that was
carefully drafted to ensure that it does not become a jurisdictional loophole”). We
review de novo the denial of a motion to remand to state court under CAFA. Hargis
v. Access Capital Funding, LLC, 674 F.3d 783, 789 (8th Cir. 2012). At issue here is
whether Peterson and Brooks are significant defendants. See 28 U.S.C.
§ 1332(d)(4)(A)(i)(II)(aa)-(bb).

       To determine whether the district managers’ “alleged conduct forms a
significant basis for the claims asserted by the proposed plaintiff class,” id.
§ 1332(d)(4)(A)(i)(II)(bb), we consider “all the claims in the action” and compare the
alleged conduct of the local defendants to the alleged conduct of all the defendants,
Westerfeld, 621 F.3d at 825. Atwood has alleged only one claim: that “[t]he
Defendants instituted a Balance Rewards Card program in violation of Arkansas law”
by “willfully refus[ing] or fail[ing] to allow Plaintiffs all rebates and discounts which
were granted by Defendants to other [rewards card] purchasers.”




                                          -6-
       Considering only the allegations in the complaint would not enable us to
complete the comparative analysis required to determine whether the district
managers’ conduct forms a significant basis for Atwood’s claim. Atwood argues that
the district managers implemented the unlawful program, but the complaint does not
allege any substantive distinctions between the conduct of the district managers and
the conduct of Walgreens. Nor does the complaint allege that the district managers
had discretion to decide whether or how the program was implemented. Rather, it
alleges that the district managers acted on behalf of Walgreens, as its agents or
officers, and that Walgreens “independently and by and through” the district
managers violated Arkansas law. The complaint’s vague allegations do not indicate
whether the local defendants’ alleged conduct is “an important ground for the
asserted claims in view of the alleged conduct of all the Defendants.” Westerfeld,
621 F.3d at 825 (quoting Kaufman v. Allstate N.J. Ins. Co., 561 F.3d 144, 157 (3d
Cir. 2009)); see also S. Rep. No. 109-14, 40 (“[T]he Committee intends that the local
defendant must be a primary focus of the plaintiffs’ claims—not just a peripheral
defendant.”).

       The affidavits make clear that “the real target in this action” is Walgreens and
that the district managers’ conduct does not form a significant basis for Atwood’s
claim. Cf. S. Rep. No. 109-14, 40 (explaining that in a consumer fraud case against
an out-of-state insurance company and its local agent, the agent “would have been an
isolated role player in the alleged scheme implemented by the insurance company”).
Atwood argues that the plain language of CAFA disallows a district court from
considering any extrinsic evidence in deciding whether the local defendants’ alleged
conduct forms a significant basis for the claim. We disagree with Atwood’s
contention that the term “alleged conduct” limits the district court to the allegations
set forth in the complaint. We instead follow the longstanding rule that “when a
question of the District Court’s jurisdiction is raised, . . . the court may inquire by
affidavits or otherwise, into the facts as they exist,” and we hold that the district court
did not err in considering the affidavits in this case. See Land v. Dollar, 330 U.S.

                                           -7-
731, 735 n.4 (1947); Buckler v. United States, 919 F.3d 1038, 1044 (8th Cir. 2019)
(explaining that “the court must rule upon the jurisdictional issue unless it is so bound
up with the merits that a full trial on the merits may be necessary to resolve the
issue”) (internal quotation marks and alterations omitted)); see also Westerfeld, 621
F.3d at 823-25 (relying, in part, on the defendants’ affidavits to hold that the district
court erred in applying the local controversy exception); Evans v. Walter Indus., Inc.,
449 F.3d 1159, 1167-68 (11th Cir. 2006) (considering extrinsic evidence in
determining that the district court erred in applying the local controversy exception).
In concluding that CAFA removal is not foreclosed by the complaint’s conclusory
allegations that the local defendants engaged in the same conduct as the diverse
defendant, we respectfully disagree with the rulings to the contrary in Coleman v.
Estes Express Lines, Inc., 631 F.3d 1010 (9th Cir. 2011). In light of our
determination that the district managers’ conduct did not form a significant basis for
Atwood’s claim, we conclude that Atwood has not met his burden of establishing that
the local controversy exception to CAFA jurisdiction applies.5

       We have considered and find to be lacking merit Atwood’s argument that the
district court was without jurisdiction to decide the merits of his case because he did
not have Article III standing. Although the defendants had argued that any injury
was caused by Atwood’s choice not to participate in the program—and not by the
alleged illegality of the program—“standing in no way depends on the merits of the
plaintiff’s contention that particular conduct is illegal.” Warth v. Seldin, 422 U.S.
490, 500 (1975).

      Finally, Atwood argues that the district court erred in dismissing his complaint
with prejudice. We held this appeal in abeyance pending the Arkansas Supreme
Court’s decision in Rhodes v. Kroger Co., which held that the defendant grocery

      5
       We thus need not decide whether the plaintiff class sought significant relief
from the district managers, whether the court erred in considering extrinsic evidence
in concluding that the plaintiff class did not, or whether the local defendants were
fraudulently joined.

                                          -8-
chain’s rewards program did not violate Arkansas Code § 4-75-501, because “it was
only the named plaintiffs’ willful refusal to take part in the Kroger Plus program that
created the situation that is the primary focus of the class-action complaint.” 575
S.W.3d 387, 392 (Ark. 2019). The Arkansas Supreme Court thus concluded that the
plaintiffs had “failed to state a viable cause of action as a matter of law” and affirmed
the dismissal of the complaint with prejudice. Id. We conclude that Rhodes applies
with equal force in this case and thus forecloses Atwood’s claim.

      The judgment is affirmed.
                     ______________________________




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