Have you ever heard of the local action doctrine? The distinction between local and transitory actions? If you’re a lawyer, you might have heard something about this in law school. But perhaps not since then. The Supreme Court has not addressed it since 1912. But the Ninth Circuit held last week that the local action doctrine required dismissal of a putative class action for lack of jurisdiction. Eldee-K Rental Properties, LLC v. DIRECTV, Inc., No. 11-17994, 2014 U.S. App. LEXIS 6510 (9th Cir. Apr. 9, 2014). If the Ninth Circuit is correct that this doctrine remains valid and is a jurisdictional requirement, could it potentially apply to property insurance cases in some jurisdictions? Determining the answer to that, based on the Ninth Circuit’s method of analysis, could require extensive research of state law in the applicable jurisdiction, delving back many years. However, the doctrine, to the extent applicable, would only apply where a property insurance lawsuit is brought outside of the federal district where the property is located.
In Eldee-K Rental Properties, the plaintiff, which owns an apartment building in Hartford, Connecticut, brought a putative nationwide class action lawsuit against DIRECTV. The suit sought to challenge a practice whereby DIRECTV will install a satellite dish on an apartment building if the tenant signs a form stating that the landlord verbally approved the installation, or that approval is not required under the rental agreement. I’m guessing that the plaintiff’s theory was that many tenants either do not bother to read the form, or sign the form without actually having permission from their landlord. One might argue that the landlord benefits from having satellite TV available. But apparently this landlord did not want the dish. A bunch of these dishes on one apartment building can sometimes be an eyesore. But that was not what the Ninth Circuit was dealing with. The issue was whether this lawsuit could properly be brought all the way across the country in the Northern District of California, given that the plaintiff’s apartment building was in Connecticut. (Plaintiff sought to apply California law to a nationwide putative class.) DIRECTV argued that, under the local action doctrine, because the claims in essence involved trespass on real property, there was no federal jurisdiction in California. And the Ninth Circuit agreed.
The Ninth Circuit’s opinion traces the origins of the local action doctrine to pre-15th century England. At that time, jurors relied on their personal knowledge to decide disputes, with no witness testimony, and thus suits had to be brought locally where people would have heard of whatever the dispute was. Deciding cases based on local rumors and hearsay was eventually, and wisely, eliminated. But a remaining vestige of this ancient practice was that at least some cases involving real estate had to be brought only where the real estate was located. An early decision by Chief Justice John Marshall, sitting as a circuit judge, adopted this local action rule as a matter of federal common law. The Supreme Court confirmed its continued existence in the late 19th century, and the Ninth Circuit concluded last week that the Supreme Court’s 19th century precedent was still binding today (even though it is not embodied in any of the federal jurisdictional statutes).
According to the Ninth Circuit opinion, state law governs the issue of whether an action is local or transitory in nature. The opinion held that, under California law, claims for violation of the California Unfair Competition Law and for negligence were “local” in nature because they arose from injury to real property, i.e., an unauthorized installation of a satellite dish. The suit therefore could only be brought where the property was located. (Ironically, the “local” satellite dish downloads television programming from around the world via a massive device that orbits the Earth, and that neither a 15th century juror nor Chief Justice Marshall could ever have imagined.)
So what does all of this have to do with property insurance? Well, here are some questions this decision raises in my mind: Is there any state in which a “local” action (based on the old distinction between “local” and “transitory” actions) would encompass a property insurance dispute, in which the issues focus on damage to real property? Or is a contract dispute universally considered a transitory suit even if it involves real property? What if the suit is brought against both a tortfeasor who caused property damage as well as a property insurer (if both can properly be sued in the same lawsuit)? Perhaps these are just ruminations most appropriate for a law school final exam question. But maybe not.