Morrison v. YTB Int’l, Inc.

Plaintiffs want to represent a class of more than 100 people with stakes of more than $5 million and invoked federal jurisdiction under 28 U.S.C. 1332(d)(2), the Class Action Fairness Act. They claim that the company violates the Illinois Consumer Fraud Act prohibition on pyramid schemes, 815 ILCS 505/2A(2). The company's customers sell each other the right to act as travel agencies, as well as selling travel services to the public. The district court did not decide whether the operation is a pyramid scheme, but ruled that transactions with residents of states other than Illinois are outside the Act, dismissed the non-Illinois plaintiffs, and decided that the suit is an intra-state controversy that belongs in state court. The Seventh Circuit vacated. Section 1332(d)(4) requires the court to decline jurisdiction when at least two-thirds of the members of the proposed class reside in the same state as the principal defendant. The class that plaintiffs propose is nationwide. Subject-matter jurisdiction depends on the state of things when suit is filed; what happens later does not detract from jurisdiction already established. While the pleadings do not establish that Illinois law does apply, they do not defeat the application of that law.