The UCL Practitioner

More on the Ninth Circuit's recent CAFA decision: Washington v. Chimei Innolux Corp.

A new blog sponsored by Thompson Reuters called On The Case has an interesting post on the ramifications of the Ninth Circuit's CAFA decision handed down last week, Washington v. Chimei Innolux Corp., ___ F.3d ___ (Oct. 3, 2011). 

Here's an excerpt:

What's important about the ruling isn't just that the Washington and California LCD [antitrust] cases will remain in state court. The Ninth Circuit panel's decision endorses the power of state AGs to bring their own cases even when private class actions cover the exact same conduct. AGs, in other words, can pre-empt private cases--which is just what plaintiffs lawyers in the municipal bond derivatives class action before Manhattan federal judge Victor Marrero assert has happened in their case. Many of the muni bond derivative defendants have reached settlements with state AGs, rather than settling in the class action. The plaintiffs lawyers assert that it's an easy out for defendants, whose regulatory settlements aren't subject to a federal judge's oversight, as real class actions are.

My post mentioned the ramifications for PAGA actions, but these further ramifications are worth considering as well if you are handling a case in which the state enforcement agencies have expressed interest. 

New Ninth Circuit CAFA decision: Washington v. Chimei Innolux Corp.

In Washington v. Chimei Innolux Corp., ___ F.3d ___ (Oct. 3, 2011), the Ninth Circuit held that parens patriae actions filed by the state are not "class actions" within the meaning of CAFA. 

Unlike private litigants, the Attorneys General have statutory authority to sue in parens patriae and need not demonstrate standing through a representative injury nor obtain certification of a class in order to recover on behalf of individuals. See Wash. Rev. Code § 19.86.080; Cal. Bus. & Prof. Code § 16760. ....  

....

Put another way, class actions are always representative actions, but representative actions are not necessarily class actions.

Slip op. at 9, 10.  A similar analysis likely applies to PAGA cases post-Arias.

[via]

Another new Ninth Circuit CAFA opinion: Coleman v. Estes Express Lines, Inc.

In Coleman v. Estes Express Lines, Inc., ___ F.3d ___ (9th Cir. Nov. 30, 2010), the Ninth Circuit addressed the "criteria to determine when it is appropriate to hear discretionary appeals under CAFA." Slip op. at 19022.

New Ninth Circuit CAFA opinion: Lewis v. Verizon Communications, Inc.

In Lewis v. Verizon Communications, Inc., ___ F.3d ___ (9th Cir. Nov. 18, 2010), the Ninth Circuit addressed CAFA's $5 million amount in controversy requirement.

BREAKING NEWS: Eleventh Circuit issues new opinion on rehearing in Cappuccitti v. DirecTV

Today the Eleventh Circuit handed down a new opinion on rehearing in the Cappuccitti case.  Cappuccitti v. DirecTV, ___ F.3d ___ (11th Cir. Oct. 15, 2010).  More on this new opinion later.

UPDATE:  Here is the introductory paragraph of the three-judge, per curiam opinion, which neatly summarizes the new decision and its holding:

On July 19, 2010, we issued an opinion in this case. Cappuccitti v. DirecTV, Inc., No. 09-14107, slip op. (11th Cir. July 19, 2010). We based our decision on our interpretation of the jurisdictional requirements of the Class Action Fairness Act of 2005 (“CAFA”), Pub. L. No. 109-2, 119 Stat. 4 (codified in scattered sections of 28 U.S.C.), which we have elsewhere called a “statutory labyrinth.” Lowery v. Ala. Power Co., 483 F.3d 1184, 1199 (11th Cir. 2007). Subsequent reflection has led us to conclude that our interpretation was incorrect. Specifically, CAFA’s text does not require at least one plaintiff in a class action to meet the amount in controversy requirement of 28 U.S.C. § 1332(a). Accordingly, we construe both parties’ petitions for rehearing en banc to include petitions for panel rehearing, vacate our earlier opinion, and replace it with this one.

Slip op. at 2 (footnote omitted) (emphasis added). 

The opinion's ensuing discussion of the jurisdiction question is very short, simple and straightforward; nothing surprising about it, this time.  Id. at 4-7.  The opinion then goes on to address the substantive issue on appeal.  It reverses the district court's order denying the defendant's motion to compel arbitration, and remands the case for further proceedings.  Id. at 7-17.

Another federal judge in California declines to follow Cappuccitti: In re DirecTV Early Cancellation Litigation

In In re DirecTV Early Cancellation Litig., ___ F.Supp.2d ___, 2010 WL 3633079, *9-*10 (C.D. Cal. Sept. 7, 2010), Judge Guilford of the Central District joined Judge Alsup of the Northern District in declining to follow Cappuccitti v. DirecTV, Inc., 611 F.3d 1252 (11th Cir. 2010), calling the decision "misguided in both the reasoning and result."

Two petitions for en banc rehearing have been filed in Cappuccitti.  The defendant's rehearing petition is here and the plaintiffs' petition is here (both links via CAFA Law Blog). 

Three new federal decisions on class action issues: Wolin v. Jaguar Land Rover, Avritt v. Reliastar Life Ins. Co., and Cappuccitti v. DirecTV, Inc.

The Eighth, Ninth and Eleventh Circuits have handed down three decisions of interest in recent weeks: 

• In Wolin v. Jaguar Land Rover North America LLC, ___ F.3d ___ (9th Cir. Aug. 17, 2010), the Ninth Circuit reversed an order denying class certification of vehicle defect claims brought under Michigan and Florida consumer protection laws.
  
  
• In Avritt v. Reliastar Life Ins. Co., ___ F.3d ___ (8th Cir. Aug. 12, 2010), the Eighth Circuit affirmed an order denying class certification of UCL and other consumer protection claims. 
  
  
• In Cappuccitti v. DirecTV, Inc., ___ F.3d ___ (11th Cir. Jul. 19, 2010), the Eleventh Circuit dismissed a putative class action for lack of jurisdiction under CAFA. This opinion (which I think badly misinterprets CAFA and probably won't be followed in other Circuits) has generated a lot of buzz.  Judge Alsup has already declined to follow it in one CAFA case, Gutierrez v. Wells Fargo Bank, N.A., ___ F.Supp.2d ___, 2010 WL 3155934 (N.D. Cal. Aug. 10, 2010) (slip op. at 82). The CAFA Law Blog reported last Friday that a petition for panel or en banc rehearing was filed on August 9, 2010.  

By the way, the extended deadline for the cert. petition in Dukes v. Wal-Mart is this coming Thursday, August 26.  I will post about that and link to the petition as soon as it becomes available online.

[HT to South Florida Lawyers for the link to the Cappuccitti opinion and to The Complex Litigator for the link to Gutierrez.]

New Ninth Circuit CAFA opinion: United Steel v. Shell Oil Co.

On April 21, 2010, the Ninth Circuit handed down a new CAFA opinion, United Steel, Paper & Forestry, Rubber, Manufacturing, Energy, Allied Industrial & Service Workers International Union, AFL-CIO, CLC v. Shell Oil Co., ___ F.3d ___ (9th Cir. Apr. 21, 2010).  The court held that once a case is properly removed under CAFA, the federal courts continue to have jurisdiction even if class certification is ultimately denied: 

Defendants removed this putative class action from state court pursuant to the Class Action Fairness Act of 2005 (CAFA), 28 U.S.C. §§ 1332(d), 1453. After denying class certification, the district court concluded that it no longer had jurisdiction and remanded the case to state court. We accepted defendants’ appeal to consider whether the denial of class certification divests federal courts of jurisdiction over cases removed under § 1332(d). Today we join the Seventh and Eleventh Circuits in holding that it does not. If the putative class action was properly removed to begin with, the subsequent denial of Rule 23 class certification does not divest the district court of jurisdiction. The case remains removed and is not to be remanded to state court.

Slip op. at 6025-26 (footnote omitted).   In so holding, the court followed the lead of two sister circuits: 

Only the Seventh and Eleventh Circuits have squarely considered this issue, and both have held that the post-removal denial of class certification does not divest federal courts of jurisdiction. See Cunningham Charter Corp. v. Learjet, Inc., 592 F.3d 805, 806-07 (7th Cir. 2010); Vega v. T-Mobile USA, Inc., 564 F.3d 1256, 1268 n.12 (11th Cir. 2009).

Id. at 6029-30.

More on Hertz Corp. v. Friend and diversity jursidiction under CAFA

The Supreme Court's opinion in Hertz Corp. v. Friend, 599 U.S. ___ (Feb. 23, 2010), does not mention the Class Action Fairness Act by name, although the action was removed to federal court under CAFA, and the remand order reached the Supreme Court only because 28 U.S.C. section 1453(c) permits appeals from remand orders in CAFA cases. (Generally speaking, post-removal remand orders are not appealable.) 

For purposes of CAFA, and the diversity statute generally, a corporation is deemed a "citizen" of its state of incorporation and "the State where it has its principal place of business." 28 U.S.C. § 1332(c)(1). A corporate defendant's citizenship is key to whether diversity (complete or minimal) exists and whether CAFA's "local controversy" or "home state" exceptions apply. See id. § 1332(d)(2)(A), (d)(3), (d)(4).

In Hertz, the Supreme Court construed the phrase "principal place of business" and adopted the so-called "nerve center test":

We conclude that “principal place of business” is best read as referring to the place where a corporation's officers direct, control, and coordinate the corporation’s activities. It is the place that Courts of Appeals have called the corporation’s “nerve center.” And in practice it should normally be the place where the corporation maintains its headquarters—provided that the headquarters is the actual center of direction, control, and coordination, i.e., the “nerve center,” and not simply an office where the corporation holds its board meetings (for example, attended by directors and officers who have traveled there for the occasion).

Slip op. at 14. As the Court points out, this test does have the benefit, with many potential corporate defendants, of simplicity and predictability. Id. at 15-16. The Court also observes, however, that "under the 'nerve center' test we adopt today, there will be hard cases." Id. at 17. The opinion remands the action for further consideration of whether, applying the "nerve center" test, Hertz is a citizen of New Jersey rather than California. Id. at 19.

My original post on the Ninth Circuit's opinion in Hertz is here.

BREAKING NEWS: Two new cases handed down today and yesterday

Yesterday, the Supreme Court handed down its opinion in the CAFA case, Hertz Corp. v. Friend, ___ U.S. ___ (Feb. 23, 2010).

Today, the Court of Appeal (Third Appellate District) handed down its opinion in McAdams v. Monier, Inc., ___ Cal.App.4th ___ (Feb. 24, 2010), once again reversing the order denying class certification of the CLRA and UCL claims.

I will have more on these opinions later.

U.S. Supreme Court hears argument in CAFA case: Hertz Corp. v. Friend

Yesterday, the U.S. Supreme Court heard oral argument in a CAFA case, Hertz Corp. v. Friend, no. 08-1107.  Here is my earlier blog post discussing that case.  The plaintiffs' position was argued by none other than fellow SFTLA and CAOC Board member Todd M. Schneider of Schneider Wallace in San Francisco.  The transcript is already available online (via SCOTUSblog), and press coverage appears in articles from the National Law Journal, CNNMoney.com, and Courthouse News Service, as well as in today's Daily Journal (no link available).

Being more accustomed to California Supreme Court practice, it's amazing to me how quickly the federal Supreme Court hears cases.  Cert. was granted in June 2009, and argument was heard in November 2009, just five months later.  In the California Supreme Court it takes years to get to the same point.

U.S. Supreme Court takes up CAFA case: Hertz v. Friend

In June, the U.S. Supreme Court granted certiorari in a CAFA case, Hertz Corp. v. Friend, no. 08-1107.  Copies of the cert. petition and other briefs are available at SCOTUSBlog.   This is the statement of the question presented:

Whether, for purposes of determining principal place of business for diversity jurisdiction citizenship under 28 U.S.C. § 1332, a court can disregard the location of a nationwide corporation's headquarters - i.e., its nerve center.

I did not previously report on the very short, unpublished Ninth Circuit opinion in this case, Friend v. Hertz Corp.,  297 Fed. Appx. 690, 2008 WL 4750198 (9th Cir. Oct. 30, 2008). The opinion reads, in full:

MEMORANDUM

Hertz's Notice of Appeal makes clear that Hertz removed this class action under the Class Action Fairness Act (CAFA). 28 U.S.C. § 1453(c). Therefore, even assuming we lack authority “to accept an appeal from the denial of a motion to remand when a class action has been removed to federal court on the basis of traditional diversity jurisdiction,” Saab v. Home Depot U.S.A., Inc., 469 F.3d 758, 759 (8th Cir.2006), rather than pursuant to CAFA, we have jurisdiction over Hertz's timely appeal from the district court's order remanding this class action to state court. 28 U.S.C. § 1453(c)(1).

The district court correctly applied the “place of operations” test to determine Hertz's principal place of business. Tosco Corp. v. Communities for a Better Env't., 236 F.3d 495 (9th Cir.2001); Industrial Tectonics v. Aero Alloy, 912 F.2d 1090 (9th Cir.1990). Taking the facts as set forth in the Declaration of Krista Memmelaar, Hertz's relevant business activities are “significantly larger” in California than in the next largest state, Florida. Although the difference between the amount of Hertz's business activity in California and the amount of its activity in Florida is not as large as the difference deemed to be significant in Tosco, California nevertheless “contains a substantial predominance” of Hertz's operations. Tosco Corp., 236 F.3d at 500.

Neither Tosco nor Industrial Tectonics supports Hertz's argument that we must consider the comparative population of states in which a corporation operates to determine whether activities are significantly larger in one state than another. Id.; Industrial Tectonics, 912 F.2d at 1092. Nor do policy concerns mandate the application of a per capita calculation. With its extensive California contacts and business activities, Hertz is not in jeopardy of being mistreated in California courts.

Because California is Hertz's principal place of business under the “place of operations” test, we do not apply the nerve center test. Tosco, 236 F.3d at 500.

AFFIRMED.

(Footnote omitted.)  Another Ninth Circuit case, Davis v. HBSC Bank Nevada, N.A., 557 F.3d 1026 (2009), will probably be impacted as well.  See this blog post for more on Davis.  The petitioner devoted an entire supplemental brief to a discussion of Davis. 

Recent Ninth Circuit CAFA decision: Davis v. HBSC Bank Nevada

I'm catching up a bit on opinions handed down while I was on a semi-hiatus from blogging. 

In Davis v. HBSC Bank Nevada, N.A., 557 F.3d 1026 (Mar. 4, 2009), the Ninth Circuit construed the term "citizen" for purposes of the local controversy exception to CAFA jurisdiction (28 U.S.C. §1332(d)(4)):

[W]e hold that a nationwide retailer with operations spread across many states will be a citizen of California only when a substantial predominance of its activities are located in California; it will not be a citizen of California merely because its operations in California cater to California’s larger population.

Slip op. at 2786.

"7th Circuit Makes It Harder for Plaintiffs to Keep Securities Class Actions in State Court": Katz v. Gerardi

Today's National Law Journal has this report on a new Seventh Circuit decision, Katz v. Gerardi, ___ F.3d ___ (7th Cir. Jan. 5, 2009), which addresses whether CAFA applies to certain securities class actions and creates a split in authority with the Ninth Circuit. 

In July, the Ninth Circuit held that CAFA's "general grant of the right of removal of high-dollar class actions does not trump" section 22(a) of the Securities Act of 1933 (15 U.S.C. section 77v(a)), which contains a "specific bar to removal of cases [filed in state court and] arising under the ... Act."  Luther v. Countrywide Home Loan Servicing LP, 533 F.3d 1031, 1034 (9th Cir. 2008).

Now, the Seventh Circuit has held that "[c]laims listed in [28 U.S.C.] §1453(d) are not removable. Other securities class actions are removable if they meet the requirements of the 2005 Act (100 investors, $5 million in controversy, minimal diversity). To read §22(a) as Katz [and the Ninth Circuit] does would be to make most of §1453(d) pointless."  Katz, slip op. at 7.  Chief Judge Easterbrook had this to say about the Ninth Circuit's opinion in Luther:

Luther failed to recognize that §22(a) of the 1933 Act is not a subset of the 2005 Act. More importantly, Luther did not appear to understand that §1453(d) tells us how the 2005 Act affects securities cases: the ninth circuit did not analyze this language or even acknowledge its existence. We therefore disagree with Luther and hold that securities class actions covered by the 2005 Act are removable, subject to the exceptions in §1332(d)(9) and §1453(d). Because it creates a conflict among the circuits, this opinion was circulated before release to all judges in active service. See Circuit Rule 40(e). None of the judges favored a hearing en banc.

Id. at 8.

Four new CAFA opinions from the federal appellate courts

The Courts of Appeals for the Second, Fourth, Seventh and Ninth Circuits have all issued CAFA-related opinions in recent weeks:

• In Luther v. Countrywide Home Loans Servicing, LP, ___ F.3d ___ (9th Cir. Jul. 16, 2008), the Ninth Circuit held that CAFA's "general grant of the right of removal of high-dollar class actions does not trump" section 22(a) of the Securities Act of 1933 (15 U.S.C. section 77v(a)), which contains a "specific bar to removal of cases [filed in state court and] arising under the ... Act." Slip op. at 6-7.

• In Strawn v. AT&T Mobility, ___ F.3d ___ (4th Cir. Jun. 30, 2008), the Fourth Circuit held, for the first time, that CAFA did not alter the removing party's ordinary burden of proving that a basis for federal jurisdiction exists. Slip op. at 8 (citing Abrego Abrego v. Dow Chem. Co., 443 F.3d 676 (9th Cir. 2006)). The opinion goes on to address CAFA's $5 million jurisdictional minimum and how it can be established. Id. at 8-11. [Via Competition Law360]

• In Spivey v. Vertrue, Inc., ___ F.3d ___, 2008 WL 2357099 (7th Cir. Jun. 11, 2008), the Seventh Circuit held, contrary to a number of other Circuits, that "less" means "less" (or, rather, "fewer") and not "more" when it comes to the time limit to appeal from a remand order. Coming from that Circuit, such a ruling is not really all that surprising. Accordingly, a petition for permission to appeal filed "not less than 7 days" after the remand order was timely. "To the possibility that this gives litigants forever to appeal, and thus interferes with the objective of ascertaining the correct forum as quickly as possible, we say: No way." Slip op. at 6. In the absence of a specific deadline in CAFA, Federal Rules of Civil Appellate Procedure 4(a) and (5)(a)(2) impose a thirty-day default deadline, which "allow[s] a party 23 days more than the authors [of CAFA] anticipated." Id.

  Drug & Device Law has a lengthy post on Spivey, as does Consumer Law & Policy, and I have covered earlier federal opinions on the "less is more" issue in these several posts.

• Finally, in Estate of Pew v. Cardarelli, 527 F.3d 25 (2d Cir. May 13, 2008), the Second Circuit "join[ed] our sister circuits in interpreting the statute to mean 'not more than 7 days.'" Slip op. at 7 (emphasis in original). The opinion then went on to address the "securities exceptions" to CAFA jurisdiction, ultimately adopting an extremely narrow interpretation of those exceptions, and holding (over the dissent of one judge) that they did not apply to the case before it. Id. at 13-23.

New Seventh Circuit CAFA opinion: Springman v. AIG Marketing

In Springman v. AIG Marketing, Inc., ___ F.3d ___ (7th Cir. Apr. 15, 2008), the Seventh Circuit noted a split among the circuits respecting whether post-removal activity can re-"commence" a case for CAFA removal purposes. Slip op. at 3. This question frequently came up in cases filed before CAFA's effective date of February 18, 2005. According to the opinion, "[t]he outlier is the Ninth Circuit." Id. at 3 (citing McAtee v. Capital One, F.S.B., 479 F.3d 1143, 1145-48 (9th Cir.2007)) (see this post for more on McAtee).

On the Ninth Circuit's view, a plaintiff can defeat removal by first filing a complaint that does not include a claim or a defendant that would trigger the Act's right of removal and later substituting a claim or defendant that would have triggered the right. Suppose that with the Act's effective date looming, the plaintiff had not completed even a minimal pre-complaint investigation. Under the Ninth Circuit's view, the plaintiff could sue Donald Duck for violating a Chicago noise ordinance and then at his leisure amend the complaint to substitute a proper claim against a proper defendant, and the new defendant would not be able to remove.

But even the cases that reject the Ninth Circuit's position forbid removal if the new claim or defendant (new in the sense of having been added after the effective date of the Class Action Fairness Act) "relates back" to the original claim or the original defendant. It would not do so in the Donald Duck case, although that would not faze the Ninth Circuit, which considers relation back important only when necessary to avoid a statute of limitations defense, since, if successful, the defense kills the plaintiff's claim rather than just forcing it to be litigated in a different court system. McAtee v. Capital One, F.S.B., supra, 479 F.3d at 1147.

Id. at 4 (emphasis added). The tone of this passage evinces a remarkable lack of respect for the Ninth Circuit judges who authored the McAtee opinion. It makes you wonder whether briefs filed by lawyers in that court are read with any respect, if the published opinions of other federal appellate judges are not. I also do not think that an analogy that assumes a breach of counsel's professional ethical duties has any place in a federal appellate court opinion.

It is important to remember that in McAtee, the Ninth Circuit was considering the effect of substitutions of named defendants for "fictitious" defendants, which are permitted by California Code of Civil Procedure section 474. Fictitious defendants are usually named "Doe," but section 474 allows them to be "designated ... by any name," including, presumably, "Donald Duck." Defendants with fictitious names are included in virtually all civil complaints filed in California state courts. Fictitious names are particularly useful when the client just brought you the case, the statute of limitations is about to run, and you've had time to identify only one of several potentially liable defendants. California law does not give plaintiffs unlimited "leisure" to substitute the true name for the fictitious name, but the unique California "Doe" procedure certainly justifies the outcome in McAtee — even applying what the Seventh Circuit calls the "majority view." That is because, in McAtee, the plaintiff appears to have acted diligently in naming the "Doe" defendant.

In Springman, the Seventh Circuit held that amending the complaint to substitute one named defendant for another "commenced" a new action for CAFA purposes because, under either federal or state law (there, Illinois law), the amendment would not "relate back" to the original filing date. Id. at 4-10. The "relation back" doctrine would not apply because of the plaintiff's "protracted and inexplicable delay" — he waited three years after learning he had sued the wrong entity — "in changing defendants." Id. at 6-7. Hence, the new defendant may remove the action to federal court under CAFA and the district court correctly denied the remand motion. Id., passim.

"Impact of CAFA on the Federal Courts: Fourth Interim Report"

The Federal Judicial Center's Impact of CAFA on the Federal Courts: Fourth Interim Report to the Judicial Conference Advisory Committee on Civil Rules (April 2008) is now available online.

Other reports and interim reports on CAFA's impact on the federal courts are collected at this link. Articles on class actions in the federal courts generally are collected at this link.

[Via ClassActionBlawg.com, The Complex Litigator]

New Ninth Circuit CAFA decision: Lussier v. Dollar Tree Stores, Inc.

In Lussier v. Dollar Tree Stores, Inc., ___ F.3d ___ (9th Cir. Mar. 7, 2008), the defendant removed the case under CAFA. The district court granted plaintiffs' motion to remand but denied their motion for attorneys' fees. Plaintiffs appealed. The Ninth Circuit affirmed, holding that in the early period after CAFA went into effect, when an action was "commenced" for CAFA removal purposes was an unsettled question. Therefore, the defendant's arguments in support of removal were not objectively unreasonable (even though the arguments "were losers"). Slip op. at 2208. [Via Federal Civil Practice Bulletin]

A collection of recent articles on CAFA

On November 30 and December 1, 2007, the University of Pennslyvania Law Review conducted a symposium entitled "Fairness to Whom? Perspectives on the Class Action Fairness Act of 2005." The papers presented at the symposium will appear in a forthcoming issue of the Review. Meanwhile, draft copies of a number of the papers are available at this link, and they sound very interesting:

• The Class Action Fairness Act of 2005 in Historical Context: A Preliminary View by Stephen B. Burbank

• CAFA Judicata: A Tale of Waste and Politics by Kevin M. Clermont & Theodore Eisenberg

• CAFA and the Revenge of the Mistrusted Lawyer by Howard M. Erichson

• Erie Doctrine Repealed by Congress? by Geoffrey C. Hazard, Jr.

• Class Action Settlements Under Attack by Samuel Issacharoff & Richard A. Nagareda

• The Impact of the Class Action Fairness Act on the Federal Courts: An Empirical Analysis of Filings and Removals by Emery G. Lee III & Thomas E. Willging

• Assessing CAFA's Stated Jurisdictional Policy by Richard L. Marcus

• The Class Action Fairness Act in Perspective: The Old and the New in Federal Jurisdictional Reform by Edward A. Purcell, Jr.

• Normative Lessons on American Federalism From The Class Action Rule of 1966 to the Class Action Fairness Act of 2005: The Political Safeguards of Translocalism and Transnationalism by Judith Resnik

• The Public Role in Private Governance: Some Reflections on CAFA's Early Experience by William B. Rubenstein

• The Role of Choice of Law in National Class Actions by Linda Silberman

• Federal Jurisdiction and Due Process in the Era of the Nationwide Class Action by Tobias Barrington Wolff

New unpublished Fourth Circuit CAFA opinion: Lanier v. Norfolk Southern Corp.

In a new unpublished opinion, Lanier v. Norfolk Southern Corp., 2007 WL 4270847 (4th Cir. Dec. 05, 2007), the Fourth Circuit denied a motion to remand under CAFA and refused to consider the plaintiffs' argument that the "local controversy exception" applied because that argument was raised for the first time on appeal. Slip op. at 7 n.2. [Via Federal Civil Practice Bulletin.]

Several new UCL and class action decisions

A bunch of new UCL and class action decisions have been handed down over the past week and a half:

• Schultz v. Neovi Data Corp., ___ Cal.App.4th ___ (June 15, 2007) (Fourth Appellate District, Division Three) (a Mervyn's "grant and hold" case on remand to the Court of Appeal)

• Linear Technologies Corp. v. Applied Materials, Inc., ___ Cal.App.4th ___ (June 18, 2007) (Sixth Appellate District) (a UCL competitor action)

• Gatton v. T-Mobile USA, Inc., ___ Cal.App.4th ___ (June 22, 2007) (First Appellate District, Division Five) (another case invalidating a no-class-action arbitration clause)

• In re: Ocwen Loan Servicing, LLC Mortgage Servicing Litigation, ___ F.3d ___ (7th Cir. June 22, 2007) (the Seventh Circuit mentions the UCL again, and the CLRA, too, and warns lawyers not to file "a hideous sprawling mess" of a complaint)

• Lott v. Pfizer, Inc., ___ F.3d ___ (7th Cir. June 25, 2007) (addresses CAFA and the right to recover attorneys' fees after improper removal; see this post on the Seventh Circuit's prior opinion in the same case)

• McAdams v. Monier, Inc., ___ Cal.App.4th ___ (May 30, 2007, modified June 25, 2007) (Third Appellate District) (court just issued an order modifying the original opinion; an interesting change in wording re "restitution" "reliance")

• Juarez v. Arcadia Financial., Ltd., ___ Cal.App.4th ___ (June 26, 2007) (Fourth Appellate District, Division One) (probably the most interesting of the bunch; addresses UCL remedies)

I've had limited time to read or analyze these decisions. Time permitting, I will post more about them later on.

"Managing Class Action Litigation: A Pocket Guide for Judges"

In 2005, the Federal Judicial Center published "Managing Class Action Litigation: A Pocket Guide for Judges" (pdf). The preface states that "[t]his pocket guide is designed to help federal judges manage the increased number of class action cases expected as a result of the Class Action Fairness Act of 2005." The guide makes for interesting reading.

CAFA law review article: "The Consumer Class Action Bill of Rights: A Policy and Political Mistake"

The April 2007 issue of the Hastings Law Journal contains an essay by Professor Laurens Walker of the University of Virginia School of Law: "The Consumer Class Action Bill of Rights: A Policy and Political Mistake," 58 Hastings L.J. 849 (2007). Here is the abstract:

This Article discusses the significance of the Consumer Class Action Bill of Rights, found in section 3 of the 2005 Class Action Fairness Act. The author argues that this section is the most significant provision of the law. In addition to expounding upon the notice provision of the Bill of Rights Section, the Article explores the possible responses that public officials could make. Additionally, the author predicts a strong degree of public participation in class action settlements, especially by the Attorneys General of the states. The Article also considers the Act's substantive regulation of settlement terms, including "coupon settlements," as well as general prohibitions on negative settlements and geographic discrimination. The author examines the public and private enforcement models and discusses the comparative efficiency of public versus private enforcement. Lastly, the Article considers the jurisdictional provisions found in sections 4 and 5 of the Class Action Fairness Act, particularly the changes to minimal diversity and the facilitation of removal to federal court.

Using a comparative study of class actions in federal and state court, the author predicts that jurisdictional provisions will result in the litigation of most major class actions in federal court, but with little impact on the outcome of these cases. The author finds that the Bill of Rights view toward public enforcement is a costly policy and political mistake, and a better solution would have been found in providing for more robust private enforcement.

[Via Federal Civil Practice Bulletin]

New Fifth Circuit CAFA case: Preston v. Tenet Healthsystems Memorial Medical Center, Inc.

In Preston v. Tenet Healthsystems Memorial Medical Center, Inc., ___ F.3d ___ (5th Cir. Apr. 25, 2007), the Fifth Circuit examined the term "citizen" for purposes of CAFA's "home state" and "local controversy" exceptions: "The underlying facts of this lawsuit and the reason for the parties contesting the citizenship issue emanate from a common origin of circumstances: the unmerciful devastation caused by Hurricane Katrina." Slip op. at 18.

The Fifth Circuit talked at length about the kinds of evidence that can be used to prove citizenship for CAFA purposes. It then affirmed the district court's remand order:

We recognize that Congress crafted CAFA to exclude only a narrow category of truly localized controversies, and the exceptions provide a statutory vehicle for the district courts to ferret out the “controversy that uniquely affects a particular locality to the exclusion of all others.” Evans [v. Walter Indust., Inc.], 449 F.3d [1159,] 1164 [(11th Cir. 1996)]. This particular Hurricane Katrina case symbolizes a quintessential example of Congress’ intent to carve-out exceptions to CAFA’s expansive grant of federal jurisdiction when our courts confront a truly localized controversy. Based on the medical records, affidavits, and attending factual circumstances, we determine that the district court did not clearly err in finding that one-third of the class members were citizens of Louisiana at the time of filing suit. Accordingly, we affirm the district court’s judgment.

Id. at 30. (Via Decision of the Day.)

New Eleventh Circuit CAFA case: Lowery v. Alabama Power Co.

In Lowery v. Alabama Power Co., ___ F.3d ___ (11th Cir. Apr. 11, 2007), the Eleventh Circuit "unravel[s] some of the mysteries of CAFA’s cryptic text." (Slip op. at 2.) The 77-page opinion addresses four issues:

The defendants’ appeals require us to address four distinct issues, and we address each in turn in the parts of this opinion that follow. In part II, we consider whether the removal of an action under CAFA by a defendant added as a party after CAFA’s effective date removes the claims against all of the defendants in the action – including those claims brought before the effective date. Part III dissects CAFA’s “mass action” provisions to identify the requirements for subject matter jurisdiction created by those provisions. In part IV, we set forth the applicable burden of proof in establishing subject matter jurisdiction in a removed case in which damages are unspecified, and we identify the party that bears this burden under CAFA. In part V, we determine what a district court may consider in reviewing the propriety of removal that is timely challenged by a motion to remand. This inquiry requires us to examine the significance of the existing removal procedures under 28 U.S.C. § 1446 – which are incorporated, in part, by CAFA – as well as the propriety of post-removal discovery on the issue of jurisdiction. Part VI applies the relevant legal principles to the instant case. Finally, part VII briefly concludes.

Slip op. at 13-14. The Court summarizes its holdings as follows:

A brief summary of our conclusions is warranted. First, we hold that any one defendant authorized under CAFA to remove the plaintiffs’ claims against that defendant to federal court may remove the action as a whole, regardless of whether other defendants in the action would be authorized to remove their claims.

Second, we hold that CAFA sets forth at least four threshold requirements for a federal court to have subject matter jurisdiction over a removed mass action. Where the parties are minimally diverse, the action consists of 100 plaintiffs or more, the plaintiffs’ claims share common questions of law or fact, and the potential aggregate value of all the claims exceeds $5,000,000, the action may be removed to federal court as a mass action.

Third, we hold that the defendants are not entitled to remand to the district court for limited jurisdictional discovery, nor may the district court conduct such discovery on its own initiative.

Moving to the merits, we hold that the defendants here are unable to meet their burden of establishing the requirements for federal jurisdiction over a mass action, because they are unable to establish that the plaintiffs’ claims are potentially valued at more than $5,000,000. Tracking § 1446(b), we note that the defendants’ notice of removal contained no document clearly indicating that the aggregate value of the plaintiffs’ claims exceeds that amount and, as such, they are unable to establish federal jurisdiction by a preponderance of the evidence.

In sum, though our reasoning diverges substantially from that of the district court, the disposition of this case remains the same. Remanding this action to state court was the appropriate course. The district court’s order is accordingly AFFIRMED.

Slip op. at 76-77. Consumer Law & Policy Blog has more on the decision.

Two more Ninth Circuit CAFA decisions: Lowdermilk v. United States Bank, NA and McAtee v. Capital One, F.S.B.

The Ninth Circuit has handed down three CAFA decisions since March 2, 2007. I've already discussed one of the three, Progressive West Ins. Co. v. Preciado, ___ F.3d ___, 2007 WL 725717 (9th Cir. Mar. 6, 2007), at this post. Here are the two others:

• In Lowdermilk v. United States Bank, NA, ___ F.3d ___ (9th Cir. Mar. 2, 2007), the court addressed the burden of proof that applies when the plaintiff's complaint expressly pleads less than the CAFA jurisdictional amount, yet the defendant removes anyway, asserting that the amount-in-controversy requisite has been met. The court preserved the rule that the plaintiff is the master of his or her complaint, and held that "the party seeking removal must prove 'with legal certainty' that the amount in controvery is satisfied, notwithstanding the prayer for relief in the complaint." Slip op. at 2. Judge Kleinfeld filed a dissenting opinion.

• In McAtee v. Capital One, F.S.B., ___ F.3d ___ (9th Cir. Mar. 16, 2007), the court addressed an issue very similar to the one raised in Progressive West. Both cases addressed what kinds of amendments to the complaint "commence" a new action for CAFA purposes. In McAtee, the court held that amending the complaint to substitute a named defendant in place of a "Doe" defendant under California Code of Civil Procedure section 474 does not "commence" a new action under CAFA. The McAtee opinion spends a lot of time explaining Progressive West, decided ten days earlier. This is a good thing, because Progressive West was very unclear in my opinion, especially its analysis of the "relation back" doctrine. Essentially, McAtee explains that under Progressive West, an action filed in California state court is "commenced" for CAFA purposes when the original complaint is filed, regardless of any subsequent amendment and regardless of whether the subsequent amendment "relates back" under California law or not. This holding creates a split among the Circuits. The earliest Circuit court opinions to address this question held that a new action is "commenced" only if the amendment in question does not "relate back" under the law of the state where the action was filed. See, e.g., Phillips v. Ford Motor Co., 435 F.3d 785 (7th Cir. 2006) (discussed in this post); Knudsen v. Liberty Mut. Ins. Co., 435 F.3d 755 (7th Cir. 2006) (discussed in this post). In the Ninth Circuit, under McAtee and Progressive West, the "relation back" doctrine is wholly irrelevant.

New Ninth Circuit CAFA decision: Progressive West Ins. Co. v. Preciado

In Progressive West Ins. Co. v. Preciado, ___ F.3d ___ (9th Cir. Mar. 6, 2007), plaintiff Progressive West filed a breach of contract action against one of its insureds. On February 17, 2005, the day before CAFA went into effect, the insured filed a cross-complaint for violation of the UCL. The original cross-complaint pleaded the UCL claim as a non-class, representative action. In approximately August 2006, the insured filed an amended cross-complaint that added formal class allegations to the UCL claim. Thereafter, Progressive West removed the action to federal court, asserting CAFA jurisdiction. The district court granted the insured's motion to remand, and the Ninth Circuit affirmed.

The opinion contains two holdings of note. First, the court held that the filing of the original, representative UCL cross-complaint on February 17, 2005 "commenced" the action for CAFA purposes — not the later filing of the amended cross-complaint with the formal class allegations. Slip op. at 3-4. Second, the court held that even if CAFA applied, Progressive West still could not remove the action to federal court because it was not the "defendant":

CAFA does not alter the longstanding rule ... that precludes plaintiff/cross-defendants from removing class actions to federal court. For this reason, Progressive would lack statutory authority to remove the action pursuant to CAFA even if the action had commenced after CAFA’s effective date.

Slip op. at 9-10. Interestingly, this same lawsuit resulted in a published California Court of Appeal opinion at the end of 2005, Progressive West Ins. Co. v. Superior Court (Preciado), 135 Cal.App.4th 263 (2005), in which the Court of Appeal held that the trial court properly overruled Progressive West's demurrer to the UCL claim. The amended complaint with the class action allegations must have been filed after that opinion issued. My original post on that opinion is here.

Recent Eleventh Circuit CAFA decision: Main Drug, Inc. v. Aetna U.S. Healthcare, Inc. and

In Main Drug, Inc. v. Aetna U.S. Healthcare, Inc., ___ F.3d ___ (11th Cir. Jan. 16, 2007), the plaintiffs filed suit in state court, the defendants removed the action under CAFA, the district court denied the motion to remand, and the plaintiffs filed a notice of appeal. The Eleventh Circuit dismissed the appeal for lack of jurisdiction, holding that it would be "too much of a stretch" to interpret a notice of appeal as a petition for permission to appeal under CAFA (28 U.S.C. §1453(c)(1)), which is the required procedure for seeking appellate review of a CAFA remand order. One judge on the panel was a Ninth Circuit judge sitting by designation.

[Via Federal Civil Practice Bulletin]

New Ninth Circuit CAFA decision: Serrano v. 180 Connect, Inc.

On Thursday, in Serrano v. 180 Connect, Inc., ___ F.3d ___ (9th Cir. Feb. 22, 2007), the Ninth Circuit held that the party seeking remand bears the burden of proving the "home state" and "local controvery" exceptions to CAFA removal jurisdiction. In so holding, the court discussed Lao v. Wickes Furniture Co., 455 F.Supp.2d 1045 (C.D. Cal. 2006), a decision that generated a lot of attention, including this Daily Journal article (subscription) (see also this blog post).

In Lao, District Judge Stephen G. Larsen held that CAFA's "home state" and "local controversy" exceptions are not "exceptions" at all but rather "integral component[s] of the removal provisions themselves." Lao, slip op. at 20. The Ninth Circuit disagreed:

We are not persuaded by Lao's reasoning because it is inconsistent with the statute. As noted above, §§ 1332(d)(4)(A) and (B) require federal courts – although they have jurisdiction under § 1332(d)(2) – to “decline to exercise jurisdiction” when the criteria set forth in those provisions are met. Subsections (d)(4)(A) and (B) are not part of the prima facie elements of jurisdiction ... but, instead, are exceptions to jurisdiction.

Serrano, slip op. at 13-14. The Ninth Circuit went on to conclude that the party seeking remand bears the burden of proving the "home state" and "local controversy" exceptions, just like any other exceptions to federal removal jurisdiction. Id. at 14-17.

"Two Years on, Class-Action Law Brings Unclear Effects"

Friday's Daily Journal had this article (subscription) on the Class Action Fairness Act two years after it was enacted. Among other things, the article discusses the split in authority among federal courts over who bears the burden of proving that the "home state" and "local controversy" exceptions to CAFA removal jurisdiction are present:

The Class Action Fairness Act has created confusion over who has the burden of proof to show why a case filed in state court should or should not be moved to federal court.

Three federal circuits - the New Orleans-based 5th Circuit, the Chicago-based 7th Circuit and the Atlanta-based 11th Circuit - have ruled that the burden falls on plaintiffs. But Los Angeles U.S. District Judge Stephen G. Larson, who has been on the bench less than a year, took a contrary view in an October ruling that quickly became the buzz of the class-action bar.

The New York-based 2nd Circuit has agreed with Larson's reasoning, leading some lawyers to say that the Supreme Court will be forced to resolve the conflict among courts.

"It's the first question in CAFA that's leading to a circuit split and important enough for Supreme Court review," Cabraser said.

Larson did not mince words in criticizing how the law was drafted.

"[It is] a statute in which some major terms are left undefined, certain of the provisions of which have been aptly described as 'bewildering' or 'clumsily crafted' and whose legislative history is ... of questionable interpretive value," he wrote in Lao v. Wickes Furniture Company, 06-448 (C.D. Cal.).

The plaintiffs, former and current sales representatives at Wickes Furniture Company Inc. showrooms, filed suit in San Bernardino County Superior Court in April, citing employment-law violations. The defendants sought to remove the case to federal court, but Larson declined their request, ruling that they had failed to prove that the Class Action Fairness Act applied because a majority of the plaintiffs and the primary defendant are from California.

An appeal to the 9th Circuit is in progress. Lawyers on both sides declined comment.

The full cite for Judge Larson's ruling, in which he found that CAFA's "home state" and "local controversy" exceptions are not "exceptions" at all but rather "integral component[s] of the removal provisions themselves," is Lao v. Wickes Furniture Co., Inc., 455 F.Supp.2d 1045 (C.D. Cal. 2006) (slip op. at 20) (link via CAFA Law Blog). Consumer Law & Policy Blog had a lengthy discussion of the decision in October.