The UCL Practitioner

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.

Another Second Circuit CAFA opinion: Fears v. Wilhelmina Model Agency, Inc.

In Fears v. Wilhelmina Model Agency, Inc., ___ F.3d ___ (2d Cir. Jan. 4, 2007), the Second Circuit affirmed an order granting final approval of an antitrust class action settlement, but reversed the order's distribution plan and attorneys' fees award, remanding for further consideration. The district court had awarded, as attorneys' fees, a percentage of the claims made from the settlement fund, rather than a percentage of the entire fund generated as a result of the litigation. Slip op. at 14-15. As authority for doing so, the district court cited the PSLRA and CAFA, reasoning that both statutes evinced congressional intent to curtail attorneys' fees awards in class action cases. Id. at 15.

The Second Circuit reversed. It rejected the notion that anything about either the PSLRA or CAFA suggested that attorneys' fees should be limited in class action cases generally:

The fee restrictions described in the PSLRA do not apply in any context other than securities class actions, and, even if they did, it is not clear how they would apply. The statute speaks in terms of a percentage of damages “actually paid to the class.” But the entire fund created by the efforts of counsel presumably is “paid to the class,” even if some of the funds are distributed under the Cy Pres Doctrine. The PSLRA would not allow for the computation of fees on the basis of such non-damages items as discounts on coupons received in settlement. A key consideration required by the PSLRA “is the result actually achieved for class members, a basic consideration in any case in which fees are sought on the basis of a benefit achieved for class members.” Advisory Comm. Notes to Fed. R. Civ. P. 23, 2003 Amendments. Arguably, the entire Settlement Fund is a “benefit achieved for class members.”

The District Court’s reliance on the CAFA is also misplaced. The CAFA recites as its purpose the following: “To amend the procedures that apply to consideration of interstate class actions to assure fairer outcomes for class members and defendants, and for other purposes.” Class Action Fairness Act, Pub. L. No. 109-2, 119 Stat. 4 (2005). However, the only mention of fees to be allowed to class counsel deals with the award of fees in coupon settlement cases. See 28 U.S.C. § 1712(a)–(c).

Slip op. at 23-24.

New Second Circuit CAFA opinion: Blockbuster, Inc. v. Galeno

In Blockbuster, Inc. v. Galeno, ___ F.3d ___ (2d Cir. Dec. 26, 2006), the Second Circuit held that CAFA did not change the ordinary rule that the removing party bears the burden of proving federal jurisdiction:

An old proverb teaches that "Heaven suits the back to the burden." The Concise Oxford Dictionary of Proverbs 94 (J.A. Simpson ed., 1982). It is well-settled that the party asserting federal jurisdiction bears the burden of establishing jurisdiction. R. G. Barry Corp. v. Mushroom Makers, Inc., 612 F.2d 651, 655 (2d Cir. 1979). So in this case we may correctly say that the law suits the back to the burden. Under this rule, Blockbuster ought to shoulder the burden because it removed the action to federal court from state court. See DiTolla v. Doral Dental IPA of New York, No. 06-2324, 2006 WL 3335125, *3-4 (2d Cir. Nov. 17, 2006) (ruling simply that CAFA has not changed the traditional rule that the party asserting federal jurisdiction bears the burden of establishing jurisdiction).

....

.... Blockbuster must show that it appears to a "reasonable probability" that the aggregate claims of the plaintiff class are in excess of $5 million. Mehlenbacher v. Akzo Nobel Salt, Inc., 216 F.3d 291, 296 (2d Cir. 2000); 28 U.S.C. § 1332(d)(2), (6).

Slip op. at 10-11, 13. [Via Consumer Law & Policy Blog.]

Loyola of Los Angeles Law Review CAFA symposium

The September 2006 issue of the Loyola of Los Angeles Law Review is a symposium of mostly student-written articles on CAFA. There are some interesting titles and the full text of each article is available online.

New Eighth Circuit CAFA decision: Saab v. Home Depot U.S.A., Inc.

In Saab v. Home Depot U.S.A., Inc., ___ F.3d ___ (8th Cir. Nov. 22, 2006), the Eighth Circuit held that the CAFA provision permitting interlocutory appeals from remand orders (28 U.S.C. section 1453(c)(1)) "does not permit us 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, § 1332(a)":

Saab urges us to interpret § 1453(c)(1) expansively and to give federal courts of appeal the jurisdiction to review the grant or denial of a motion to remand any class action. This argument does not differentiate between class actions removed pursuant to § 1332(a) (traditional diversity jurisdiction) or § 1332(d) (CAFA diversity jurisdiction). We reject this contention.

Slip op. at 2. [Hat Tip: Consumer Law & Policy Blog]

New Second Circuit CAFA decision: DiTolla v. Doral Dental

In DiTolla v. Doral Dental IPA of New York, Inc., ___ F.3d ___ (Nov. 17, 2006), the Second Circuit addressed CAFA's requirement that appeals be decided within 60 days after "filing":

CAFA’s 60-day clock for rendering judgment starts running on the day that the Court’s order granting permission to appeal is filed. In so holding, we join several of our sister circuits. See Hart v. FedEx Ground Package System Inc., 457 F.3d 675, 678 (7th Cir. 2006); Evans v. Walter Industries, Inc., 449 F.3d 1159, 1162-63 (11th Cir. 2006); Patterson v. Dean Morris, L.L.P., 444 F.3d 365 (5th Cir. 2006); Bush v. Cheap Tickets, Inc., 425 F.3d 683, 685-86 (9th Cir. 2005).

Slip op. at 6-7. Next, the court held that CAFA did not alter the rule that the party seeking removal bears the burden of establishing jurisdiction:

It is well-settled that, prior to CAFA’s enactment, “[t]he party asserting federal jurisdiction [bore] the burden of proving that the case [was] properly in federal court.” Gilman v. BHC Sec., 104 F.3d 1418, 1421 (2d Cir. 1997) (citing McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189 (1936)). It is an issue of first impression in this Court whether CAFA has changed this traditional rule. Substantially for the reasons articulated by the District Court, we join three of our sister circuits and hold that it has not. See Miedema v. Maytag Corp., 450 F.3d 1322, 1328-29 (11th Cir. 2006); Abrego Abrego v. Dow Chem. Co., 443 F.3d 676, 685 (9th Cir. 2006); Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 448 (7th Cir. 2005).

Slip op. at 7. Finally, the court construed CAFA's "amount in controversy" provision in the context of an accounting claim. It determined that the amount of the fund of which the accounting was sought was not "in controversy," as that term is used in CAFA:

[Plaintiff's] complaint does not even purport to suggest the value of, much less lay claim to, the [fund]. It seeks only an accounting, the results of which are presently unknown. For that reason, no one can say how much money may be ultimately claimed by [plaintiff]. .... [W]e may infer that if the accounting were to reveal such potential fraud, [plaintiff] and the putative class would stand to gain court-ordered restitution or a settlement. We cannot say beyond mere speculation, however, whether those damages, if they are awarded, would be more than $5 million. [Defendant] has thus failed to demonstrate that the claim here satisfies CAFA’s jurisdictional amount in controversy.

Slip op. at 10, 12. [Hat tip: Consumer Law & Policy Blog]

New Seventh Circuit CAFA decision: Santamarina v. Sears, Roebuck & Co.

In Santamaria v. Sears, Roebuck & Co., ___ F.3d ___ (7th Cir. Oct. 19, 2006), the Seventh Circuit (Judge Posner) affirmed an order remanding a pre-CAFA action to California state court, where it was originally filed. The case was MDL'd to the Northern District of Illinois after a federal judge in California denied plaintiffs' motion to remand. On reconsideration, the federal judge in Illinois remanded the case back to California state court, and the defendant appealed to the Seventh Circuit. The Seventh Circuit held that the federal judge in Illinois had the power to reconsider the California judge's ruling, then held that filing an amended complaint adding two new class representatives as plaintiffs did not "kick off a new action" for CAFA purposes. In reaching the latter conclusion, the Court interpreted California law governing whether a later-filed action "relates back" to the original filing date (a rule that comes up mainly in the context of statute of limitations analyses). [Hat tip: How Appealing.]

UPDATE: For more on the Santamaria decision, see this post at Consumer Law and Policy Blog.

New Third Circuit CAFA opinion also holds that "less" is "more": Morgan v. Gay

On Monday, the Third Circuit joined the Ninth, Tenth and Eleventh Circuits in holding that "less" is "more" when it comes to CAFA's appellate filing deadline. Morgan v. Gay, ___ F.3d ___ (3d Cir. Oct. 16, 2006). [Hat tip: How Appealing]

UPDATE: Consumer Law & Policy Blog has an interesting and more detailed discussion of the Morgan decision.

UPDATE: The Legal Intelligencer reports that "Less Means More: 3rd Circuit Fixes Congressional Typo."

Federal Judicial Center report on CAFA

On September 7, 2006, the Federal Judicial Center issued a report entitled "The Impact of the Class Action Fairness Act of 2005: Second Interim Report to the Judicial Conference Advisory Committee on Civil Rules." According to the introduction:

[T]he Federal Judicial Center has undertaken a long-term study of the impact of the Class Action Fairness Act of 2005 (CAFA) on the resources of the federal courts. The following report presents preliminary data on the number, frequency, and types of class action filing and removal activity in the federal district courts between July 1, 2001, through June 30, 2005.

Consumer Law & Policy Blog provides a more detailed summary of the report.

"'Less' is 'More'? Textualism, Intentionalism, and a Better Solution to the Class Action Fairness Act's Appellate Deadline Riddle"

This article was recently posted at SSRN:

Steinman, Adam, "'Less' is 'More'? Textualism, Intentionalism, and a Better Solution to the Class Action Fairness Act's Appellate Deadline Riddle" (August 25, 2006). University of Cincinnati Public Law Research Paper No. 06-13.

The full text is available for download here. My own blog posts on the recent federal decisions on the "less is more" issue are here, here, and here.

[Hat tip: How Appealing]

New Seventh Circuit CAFA opinion: Hart v. FedEx Ground Package System, Inc.

In Hart v. FedEx Ground Package System, Inc., ___ F.3d ___ (7th Cir. Aug. 9, 2006), the Seventh Circuit addressed two of CAFA's mandatory exceptions to federal jurisdiction, the "local controversy" exception and the "home-state controversy" exception. The court held that, while the defendant bears the burden of proving that CAFA's initial requisites to jurisdiction have been met, the plaintiff bears the burden of proving that an exception applies. In so holding, the court followed recent decisions of the Fifth and Eleventh Circuits, Frazier v. Pioneer Americas LLC, No. 06-30434, 2006 WL 1843629 (5th Cir. July 6, 2006) and Evans v. Walter Industries, Inc., 449 F.3d 1159, 1165 (11th Cir. 2006). The court also held that "plaintiffs have the right, through appropriate discovery, to explore the facts relevant to the court’s jurisdiction as the case progresses." (Slip op. at 13.) [Hat tip: CAFA Law Blog]

More CAFA-related law review articles

CAFA Law Blog has compiled a lengthy list of law review articles related to the Class Action "Fairness" Act.

New Eleventh Circuit CAFA decision: Miedema v. Maytag Corp.

In Miedema v. Maytag Corp., ___ F.3d ___ (June 5, 2006), the Eleventh Circuit agreed with the Ninth Circuit that "less" is "more," and held that the seven-day period to file an application for permission to appeal a CAFA remand order is a deadline, not a waiting period: "[T]o read [the statute] literally would create an absurd result: there would be a front-end waiting period (an application filed 6 days after entry of a remand order would be premature), but there would be no back-end limit (an application filed 600 days after a remand order would not be untimely)." (Slip op. at 6-7.) My prior coverage of the Ninth Circuit's "less is more" decision, Amalgamated Transit Union Local 1309, AFL-CIO v. Laidlaw Transit Servs., Inc., 435 F.3d 1140 (9th Cir. 2006), is here and here.

The Eleventh Circuit also held that CAFA does not alter the rule that the defendant bears the burden of proving that jurisdiction exists, or the rule that removal stautes should be strictly construed and any doubts resolved in favor of remand. (Slip op. at 8-14.) The court then affirmed the district court's remand order, holding that the defendant had not proven the requisite amount in controversy by a preponderance of the evidence. (Slip op. at 14-19.) [Hat tip: How Appealing.]

Spring/Summer 2006 issue of Competition

The Spring/Summer 2006 issue of Competition: The Journal of the Antitrust and Unfair Competition Law Section of the State Bar of California is now out. It has two articles of interest relating to CAFA:

• Thomas S. Hixson, "The Class Action Fairness Act of 2005: One Year Later"
• Lisa Saveri, "Implications of the Class Action Fairness Act for Antitrust Cases: From Filing Through Trial"

Ninth Circuit denies en banc rehearing in CAFA "less is more" case: Amalgamated v. Laidlaw

Yesterday, the Ninth Circuit denied en banc rehearing of its "less is more" opinion, Amalgamated Transit Union Local 1309, AFL-CIO v. Laidlaw Transit Servs., Inc., 435 F.3d 1140 (9th Cir. 2006). The order denying rehearing is here. It is an interesting order because it includes not only a six-judge dissent, but also an introductory explanation (presumably authored by the original panel) further justifying the conclusion that CAFA's language and legislative history compel the result that the 7-day time period to file a petition for permission to appeal from an order granting or denying remand is a deadline, not a waiting period. My original post on Amalgamated is here.

New Fifth Circuit CAFA decision: Braud v. Transport Service Co.

Federal Civil Practice Bulletin has more on the Fifth Circuit's decision in Braud v. Transport Service Co., ___ F.3d ___ (5th Cir. Apr. 6, 2006).

New Ninth Circuit CAFA decision: Abrego v. Dow Chemical

Yesterday, the Ninth Circuit issued a new CAFA decision, Abrego v. Dow Chemical Co., ___ F.3d ___ (9th Cir. Apr. 4, 2006). Its key holdings are (1) CAFA did not alter the burden of proving that federal removal jurisdiction is appropriate; the defendant retains that burden (slip op. at 16-23); (2) for a "mass action" to be subject to removal, at least one plaintiff's claims must individually meet the $75,000 jurisdictional requirement (slip op. at 23-32); and (3) the district court has discretion to deny jurisdictional discovery; CAFA does not require that such discovery be permitted (slip op. at 32-38). The decision addresses the "bewildering" (slip op. at 23) language of CAFA in some detail and is worth a read.

"The Unfairness of the Class Action Fairness Act"

The March 2006 issue of Los Angeles Lawyer had this interesting article (pdf file of entire issue; scroll to page 52), which harshly criticized CAFA. [Hat tip: Federal Civil Practice Bulletin.]

New CAFA decision: Patterson v. Dean Morris

In Patterson v. Dean Morris, LLP, ___ F.3d ___ (Mar. 22, 2006), the Fifth Circuit held (with one judge dissenting) that the statutory time limit for the federal courts of appeals to rule on a discretionary appeal from an order granting or denying remand under CAFA (60 days) does not begin to run until leave to appeal is granted. [Hat tip: How Appealing]

The Fifth Circuit also followed a recent Ninth Circuit holding that the losing party's 7-day time limit to file a petition for permission to appeal is 7 court days, not 7 calendar days. Slip op. at 7 n.1 (citing Amalgamated Transit Union Local 1309, AFL-CIO v. Laidlaw Transit Servs., Inc., 435 F.3d 1140, 1146 (9th Cir. 2006)). The Ninth Circuit so held in Amalgamated even though the statute says that the petition "must be made to the court of appeals not less than seven days after entry of the order," suggesting that the 7 days is a waiting period, not a deadline. 28 U.S.C. § 1453(c)(1) (emphasis added). The court explained that "there is no apparent logical reason for the choice of the word 'less' in the statute" and that "use of the word 'less' is, in fact, illogical and contrary to the stated purpose of the provision." Amalgamated, 435 F.3d 1140 (slip op. at 1093-94).

Another new Seventh Circuit CAFA case: Knudsen v. Liberty Mutual

On January 27, 2006, the Seventh Circuit issued another CAFA opinion, this time holding that "a novel claim tacked on to an existing case commences new litigation for purposes of the Class Action Fairness Act." Knudsen v. Liberty Mutual Ins. Co., ___ F.3d ___ (7th Cir. Jan. 27, 2006). The defendant's previous effort to remove this case to federal court under CAFA failed. See Knudsen v. Liberty Mutual Ins. Co., 411 F.3d 805 (7th Cir. 2005). The latest opinion is noteworthy because I believe it is the first one in which a case originally filed before CAFA's effective date was successfully removed based on post-CAFA activity in the trial court. [Hat tip: How Appealing.]

New Seventh Circuit CAFA case: Phillips v. Ford Motor Co.

The Seventh Circuit has probably issued more CAFA decisions than any other Circuit, and they are certainly more interesting. Last week, in Phillips v. Ford Motor Co., ___ F.3d ___ (7th Cir. Jan. 30, 2006), the Seventh Circuit held that substituting representative plaintiffs in a pending putative class action does not "commence" a new suit and permit removal under CAFA:

Substitution of unnamed class members for named plaintiffs who fall out of the case because of settlement or other reasons is common and normally an unexceptionable ("routine") feature of class action litigation. [Citations.] But there is a potential complication here: the plaintiff class ... has not been certified ....

Strictly speaking, if no motion to certify has been filed (perhaps if it has been filed but not acted upon), the case is not yet a class action and so a dismissal of the named plaintiffs' claims should end the case. If the case is later restarted with a new plaintiff, it is a new commencement, a new suit. But the courts ... are not so strict. Unless jurisdiction never attached, ... or the attempt to substitute comes long after the claims of the named plaintiffs were dismissed, substitution for the named plaintiffs is allowed. [Citations.]

The courts thus disregard the jurisdictional void that is created when the named plaintiffs' claims are dismissed and, shortly afterwards, surrogates step forward to replace the named plaintiffs.

(Slip op. at 3, 4.) The Court held that the determinative question is whether, under state law, such an amendment "relates back" for statute of limitations purposes. If it does, then no new action has been "commenced" under CAFA.

A recent Court of Appeal decision, Shapell Industries, Inc. v. Superior Court, 132 Cal.App.4th 1101 (2005), is a prime example of a (non-CAFA) case in which the "jurisdictional void" was disregarded. The Shapell court also noted the "unusual procedural scenario" presented when the representative plaintiff's claims are dismissed prior to certification, yet allowed amendment to substitute a new representative plaintiff. (My original post on Shapell is here.)

Congratulations, Jan!

Speaking of my former partners, I want to extend a long-overdue congratulations to my former partner Jan T. Chilton, also of Severson & Werson. On November 8, Jan presented oral argument before the United States Supreme Court in one of the first cases to be argued before Chief Justice John Roberts. And on December 7, in his first opinion for the Court, Chief Justice Roberts handed Jan a complete and total win. Martin v. Franklin Capital, 546 U.S. ___ (Dec. 7, 2005). A copy of Jan's winning brief is accessible here, the transcript of the argument is here, and SCOTUSblog's post-argument report is here. The case involved whether the plaintiff can recover attorneys' fees for winning a motion to remand a case that was improperly removed to federal court. The decision will increase in importance as more and more cases are removed under CAFA. Jan is the best brief-writer I have ever encountered. I learned a great deal about appellate advocacy and legal writing from working with him.

CAFA in action

You might have read some of the news reports last week about a new nationwide class action against Apple alleging that the iPod Nano is defective because the display screen scratches too easily. A copy of the first amended complaint is accessible here. The action was filed in the Northern District of California in San Jose, and includes claims based on the warranty and consumer protection laws of the 50 states (except California, a notable omission; the original complaint, which is no longer available online, included California and a UCL claim). I'm not at all privy to the plaintiffs' strategy here, but this case has CAFA written all over it.

New CAFA decision: Pfizer, Inc. v. Lott

In Pfizer, Inc. v. Lott, ___ F.3d ___ (7th Cir. Aug. 4, 2005), the Seventh Circuit rejected another attempt to remove a case to federal court based on the Class Action "Fairness" Act. But before getting to the CAFA issues, the court (Judge Posner) neatly explained the Supreme Court's holding in Exxon Mobil Corp. v. Allapattah Service, Inc., 125 U.S. 2611 (2005) in a single sentence:

The named plaintiffs stipulated that they would not seek or even accept damages in excess of $75,000, and while the stipulation would not bind the other members of the class, the likelihood that [any class member] had damages in excess of $75,000 was sufficiently remote to cast on [the defendant] the burden of presenting some evidence or argument to establish the plausibility of an inference that at least one member of the class could cross the $75,000 threshold, which would establish jurisdiction over the entire class.

Slip op. at 2 (citations omitted). (I'm glad to find I got it right after my quick read of Exxon when it came down in late June.) (UPDATE: An anonymous commenter points out that I was too quick to endorse Judge Posner's reading of Exxon. Exxon held that if "at least one named plaintiff" (not just any class member) meets the $75,000 jurisdictional threshold, then diversity jurisdiction is present. Thanks to Mr./Ms. Anonymous for pointing this out.)

After determining that diversity jurisdiction was not present under Exxon, the court turned to CAFA. The case was filed in state court on the day before CAFA was enacted, and was removed within thirty days after that. The court rejected the argument that the word "commenced" in CAFA meant the date of removal. Slip op. at 3. It's interesting that the court employed the state-law definition of the word "commenced" in determining its meaning for purposes of CAFA. In Illinois, the filing of the complaint "commenced" the case, so CAFA did not apply. Slip op. at 3. This means that, potentially, CAFA might operate differently in some states than in others. The opinion ended with these words:

This is not to belittle Pfizer's indignation at the plaintiffs' having beat the statute by one day, but their gamesmanship actually hurts its argument. Pharmaceutical and other companies that pressed for the enactment of the Class Action Fairness Act were doubtless acutely aware, as the bill that became the statute was wending its way through Congress en route to enactment, that the prospect of its enactment would spur the class action bar to accelerate the filing of state-law class actions in state courts. Doubtless the companies made their concerns known to Congress. The fact that Congress did not respond by writing "removed" (or "removed after the date of enactment but within 30 days of the orignal filing") instead of "commenced" is telling.

Slip op. at 4. Is it "gamesmanship" to file suit based on the law in effect on the filing date? I would argue not. As the opinion observes, Congress could have made CAFA retroactive if it wished to. Nor should a defendant be "indignant" about being sued if, in fact, it violated the law. But in any event, thanks to the reader who forwarded this case to me. And for more interesting reading, check out the Becker-Posner Blog, which Judge Posner writes with Professor Gary Becker (winner of the Nobel Prize in Economics).