#11094 - Coordination Of Class Proceedings The Class Action Fairness Act Cafa - Complex Litigation

Coordination of Class Proceedings–The Class Action Fairness Act (CAFA)

1. In General

   1. CAFA adds new subsection (d) to 28 U.S.C. § 1332, the diversity jurisdiction statute.

   2. 28 U.S.C. § 1332(d)(2) provides:

      1. “The district courts shall have original jurisdiction of any civil action in which the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs, and is a class action in which—

         1. (A) any member of a class of plaintiffs is a citizen of a State different from any defendant;

         2. (B) any member of a class of plaintiffs is a foreign state or a citizen or subject of a foreign state and any defendant is a citizen of a State; or

         3. (C) any member of a class of plaintiffs is a citizen of a State and any defendant is a foreign state or a citizen or subject of a foreign state.” (CB 387).

      2. Under 28 U.S.C. § 1332(d)(2):

         1. (1) So long as one class member–not even necessarily the named plaintiff–is diverse from one defendant, the diversity requirement for diversity jurisdiction is satisfied. 28 U.S.C. § 1332(d)(2).

            1. Complete diversity is not required. See id.

         2. (2) The amount-in-controversy requirement is satisfied insofar as the claims in the class suit, taken together, exceed $5 million. 28 U.S.C. § 1332(d)(2).

            1. Pursuant to 28 U.S.C. § 1332(d)(6), “the claims of the individual class members shall be aggregated to determine whether the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interests and costs.” (CB 388).

            2. The putative class representative cannot stipulate regarding the amount in controversy; insofar as the class is not yet certified, the stipulation is not binding on other proposed class members. Standard Fire.

            3. The court is to determine the amount in controversy at the pleading stage with regard to whether the amount in controversy requirement is met. Standard Fire.

   3. Jurisdiction under CAFA does not depend on class certification. 28 U.S.C. § 1332(d)(8) (CB 388).

      1. CAFA jurisdiction attaches when a case is filed as a class action. In re Burlington N. (CB 388).

      2. Denial of class certification does not divest federal courts of jurisdiction. Metz (CB 388).

2. Exclusions from Jurisdiction

   1. CAFA does not apply to class suits with less than 100 class members. See 28 U.S.C. § 1332(d)(5).

   2. CAFA does not authorized jurisdiction over any class action in which “the primary defendants are States, State officials, or other governmental entities against whom the district court may be foreclosed from ordering relief.” 28 U.S.C. § 1332(d)(5)(A) (CB 389).

   3. CAFA does not apply to any class action that “solely” involves specific claims under the federal securities laws or claims “that relate to the internal affairs or governance of a corporation or other form of business enterprise and that arises under or by virtue of the laws of the State in which such corporation or business enterprise is incorporated or organized.” U.S.C. § 1332(d)(9) (CB 389).

3. Removal Under CAFA

   1. CAFA includes a removal provision designed to make it easier to remove qualifying actions from state court to federal court. See 28 U.S.C. §1453.

   2. 28 U.S.C. § 1453(b) provides:

      1. “A class action may be removed to a district court of the United States in accordance with section 1446 (except that the 1-year limitation under section 1446(c)(1) shall not apply), without regard to whether any defendant is a citizen of the State in which the action is brought, except that such action may be removed by any defendant without the consent of all defendants.” (CB 390).

         1. Changes from original removal statute:

            1. (1) All the defendants do not have to agree to removal;

            2. (2) The case does not have to be removed within a year; and

            3. (3) Eliminates the “defendant forum rule,” which doesn’t allow removal where the defendant is sued in his home state. See 28 U.S.C. § 1453(b).

   3. 28 U.S.C. § 1453(c) relaxes the general prohibition on appellate review of orders granting or denying motions to remand a suit from federal to state court.

      1. BUT § 1453(c)’s review provisions are limited to those class actions brought under CAFA. Saab (CB 392).

   4. § 1453 applies to suits over which the federal courts have original jurisdiction under § 1332(d).

   5. District courts have continued to require the removing party to demonstrate that removal is proper.

4. Mandatory Declination of Jurisdiction

   1. 28 U.S.C. § 1332(d)(4) provides that the court “shall decline” to exercise jurisdiction when the requirements of either (1) 28 U.S.C. § 1332(d)(4)(A) or (2) 28 U.S.C. § 1332(d)(4)(B) are met.

      1. (1) The Local Controversy Exception–28 U.S.C. § 1332(d)(4)(A)

         1. § 1332(d)(4)(A) requires a district court to decline to exercise jurisdiction in some cases in which more than two-thirds of the class members are citizens of the state in which the action was originally filed, but not all the primary defendants are citizens of the state in which the action was originally filed.

            1. BUT it is unclear how to calculate the total number of class members.

            2. BUT it is unclear what “primary defendants” means.

         2. In order to decline jurisdiction, at least one of the defendants must be a party (1) “from whom significant relief is sought by members of the plaintiff class”; (2) “whose alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class”; and (3) “who is a citizen of the State in which the action was originally filed.” 28 U.S.C. § 1332(d)(4)(A)(i)(II) (CB 393).

            1. BUT it is unclear what “significant relief” means.

            2. BUT it is unclear what “significant basis” means.

         3. In addition, the following requirements must be met: (1) the “principal injuries resulting from the alleged conduct or any related conduct of each defendant were incurred in the State in which the action was originally filed,” 28 U.S.C. § 1332(d)(4)(A)(i)(III); and (2) during the 3-year period preceding the filing of that class action, no other class action has been filed asserting the same or similar factual allegations against any of the defendants on behalf of the same or other persons,” 28 U.S.C. § 1332(d)(4)(A)(ii).

      2. (2) The Home State Exception–28 U.S.C. § 1332(d)(4)(B)

         1. § 1332(d)(4)(B) requires a court to decline to exercise jurisdiction if “two-thirds or more” of class members and the “primary defendants are citizens of the State in which the action was originally filed.” (CB 393).

            1. BUT It is unclear how to calculate the total number of class members.

            2. BUT it is unclear what “primary defendants” means.

   2. A class seeking remand to a state court has the burden of showing that jurisdiction should be declined under § 1332(d)(3) or (d)(4). Hart (CB 393).

      1. The placement of the burden on the plaintiffs as to the carve-out provisions is consistent with the stated purpose of CAFA. Hart (CB 394).

      2. The opponent of removal must prove that there is an express exception to removability. Breuer (CB 393).

5. Discretionary Declination of Jurisdiction

   1. Interests of Justice Exception

      1. 28 U.S.C. § 1332(d)(3) provides that a federal district court “may in the interests of justice and looking at the totality of the circumstances” decline to exercise jurisdiction in a class action when more than one-third but less than two-thirds of class members and all of the primary defendants are citizens of the state where the suit was originally filed. (CB 392).

         1. BUT It is unclear how to calculate the total number of class members.

         2. BUT It is unclear what the meaning of “primary defendants” is.

      2. 28 U.S.C. § 1332(d)(3) specifically identifies six FACTORS that are to be considered when deciding whether declining to exercise jurisdiction would be in the interests of justice:

         1. (A) whether the claims asserted involve matters of national or interstate interest;

         2. (B) whether the claims asserted will be governed by laws of the State in which the action was originally filed or by the laws of other States;

         3. (C) whether the class action has been pleaded in a manner that seeks to avoid Federal jurisdiction;

         4. (D) whether the action was brought in a forum with a distinct nexus with the class members, the alleged harm, or the defendants;

         5. (E) whether the number of citizens of the State in which the action was originally filed in all proposed plaintiff classes in the aggregate is substantially larger than the number of citizens from any other State, and the citizenship of the other members of the proposed class is dispersed among a substantial number of States; and

         6. (F) whether, during the 3-year period preceding the filing of that class action, 1 or more other class actions asserting the same or similar claims on behalf of the same or other persons have been filed. (CB 392-93).

   2. A class seeking remand to a state court has the burden of showing that jurisdiction should be declined under § 1332(d)(3) or (d)(4). Hart (CB 393).

      1. The placement of the burden on the plaintiffs as to the carve-out provisions is consistent with the stated purpose of CAFA. Hart (CB 394).

      2. The opponent of removal must prove that there is an express exception to removability. Breuer (CB 393).

6. Mass Action Provisions

   1. General Rule:

      1. “For purposes of this subsection and section 1453, a mass action shall be deemed to be a class action removable under paragraphs (2) through (10) if it otherwise meets the provisions of those paragraphs.”

   2. Definition of “Mass Action”

      1. As used in subparagraph (A), the term “mass action” means any civil action . . . in which the monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact, except that ...