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Posts Tagged ‘Class Action Fairness Act’

Plaintiff’s Counsel Can’t Bind Class By Stipulating to $4,999,999 in Damages, Says Supreme Court in Standard Fire

Posted in Class Action Decisions, Class Action Fairness Act, Supreme Court Decisions, tagged , , , , , , , , , , , , , , , on March 19, 2013 | 1 Comment »

The Supreme Court issued its first-ever decision interpreting the Class Action Fairness Act (CAFA) today, and its holding strengthens defendants’ right to a federal forum in class actions. 

The question presented in Standard Fire Insurance Co. v. Knowles, No. 11-1450, slip op. (U.S., Mar. 19, 2012) was a simple one: can a plaintiff avoid federal jurisdiction under CAFA by stipulating to less than $5 million in damages on behalf of the putative class?  The Court’s unanimous answer was no, and its reasoning is also simple:

Stipulations must be binding . . . [and] a plaintiff who files a proposed class action cannot legally bind members of the proposed class before the class is certified.

Slip op. at 3-4.  

Does Standard Fire mean the end of any debate about the federal courts as a forum for class actions?  Probably not.  Justice Breyer’s well-reasoned opinion makes the issue sound like a no-brainer, but this is an issue that had been far from settled in the lower courts.  The fact that the Supreme Court had to intervene on this issue is in part a symptom of a lingering antagonism by many lower federal court judges toward diversity jurisdiction.  The ruling is unlikely to change the predisposition of some federal judges to look for ways to clear their dockets by remanding diversity cases to the state courts.  Although the effectiveness of this particular method for avoiding CAFA jurisdiction is now settled in defendants’ favor, that is not to say that other tactics for avoiding federal jurisdiction in class actions won’t succeed in the future.

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Not a Penny More than $4,999,999.99

Posted in Class Action Fairness Act, tagged , , , , , , , , , , , , on January 5, 2013 | Leave a Comment »

The Supreme Court is set to hear oral argument Monday in the case of Standard Fire Insurance Co. v. Knowles.  At issue is whether a plaintiff can avoid federal removal jurisdiction under the Class Action Fairness Act (CAFA) by stipulating to a recovery of less than $5 million on behalf of  a would-be class.  Debra Lyn Bassett has a good preview of the argument over at SCOTUSblog:

http://www.scotusblog.com/2013/01/argument-preview-avoiding-removal-by-limiting-damages/

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Tenth Circuit Holds that Mere Allegation by Plaintiff of Intent Not to Seek More than $4,999,999.99 in Damages Is Not Dispositive of CAFA Jurisdiction

Posted in CAFA Requirements, Class Action Decisions, tagged , , , , , , , , , , on June 28, 2012 | 1 Comment »

Earlier today, the Tenth Circuit joined the majority of Circuit Courts of Appeals in holding that a plaintiff cannot conclusively avoid federal removal jurisdiction under the Class Action Fairness Act of 2005 (CAFA) by including in the complaint a statement of intention not to seek more than $4,999,999.99 in damages on behalf of the putative class.  In Frederick v. Hartford Underwriters Insurance Company, No. 12-1161 (10th Cir. June 28, 2012) the Tenth Circuit followed decisions from the First, Second, Fourth, Sixth, Seventh, Eighth and Eleventh Circuits in holding that a Defendant may support jurisdiction by showing by a preponderance of the evidence that the amount in controversy exceeds $5 million, even if the plaintiff expressly pleads a lesser amount.  It rejected a more stringent “legal certainty” standard, which has been applied by the Ninth and Third Circuits.

The Frederick decision means that plaintiffs cannot foreclose federal jurisdiction in class actions through creative pleading in the Tenth Circuit.  However, the burden is still on the defendant to prove as a matter of fact that the amount at stake in the case exceeds $5 million.  Therefore, it also highlights the need for defense counsel to gather, plead, and be prepared to prove specific facts showing the amount at stake in the case. 

It is always important to remember that proving the amount in controversy does not require the defendant to prove the damages that are likely to be awarded against it in the case (of course most defendants would say that this amount is zero).  Instead, it requires the defendant to establish the highest amount that the plaintiff class could conceivably win based on the legal claims presented, the relief sought (both damages and other relief sought expressly and damages that could legally flow from the claims presented), and the maximum potential value that the plaintiff could reasonably put on that relief.  The preponderance standard requires the defendant to prove facts that would cause more than $5 million to be awarded if the plaintiff proves the claims and potential theories of damages that flow from those claims.

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The Decline of Class Actions, in a Nutshell

Posted in Class Action Trends, tagged , , , , , , , , , , , , , , , , on May 8, 2012 | Leave a Comment »

Robert H. Klonoff, Dean of the Lewis and Clark Law School and author of the quintessential class action compendium, Class Actions and Other Multi-Party Litigation in a Nutshell, has authored an excellent research paper entitled The Decline of Class Actions.  The paper which will be published in Volume 90 of the Washington University Law Review, but a draft is now available for free download at SSRN.  Dean Klonoff asserts that recent trends in class action decisions, which make it more difficult for plaintiffs to obtain class certification, have undermined the “compensation, deterrence, and efficiency” objectives underlying Rule 23.  He urges policymakers, rulemakers, and the courts to take a “more balanced approach to classwide adjudication.”

Whether or not you agree with Dean Klonoff’s criticisms from an academic point of view, the article is a must read for anyone looking for a good synopsis of the key developments in the U.S. class action law over the past several years.  From the Class Action Fairness Act to the Supreme Court’s recent decisions in Dukes and Concepcion to slightly less glamorous topics such as the necessity of a precise class definition, Klonoff’s article is impressive in its comprehensive analysis of relevant recent developments.

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Fourth Circuit Holds that CAFA Does Not Apply to State Parens Patriae Action

Posted in Class Action Decisions, Class Action Fairness Act, tagged , , , , , , , , on May 23, 2011 | 3 Comments »

One of the more significant issues relating to the Class Action Fairness Act of 2005 (CAFA) that has percolating through the federal courts over the past few years is whether parens patriae actions brought by state attorneys’ general seeking to recover damages for their citizens are “class actions” that can be removed to federal court.  On Friday, a panel of the Fourth Circuit Court of Appeals issued a 2-1 decision holding that parens patriae actions are not class actions subject to removal under CAFA.  West Virginia v. CVS Pharmacy, Inc., No. 11-1251 (4th Cir. May 20, 2011) (to be published).

CAFA Law Blog has been covering this issue extensively in recent months, and I expect they will have an entertaining post about the case in the coming days.  For CAFA Law Blog posts on the topic, see this link.

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Don’t Miss the CAFA Removal and Remand Developments Seminar, March 29, 2011

Posted in CAFA Requirements, Class Action Trends, CLE Programs, tagged , , , , , , , , , , , on February 24, 2011 | Leave a Comment »

I will be speaking in an upcoming live phone/web seminar on CAFA removal issues sponsored by Strafford Publications.  Here is some information about the program:

CAFA Removal and Remand: Latest Developments

Tuesday, March 29, 1:00pm-2:30pm EDT

Program Description:

Jurisdictional ambiguities in the CAFA statute continue to challenge litigators. One example is the Eleventh Circuit’s Cappuccitti v. DirecTV ruling that the district court lacked jurisdiction because no individual plaintiff or putative class member met the amount-in-controversy requirement. While the Eleventh Circuit later vacated its decision, its initial confusion was caused by CAFA’s ambiguous jurisdictional structure. Another evolving jurisdictional issue is the federal court’s authority to retain jurisdiction post-removal. Courts still wrestle with the effect of post-removal events such as denial of class certification or loss of diversity on continued federal court jurisdiction. While several recent cases more firmly establish continued post-removal federal court jurisdiction, this issue is far from settled.

This program will provide class action litigators with an examination of the latest case law developments in CAFA removal and remand, analyze continued jurisdictional ambiguities and pitfalls, and offer litigation strategies for navigating these ambiguities. The panel will offer perspectives and guidance on these and other critical questions: How are the courts resolving ambiguities in CAFA’s amount-in-controversy requirements for federal court jurisdiction? Do the federal courts retain jurisdiction even after class certification is denied or diversity is destroyed? What post-removal events or circumstances can result in a remand to state court?

The panel presentation will be followed by a  live question and answer session.

For more information and to register, see the Strafford Publications website.

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A Breach of Contract Doesn’t Equal Fraud, and Other Observations

Posted in Class Action Decisions, Consumer Class Actions, Federal Court Decisions, tagged , , , , , , , , , , , , on January 11, 2011 | 1 Comment »

Two colleagues separately sent me a copy of the Seventh Circuit Court of Appeals’ decision yesterday in Greenberger v. GEICO General Insurance Co., slip op., No. 09-1603 (7th Cir., Jan. 10, 2011) (Sykes, J.), so I thought it was worthy of a summary. 

Greenberger involved would-be class action claims against an insurer for the alleged practice of not paying to have vehicles restored to their pre-loss condition, as required under its policies.  The district court had granted the defendant’s motion for summary judgment before reaching a decision on class certification.  The Seventh Circuit affirmed.  The panel’s decision ostensibly rests on the holdings of earlier cases and doesn’t pretend to make new law.  However, the number of different issues addressed may make the case a common citation in future class certification response briefs, especially in insurance class actions in Illinois and the Seventh Circuit, but potentially elsewhere as well.  The holdings included:

  • Jurisdiction under the Class Action Fairness Act of 2005 (“CAFA”) attaches to a class action complaint even if a class is never certified.  Slip op. at 5-6 (relying on Cunningham Charter Corp. v. Learjet, Inc., 592 F.3d 805, 806 (7th Cir. 2010)).
  • An insured cannot succeed on a breach of contract claim against his insurer for allegedly failing to bring a vehicle to a pre-loss condition if the vehicle is not available to be examined, because the insured cannot prove either a breach of the contract (by showing that the vehicle was not repaired to its pre-loss condition) or damages (by establishing the difference in value between the vehicle as repaired and the vehicle in its pre-loss condition).  Slip op. at 6-11 (relying on Avery v. State Farm Mutual Automobile Insurance Co., 835 N.E.2d 801 (Ill. 2005)).
  • A plaintiff cannot prevail on a consumer fraud or common law fraud claim if the fraud claim is based on the same predicate facts as a claim for breach of contract.  Slip op. at 11-16 (also relying on Avery).
  • In Illinois, no fiduciary duty exists between insurer and insured as a matter of law, unless the plaintiff can prove by clear and convincing evidence that special circumstances existed such that the insured placed trust or confidence in the insurer.  Slip op. at 16-17 (citing Fichtel v. Bd. of Dirs. of River Shore of Naperville Condo. Ass’n, 907 N.E.2d 903 (Ill. App. Ct. 2009); Martin v. State Farm Mut. Ins. Co., 808 N.E.2d 47 (Ill. App. Ct. 2004)).

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Eleventh Circuit Takes a Mulligan on Cappuccitti

Posted in Class Action Decisions, Class Action Fairness Act, Federal Court Decisions, tagged , , , , , on October 20, 2010 | 1 Comment »

The Eleventh Circuit Court of Appeals reversed itself just months after its widely reviled opinion in Cappuccitti v. DirecTV.  In a per curiam opinion issued October 15, 2010, a three judge panel concluded, on rehearing, that the earlier Cappuccitti decision was simply “incorrect.”  The key holding means that a plaintiffs’ class under CAFA does not have to meet a threshold requirement of having at least one plaintiff with a claim of $75,000 or more. 

“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.” Cappuccitti v. DirecTV, — F.3d —, 2010 WL 4027719 (11th Cir. Oct. 15, 2010) (cites omitted).

 This decision should quiet the near universal criticism that has been clanging through the echo chamber of the class action bar since the appellate court’s July 19 ruling. The July opinion focused on the jurisdictional thresholds of the Class Action Fairness Act (CAFA).  The summer Cappuccitti decision was controversial because it seemingly invented a new requirement for federal courts to exercise original jurisdiction over class actions filed under CAFA.  The opinion set an unprecedented threshold that at least one plaintiff in a CAFA class action must allege an amount in controversy of at least $75,000.  Critics of the ruling observed that such a requirement would effectively end the filing of CAFA class actions in the Eleventh Circuit.  The CAFA law blog has extensively covered the potential impacts.  But never mind, that’s all in the past.  After the most recent ruling, the CAFA doors are now back open.

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CAFA Jurisdiction Survives Decertification

Posted in CAFA Requirements, Class Action Decisions, tagged , , , , , , , on March 23, 2010 | Leave a Comment »

While browsing the news today, I came across an informative class action-related snippet on www.lexology.com apparently authored by someone at my firm.  (I’m not sure specifically whom to credit for the tip, I just know it wasn’t me.)  The article summarizes a January 2010 decision authored by Seventh Circuit Court of Appeals Judge Richard Posner regarding the impact of a denial of class certification under the Class Action Fairness Act.  The case is Cunningham Charter Corp. v. Learjet, Inc., 592 F.3d 805 (7th Cir. 2010).  A full copy of the opinion is available courtesy of the good folks at the CAFA Law Blog.  Here’s a link to the Baker Hostetler article.

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Supreme Court Embraces Nerve Center Test

Posted in Class Action Decisions, Class Action Fairness Act, Federal Civil Procedure, Supreme Court Decisions, tagged , , , , , , , on March 2, 2010 | 1 Comment »

On February 23, the Supreme Court issued its decision in Hertz Corp. v. Friend, No. 08-1107, in which it adopted the “nerve center” test as the proper approach for determining a corporation’s principal place of business for diversity jurisdiction.  The Court stated that it was adopting a single test among the numerous approaches previously employed by the lower federal courts ”[i]n an effort to find a single, more uniform interpretation of the statutory phrase ["principal place of business."]  The decision promises to bring more predictability to the resolution of an often-litigated issue in the context of removal of class actions under the Class Action Fairness Act of 2005.

For a good synopsis of the decision and its potential impact in the class action removal context, read Karen P. Palmersheim’s article at www.lexology.com entitled Supreme Court’s decision opens doors to lawsuits under the federal Class Action Fairness Act.

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