The Class Action Fairness Act of 2005 (“CAFA”) provides that defendants may remove certain mass actions—cases that are proposed to be tried jointly—so long as the aggregate amount at stake is at least $5 million and there are 100 or more plaintiffs in the case. 28 U.S.C. § 1332(d)(11). But what if plaintiffs’ counsel try to avoid removal by splitting up a 100-plaintiff mass action into two smaller mass actions?

That was the situation facing Carnival. After a cruise ship ran aground off the coast of Italy, plaintiffs’ lawyers filed a mass action in state court on behalf of 39 plaintiffs. When an additional 65 plaintiffs indicated an intent to join that action—which would nudge it across the 100-plaintiff threshold for removal under CAFA—the plaintiffs voluntarily dismissed that action. The plaintiffs then re-filed two new mass actions in state court: one on behalf of 56 plaintiffs, and one on behalf of 48 plaintiffs. The two suits appeared to turn on common questions of law or fact, and otherwise seemed to satisfy CAFA’s mass-action removal provisions if taken together. So Carnival removed them to federal court.

The federal district court, however, granted the plaintiffs’ motion to remand. And the Eleventh Circuit recently affirmed. Scimone v. Carnival Corp. (pdf), No. 13-12291.

The Eleventh Circuit concluded that “the plain language of CAFA” deprived the district court of “subject-matter jurisdiction over the plaintiffs’ two separate actions unless they proposed to try 100 or more persons’ claims jointly.” But the plaintiffs asserted that they intended to try the two batches of related claims in two separate trials. CAFA itself bars the defendant from creating jurisdiction by proposing a single joint trial. And the state trial judge hadn’t consolidated the two actions. That was enough to require a remand, the Eleventh Circuit reasoned, even though the plaintiffs were clearly engaged in jurisdictional maneuvering in splitting up the plaintiffs between two mass actions. For example, some plaintiffs who were traveling on the cruise on the same ticket were split up between the two actions. The idea that the plaintiffs would really try their claims separately is hard to swallow.

The Eleventh Circuit isn’t alone in taking a literalist approach. Three other circuits have also allowed plaintiffs’ lawyers to avoid the removal of 100-plaintiff mass actions by splitting up their clients among multiple smaller actions. See Abrahamsen v. ConocoPhillips, Co., 503 F. App’x 157, 160 (3d Cir. 2012); Anderson v. Bayer Corp., 610 F.3d 390, 392 (7th Cir. 2010); Tanoh v. Dow Chem. Co., 561 F.3d 945, 950-51 (9th Cir. 2009).

But are these decisions consistent with the principle that plaintiffs’ artful pleading can’t eliminate federal jurisdiction and CAFA’s purpose of ensuring a federal forum for significant class and mass actions? After all, even if plaintiffs stick to their story and never move to consolidate the cases as a formal matter, they nonetheless would effectively be tried jointly because the judgment in the first action might well have preclusive effect on the trial in the second action, which surely would be presided over by the same judge and involve similar witnesses and evidence.

We’re reminded of Chief Justice Roberts’s hypothetical during oral argument in Standard Fire Insurance Co. v. Knowles, which involved a related problem under CAFA’s class-action removal provisions—whether a defendant can remove a class action when the plaintiff stipulates that the case is worth less than CAFA’s $5 million amount-in-controversy threshold. Chief Justice Roberts asked plaintiffs’ counsel: “What if you had a case where a lawyer brings an action in Miller County and says: I want to represent the class of people with these claims and these claims, whose names begin with A to K. It turns out that’s $4 million. And in the next county, at the same time, he files a case saying, I’d like to represent these people whose names begin L to Z. In each of those cases, it’s $4 million. I take it you don’t have any objection to that?” Knowles’ counsel responded that “for federal jurisdiction purposes . . . that kind of legal strategy is perfectly appropriate. . . .” This answer caused Justice Breyer to remark that an artificial limit on the amount of damages claimed “is just a loophole because it swallows up all of Congress’s statute . . . we have 30 or 40 or $50 million cases being tried in whatever counties Congress liked the least . . . .” Justice Breyer wondered whether to avoid such a “mechanical method of avoiding the purpose of the statute,” the Court should adopt a reading of CAFA that “you should aggregate the real value” of the claims “that the class is likely to have.”

And that is ultimately what the Court did in Knowles, in an opinion by Justice Breyer that explained that subdividing “a $100 million action into 21 just-below-$5-million state-court actions” would “squarely conflict” with CAFA’s objectives. Shouldn’t the courts take a similarly pragmatic approach to the mass-action removal provisions of CAFA? Otherwise, as Justice Breyer observed during argument in Knowles, “all that is required” to avoid the federal forum that Congress intended to provide “is a few extra pieces of paper that will soon become standardized, and a lot of postage stamps.”

  • Ryan Killian

    While Freeman v. Blue Ridge Paper Products in the Sixth Circuit was different in some important respects, it would have been nice to see its approach applied by the Eleventh Circuit. Stealing from that opinion, you could’ve wound up with something like this:

    “[E]ach of the [two] suits must be aggregated. The complaints are identical in all respects except for the [arbitrary division of plaintiffs]. Plaintiffs put forth no colorable reason for breaking up the lawsuits in this fashion, other than to avoid federal jurisdiction. In fact, plaintiffs’ counsel admitted at oral argument that avoiding CAFA was the only reason for this structuring. If such pure structuring permits class plaintiffs to avoid CAFA, then Congress’s obvious purpose in passing the statute — to allow defendants to defend large interstate class actions in federal court — can be avoided almost at will, as long as state law permits suits to be broken up on some basis.”

    Permitting a practice that flies in the face of CAFA’s stated policy regarding cases of national important while simultaneously encouraging an enormously inefficient tactic that wastes the judiciary’s resources—just another day of CAFA interpretation by circuit courts.