Back in December, we blogged about two cases in the Ninth Circuit that were the latest skirmishes in the fight over whether plaintiffs can evade removal under the Class Action Fairness Act of 2005 (“CAFA”) by artificially subdividing their mass actions. Plaintiffs have sought to make an end-run around CAFA’s provision permitting removal of mass actions raising “claims of 100 or more persons that are proposed to be tried jointly” (28 U.S.C. § 1332(d)(11)(B)(i)), by bringing parallel mass-action cases of fewer than 100 persons each, and asking that the cases be treated together for as many purposes as possible without crossing the line into a joint trial.

Some courts, such as the Eighth Circuit in Atwell v. Boston Scientific, have resisted those efforts.  But a divided panel of the Ninth Circuit had issued two decisions—Romo v. Teva Pharmaceuticals USA, Inc., and its companion case, Corber v. Xanodyne Pharmaceuticals—affirming orders remanding cases in which the plaintiffs had sought joint treatment of two just-under-100-plaintiff mass actions under a California state-law procedure that allows coordination of certain civil actions “for all purposes.”

On Monday, the Ninth Circuit granted rehearing en banc (pdf) in both Romo and Corber. Although it’s perilous to predict how an en banc panel will rule in those cases, it isn’t hard to deduce why a majority of the court’s active judges might have thought the cases warranted rehearing. As we previously explained, the panel’s approach in Romo seems excessively formalistic; the panel focused on whether the plaintiffs had used the magic words of asking for a “joint trial,” while failing to consider the reality of how the mass actions were likely to be litigated.  And the panel had, of course, created a circuit split with the Eighth Circuit in Atwell.

We’ll continue watching these cases, which are of tremendous importance to defendants’ right under CAFA to remove mass actions to federal court.

 

When state attorneys general file suits to seek monetary recoveries based on claimed injuries to private citizens, those lawsuits look like, walk like, and quack like class actions. In fact, in most of these so-called “parens patriae” cases, the same private plaintiffs’ lawyers that bring private class actions are retained to represent states in exchange for the potential to garner substantial attorneys’ fees. While most class actions and mass actions of significance can be removed to federal court under the Class Action Fairness Act of 2005 (“CAFA”), the Supreme Court held today in Mississippi ex rel. Hood v. AU Optronics Corp. (pdf), that lawsuits in which the state is the sole named plaintiff do not as a technical matter fall within CAFA’s coverage of “mass actions,” and therefore that such lawsuits may proceed in state courts. The likely impact of the decision is that businesses will face more class-action-style cases in state-court forums.

CAFA allows defendants to remove, among other things, “mass actions” from state to federal court. Under the statute, a mass action is “any civil action … in which monetary relief claims of 100 or more persons are proposed to be tried jointly.” 28 U.S.C. § 1332(d)(11)(B)(i). The question facing the Court in Hood was whether a parens patriae suit filed by a State as the sole plaintiff constitutes a mass action when the suit includes claims for restitution based on injuries suffered by the State’s citizens.

The case arose out of a lawsuit filed in state court by the State of Mississippi alleging that manufacturers of liquid crystal displays (“LCDs”) had formed a cartel to restrict competition and raise prices. The State sought, among other forms of relief, restitution for its own purchases of LCD products and for the purchases of its citizens. The manufacturers removed the case to federal court, arguing that it qualified as a mass action. The district court found that the case was a mass action, but remanded under CAFA’s “general public exception.” On appeal, the Fifth Circuit reversed, agreeing with the district court that the case qualified as a mass action but finding that no exception to federal jurisdiction under CAFA existed. The Fifth Circuit’s decision conflicted with rulings in the Fourth, Seventh and Ninth Circuits, which had all held that similar lawsuits were not “mass actions” under CAFA.

The Supreme Court granted review to resolve the circuit split. Today, in a unanimous opinion by Justice Sotomayor, the Court reversed the Fifth Circuit’s decision, holding that such parens patriae actions do not qualify as mass actions under CAFA. The Court held that the “100 or more persons” language in CAFA’s mass action provision refers to named plaintiffs only, and does not encompass unnamed persons who are real parties in interest. Slip op. 5-10. Citing CAFA’s numerosity requirement (28 U.S.C. § 1332(d)(5)(B)), the Court noted that Congress knew how to include unnamed persons in a definition, but chose not to do so with respect to mass actions. Id. at 6. Further, the Court determined that the “100 or more persons” were later specified as the “plaintiffs” in the same provision and that the term “plaintiffs” could not include unnamed parties. Id. at 6-8. The Court concluded that construing “plaintiffs” to include unnamed real parties in interest would stretch the meaning of “plaintiff” beyond its common understanding as a party who brings a civil suit. Id. at 8-9.

In addition, the Court noted CAFA’s requirement that a removed case shall not be transferred to another court “unless a majority of the plaintiffs in the action request transfer.” Id. at 10. If “plaintiffs” included unnamed parties, the Court found, it would be difficult for a court to poll all of the real parties in interest to decide whether the case could be transferred. Id. In addition, the Court found that the mass action provision functions largely as a “backstop” to ensure that plaintiffs cannot evade federal jurisdiction under CAFA by naming a host of plaintiffs rather than using the class device. Id. at 11. According to the Court, if Congress wanted CAFA to authorize removal of representative actions brought by a state, it would have provided for the removal under the class action mechanism, not the mass action provision. Id.

Finally, the Court found that it was not proper in the mass action context to apply a background principle requiring courts to look behind the pleadings to ensure that parties are not improperly creating or destroying diversity jurisdiction. Id. at 11-13. According to the Court, this background principle had not previously been applied to count up unnamed parties but was typically applied to determine which parties’ citizenship should be considered in determining diversity. Id. at 12. In addition, by prohibiting defendants from joining unnamed individuals to turn a case into a mass action, see 28 U.S.C. 1332(d)(11)(B)(ii)(II), Congress indicated that it did not want courts to look behind the pleadings to attempt to find the real parties in interest. Id. at 13.

Today’s decision is highly significant for businesses. State attorneys general already have been filing enforcement actions in increasing numbers. And, as we have discussed before, some members of the plaintiffs’ bar have been lobbying states to deputize them as acting attorneys general so that they may file lawsuits as parens patriae actions in order to avoid federal jurisdiction and instead proceed in state court, which they perceive as a more hospitable forum. The Court’s decision today will likely encourage the private plaintiffs’ bar to redouble those efforts.

In nearly nine years on the books, the Class Action Fairness Act of 2005 (“CAFA”) has generated a host of decisions interpreting its provisions. Because the state of the law on CAFA—and class actions in general—is in constant flux, practitioners should certainly make use of online resources (like this blog) to stay up to date. But sometimes what’s needed is a desktop reference that places at one’s fingertips the answers to how to remove a case under CAFA—or how to resist that removal. To fill that need, the ABA’s Section of Litigation recently issued The Class Action Fairness Act: Law and Strategy, edited by Gregory C. Cook.

[Readers should be aware that we received a free review copy of the book.]

This book, dedicated solely to CAFA, provides a thorough analysis of the statute’s provisions and the key judicial decisions interpreting it. In addition, the book offers a number of practical tips for both plaintiffs’ and defense lawyers.

The book opens with a broad overview of CAFA and its expansion of federal jurisdiction over class actions and mass actions. The jurisdictional changes brought about by CAFA are neatly summarized at the close of the introduction in a quick reference chart, which presents a side-by-side comparison of federal diversity and removal jurisdiction over class actions before and after the enactment of CAFA.

Practitioners will also want to bookmark the series of flowcharts preceding the introduction—“CAFA At A Glance”—which were created by Arizona lawyer Kathryn Honecker. Offering visual step-by-step guidance in navigating through the thicket of CAFA’s jurisdictional provisions, including the often thorny “Local Controversy” and “Home State” exceptions to federal jurisdiction, these charts should help orient practitioners—particularly those not already well versed in the minutiae of CAFA—in the right direction.

Also well worth a read is the detailed chapter on CAFA’s legislative history, authored by Scott Nelson of Public Citizen Litigation Group—a respected appellate advocate who routinely represents plaintiffs (and often is one of our opponents in litigation and public policy debates). He chronicles the efforts of five Congresses—and the lively debates outside of Congress—that culminated in CAFA’s enactment in 2005. Nelson identifies the problem that Congress ultimately focused on in adopting CAFA: the willingness of certain state courts to certify virtually any proposed class and to tolerate abuses of the class-action device (and of analogous procedures like mass actions and representative proceedings). These “magnet” jurisdictions attracted nationwide or multistate class actions against businesses. The chapter details the inside baseball of the legislative process as CAFA evolved into an intricate framework of requirements for establishing and exceptions to federal jurisdiction over class and mass actions. A condensed version of this history is presented as a handy timeline at the conclusion of the chapter.

The remaining chapters, too, are worthwhile for class-action practitioners (and other CAFA aficionados). They break down each of CAFA’s provisions, ranging from the $5 million amount-in-controversy requirement to the separate provisions for mass actions to the notice requirements for proposed class action settlements. Practitioners can jumpstart their research process by consulting the relevant chapter or chapters as they confront CAFA-related issues.

In short, The Class Action Fairness Act: Law and Strategy has without a doubt earned a place on our bookshelves. We look forward to the next edition.

We’ve blogged before about plaintiffs’ attempts to circumvent the “mass action” provisions in the Class Action Fairness Act of 2005 (“CAFA”), which  allow defendants to remove to federal court certain cases raising “claims of 100 or more persons that are proposed to be tried jointly.” 28 U.S.C. § 1332(d)(11)(B)(i). To evade removal, creative plaintiffs’ lawyers have subdivided their mass actions into parallel cases of fewer than 100 persons each. Some courts have gone along with the charade. See, e.g., Scimone v. Carnival Corp., No. 13-12291 (11th Cir. July 1, 2013); 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).

The fight over removal in these gerrymandered mass actions often boils down to one key question:  whether the parallel cases are “proposed to be tried jointly.”  If so, CAFA permits removal.

Recognizing this point, the plaintiffs in these cases frequently remain coy about—or outright deny—an intent to try the parallel mass actions jointly.  But they often go right up to the edge, urging the same state trial court to resolve threshold issues in the cases together—or even simply to consolidate the state-court actions outright. Then, these plaintiffs say, CAFA’s mass-action removal provision doesn’t apply because they say that they have had the claims “consolidated or coordinated solely for pretrial proceedings.” 28 U.S.C. § 1332(d)(11)(B)(ii)(IV) (emphasis added).

But not all courts are falling for this effort to elevate form over substance.

Continue Reading Will the En Banc Ninth Circuit Clarify When a Subdivided Mass Action Can Be Removed Under CAFA?

Today at the Supreme Court, all eyes, including mine, were on the oral arguments in the Town of Greece prayer case. But the second case—although it will certainly garner less attention—also is of great importance, especially to class-action practitioners. The issue in that case, Mississippi ex rel. Hood v. AU Optronics Corp., is whether so-called parens patriae lawsuits filed by state attorneys’ general to recover money on behalf of state citizens can be removed to federal court under the Class Action Fairness Act (CAFA).

Why does Hood matter? Significantly, the fight is not over whether these cases can be brought at all, but instead whether they proceed in federal court rather than state court. As business defendants know well, many state courts have a long and distressing history of tolerating abuses of the class-action device (or analogous procedures like mass actions and representative proceedings). Indeed, it was in response to that phenomenon that Congress enacted CAFA in 2005. And many parens patriae lawsuits bear some of the same hallmarks as class-action lawsuits. After all, state attorneys general routinely retain private class action lawyers to bring the litigation—Hood is a great example—and frequently the apparent goals of the case are (1) to recover money on behalf of individual consumers (whether paid to those consumers or into the state’s coffers) and (2) to secure attorneys’ fees for the private lawyers driving the litigation.

In short, when these state AG lawsuits are in effect prosecuted in state court by the private plaintiffs’ class action bar, the same kinds of abuses that led Congress to pass CAFA are implicated. Thus, as a policy matter, the real question should be: What do state attorneys general—or more to the point, their retained outside counsel—have to fear from a level playing field in federal court?

As I watched the oral arguments, it seemed clear that policy concerns about the misuse of parens patriae actions were on the minds of at least some of the Justices. That said, most of the questioning at oral argument focused on whether the state AG lawsuit at issue—in which the state seeks restitution of excess money paid due to allegedly fixed prices in violation of state antitrust law—qualified as a “mass action” under CAFA. On that legal question, which is one that has divided the circuits, my take is that the Justices’ questions at argument did not clearly signal which way the Court will go.

That said, I have a number of takeaways from the argument (transcript available here)).

First, many Justices were concerned with how any money recovered by the state AG would be allocated and distributed. Counsel for Jim Hood, the Mississippi attorney general, asserted that “the restitution claim seeks recovery to the State of the money, not to consumers in Mississippi,” and that it was likely that any such money would end up in the state treasury. But as Justice Breyer asked in one of his questions, the language of the relevant Mississippi statute refers to ordering defendants “to restitute any and all moneys for the purchases of its citizens”—and so even if the money was “given to the State, the restitution is for individual purchases of individual citizens,” meaning that “you better have a list of the individual people who bought something.” If so, Justice Breyer continued, that fact might support the companies’ argument that the state is really “pursuing” the claims of “individual people.” (Or, put another way, the individual consumers might be seen as the real parties in interest because the subject matter of the litigation comprises alleged antitrust violations as to those consumers’ particular purchases.) Thus, that approach sounds a lot like seeking to try many individual consumers’ antitrust claims jointly in the same action, which—roughly speaking—is a substantial part of test for whether a set of claims qualifies as a “mass action” that is removable under CAFA.

Second, there was a great deal of debate over whether a state AG’s lawsuit actually does propose to try claims jointly “on the ground that the plaintiffs’ claims involve common questions of law or fact,” as CAFA puts it. Justice Kagan pushed the companies’ counsel on this issue, contending that, as a procedural matter, the state did not have to demonstrate affirmatively that such “common questions of law and fact” truly existed. Justice Kagan seemed to be of the view that, if the state AG did not have to meet that hurdle, the text of CAFA’s mass-action provision would not be triggered.

Third, Chief Justice Roberts focused on the fact that parallel private class-action lawsuits had been filed involving similar allegations, and that settlements had been reached in those lawsuits that called for companies to pay money damages. (It is fairly common for parens patriae lawsuits to be filed by state AGs after or alongside private class actions.) This fact led the Chief Justice to point out “that there is nothing to prevent 50 attorneys general . . . from saying, every time there is a successful class action as to which somebody in my state purchased one of the items, we are going to file a parens patriae action” in which “the complaint is going to look an awful lot like the class action complaint.” If so, he noted, “it would make no sense for a defendant in a class action brought by consumers to ever settle the case,” because the business is “going to have to pay twice”— to settle the private class action and to resolve the state’s lawsuit. That problem would raise practical concerns about judicial administration that could be solved if state AG actions were removable to federal court, where presumably they would be joined or consolidated through the MDL process with private class actions filed in or removed to federal court.

Of course, the ultimate resolution of these troubling policy concerns depends upon how the Supreme Court interprets CAFA. A number of the Justices seemed sympathetic to the companies’ argument that “the driving force behind [CAFA] was to put interstate claims of national importance into Federal court.” And surely at least some Justices agree that these state AG lawsuits look like and quack like the types of class and mass actions that were susceptible to state court abuses. But that does not necessarily mean that the Court will find these state AG lawsuits subject to removal. As Justice Scalia archly observed: “Sometimes Congress doesn’t do it right. … Sometimes, they try to catch everything, but the language they use doesn’t do it.”

Did Congress get it right here? We’ll be waiting for the Supreme Court’s answer.

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.”

We’ve blogged before about whether parens patriae lawsuits filed by state attorneys’ general to recover money on behalf of state citizens can be removed under the Class Action Fairness Act (CAFA). (CAFA authorizes defendants to remove certain “mass actions” involving “monetary relief claims of 100 or more persons” from state court to federal court. 28 U.S.C. § 1332(d)(11)(B)(i). Today, the Supreme Court granted certiorari in Mississippi ex rel. Hood v. AU Optronics Corp., No. 12-1036, to resolve a circuit split on this issue.

The case arises from a lawsuit that the Mississippi attorney general filed in state court against manufacturers of liquid crystal display panels, alleging a price-fixing conspiracy. Among other relief, the complaint sought restitution on behalf of Mississippi consumers who had purchased LCD panels during the period when prices were allegedly fixed. After the defendant manufacturers removed the case to federal court as a “mass action” under CAFA, Mississippi moved to remand, contending that it did not fall within the scope of CAFA jurisdiction.

The district court granted Mississippi’s motion to remand, but the Fifth Circuit reversed.  Mississippi ex rel. Hood v. AU Optronics Corp., 701 F.3d 796 (5th Cir. 2012). The Fifth Circuit concluded that Mississippi’s suit constituted a mass action because the individual consumers are “[t]he real parties in interest.” Id. at 800. The court reasoned that, insofar as Mississippi brought claims to enforce the rights of consumers, the state was “not asserting its sovereign interest[s]” but was instead acting “as a class representative” and “pursu[ing] the interests of … private part[ies].” Id. at 801. The case therefore remained in federal court.

Many other state attorneys general have filed similar lawsuits against the LCD manufacturers. In a number of those lawsuits, however, the Fourth, Seventh, and Ninth Circuits have held that removal is not permitted under CAFA. The Supreme Court granted review to resolve the circuit split.

The Supreme Court’s decision in this case will be significant for businesses, as state attorneys general have been filing enforcement actions in increasing numbers. Indeed, we have blogged about how some members of the plaintiffs’ bar have been lobbying states to deputize them as acting attorneys general so that they may file lawsuits as parens patriae actions in order to avoid federal jurisdiction. Moreover, as we have discussed in the past, the Court’s decision may be relevant to litigation over the scope of the Securities Litigation Uniform Standards Act of 1998, 15 U.S.C. § 78bb(f), which prohibits “private part[ies]”—but not states—from filing certain securities-fraud class actions in state court.

The Fourth Circuit recently weighed in on a technical question involving the process for removing a case against multiple defendants to federal court—namely, whether every defendant must actually sign the notice of removal. The Fourth Circuit concluded that “[w]e can see no policy reason why removal in a multiple-defendant case cannot be accomplished by the filing of one paper signed by at least one attorney, representing that all defendants have consented to the removal.” Mayo v. Bd. of Educ., Nos. 11-1816, 11-2037 (4th Cir. Apr. 11, 2013).

The Fourth Circuit is correct. That said, at least some courts are apparently willing to impose pointless technical requirements despite the lack of justification. The fact that there’s a circuit split on this issue is a perfect example. In the wrong court, the failure to get all defendants in a multi-defendant case to confirm their consent to removal in the correct way can open a trapdoor through which the case will fall back into state court.

In most class actions, this issue does not arise because the Class Action Fairness Act (CAFA) allows a single defendant to remove a qualifying class or mass action even without the other defendants’ consent. 28 U.S.C. § 1453(b). But CAFA isn’t always the basis for removal. Perhaps the lawsuit involves a federal question or satisfies the test for classic diversity jurisdiction, but doesn’t satisfy CAFA’s definition of a class or mass action or its $5 million amount-in-controversy requirement (or the defendant doesn’t want to have to demonstrate that at least $5 million is at stake). Or perhaps the class action falls into CAFA’s local-controversy or home-state exception. If so, the notice of removal must satisfy the requirement in 28 U.S.C. § 1446(b)(2) that “all defendants who have been properly joined and served must join in or consent to the removal of the action.” And typically that joinder or consent must be done no later than 30 days after the last-served defendant received the complaint. Id. § 1446(b)(2)(B)-(C).

Unfortunately, the removal statute doesn’t outline in detail how each defendant’s “consent” must be indicated. The Sixth and Ninth Circuits—now joined by the Fourth Circuit—agree that it’s enough for the filing defendant’s attorney to confirm in the notice of removal that all defendants consent. See Proctor v. Vishay Intertechnology Inc., 584 F.3d 1208, 1225 (9th Cir. 2009); Harper v. AutoAlliance Int’l, Inc., 392 F.3d 195, 201-02 (6th Cir. 2004). That rule makes perfect sense; Rule 11 and ethics rules make the signing attorney accountable for the truth of the representation that all defendants join in the removal.

But the Seventh Circuit some years ago adopted an apparently bright-line rule that “[a] petition for removal is deficient” unless “all served defendants * * * support the petition in writing, i.e., sign it.” Gossmeyer v. McDonald, 128 F.3d 481, 489 (7th Cir. 1997). And although the Fifth and Eighth Circuits don’t require every defendant to sign the notice of removal, they do call for “some timely filed written indication from each served defendant * * * that it has actually consented to” the removal. Getty Oil Corp. v. Ins. Co. of N. Am., 841 F.2d 1254, 1262 n.11 (5th Cir. 1988); see also Pritchett v. Cottrell, Inc., 512 F.3d 1057, 1062 (8th Cir. 2008).

It’s difficult to imagine the need for that requirement. How often is there such a severe miscommunication between defendants that the lawyer filing the notice of removal mistakenly certifies that a defendant that prefers to stay in state court consents to removal? And of that tiny fraction of cases, in how many are the defendants that prefer to remain in state court so helpless or oblivious to the filing of the notice of removal that they can’t file an objection? Given the extreme remoteness of the risk of wrongful removal, it’s hard to see why courts should adopt a prophylactic rule requiring all defendants to sign the notice of removal or to file a written consent in order for a removal to be valid.

After all, that prophylactic rule isn’t costless. Just ask a defendant that is facing a motion to remand on the ground that not every co-defendant signed the notice of removal or filed a joiner within the 30-day limit. That’s what happened in Mayo—although the defendant school board certified in its notice of removal that it had consulted with its co-defendant, a union, and obtained its consent to removal, the union hadn’t also contemporaneously filed a separate joinder in the removal. Instead, the union simply dropped a footnote confirming the school board’s representation in its first substantive filing in federal court. Thankfully, the courts in that case saw reason and denied the motion to remand. But not every court would have done so—even though there is no doubt that all defendants in fact consented to removal.

A lot of money gets wasting litigating over senseless technicalities. The amount of time and effort that has been wasted in litigating the validity of removals because of the everyone-must-sign rule that a few circuits have adopted is just more money down the drain. Congress fixed some ambiguities in the removal statutes in the Federal Courts Jurisdiction and Venue Clarification Act of 2011 (pdf). Assuming that the Supreme Court doesn’t eventually resolve this issue, it is worth putting on the wish list for the next time Congress amends these statutes.

Earlier today, the Supreme Court issued a unanimous decision in Standard Fire Insurance Co. v. Knowles, No. 11-1450, that should make it a lot harder for plaintiffs and their counsel to avoid federal-court jurisdiction over significant class actions.

The Class Action Fairness Act of 2005 authorizes the removal of class actions to federal court when, among other things, the amount “in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs.” 28 U.S.C. § 1332(d)(2). Some class-action plaintiffs have sought to defeat federal-court jurisdiction under CAFA—and thereby force a remand to state court—by stipulating that the maximum recovery that they will seek on behalf of the proposed class is less than CAFA’s $5 million jurisdictional threshold. The plaintiff in Knowles, for example, attached to his state-court complaint a stipulation stating that he would not “at any time during this case, whether it be removed, remanded, or otherwise . . . seek damages for the class . . . in excess of $5,000,000.”

Today, the Supreme Court held that such stipulations do not destroy federal jurisdiction under CAFA when the defendant has presented evidence that, but for the stipulation, the amount in controversy would exceed $5 million. The Court’s reasoning was, in its words, “simple”: To be effective, “[s]tipulations must be binding,” but “a plaintiff who files a proposed class action cannot legally bind members of the proposed class before the class is certified.” Therefore, a nonbinding stipulation must be ignored when assessing the amount in controversy under CAFA.

Because a precertification stipulation binds only the named plaintiff, the Court explained, it cannot “reduce[] the value of the putative class members’ claims.” In part, that is because a “nonbinding, amount-limiting, stipulation may not survive the class certification process.” If, for example, a case were remanded to state court, the stipulation might then be voided in the class-certification process in order to protect the interests of the unnamed class members. The stipulation’s effectiveness would at best be “contingent” and hypothetical.

In short, the Court refused to treat “a nonbinding stipulation as if it were binding,” because that result would “exalt form over substance, and run directly counter” to CAFA’s “primary objective” of ensuring that the federal courts have jurisdiction over important (i.e., relatively large) interstate class actions. The Court therefore directed federal courts to “ignore[]” stipulations purporting to limit damages to a proposed class when determining the aggregate amount in controversy of a removed class action.

The Knowles decision is of enormous significance to businesses that may be targeted by class actions. Significantly, the Court pointed out that artful pleading, such as subdividing “a $100 million action into 21 just-below-$5-million state-court actions,” would “squarely conflict” with CAFA’s objectives, and therefore is forbidden. Knowles strongly suggests that the Court will look askance at future efforts by plaintiffs to gerrymander complaints in an effort to avoid federal-court jurisdiction and subvert CAFA’s purposes.

The Fair Debt Collection Practices Act (FDCPA), which regulates the conduct of debt collectors, authorizes plaintiffs suing over violations to recover statutory damages of up to $1,000. Because these amounts can rapidly add up to exorbitant numbers in a class action for very minor, technical violations, Congress capped the total amount of statutory damages that may be sought for the absent class members in a class action at the lesser of $500,000 or 1 percent of the debt collector’s net worth. 15 U.S.C. § 1692k(a)(2)(B).

Now imagine that you’re a plaintiff’s lawyer who has stumbled across what appears to be a very widespread FDCPA violation committed by a national debt collector—say, an error in the standard dunning letter sent to debtors across the country. Why would you ever file a single nationwide class action in which the class recovery tops out at a half- million dollars (or less, depending upon the defendant’s assets)—which means that your fees in a settlement effectively would be capped at a third or a fourth of that amount—when you can file dozens, fifty, or a hundred smaller class actions in which you could recover the same amount in each case?

Of course, any such maneuver would  be a transparent evasion of FDCPA’s cap on aggregate statutory damages. And it would frustrate Congress’s goal of protecting debt collectors from being bankrupted by FDCPA class actions. Nonetheless, in LaRocque v. TRS Recovery Services Inc., No. 2:11-cv-91-DGH (D. Me. Jan. 2, 2013), a district court held that the nothing in the FDCPA prevents plaintiffs from atomizing their class actions in order to recover the statutory cap in a series of individual suits.

In LaRocque, the plaintiff—or perhaps her granddaughter, who was a paralegal at a FDCPA class action firm—noticed that a debt-collection letter she had received regarding a bounced check arguably violated the FDCPA. The plaintiff then filed a class action on behalf of a putative class of recipients of similar letters in Maine, and—after that class was certified—filed state-specific class actions in four other federal courts. In the case in Maine, the defendants moved to expand the Maine-only class into a nationwide class, arguing that allowing the plaintiffs to pursue a series of single-state classes would circumvent the FDCPA’s cap on statutory damages.

The court denied the request, noting that FDCPA’s cap on statutory damages is phrased differently than the later-enacted cap in the Truth in Lending Act, which specifies that the cap applies “in any class action or series of class actions.” 15 U.S.C. § 1640(a)(2)(B) (emphasis added). Previously, the Seventh Circuit also had concluded that FDCPA’s damages cap doesn’t require plaintiffs to seek certification of a nationwide rather than a single-state class. Mace v. Van Ru Credit Corp., 109 F.3d 338 (7th Cir. 1997). But in that case, the Seventh Circuit observed that its holding might have to be revisited if a plaintiff ever actually brought “multiple or serial class actions to recover for the same misconduct.” Id. at 344. The district court in LaRocque, however, declined to analyze the issue substantively because other district courts presented with it hadn’t done so either.

So what should a defendant do if targeted by a wave of small class actions designed to avoid FDCPA’s cap on total damages in a class action? One approach would be to raise the issue that the Seventh Circuit left undecided in Mace and argue that the FDCPA should be read to bar plaintiffs from evading it by subdividing nationwide or multi-state class actions into a series of smaller class actions. Indeed, otherwise nothing would stop plaintiffs from bringing a separate class action for the smallest number of people that would satisfy the numerosity requirement. This tactic brings to mind Chief Justice’s hypothetical during oral argument in Standard Fire Insurance Co. v. Knowles—the case on whether plaintiffs can avoid removal under CAFA by stipulating that the class recovery would be less than the $5 million amount-in-controversy requirement—of a lawyer filing one class action for people “whose names begin with A to K” and another for “people whose names begin L to Z.”

Alternatively, the defendant could reframe the argument as a challenge to the superiority of an artificially small class action. Rule 23(b)(3) permits class certification only if the proposed class “is superior to other available methods for fairly and efficiently adjudicating the controversy,” and requires the court to consider (among other things) “the extent and nature of any litigation concerning the controversy already begun by or against class members” and “the desirability or undesirability of concentrating the litigation of the claims in the particular forum.” Fed. R. Civ. P. 23(b)(3)(B)-(C). In a FDCPA class action, litigating a wave of mini-class actions would be less efficient than a single nationwide class action and would increase the defendant’s liability—perhaps by 50 times or more—in ways that Congress did not intend.

If neither of these approaches succeeds, a defendant could argue that the court should exercise its discretion under FDCPA to reduce the amount of statutory damages awarded in consideration of the size of the class and the pendency of actions in other jurisdictions.