Standard Fire Ins. Co. v. Knowles

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Over the past few years, a number of plaintiffs’ lawyers have attempted—with some success—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).  Although these lawyers represent 100-plus clients with substantively identical claims, they subdivide their mass actions into multiple parallel cases, often with just under 100 plaintiffs each.  And to avoid the “proposed to be tried jointly” language of CAFA, they remain coy about—or…
Continue Reading En Banc Ninth Circuit Permits Removal Under CAFA of a Subdivided Mass Action

This morning I attended oral arguments at the Supreme Court in Dart Cherokee Basin Operating Co. v. Owens.  The issue presented in Dart Cherokee is whether a defendant who wishes to remove a case to federal court under the Class Action Fairness Act (CAFA) is required to submit evidence supporting federal jurisdiction along with the notice of removal.    Here’s my key takeaway from the argument:  The answer will be “no”—defendants need not attach evidence to a notice of removal—but only if the Court concludes that it has the power to reach the merits.

In most circuits, when a defendant…
Continue Reading Supreme Court May Clarify Procedures For Removal Under CAFA—If It Decides To Answer The Question Presented in Dart Cherokee Basin Operating Co. v. Owens

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?

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…
Continue Reading Can Plaintiffs Gerrymander Mass Actions to Avoid Federal Jurisdiction?

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…
Continue Reading Supreme Court Rejects Plaintiffs’ Efforts To Avoid Federal Jurisdiction By “Stipulating” To Limit Class Recoveries To Under $5 Million

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…
Continue Reading Can Plaintiffs Evade The FDCPA’s Cap on Total Statutory Damages in a Class Action by Filing Multiple, Gerrymandered Class Actions?

This morning I attended the oral argument before the Supreme Court in Standard Fire Insurance Co. v. Knowles, the first major case in which the Court will address the provisions of the Class Action Fairness Act of 2005 (CAFA).   For class-action lawyers on both sides, this case has been seven years in the making.   From where I sat, today’s arguments did not disappoint.

In a nutshell, the issue in Standard Fire is whether a named plaintiff may avoid removal to federal court of a putative class action that would otherwise satisfy CAFA’s $5 million amount-in-controversy requirement by stipulating that he or she does not seek to recover more than $5 million.  If the stipulation tactic were permissible, plaintiffs’ lawyers could avoid removal of class actions to federal court with ease.  That would allow a widespread evasion of CAFA, which was enacted in response to the massive abuse of the class-action device by a number of “magnet” state courts that were (and remain) hostile to out-of-state defendants.  (For a more extensive preview of the case, please see our earlier post.)

The oral argument (transcript (pdf)) focused on two disputed questions.…

Continue Reading CAFA Showdown in the Supreme Court: Today’s Oral Argument In Standard Fire Insurance Co. v. Knowles

According to an interesting student note that will soon be published in the Stanford Law Review, the answer to both questions is “yes.” Specifically, the would-be class counsel must “protect[] the substantive legal rights of putative class members . . . from prejudice” “resulting from the actions of class counsel.”

The implications for defendants opposing class certification are significant: If the plaintiff’s lawyers have prejudiced the rights of absent class members, then they have demonstrated that they will not “fairly and adequate protect the interests of the class,” as required by Federal Rule of Civil Procedure 23(a)(4). And…
Continue Reading Do Class Counsel Owe Fiduciary Duties to Absent Class Members Before Class Certification (and Should Defendants Care)?

Today, Marcia Coyle of the National Law Journal and Daniel Fisher of Forbes each published previews of the just-commenced Supreme Court term that mention the three cases scheduled for argument that involve issues near and dear to the hearts of class-action practitioners: Standard Fire Insurance Co. v. Knowles, Comcast Corp. v. Behrend, and Amgen v. Conn. Retirement Plans.

Although the National Law Journal article is behind a paywall, my blog co-editor Archis Parasharami is quoted—which alone is enough to make a subscription worthwhile. And the Forbes piece quotes my colleague Dan Himmelfarb.  Happy reading!
Continue Reading National Law Journal and Forbes Highlight Supreme Court’s Focus on Class Actions in Upcoming Term

The first question my colleagues and I ask when a client has been sued in a class action in state court is whether the case can be removed to federal court. Often, the only ticket out of state court is the Class Action Fairness Act of 2005 (“CAFA”), which authorizes removal of certain mass and class actions in which the “matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs.” 28 U.S.C. § 1332(d)(2). Accordingly, plaintiffs who want to stay in state court are constantly looking for ways to prevent removal under CAFA. The…
Continue Reading Standard Fire Insurance Co. v. Knowles: Supreme Court To Decide Whether Plaintiffs May Evade Federal Jurisdiction Under CAFA By Stipulating That They Seek Less Than $5 Million In Damages