Assessing CAFA's stated jurisdictional policy.

AuthorMarcus, Richard L.
PositionClass Action Fairness Act

INTRODUCTION I. PRE-CAFA JURISDICTIONAL DOCTRINE: SOMETHING WORTH PRESERVING? II. INVOKING CLASS ACTION THEORY III. THE POLICY RAMIFICATIONS OF THE UNIQUENESS OF JURISDICTIONAL QUESTIONS IV. THE TWO PRONGS OF CAFA'S JURISDICTIONAL POLICY A. Preferring and Protecting Federal Class Action Procedures 1. Improved Class Action Procedures 2. Dealing with the Problems of Overlapping Class Actions B. Providing the National Courts with Jurisdiction To Hear National Class Actions V. TOWARDS THE SLIPPERY SLOPE? IMPLICATIONS FOR ERIE AND KLAXON CONCLUSION INTRODUCTION

Anyone who addresses jurisdictional policy must contend with the fact--proclaimed at the outset of Professors Wright and Kane's Federal Courts treatise--that "there is to this day no consensus as to the historical justification or the contemporary need for diversity jurisdiction." (1) Even if one could discern the original objectives, they add, "[t]he conditions that existed, or were feared to exist, in 1789 are irrelevant in determining the continued necessity for diversity jurisdiction." (2) Thus, although one may fashion a general theory about the appropriate use of the federal judicial power, (3) one is also left with strong competing currents. At least in Congress, those currents often respond more to political pressure than to elegant general jurisdictional policies.

Until recently, political currents have not often focused on procedural issues, so jurisdictional policy has hardly occupied Congress. As we are all aware, however, that has changed during the last two decades, and Congress has acted--and has given serious consideration to further acting--on procedural issues with some frequency. (4) It is hardly surprising that Congress might focus eventually on the class action. A decade ago, for example, Judge Becker reported that "[i]n my 27 years on the bench, I have never seen an area in as much ferment as this class action area is." (5) Since then, the ferment surely has not abated.

Identifying the stated jurisdictional policy of the Class Action Fairness Act of 2005 (CAFA) (6) is not difficult. Congress said that the Act was designed to redress overreaching by state courts handling multistate class actions, to ensure that these cases involving nationally important issues could be brought into federal court, and to provide protections for class members. (7) It is, of course, easy to denounce these justifications for CAFA as window dressing, and to regard the Act as a naked power grab. That is an understandable reaction, and has been voiced by very reasonable observers. (8) It is in keeping with Professor Purcell's analysis of the uses of diversity jurisdiction during the late nineteenth and early twentieth centuries. (9) But that approach leaves no room for considering jurisdictional policy on its own merits, since it proceeds on a premise that there has been a "take no prisoners" legislative effort. Moreover, there is nothing inherently wrong with justifying expansions of federal jurisdiction as a method for improving results for a favored class of litigants. (10) Whether or not the proponents of CAFA should have been more candid about their motivations, this paper treats the stated grounds for CAFA seriously.

The existence of "conspiracy" theories about CAFA is not surprising. Anyone who recently has worked on procedural reform knows that even small changes often stir large passions and strong rhetoric. (11) The magnitude of the issues surrounding class actions was sufficiently large that for a quarter century after amending the rule in 1966 the Advisory Committee on Civil Rules "stayed on the sidelines because of a self-imposed moratorium on Rule 23 revisions." (12) In 1996, the Committee put out for comment a preliminary draft of possible revisions of the standards for certifying class actions, and a cascade of strong public commentary followed. (13) In 2003, the rule was amended to refine and strengthen the judicial handling of class actions--not to alter the standards for certifying a class action--and very substantial controversy nonetheless attended these developments. If CAFA is "the most significant change in class action practice" since the 1966 amendment of Rule 23, (14) it was unavoidable that it would incite heated controversy.

Combining the absence of a clear contemporary policy for diversity jurisdiction with the enormous controversy about the contemporary class action therefore presents one evaluating the jurisdictional policy of CAFA with a challenge. I propose to approach that topic by looking, first, at whether class action jurisdictional doctrine before CAFA protected important jurisdictional policies, and then considering how class action theory might inform those jurisdictional issues. I then will turn to the unique importance attached to subject matter jurisdiction, and the potential implications of that treatment for the thorny issues that CAFA requires a court to resolve in determining whether it has jurisdiction.

Focusing on the stated objectives of CAFA itself, it seems to me that most concede that there were valid arguments for using diversity jurisdiction in at least some class actions that could not have been in federal court before the Act was adopted, although one can certainly contend that the problems were not as great as urged and that CAFA's solution was overbroad. Accepting that CAFA furthers some legitimate jurisdictional policies, I will then turn to some possible implications of this use of jurisdiction that have been urged by others: the withering of the Erie restraint on substantive lawmaking by federal judges in diversity cases, and the possible relaxation of the Klaxon requirement that federal judges follow the choice of law principles of the states in which they sit. Finally, I will caution that even if Erie and Klaxon are outwardly respected after CAFA, there is a possibility that federal judges in CAFA cases may take what Judge Easterbrook famously called the "central planner" attitude of preferring settlements that offer a national solution for all class members. (15) Whether or not those results could be regarded as flowing from jurisdictional policy, they seem worthy of attention as possible consequences of this change in jurisdiction.

What remains after one moves beyond strident statements, then, is a rather modest reorientation of jurisdictional policy that seems consistent with what might be called the "liberal" orientation of thirty years ago but that is now adopted at the behest of business interests. This is surely not the first time that such ironic turns have occurred in federal procedural legislation, (16) but it suggests that today's preferences may also be transitory. There is no particular reason to assume the enduring attractiveness for business interests of federal courts', compared to state courts', views on class certification and related matters, (17) so one possible result of CAFA's jurisdictional policy could be to empower future federal courts to become more creative in favor of class action treatment than they have been in the past. That impulse might be furthered by the congressional acknowledgement in CAFA that class actions are a valuable technique for aggregating claims. By the 1980s and 1990s, consternation about the 1966 expansion of class actions shifted markedly as defendants learned how to use class actions to accomplish the goals they wanted to achieve. (18) So also, a quarter century from now, many may look back at CAFA as enabling legislation that furthered the goal of consumer class actions rather than the interests of the business establishment that pressed for its passage.

  1. PRE-CAFA JURISDICTIONAL DOCTRINE: SOMETHING WORTH PRESERVING?

    Because CAFA changed existing jurisdictional doctrine, it seems useful to start with that doctrine. Although application could be difficult, (19) the rules were clear enough. But that hardly means that they made sense; probably few would endorse them as an original matter, even though they may have been comfortable because they were familiar until CAFA changed them.

    On the complete diversity prong, the Supreme Court's 1921 decision in Supreme Tribe of Ben-Hur v. Cauble held that only the citizenship of the named plaintiffs needed to be considered in determining whether the complete diversity requirement was satisfied. (20) It reached this conclusion by analogizing the class action to a creditors' bill and invoking an 1885 decision in which it held that there was jurisdiction to permit intervention by nondiverse parties after the suit was initiated by diverse parties. (21) But this form of ancillary jurisdiction seemed to weaken the complete diversity requirement, since one could arrange to have the diverse parties sue first and then add the others later. Similarly, in a class action, a lawyer could initially name only diverse class members and use the class device to broaden the case to include the nondiverse ones.

    The intervention route was closed by the Supplemental Jurisdiction Act in 1990, (22) but the class action wrinkle was not mentioned in that statute, leading to the Supreme Court's 2005 holding in Exxon Mobil Corp. v. Allapattah Services, Inc. that, at least as to amount in controversy (discussed below), supplemental jurisdiction exists for claims of class members that do not satisfy the jurisdictional minimum so long as the proposed class representative can satisfy the jurisdictional minimum. (23) Perhaps having in mind the "potentially gaping hole in the complete diversity requirement" (24) that this reading could create with regard to Rule 20 joinder of additional plaintiffs, (25) the Court was quick to emphasize that the complete diversity requirement was not necessarily eroded by its relaxation of the jurisdictional-amount requirement:

    The complete diversity requirement is not mandated by the Constitution or by the plain text of [section] 1332(a). The Court, nonetheless, has adhered to the complete...

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