CAFA judicata: a tale of waste and politics.

AuthorClermont, Kevin M.
PositionClass Action Fairness Act

The Class Action Fairness Act (CAFA) has taken on its real form through construction by federal judges. That form emerges in this empirical study of judicial activity and receptivity in regard to the Act. Our data comprise the opinions under the Act published during the two and a half years following its enactment in 2005.

CAFA has produced a lot of litigation in its short life. The cases have been varied, of course, but most typically the resulting published federal opinion involved a removed contract case, with the dispute turning on the statute's effective date or on federal jurisdiction. Even though the opinions shed some light on issues such as jurisdictional burden and standard of proof most of the judicial activity was socially wasteful litigation. It emphasized transitional efforts to interpret sloppily drafted provisions.

More interestingly, we saw wise but value-laden resistance by judges to CAFA, as they interpreted it in a way that dampened the early hopes of overly enthusiastic removers. Regression analysis confirms the suggestion that one can derive from percentages of cases decided in certain ways. With the exception of Republican male judges, the federal judiciary has not warmly embraced the statute.


INTRODUCTION I. BACKGROUND II. METHODOLOGY III. OBSERVATIONS A. Nature of Cases B. Nature of Issues 1. Burden of Proof 2. Standard of Proof a. Non-CAFA Cases b. CAFA Cases c. Optimal Approach C. Judicial Reactions 1. District Courts 2. Courts of Appeals D. Regression Models CONCLUSION INTRODUCTION

What happened when the Class Action Fairness Act of 2005 (CAFA) (1) encountered the federal judges--did the courts match the congressional ardor for class action reform? In an effort to answer this question, we studied the cases decided under the Act after its enactment on February 18, 2005, and before our cutoff of August 18, 2007. We measured judicial activity and receptivity in regard to the Act. It turned out not to be a matter of CAFA ipsa loquitur, because the courts played a role in reshaping the Act. By examining at close range the thing adjudged, we saw social waste by litigation, and we saw wise but value-laden resistance by judges.


    The Republican Congress, in enacting the Class Action Fairness Act, gave it a broad scope covering interstate class actions, with the expressed intent of defeating the plaintiffs' bar's manipulation of state courts. When the Republican President George W. Bush signed it into law, he declared that it "marks a critical step toward ending the lawsuit culture in our country." (2) The statute's method was to funnel more class actions away from the state courts and into the federal courts, and perhaps thereby to discourage class actions. However, neither the cause of any malady nor the effectiveness of this cure is beyond debate. (3)

    Let us run through the 2005 Act, showing in bold the potential points of dispute, for each of which we coded.

    The Act contained a few minor regulatory provisions aimed at curbing certain class action abuses. (4) Notably, in what is now 28 U.S.C. [section] 1712, Congress ratcheted up the judicial scrutiny applicable to a federal CAFA or non-CAFA class action's settlement terms that provide for recovery of discount coupons by class members.

    More important for present purposes was the Act's expansion of federal subject matter jurisdiction for class actions or mass actions (5) that were commenced on or after the enactment date. In 28 U.S.C. [section] 1332(d), Congress bestowed original jurisdiction on the federal district courts for sizable multistate class actions, generally those in which the plaintiff class contains at least 100 members and their claims aggregated together exceed $5 million, exclusive of interest and costs. The Act does not require complete diversity, but rather minimal diversity, which means that only one member of the class must differ in citizenship from any one defendant:

    (2) The district courts shall have original jurisdiction of any civil action in which the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs, and is a class action in which--

    (A) any member of a class of plaintiffs is a citizen of a State different from any defendant;

    (B) any member of a class of plaintiffs is a foreign state or a citizen or subject of a foreign state and any defendant is a citizen of a State; or

    (C) any member of a class of plaintiffs is a citizen of a State and any defendant is a foreign state or a citizen or subject of a foreign state. (6)

    This jurisdiction, by a bewilderingly complicated qualification in subsection (4) of 28 U.S.C. [section] 1332(d), does not extend either to a class action in which two-thirds or more of the plaintiff members are citizens of the state where the action was filed and the primary defendants are also local citizens (the "home state" exception) or to a class action in which there are certain other markers of localism (the "local controversy" exception). Under subsection (3), if that fraction falls between one-third and two-thirds, and if the primary defendants are citizens of the state where the action was filed, the district court may discretionarily decline jurisdiction over what it sees as an essentially local case. The statute goes on to carve out other cases from federal jurisdiction in subsection (5)(A) (certain actions where the primary defendants are governmental) and subsection (9) (certain securities and corporate actions).

    In 28 U.S.C. [section] 1453, Congress further provided that any defendant can remove a class action from state court to the local federal district court--but only, as one presumes in accordance with the clear legislative history despite the absence of appropriate statutory wording, if the action would be within the original federal jurisdiction of [section] 1332(d). The statute goes on to say that the removing defendant can be a local citizen and need not seek the consent of the other defendants.

    Upon enactment, all sorts of legal skirmishes and interpretive problems obviously lay ahead for the parties and the courts: What was the meaning of "primary defendants" and the related formulations? How would the one-third and two-thirds numerical tests work, especially for ill-defined classes? More problems lay beyond the words of the statute, including choice of law (7) and venue. (8) In fact, the Act has already generated much litigation on some other questions, especially on the Act's effective date and threshold jurisdictional questions, including the burden and standard of proof. We wanted to systematically explore that case law.


    Our technique was to apply the search term "('class action fairness act' or cafa) & da(aft February 17, 2005 and bef August 18, 2007)" in Westlaw's U.S. District Court Cases ("dct") and U.S. Courts of Appeals Cases ("cta") databases. Those databases contain the opinions, published in print or online, of the federal district courts and courts of appeals, respectively.

    In many situations, empirical research limited to published opinions is dangerous. To begin with, judicial decisions represent only the very tip of the mass of grievances, and it is sometimes tough to infer from that tip truths about the underlying mass of disputes or what lies below the disputes. (9) More to the point, a rather small percentage of judicial decisions appear as published opinions. (10) Those published opinions are, in fact, a skewed sample of judicial decisions. (11) Nonetheless, here we want to see how the courts have treated CAFA as a matter of doctrine. Published opinions are the decisions that move the law. Accordingly, published opinions are exactly what we wish to examine.

    This Westlaw search yielded 382 federal district court published opinions and 63 court of appeals published opinions. (12) There is our first interesting result: CAFA has produced a lot of cases. (13) For comparison purposes, an analogous search for the Private Securities Litigation Reform Act of 1995 (14) yielded 154 federal district court opinions and 14 court of appeals opinions in its first two and a half years of existence; for the Securities Litigation Uniform Standards Act of 1998, (15) the numbers were 41 and 6; and for the Multiparty, Multiforum Trial Jurisdiction Act of 2002, (16) the numbers were 4 and 1. CAFA's expansion of the right to appeal immediately from orders granting or denying remand (17) might explain the larger number of court of appeals decisions, but the number for the district courts, at least, suggests that CAFA, with its wider applicability, made a bigger splash. Relatively and absolutely, CAFA has already generated an impressive hillock of case law. (18)

    Of course, not all of the CAFA opinions turning up in our search were consequential treatments. Reading the cases revealed the references to CAFA to be inconsequential in about half of the opinions (in some, "CAFA" was used to refer to the Criminal Activity Forfeiture Act, Christians Against Family Abuse, or Citizens Against Forced Annexation). So, we decided to reject any opinion that mentioned CAFA as an aside, but to include it if the court resolved, no matter how easily, a Class Action Fairness Act point disputed by the parties. Only 182 of the district court opinions were relevant in this sense, with 200 irrelevant. On the court of appeals front, 44 were relevant, 19 not. (19)

    Working with this residue of relevant opinions, we coded them. We coded for all the different types of disputes (bolded above) that could arise in construing CAFA. And we coded for many other things, including court (and its weighted case filings per authorized judgeship (20)), judge (and the judge's gender, birth year, confirmation year, and party affiliation (21)), subject area of claim, certification status, (22) decision date, who won the decision, and whether the decision was receptive or resistant to CAFA. (23)


    1. Nature of...

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