Chapter § 5.11 Forum Selection for Class Actions

• Jurisdiction: United States
• Publication year: 2020

§ 5.11 Forum Selection for Class Actions

Class action litigation can involve unique forum selection issues and strategies. Choosing a forum in a class action may be a critical element in the lawsuit. In fact, in nationwide class actions implicating the substantive law of multiple states, the class certification determination and defendant’s liability may turn on the application of forum state’s choice of law rules and substantive law. To be sure, when a plaintiff’s claims rest on state law, courts employ the choice of law rules of the forum state or the state in which a federal district court sits.²⁰⁸ Plaintiffs shouldn’t ignore forum selection when commencing a class action given the advantage they could gain from a state or forum’s certification practices and choice of law approaches. Defendants, by the same token, should review their options for dismissing or transferring cases in unfavorable forums.

[1] Substantive State Law and Application of Choice of Law in Class Actions

The choice of law issues facing a trial court are intricate, and the consequences can be profound for the parties. The Supreme Court has held that the due process and the full faith and credit clauses limit the situations in which a court may apply its own substantive law (or that of the forum) to the entire class: a state “must have a ‘significant contact or a significant aggregation of contacts’ to the claims asserted by each member of the plaintiff class” that creates state interests to apply its law to the claim of each member of the class such that application of that law is “neither arbitrary nor fundamentally unfair.”²⁰⁹

The question of whether a court can constitutionally apply the law of a single state to an entire class is often a key issue. This is because, in class actions governed by multiple state laws, variations in those laws may conflict in a “material way”²¹⁰ and, thus, swamp any common issues and defeat predominance.²¹¹ A plaintiff seeking to certify a nationwide class must therefore “provide an ‘extensive analysis’ of state law variations to reveal whether these pose ‘insuperable obstacles.’ ”²¹² And the court must then “consider how variations in state law affect predominance.”²¹³ “The issue can only be resolved by first specifically identifying the applicable state law variations and then determining whether such variations can be effectively managed through creation of a small number of subclasses grouping the states that have similar legal doctrines.”²¹⁴

[2] Federal Court Jurisdiction in Class Actions Not Governed by the Class Action Fairness Act

It is well known that federal courts are courts of limited subject matter jurisdiction, which possess only the power authorized by the Constitution and federal statutes. Article III, section II of the Constitution and Title 28, section 1331 of the Judicial Code²¹⁵ permit courts to exercise jurisdiction over civil actions “arising under the Constitution, laws, or treaties of the United States,” also known as federal question jurisdiction.²¹⁶ Such jurisdiction is available for plaintiffs pleading causes of action created by federal law, such as 42 U.S.C. § 1983, and for certain state law claims that implicate significant federal issues.²¹⁷

Title 28, section 1332(a) of the Judicial Code provides the other common ground for federal courts to exercise jurisdiction—i.e., general diversity jurisdiction. District courts have original jurisdiction over civil actions between citizens of different states “where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs.”²¹⁸ These courts may hear a class action under section 1332(a) only if there is “complete diversity,” meaning “all class representatives were diverse from all defendants” and “at least one named plaintiff satisfied the amount in controversy requirement of more than $75,000.”²¹⁹ The Supreme Court has interpreted Title 28, section 1367 of the Judicial Code to require that the claims of the named plaintiffs who don’t satisfy the amount-in-controversy be “part of the same case or controversy as the claims of plaintiffs who do allege a sufficient amount” for a court to properly exercise supplemental jurisdiction over all claims.²²⁰

[3] Federal Court Jurisdiction Under the Class Action Fairness Act

As an preliminary matter, the Class Action Fairness Act of 2005 (“CAFA”)²²¹ “does not supplant traditional diversity jurisdiction; it supplements it.”²²² As discussed in section 5.06, with certain exceptions, CAFA grants federal courts original jurisdiction over actions where (1) the suit constitutes a “class action,” (2) “the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs”; (3) CAFA’s minimal diversity requirements are met (e.g., “any...