Dueling Grants: Reimagining Cafa's Jurisdictional Provisions

JurisdictionUnited States,Federal
Publication year2017
CitationVol. 33 No. 3

Dueling Grants: Reimagining CAFA's Jurisdictional Provisions

Tanya Pierce
Texas A&M University School of Law, tanyapierce@law.tamu.edu

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Tanya Pierce*


More than a decade after Congress passed the Class Action Fairness Act of 2005 (CAFA),1 courts continue to disagree as to its application and meaning in a variety of situations, many of which have wide-ranging effects.2 This article considers a fundamental issue that arises after a certification decision is reached: whether a court's subject matter jurisdiction under CAFA depends on a class being certified. Specifically, the article considers what happens when a federal court's subject matter jurisdiction derives solely from CAFA's minimal diversity jurisdiction provision and a request for class certification under Federal Rule of Civil Procedure 23 (Rule 23) is denied. The statute's ambiguity on this point has resulted in numerous inefficiencies and opportunities to manipulate jurisdiction.3

Before introducing the statute's jurisdictional provisions, it is helpful to briefly outline some of the concerns underlying the availability of class treatment and motivating CAFA's passage.4 In the right cases, class treatment furthers judicial economy and increases efficiency.5 It allows plaintiffs opportunities for recovery

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where they might otherwise have none, and it deters wrongdoing that might otherwise go unpunished.6 It enables cost sharing and prevents duplicative, potentially conflicting judgments.7 While these goals are commendable, the class treatment device can also provide opportunities for abuse.8 By alleging a class action, plaintiffs can transform cases involving little harm into ones that have the ability to bankrupt defendants.9 And in some states, courts that routinely certified classes became known as "judicial hellholes" that enabled "drive by certifications."10 By providing federal courts jurisdiction over the largest of alleged, nationwide class actions, proponents of CAFA sought to eliminate the incentives for filing such actions.11 After all, given the difficulty of meeting Rule 23's requirements,12 most alleged classes would fail, and plaintiffs, whose claims could not independently exceed the $75,000 threshold for jurisdiction under the general diversity statute, would lack the incentive and resources to pursue their remaining individual claims.13

But time has proven not all plaintiffs act reasonably, nor do they always act in their own economic interests.14 In addition, while most class action plaintiffs would prefer to avoid litigating in federal court, it is not completely unheard of for some plaintiffs to seek to litigate there.15 Take for example, a plaintiff who alleged he overpaid for a

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roughly $24.00 diet supplement16 and another who alleged he overpaid for a video game.17 These claims, because they were styled as nationwide class actions of the kind covered by CAFA, conferred subject matter jurisdiction on federal courts until certification in each was denied.18 If one were to conclude CAFA jurisdiction always continues over individual claims after a class fails, plaintiffs could force federal courts to try even the most trivial cases to their ultimate conclusions. That is exactly what the plaintiffs in the diet supplement and video game cases tried to do, even though the cases could not have satisfied the relatively generous jurisdictional requirements to be litigated in state courts.19 Unsurprisingly, the federal courts in both cases rejected plaintiffs' attempts to manipulate jurisdiction and instead held jurisdiction under CAFA expired when the class actions failed.20

Such a conclusion is not a panacea, however, nor would it necessarily result in increased efficiency in every case.21 For example, consider a hypothetical plaintiff who files a qualifying putative class action in state court. Relying on CAFA's expansion of federal court jurisdiction, defendants remove. After significant time and resources are spent, the court rejects class treatment under Rule 23. If the court retained jurisdiction, an unreasonable plaintiff could continue to pursue the case in federal court, but in all likelihood, the case would quickly come to an end once class treatment was no longer a possibility. If jurisdiction ceased when the certification failed, however, the case would be remanded to state court.22 The state court could then certify the class under the state's class action rules, which would undermine one of CAFA's primary goals.23 CAFA's provisions then could be read to suggest if a state court

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certified any aspect of the case for class treatment, the defendants could again remove the action to federal court, which would have authority to revisit certification decisions and the obligation to ensure Rule 23's requirements are met. Decertifying the class, however, would again divest the court of subject matter jurisdiction, and despite the apparent irrationality, the process could be repeated.

Recognizing this type of situation could render litigation a game of jurisdictional "ping-pong," the trend in circuit courts is to hold that jurisdiction continues after a denial of class certification.24 But not all courts agree.25 Likewise, scholars who have analyzed this problem have reached opposing determinations.26 This article concludes CAFA's language and statutory scheme require courts to consider jurisdiction at two points: before a certification decision is reached and after such a decision. While CAFA's jurisdictional provisions clearly provide federal courts with jurisdiction as soon as plaintiffs allege the kind of putative class covered by CAFA, some courts reason that jurisdiction must continue post denial of certification or it must be treated as never having existed from the beginning.27 That reasoning is flawed. Despite the potential that cases could move back and forth between federal and state courts, given the way CAFA was drafted, this article concludes a denial of certification should cause jurisdiction to cease, such that dismissal or remand is required. If a reasonable possibility exists that a deficiency in the alleged class can be fixed, perhaps the class representatives' claims are not typical of the absent class members' claims,28 for example, courts should delay the certification decision and encourage the parties to explain how the alleged class might be remedied to allow certification. If the court remains unconvinced, however, it should deny certification and

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dismiss or remand the case, unless an alternative basis for federal jurisdiction exists.

Approaching CAFA's jurisdictional provisions in this way would allow courts to avoid ignoring some of the statute's more problematic, but nevertheless, existing jurisdictional provisions. In addition, to the extent possible, it would further the primary articulated purposes underlying Congress's passage of CAFA, ensuring, on the one hand, that class actions of national importance are heard in federal courts and preventing, on the other hand, de minimis or meritless claims that do not further substantive legal policies and could never qualify for class treatment from taking up limited judicial resources merely because plaintiffs allege a qualifying putative class.29 It would also promote predictable and logically consistent answers to the question of continuing jurisdiction, even though in some cases characteristics of a given class weigh in favor of delaying a class certification decisions, whereas in others they do not.

Part I of the article discusses the relevant policies underlying CAFA and Rule 23. Part II briefly outlines the more straightforward operation of CAFA jurisdiction in pre-certification and post-successful certification situations before explaining the provisions in CAFA that have given rise to considerable confusion after courts deny class certification. Part III critiques the arguments made by courts and scholars in support of and against continuing jurisdiction. It then suggests an approach that is most consistent with the statute, in light of all of its relevant provisions and their corresponding limitations, and that furthers prudential concerns underlying Rule 23 and CAFA as much as possible given the way the statute was drafted.

I. CAFA and Rule 23

While state courts enjoy broad subject matter jurisdiction, federal courts have limited jurisdiction and may hear only the kinds of cases

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that the Constitution permits and that Congress authorizes.30 Determining whether a case falls within a court's jurisdiction is, of course, of critical importance because a court's lack of subject matter jurisdiction is a fatal defect that cannot be waived.31 Moreover, courts and parties do not have the power to create subject matter jurisdiction by agreement or by consent.32 Before Congress passed CAFA, federal courts could exercise jurisdiction over class actions only if the alleged class actions fell within one of the already existing jurisdictional statutes,33 and most did not.34

Through CAFA, Congress amended the federal diversity statute to incorporate a minimal diversity requirement that allows federal courts to preside over more interstate class actions, even when those class actions are based solely on state law claims.35 Now, whenever a

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plaintiff files a putative class action alleging sufficient damages, a large enough class, and at least one diverse party, federal courts may exercise original jurisdiction to hear the action, unless one of CAFA's narrow statutory exceptions applies.36 CAFA also modified federal removal procedures so that any defendant can remove an action to federal court, even if not all defendants agree, and it eliminated the home-state defendant and one-year limitations on removal.37 While CAFA addressed some legitimate problems, it did so by adopting jurisdictional provisions that "are detailed...

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