The impact of the Class Action Fairness Act on the federal courts: an empirical analysis of filings and removals.

AuthorLee, III, Emery G.

This Article presents preliminary findings from the Federal Judicial Center's (FJC) study of the impact of the Class Action Fairness Act of 2005 (CAFA) on filings and removals of class actions in the federal courts. After setting the FJC research in the context of the Judicial Conference's evolving position with respect to expanded federal court jurisdiction over class actions, the Article shows that the monthly average number of diversity of citizenship class actions filed in or removed to the federal courts has approximately doubled in the post-CAFA period (February 18, 2005, through June 30, 2006). The Article also presents preliminary findings on trends in federal question class action filings and removals, class action activity by nature-of-suit categories, and the geographic distribution of class action filings and removals in the federal courts.

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INTRODUCTION I. EVOLUTION OF JUDICIAL BRANCH POLICIES II. PURPOSES OF CAFA AND EXPECTATIONS ABOUT ITS PROBABLE EFFECTS A. Jurisdictional Findings, Purposes, and Statutory Terms 1. Jurisdictional Provisions 2. Jurisdictional Exceptions 3. Judicial Interpretations of CAFA 4. Removal Provisions 5. Class Action Settlements and Notices B. Predictions of CAFA's Effects III. THE FJC STUDY A. Research Design (Phase I) 1. Identifying Class Actions 2. Accounting for Overlapping and Duplicative Federal Class Actions 3. Determining Whether CAFA Has Impacted the Federal Courts B. Preliminary bindings 1. Filings and Removals 2. Nature-of-Suit Categories 3. Circuit-Level Analysis IV. QUESTIONS FOR CONTINUING RESEARCH INTRODUCTION

This Article presents empirical findings on the effects of the Class Action Fairness Act of 2005 (CAFA) (1) on the federal courts. Looking at filing patterns before and after CAFA, these preliminary findings focus primarily on what is knowable this early in CAFA's life: namely, what effect, if any, the Act has had in adding class actions to the federal dockets, whether in the form of new filings, removals, or both. Analysis of CAFA's impact on litigation practices--with the possible exception of remand activity in removed cases--will have to await the termination of cases filed or removed after CAFA went into effect.

Part I of this Article describes the evolving judicial branch policies that were a central part of CAFA's enactment and that provide a context for many of the empirical issues to be studied. Part II outlines the purposes of CAFA and its major statutory provisions as a framework for identifying expectations of the Act's proponents and of Congress, as well as for identifying research questions. Where empirical findings from prior studies are available, we summarize them. This Part also addresses predictions of CAFA's overall effect on the federal courts' caseload. Part III presents the research design of the ongoing Federal Judicial Center (FJC) study of CAFA's impact on the federal courts, and provides highlights of its preliminary findings on class action activity in the federal courts before and after CAFA's effective date. To date, the FJC study has found an increase in diversity class action filings and removals in the federal courts. The observed increase is consistent with the expectations of the judicial branch, members of Congress, and proponents and opponents of CAFA, though our findings may represent a less dramatic increase than some anticipated. These findings describe changes in the number and types of cases filed in and removed to the federal district courts and include analysis of filings and removals in district courts, organized by circuits. Part IV then briefly identifies questions for continuing research, including questions to be addressed in the FJC's ongoing study and possible questions for other researchers, particularly at the state level.

  1. EVOLUTION OF JUDICIAL BRANCH POLICIES

    CAFA was signed into law on February 18, 2005, after years of contentious debate. Public attention focused on the arguments advanced by proponents of the controversial legislation, typically corporations and organizations representing business interests, and by its opponents, typically plaintiffs' attorneys and organizations representing consumers, employees, and other class litigants. Proponents of the legislation generally claimed that existing law allowed plaintiffs' attorneys to choose any state forum in which to litigate nationwide class action claims. Self-interest, the argument went, led to the filing of such cases in so-called "judicial hellholes," (2) state courts predisposed to certify nationwide classes, sometimes hastily and without an opportunity for a hearing. The proposed solution was to expand federal jurisdictional and removal statutes to allow almost all class actions to be removed to and litigated in the federal courts. Opponents of the legislation generally defended the status quo as supporting the rights of states to enforce their own laws. Opponents also emphasized the importance of the class action device as a remedy for legal wrongs too trivial to support individual lawsuits. Some opponents expressed alarm at the potential addition of thousands of cases to the federal courts' dockets.

    Dating back to legislative proposals to alter class action jurisdiction and removal provisions in the 1990s, the federal judiciary has shown an understandably keen interest in class action legislation. The proposed changes, after all, involved a potentially dramatic expansion of federal jurisdiction and a consequent increase in the federal caseload. But the consequences of expanded federal jurisdiction look quite different when viewed from divergent perspectives. From a purely administrative perspective, the resulting increase in complex cases seemed dangerous, threatening to consume scarce judicial resources and to place additional pressures on an already overburdened federal judiciary. From a federalism perspective, expanded federal jurisdiction appeared as a different kind of threat, one potentially sweeping into the federal courts many class actions that really do not belong there, i.e., those involving claims of state residents based purely on state laws, cases arguably within the state courts' proper domain. From a national perspective, the expansion of federal jurisdiction could potentially serve important functions by providing for aggregation and by facilitating the efficient and fair national resolution of class actions raising issues affecting more than the interests of any single state. Under any of these perspectives, however, and in whatever terms they were expressed, the expansion of federal jurisdiction as a result of the legislative proposals was a legitimate cause for judicial branch interest and even concern.

    During this lengthy legislative battle, little public attention was paid to the policy pronouncements of the federal judiciary. That is not to say that the legislature ignored the judicial branch's position. On the contrary, the judicial branch's final policy appears to have enabled some legislators and other participants to forge a compromise between the proponents and opponents of class action legislation. The principles asserted by the judicial branch serve as a conceptual backdrop for understanding the limits of the legislation and also provide an underpinning for the research that the FJC is conducting at the request of a number of committees of the Judicial Conference of the United States (JCUS). We outline here the evolution of the JCUS policies in order to put our research into context.

    The logical starting point, given the related concerns of caseload and federalism, is the JCUS's official position with respect to the diversity jurisdiction of the federal courts. Beginning in 1977, the Conference expressed its general support for abolishing diversity jurisdiction. (3) In so doing, the JCUS viewed the expansion (or simply the scope) of federal jurisdiction primarily from the administrative perspective, although federalism concerns also played a role. The JCUS continued to express its anti-diversity jurisdiction position throughout the 1970s and 1980s. (4)

    In the 1990s, though, the JCUS began to carve out exceptions to that general position. In 1989 the Chief Justice, following congressional direction, appointed the Federal Courts Study Committee, a diverse group of judges, attorneys, and legislators, to study the issues then facing the federal judiciary. In its report, the Committee expressed an appreciation for the national dimensions of complex litigation, recognizing a role for the federal courts in cases raising issues that transcend the interests of any single state. (5) The Committee recommended that "Congress should limit federal jurisdiction based on diversity of citizenship to complex multi-state litigation, interpleader, and suits involving aliens." (6) The stated rationale for the complex litigation exception, allowing diversity jurisdiction, was that in cases "involving scattered events or parties and substantial claims by numerous plaintiffs[,] ... the national reach of a federal court would enable a single forum to resolve disputes involving multiple parties from many states." (7) In short, the Federal Courts Study Committee viewed the question of federal jurisdiction from the national perspective when it examined the complex litigation issue, even as it employed the administrative or federalism perspectives in other contexts.

    In the 1995 long-range plan for the federal courts, the JCUS reiterated its opposition to diversity jurisdiction in general, asserting in the accompanying commentary that "[p]erhaps no other major class of cases has a weaker claim on federal judicial resources." (8) But at the same time, the long-range plan noted the Conference's prior support for legislation that would establish "'minimal' diversity criteria to allow federal court consolidation of multiple litigation involving personal injury or property damage arising out of a single...

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