Federal jurisdiction and due process in the era of the nationwide class action.

Author:Wolff, Tobias Barrington
 
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INTRODUCTION I. INTERDICTING STATE COURT PROCEEDINGS: TARGETED GRANTS OF JURISDICTION AND THE ANTISUIT INJUNCTION A. The Anti-Injunction Act in an Era of Nationwide Complex Litigation B. Targeted Jurisdiction and the Anti-Injunction Act C. The Class Action Fairness Act and the Interdiction of Collusive Suits II. ENFORCING DENIALS OF CERTIFICATION: SHUTTS, DUE PROCESS, AND THE ANTISUIT INJUNCTION A. Understanding Shutts 1. Shutts and the Role of "Consent" 2. The Mullane Antecedent B. Class Certification, Choice of Law, and Choice of Remedies C. Enforcement of Certification Denials Under the Class Action Fairness Act III. COLLATERAL ATTACKS AND ADEQUACY OF REPRESENTATION CONCLUSION INTRODUCTION

The class action has come of age in America. With increasing regularity, class litigation plays a central role in discussions about theory, doctrine, and policy in the American civil justice system. The dynamics of the class action lie at the heart of current debates over the nature of the litigation process and the limits of adjudication in effectuating social policy. Choice of law analysis has enjoyed a renaissance as its significance to the question of class certification has become apparent. Class litigation now frequently drives debates over tort reform and the phenomenon of regulation through litigation. In these and many other respects, we have entered a new dispensation: the era of the nationwide class action. The passage of the Class Action Fairness Act of 2005 (CAFA) (1)--the first occasion on which Congress has enacted a generally applicable legislative policy pertaining to aggregate representative litigation (2)--aptly punctuates that arrival.

The class action's ascendance to center stage, however, has not always been accompanied by the development of a sophisticated doctrinal and analytical apparatus that is adequate to its needs. This is particularly the case in the two important areas that will be my primary focus in this Article: the analysis of the content and impact of federal jurisdictional policy when parallel class actions are filed in state and federal courts, and the due process standards that govern the various aspects of representative litigation. In the former case, much of the discussion among courts and commentators has been mired for too long in forms of analysis that are inapposite and inadequate. In the latter, the discussion has been riddled with outright mistakes and misunderstanding.

The enactment of CAFA offers an important occasion for revisiting our treatment of these vital questions of federal jurisdictional policy and due process in representative litigation. This is so for several reasons. First, the Act promises to move large numbers of nationwide class actions into the federal courts. (3) This dramatic change in the allocation of class actions within the dual American court system will increase the stress on the flawed doctrines that are currently available for administering parallel class action proceedings and, at the same time, provide a concomitant opportunity for achieving a more uniform and comprehensive restatement of those doctrines. Second, the Act itself contains a serious flaw--a jurisdictional paradox, as I call it--that promises to intensify further the need to rationalize the methods available for administering multiforum class actions. To appreciate the legislative impetus that CAFA provides for this larger project of reexamination, it is necessary to understand the impact that the Act has on the federal jurisdictional policies that govern class litigation and the manner in which the Act operates in allocating class actions to the federal forum.

CAFA operates in two basic modes. First, it dramatically expands the ability of federal courts to exercise jurisdiction over class action lawsuits by liberalizing the rules on citizenship and amount in controversy that ordinarily constrain diversity jurisdiction. (4) This expansion of diversity jurisdiction, in turn, is an expression of the instinct that lies at the Act's foundation: the belief that federal courts will apply different and more restrained standards to the administration of class actions than will state courts, thus providing greater confidence that the interests of parties on both sides of the dispute will be protected from abuse. The shift to the federal forum, in other words, is expected and intended to alter the outcome in class litigation based on state law.

Second, the Act imposes limits on the forms of class action settlement that may be approved once a class action is brought to the federal forum, singling out practices believed to be particularly prone to abuse and imposing certain reporting requirements before a settlement may be approved. (5) All of these changes are effectuated against the backdrop of a set of affirmative statements of policy contained in the Act regarding the proper role of class actions--and, in particular, the federal forum--in promoting the fair and efficient resolution of claims by aggrieved plaintiffs. (6) Modern federal class action practice, in other words, is no longer purely a creature of the rulemaking process and judicial innovation. It can now claim at least some of the benefits of legitimacy that federal legislation confers.

One of the first orders of business in assessing the significance of the Act will be to understand the change that it effects in the authority structure governing the administration of federal class actions. Until now, scholarly and judicial debates surrounding class litigation have centered largely on second-order questions: what is the proper role of judges in using aggregation to bring about substantive goals, and what principles should guide them in that endeavor in the absence of an affirmative congressional mandate or express statement of policy? CAFA provides a long-deferred occasion to pose some first-order questions: what congressional policies toward federal jurisdiction can CAFA fairly be understood to embrace, and how should those policies affect the administration of representative litigation?

The answers to such first-order questions will necessarily be shaped, in part, by the jurisdictional paradox that is embodied in the statute. One of the primary stated purposes of CAFA is to protect absent class members from the faithless or collusive behavior of their own class counsel. (7) As has been extensively analyzed, aggregate litigation can create a serious misalignment between the interests of class counsel and the interests of the absentees they represent, a mismatch that in turn can lead class counsel to sacrifice the welfare of the class in return for personal gain. (8) The Act recites this problem as one of the principal evils that it seeks to remedy and offers access to the federal forum as the solution. (9) What it fails to do, however, is to make any change to the gatekeepers who will control that access. More precisely, the Act offers no mechanism by which absent class plaintiffs can act independently of class counsel to move their lawsuits into federal court.

The paradigmatic case of the faithless or collusive class counsel takes the following basic form: Defendant has engaged in a course of conduct that leaves it exposed to the threat of substantial liability. In response, various lawyers have filed multiple overlapping class actions in courts around the country, some purporting to represent the citizens of a particular state or region, others attempting to represent all claimants nationwide. Defendant, apprehending a real threat of liability exposure or major litigation costs, wishes to arrive at a settlement that binds all claimants to a global release while keeping its payment obligation at the lowest possible level. (10) For their part, the competing class lawyers all have an incentive to arrive at a binding resolution quickly in order to ensure that they will be awarded attorneys' fees before being preempted by a competitor lawsuit. The stage is thus set for Defendant to shop for the lowest bidder by engaging in some form of reverse auction, seeking lead counsel in one of the nationwide proceedings who will settle the class claims at a price that may seriously undervalue those claims, perhaps providing no meaningful relief to class members at all, in return for receiving a lock on a generous fee award.

The actual prevalence of suits in which class counsel exhibit such malfeasance is a matter of dispute. (11) Nonetheless, Congress enacted CAFA on the basis of an express finding that such faithless or collusive proceedings present a serious problem that occurs most frequently in state court, and it offered expanded access to federal court as the primary solution. (12)

But how are class members to gain access to a federal forum in such a case? When original federal subject matter jurisdiction exists over a dispute, the ordinary methods of gaining access to federal court are well established. For a plaintiff, the ordinary route is to file the lawsuit in federal court in the first instance. For a defendant in a case that has been filed in state court, the ordinary route is to remove the suit to the federal forum. In class action litigation, the routes into federal court remain the same but the relevant actors change, with the role of class counsel becoming central to the choice of forum for plaintiffs. But an absent class member has no power to direct class counsel to select the federal forum in the first instance--indeed, as a formal matter, "absent class members" do not exist as such until a putative class proceeding is filed--and even named class plaintiffs play almost no role in strategic decision making in all but the most unusual of proceedings. As a consequence, neither of the established methods of invoking the federal forum is generally available to absentees. It is class counsel (and defendants), rather than class members, that serve as the gatekeepers for access to the federal forum in a class...

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