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Signed into law to provide expanded federal jurisdiction over class actions, the Class Action Fairness Act (CAFA) is beginning to engender a body of case law. My last column covered the issue of the effective date of CAFA [NLJ, June 27]. This column addresses practical issues that arise when a class action is unquestionably governed by CAFA, and provides a peek at how plaintiffs’ lawyers and defense lawyers are negotiating the contours of CAFA. Undefined CAFA provisions to trigger litigation? CAFA is applicable to cases commenced on or after the date of its enactment, Feb. 18, 2005. When CAFA was enacted, many commentators predicted that the various undefined and ambiguous provisions of CAFA were likely to provoke much litigation. (See, e.g., Georgene Vairo, “The Class Action Fairness Act of 2005: A Review and Preliminary Analysis,” published in Class Action Fairness Act of 2005, with commentary and analysis (LexisNexis March 2005)). Two cases decided recently involve some of those provisions, but also involve a provision that Congress left out of the act: Who has the burden of proof when a court is deciding whether to exercise jurisdiction under CAFA? Because CAFA’s provisions are ambiguous and untested, although not confronted with an insurmountable challenge, the party bearing the burden of proof likely will have a tough row to hoe. The decisions also delve into how to aggregate claims under CAFA, and how to prove citizenship. This column discusses the first of the cases. Berry v. American Express Publishing Corp., 2005 U.S. Dist. Lexis 15514 (C.D. Calif. June 2005). My next column will discuss the second case. Schwartz v. Comcast Corp., 2005 U.S. Dist. Lexis 15396 (E.D. Pa. July 2005). The two cases present the classic scenario that Congress attempted to deal with in CAFA: facilitating removal of class actions filed in state courts. In Berry for example, in the first reported case dealing with the burden-of-proof issue, the plaintiff filed a class action complaint in a California state court on March 3, 2005. The plaintiff sought injunctive relief to end an allegedly unlawful business practice whereby the defendants had charged credit card holders for unsolicited magazine subscriptions unless the credit card holders take affirmative action declining the subscriptions. The plaintiff, who had been charged for a subscription to Travel & Leisure magazine, successfully canceled the magazine and obtained a refund of all charges. Nonetheless, the plaintiff contends that the defendants’ actions violate various California Civil Code provisions. Anticipating that the defendants would remove the case to federal court, the plaintiff alleged that “no monetary award in the amount of $5,000,000.00 or greater is sought that would provide the United States District Court with diversity jurisdiction pursuant to the terms of the Class Action Fairness Act of 2005.” On April 1, the defendants timely filed a notice of removal under CAFA’s jurisdictional and removal procedures. The plaintiff filed a motion for remand, arguing that the defendants bear the burden of showing that the amount in controversy exceeds $5 million, and that the defendants fail to meet this burden when the complaint contains only claims for injunctive relief and the plaintiff affirmatively indicates that the relief sought does not meet CAFA’s statutorily prescribed amount in controversy. In response, the defendants argued that CAFA be interpreted according to its legislative intent to confer jurisdiction on federal courts and to shift the burden to plaintiffs to show that removal is improper. Additionally, defendants argued that the recovery could exceed $5 million. According to the defendants, the value of the injunctive relief, whether measured from the perspective potential recovery by, or value to, a plaintiff or the cost to defendants, exceeds the requisite amount in controversy. Judge Alicemarie H. Stotler’s opinion covers a number of technical procedural issues. First, she writes that on a motion for remand, prior to the enactment of CAFA, the burden of proof would be on the defendant, that all contested fact issues would be resolved in favor of the plaintiff, and that there was a strong presumption against removal. She then discussed CAFA, noting that the statute was passed to ensure that class actions involving large sums would be litigated in federal court. The statute thus provided for an amount in controversy in excess of $5 million, and also provided that the claims of class members be aggregated to determine whether the amount in controversy was met. Although detailed and extensive, because the statute did not address the burden-of-proof issue, the court looked to the legislative history of CAFA as an essential tool, finding that committee reports are “the authoritative source for finding the Legislature’s intent.” Stotler, citing the preamble to CAFA, noted that the statute was clearly enacted to expand federal jurisdiction over class actions to prevent class action abuses. See Sen. Pub. 109-14, p. 8. Although the statute did not address the burden of proof, the Senate report states that “it is the Committee’s intention with regard to each of these exceptions that the party opposing federal jurisdiction shall have the burden of demonstrating the applicability of an exemption.” Sen. Rep. 109-14, p. 44; see also Sen. Rep. 109-14, p. 43. The court rejected the plaintiff’s argument that Congress’ failure to codify the Senate report’s intentions on the burden of proof demonstrated an explicit intent to maintain the status quo. Rather, she found that although the omission of any burden-shifting provisions could be “an opaque means of preserving the status quo,” it was just as likely there had been an oversight on the part of Congress, that it is difficult for statutes to address all circumstances, and, more likely that Congress expected that the clear statements in the Senate report would be sufficient to shift the burden of proof. Finally, the court observed that its interpretation is consistent with the tradition of placing the burden on the moving party. Next, Stotler addressed the amount-in-controversy valuation issue. Although the statute provides for aggregation, like the regular diversity jurisdiction $75,000 amount-in-controversy provision, CAFA does not provide any rules for valuing the amount in controversy. Prior to the CAFA, the 9th U.S. Circuit Court of Appeals did not permit the value of injunctive relief sought in a class action to be determined by the possible aggregate cost to the defendant. According to Stotler, CAFA’s provision allowing aggregation of claims in class actions suggests that there should be no barrier to using either the plaintiff’s or the defendants’ viewpoint in determining whether the jurisdictional amount is satisfied. Under CAFA, plaintiffs may aggregate their claims to invoke diversity jurisdiction, and, therefore, determining the amount of controversy from the aggregate cost to defendants does not circumvent any nonaggregation principles. The court ruled that the plaintiff met its burden of showing that the case falls outside of CAFA’s jurisdictional provisions. First, the plaintiff made no claims for monetary relief in the complaint. Second, although the plaintiff’s general prayer for relief stated that he seeks statutory damages, he expressly stated that neither he nor the class seeks to recover more than $5 million. Rather than assume that the plaintiff had misstated the value of the claim to defeat jurisdiction, the court opined that the plaintiff’s representations to the court put the defendants in a strong position to estop plaintiffs from asserting a harm and recovering damages in excess of $5 million. Third, the value of the injunctive relief also does not exceed the jurisdictional minimum. Class members who do not want the subscription are able to obtain cancellations and refunds. “Thus, the value of an injunction to the class members would be the value of not being bothered by unsolicited magazine subscriptions, an intangible, highly speculative benefit.” Looking at the claim for injunctive relief based on the defendants’ viewpoint, the court again found that the jurisdictional amount was not satisfied. The cost to defendants merely would be the cost of ceasing the practice: “Indeed, ceasing this practice might actually result in savings to defendants as a result of fewer mailings, less postage and reduced promotional materials.” Because the claims are so difficult to value, any monetary valuation would be wholly speculative. Accordingly, the court ordered the case remanded to state court. Burden on party resisting jurisdiction under CAFA As we will see in the next column, the court in the Schwartz case disagreed with Stotler on the burden-of-proof issue. In my view, Congress probably did intend that the burden of proof be placed on the party resisting jurisdiction under CAFA. Additionally, although it surely would agree with Stotler’s injunctive relief valuation rules, one wonders whether it would agree with her decision to remand based on the uncertainty of the injunctive reward. Prior to the adoption of CAFA, plaintiffs’ lawyers would routinely all but, and sometimes actually did, place in bold on their state court complaints a “DO NOT REMOVE ME!” notation. Like it or not, Congress quite clearly is trying to provide the defendants with a vehicle for removing such cases. It is surely cold comfort to the defendants that they might be able to persuade the state court judge to estop the plaintiffs who end up seeking relief in excess of $5 million upon return to state court. Defendants would, in my view, have a remedy under CAFA at that point. If the plaintiffs seek in excess of CAFA’s jurisdictional amount, or if defendants believe that they will, in appropriate cases, defendants ought to test that proposition by offering to settle at less than the jurisdictional amount. If the plaintiff refuses to settle, the defendants may remove again. The one-year limit on removing diversity cases does not apply to cases removed under CAFA. See 28 U.S.C. 1453(d). Georgene M. Vairo is a professor of law and William M. Rains fellow at Loyola Law School, Los Angeles. She can be reached at [email protected].

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