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One year ago, as Congress was wrapping up its debate on the Class Action Fairness Act (CAFA), both supporters and opponents of class action reform openly questioned whether the bipartisan compromise that led to the bill’s passage had watered it down too far. Some worried that the exceptions agreed to by bill supporters would swallow the rule, and others complained that the time limits for appellate review would discourage appeals courts from wading into CAFA cases. The last 12 months, however, have proven the critics wrong. On the eve of its one-year anniversary, CAFA has already made great strides in fulfilling Congress’ key goals. During the debate that led to enactment of CAFA, the bill’s sponsors set forth four goals for class action reform legislation: to put an end to the “magnet” state court phenomenon; to stop state courts from dictating other states’ laws; to allow overlapping class actions to be coordinated in federal multidistrict litigation (MDL) proceedings; and to protect consumers from abusive class action settlements. Fulfillment of the first and second goals did not take long. CAFA has shut down magnet state courts and by extension put an end to the problem of county courts dictating law for the whole country. In Madison County, Ill., the most notorious of magnet courts, there were 82 class actions filed in 2004, and 36 class actions filed in the first month-and-a-half of 2005 (before CAFA’s enactment). But between Feb. 18, 2005, and Dec. 31, 2005, just 10 class actions have been filed in the county, a decline of 87% from the 77 suits filed during that period in 2004. These statistics are consistent with anecdotal reports from corporate counsel around the country that class action filings are dropping, many plaintiffs’ counsel are simply filing in federal court and most removed post-CAFA class actions are staying in federal court. Congress’ goal of coordinating overlapping class actions in federal MDL proceedings also appears to be bearing fruit. Since CAFA’s enactment, 33 of the 38 MDL proceedings established include class actions. And while it is still too early to gauge CAFA’s impact on settlements, there can be little doubt that federal courts will be far more skeptical of the lawyer-takes-all settlement proposals that had become a staple in state court. CAFA’s exceptions are narrow So why were the critics wrong? First, as federal courts have almost consistently recognized, the CAFA exceptions are, in fact, very narrow. In Kearns v. Ford Motor Co., No. CV 05-5644-GAF (C.D. Calif. Nov. 22, 2005), for example, the plaintiffs tried the old trick of naming a local car dealership to evade federal jurisdiction. Prior to CAFA, the case would almost certainly have been remanded. But the rules have now changed, and the federal district court held that the plaintiffs could not take advantage of the local-controversy exception simply by tacking a dealer on to their obviously interstate claim. Similarly, in Moore v. State of Louisiana, No. 05-374-JJB-SCR (M.D. La. Nov. 1, 2005), a magistrate judge held that naming state agencies in a case that was clearly targeted at an insurance company did not bring the case within the scope of the “state action” exception. Second, plaintiffs have the burden of showing that the exceptions are satisfied. To date, the majority of courts to consider the burden question have relied on the very expansive congressional history to find that the burden in a CAFA removal case always rests with the party seeking remand. But even in the one circuit where the court of appeals held that defendants still have the burden of satisfying the threshold requirements for jurisdiction (see, e.g., Brill v. Countrywide Home Loans Inc., 427 F.3d 446 (7th Cir. 2005)), a district court recently concluded that a plaintiff seeking remand bore the burden of showing that two-thirds of class members were from the forum state per CAFA’s home-state exception. See In re FedEx Ground Package Sys., No. 3:05-MD-527, 2006 U.S. Dist. Lexis 1219 (N.D. Ind. Jan. 13, 2006). Third, the cases that fall within CAFA’s exceptions are generally viewed as unattractive by plaintiffs’ lawyers. As a rule, plaintiffs’ counsel prefer to file sprawling class actions that generate a lot of publicity and provide the potential for huge fees. But those large, interstate suits simply don’t fall within CAFA’s exceptions. Many lawyers would find that the potential payoff from a local case simply isn’t large enough to make litigation worthwhile-especially now that they must file the case in the defendant’s home state rather than a magnet court. Finally, CAFA has also surpassed its critics’ expectations because its appellate review provision is working. When CAFA was amended to make appellate review discretionary and add a 60-day deadline for appellate decisions on remand orders, many observers expressed concern that appellate courts would not take these appeals. However, early experiences with the legislation suggest precisely the opposite. To date, even though most of the litigation regarding CAFA has focused on questions of retroactivity, the 1st, 7th, 8th, 9th and 10th circuits have all accepted CAFA appeals, and appellate interest in CAFA interpretation will likely grow over the next year as the case law focuses more on the statute’s jurisdictional and settlement provisions-and less on its effective date. John Beisner and Jessica Davidson Miller are partners in the Washington office of O’Melveny & Myers and members of the firm’s class action defense practice. As counsel to the U.S. Chamber of Commerce, they played a key role in the passage of the Class Action Fairness Act.

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