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As the two-year anniversary of the Class Action Fairness Act of 2005 approaches, federal courts seem to be working beyond vexing threshold issues after enactment of this new jurisdictional statute. See Pub. L. 109-2, 199 Stat. 4 (2005), 28 U.S.C. 1332(d) and 28 U.S.C. 1453. Since February 2005, federal courts have interpreted whether changes to class action pleadings commence a new action to subject the litigation to CAFA’s provisions; which party on removal carries the burden of proof on jurisdictional requirements; amount-in-controversy challenges; and timing of interlocutory appeals. Moreover, courts have parsed CAFA’s home-state and local-controversy exceptions, and considered whether a removed case constitutes a “mass action” under CAFA. Although courts have now spoken on many CAFA problems, emerging jurisprudence is rife with numerous conflicting opinions. In addition, many courts agree with the sentiment of Judge Stephen G. Larson of the U.S. District Court for the Central District of California, who recently suggested that CAFA is “a statute in which some major terms are left undefined, certain provisions of which have been aptly characterized as ‘bewildering’ or ‘clumsily crafted,’ and whose legislative history is, in part, of questionable interpretive value. In short, it is a statute that is a headache to construe.” Lao v. Wickes Furniture Co. Inc., 2006 U.S. Dist. Lexis 76982, at 2 (C.D. Calif. Oct. 4, 2006). This column discusses a few unusual CAFA problems that courts have grappled with in recent months, which the legislative drafters may not have contemplated when enacting CAFA. Removal provisions boost federal MDL procedure CAFA’s removal provisions have given a boost to federal multidistrict litigation (MDL) procedure. Because CAFA is intended to promote removal of class action litigation of a “national” scope, a removed state class action may then be transferred and consolidated with an existing federal MDL. See 28 U.S.C. 1407. What powers, if any, does the MDL court have over CAFA challenges? The 7th U.S. Circuit Court of Appeals recently resolved a CAFA appeal. See Santamarina v. Sears, Roebuck and Co., 2006 U.S. App. Lexis 25861 (7th Cir. Oct. 19, 2006). In an opinion by Judge Richard Posner, the court held that a district judge presiding over a Chicago MDL litigation had the power to reconsider, and reverse, a California federal judge’s order approving a CAFA removal from state court. In Santamarina, a plaintiff sued Sears in California state court alleging that Sears fraudulently represented that certain Craftsman tools were manufactured in the United States, when the tools were manufactured abroad. The plaintiffs filed their original class complaint before CAFA, but subsequently amended their complaint. Sears then removed the case to federal court pursuant to CAFA. The plaintiffs did not appeal the removal. After removal, the multidistrict litigation panel transferred the litigation to an existing Chicago MDL. After 28 months, the plaintiffs asked the MDL judge to reconsider the California judge’s ruling on the CAFA removal. The MDL judge granted the plaintiffs’ motion, ruled that the California lawsuit was improperly removed, and ordered that it be remanded to California state court. Santamarina at 2006 U.S. App. Lexis 25861, at 2-3. Sears appealed the MDL judge’s order. The 7th Circuit upheld the authority of the MDL judge to reconsider the California judge’s decision, based on the doctrine of “the law of the case.” Posner stated: “The authority of a district judge to reconsider a previous ruling in the same litigation, whether a ruling made by him or by a district judge previously presiding in the case, including (because the case has been transferred) a judge of a different court, is governed by the doctrine of the law of the case, which authorizes such reconsideration if there is a compelling reason, such as a change in, clarification of, law that makes clear the earlier ruling was erroneous.” Santamarina at 2006 U.S. App. Lexis 25861, at 3-4. The 7th Circuit agreed that the Chicago MDL judge was correct in ordering the remand to California state court. The court concluded that the plaintiffs’ amended complaint related back to their pre-CAFA original complaint, and the case should not have been removed to federal court. Santamarina at 2006 U.S. App. Lexis 25861, at 6-12. In another California class litigation, a corporate defendant unsuccessfully invoked CAFA removal to seek enforcement of a mandatory arbitration clause. See Hoffman and Market Trading Inc. v. Cingular Wireless LLC, 2006 U.S. Dist. Lexis 79067 (S.D. Calif. Oct. 26, 2006). In Hoffman, plaintiffs filed a class action in California state court alleging state causes of action for breach of contract, deceptive trade practices, and unlawful, fraudulent and unfair business acts in violation of the California Business & Professions Code � 17200, et seq. The litigation centered on consumer complaints relating to Cingular Wireless’ representations about “rollover” minutes. Cingular removed the action to federal court under CAFA. After removal, Cingular sought to compel arbitration under a contractual arbitration provision that included a class action waiver. Plaintiffs opposed the motion on the ground that California law rendered the arbitration agreement unconscionable. The federal district court, applying California law, agreed and held the arbitration clause was substantively and procedurally unconscionable. Hoffman, 2006 U.S. Dist. Lexis 79067, at 6-14, relying on Discover Bank v. Superior Court, 36 Cal. 4th 148, 30 Cal. Rptr. 3d 76, 113 P.3d 1100 (2005). In addition, the court also rejected Cingular’s argument that even if the arbitration clause was unconscionable under Discover Bank, then the Federal Arbitration Act (9 U.S.C. 1) pre-empted California law, in favor of enforcement of the arbitration agreement. Hoffman, 2006 U.S. Dist. Lexis 79067, at 21-22. The court held that the doctrine of unconscionability is a defense to contracts, and California’s unconscionability doctrine is not pre-empted by the FAA. Id. Although Hoffman did not turn on an interpretation of CAFA, it illustrates that defensive strategic invocation of CAFA, to avoid unfavorable state law, may be unavailing in certain circumstances such as the enforceability of arbitration provisions. In Hoffman, CAFA removal permitted the defendant another choice of forum, but not better law. Among CAFA’s many headache-inducing problems, not the least is whether a proposed class action satisfies the home-state or local-controversy exceptions in relation to the proportion of state citizens to noncitizens in the class. Under CAFA, a federal district court must decline to exercise jurisdiction if “greater than two-thirds of the members of all proposed classes in the aggregate are citizens of the state in which the action was originally filed.” 28 U.S.C. 1332(d)(4)(A). If less than one-third of class members are not citizens of the state, then the federal court can exercise jurisdiction. CAFA, of course, is silent on how a court should make this determination. In a class action arising in Georgia, a defendant successfully removed a class action under CAFA. The federal court denied the plaintiffs’ remand, because the plaintiffs failed to offer evidence that the class consisted of two-thirds Georgia citizens. Scott v. ING Clarion Partners LLC, 2006 U.S. Dist. Lexis 79224 (N.D. Ga. Oct. 31, 2006). The Scott litigation involves landlord-tenant dispute based on alleged breach of fiduciary duty and statutory violations relating to the landlords’ failure to refund tenants “redecorating fees” in the amount of $150. The class embraces all current and former tenants for 20 years prior to the filing of the complaint. The plaintiffs originally filed the case in Georgia state court, but the defendants removed the under CAFA. Scott, 2006 U.S. Dist. Lexis 79224, at 2. The plaintiffs moved for remand and for an evidentiary hearing; the federal court denied both requests. In evaluating whether CAFA removal was proper, the court initially held that, consistent with 11th Circuit precedent, the defendants-as the party invoking federal court jurisdiction-carry the burden of satisfying jurisdictional requirements. Scott, 2006 U.S. Dist. Lexis 79224, at 7-8, relying on Miedema v. Maytag Corp., 450 F.3d 1322 (11th Cir. 2006). However, the court further held that a plaintiff seeking a remand based on the local-controversy exception has the burden to establish that the proposed class falls within the exception. Id., at 8. Burden on plaintiffs to prove ‘two-thirds’ issue Based on the facts, the court held that the action satisfied CAFA’s minimal diversity requirements because the plaintiffs were citizens of Georgia and some defendants were citizens of Texas. In addition, after aggregating the damages of approximately 6,000 tenants, the court concluded that CAFA’s $5 million amount-in-controversy requirement was satisfied. The burden then shifted to the plaintiffs to show the applicability of the local-controversy or home-state exceptions. The defendants contended that with a class period extending across 20 years, it is highly likely that more than one-third of class members are no longer Georgia citizens. The plaintiffs responded that the defendants did not adduce evidence proving this point. Id., at 14-15. The court disagreed, ruling that the burden is on the plaintiffs, not defendants, to prove that two-thirds of the putative class are Georgia citizens. Because the plaintiffs did not come forward with any evidence to support this claim, the court determined that the plaintiffs failed to meet their burden. Therefore, the court held that it did not need to parse the other elements of the local-controversy requirement. Id., at 15. Linda S. Mullenix holds the Morris and Rita Atlas Chair in Advocacy at the University of Texas School of Law. She can be reached at [email protected].

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