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The Class Action Fairness Act of 2005 created new original and removal federal jurisdiction for class actions. See 28 U.S.C. 1332(d)(2) and 28 U.S.C. 1453. Under the CAFA provisions, a plaintiff can file a class action in federal court if the proposed class has more than 100 claimants, the amount in controversy exceeds $5 million and there is minimal diversity among the parties. In addition, CAFA permits defendants to remove state class actions, provided the defendants can satisfy the same jurisdictional requirements. See 28 U.S.C. 1453. Pre-CAFA class actions were subject to the same diversity jurisdiction requirements for all other cases. See 28 U.S.C. 1332(a). Thus, a pre-CAFA class action had to satisfy complete diversity of citizenship among parties to the dispute. In addition, each class member had to satisfy the $75,000 amount-in-controversy requirement, and class member’s damages could not be aggregated to satisfy this requirement. Zahn v. Int’l Paper Co., 414 U.S. 291 (1973). CAFA modified federal diversity jurisdiction for class actions in three significant respects. First, CAFA permits federal jurisdiction of class actions where there is minimal diversity among parties. Second, there is no $75,000 damage requirement for individual claimants. And third, CAFA statutorily overrules the Zahn decision, and permits the aggregation of damages to satisfy the $5 million amount-in-controversy requirement. Addressing jurisdictional problems brings conflict Since enactment of CAFA, a number of federal courts have been faced with the problem of what to do with cases filed under CAFA, where the court either does not certify the proposed class action, or decertifies a CAFA class action. In these situations, may the federal court retain jurisdiction over portions of the case, or must the case be dismissed? Similar to many unforeseen CAFA problems, federal courts that have addressed this jurisdictional problem have issued conflicting decisions. Some courts have determined that events that divest CAFA jurisdiction require dismissal of the entire action; other federal courts have determined that even though no class action remains, the court may nonetheless exercise jurisdiction over remaining portions of the litigation. The U.S. District Court for the Southern District of New York first concluded that once the court determined that a proposed class action was not suitable for certification, the court lost its CAFA subject matter over the plaintiff’s individual action. See McGaughey v. Treistman, 2007 U.S. Dist. Lexis 126, *11 (Jan. 4, 2007). In McGaughey, the plaintiff brought a class action against Treistman pursuant to the Telephone Consumer Protection Act (TCPA), 47 U.S.C. 227 et seq., alleging that the defendant sent unsolicited junk faxes in violation of the TCPA. McGaughey asserted federal subject-matter jurisdiction pursuant to CAFA, 28 U.S.C. 1332(d)(2)(a). The plaintiff moved for class certification, which the court denied for lack of numerosity. As a consequence of the certification denial, the court noted that the plaintiff’s two possible grounds for establishing subject matter no longer existed. The action was no longer a class action and the court could not retain jurisdiction over the plaintiff’s action pursuant to CAFA. Furthermore, because the plaintiff put forth no facts establishing that his individual action met the $75,000 amount-in-controversy requirement under the general diversity statute, the court lost subject-matter jurisdiction under that alternative. The court therefore dismissed the plaintiff’s action for lack of subject-matter jurisdiction. Id. at *12. The Kansas district court subsequently endorsed this McGaughey holding. See Gonzalez v. Pepsico, Inc., 2007 U.S. Dist. Lexis 27279, *13-*14 (D. Kan. April 11, 2007). Subsequent to McGaughey, the Southern District of New York qualified McGaughey, limiting its holdings only to cases where a proposed class action could not be certified at that time or in the foreseeable future. See Falcon v. Philips Electronics North America Corp., 489 F. Supp. 2d 367, 369 (S.D.N.Y. 2007). The court disagreed, however, that a denial of class certification necessarily divested the federal court of its jurisdiction. The court reasoned that CAFA does not list class certification as a prerequisite to federal jurisdiction. Instead, CAFA defines “class action” as any civil action filed under Rule 23 of the Federal Rules of Civil Procedure. 28 U.S.C. 1332(d)(1)(B). See also Arabian v. Sony Electronics Inc., 2007 U.S. Dist. Lexis 67769 (S.D. Calif. Sept. 13, 2007) (following McGaughey and Falcon, and dismissing for lack of jurisdiction); Hoffer v. Cooper Wiring Devices Inc., 2007 U.S. Dist. Lexis (N.D. Ohio Sept. 28, 2007) (same). Judges in the Southern District of New York also have looked to Fed. R. Civ. P. 12(h) as authority to dismiss CAFA cases where post-removal changes in certification affect jurisdictional requirements. See Giovanniello v. N.Y. Law Publ’g Co., 2007 U.S. Dist. Lexis 56694, *3 n.11 (S.D.N.Y. Aug. 6, 2007). In Giovanniello, the court held that for a court to retain CAFA jurisdiction after changed jurisdictional facts “ignores the Fed. R. Civ. P’s instruction that ‘whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action.’ ” Id. Other federal courts, however, have reached a contrary conclusion concerning whether federal jurisdiction is divested when a CAFA class action fails. In a post-CAFA removal case where a class certification decision changed the nature of the action, a federal court nonetheless determined to retain federal jurisdiction. See Davis v. Homecomings Financial, 2007 WL 905939 (W.D. Wash. March 22, 2007). In Davis, plaintiffs filed a nationwide class action in state court. The defendant removed the case to federal court pursuant to CAFA. The federal court then certified a state-only class, which reduced the amount in controversy below the CAFA $5 million jurisdictional threshold. Nevertheless, the Davis court determined that it could retain jurisdiction over the diminished class action, following the principle that the amount in controversy is determined as of the time of removal. The Davis court reasoned that Congress is presumed to be aware of the legal context in which it is legislating and “there is no indication that Congress intended to alter the established authority regarding subsequent changes to the amount in controversy.” Id. at *1. Following the Davis court’s lead, the U.S. District Court for the District of Maryland determined to retain federal jurisdiction in another TCPA junk-fax case, after the court decertified an action brought pursuant to CAFA jurisdiction. The court decided to retain federal jurisdiction over the plaintiff’s sole claim, even though the plaintiff’s damages were far below the requisite amount in controversy for diversity jurisdiction. See Levitt v. Fax.com, 2007 U.S. Dist. Lexis 83143, *23-*25 (D. Md. May 25, 2007). An Illinois federal court similarly agreed with this analytical approach. See Genenbacher v. Centurytel Fiber Co. II LLC, 2007 U.S. Dist. Lexis 35327 (C.D. Ill. May 15, 2007). In Genenbacher, the plaintiffs filed a class action in Illinois state court alleging state law claims for trespass, declaratory judgment and unjust enrichment. The defendant removed the case to federal court, asserting CAFA removal jurisdiction. After removal, the federal court denied class certification. Regarding continued jurisdiction, the court concluded that the case was fundamentally based on diversity jurisdiction, and that diversity jurisdiction was determined at the time the complaint was filed. Referring to long-established precedent, the court noted that subsequent changes to the residencies of the parties, or to the amount in controversy, does not destroy diversity jurisdiction. Genenbacher at *2, citing St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283 (1938). The court suggested that while CAFA had changed the requirements for meeting diversity jurisdiction for class actions, CAFA did not establish a new basis for jurisdiction. At the time Genenbacher’s complaint was filed, it alleged facts that invoked the court’s removal jurisdiction based on diversity under CAFA. Federal courts determine removal jurisdiction at the moment the case is removed. When the class action was not certified, the subsequent reduction in the amount in controversy and the elimination of class claims did not remove that diversity jurisdiction. Genenbacher at *2-*3. “Thus, the court’s denial of class certification did not affect the Court’s continued diversity jurisdiction over the matter.” Genenbacher at *6. Court recognizes contrary authority in ‘McGaughey’ The court recognized the contrary authority in McGaughey, stating: “This Court respectfully disagrees with this analysis. A case brought or removed under CAFA invokes this court’s diversity jurisdiction. “Once this Court has diversity jurisdiction, subsequent determinations that the plaintiffs cannot establish the jurisdictional facts do not affect the continued jurisdiction of this Court.” In light of the conflict, the judge granted leave for immediate interlocutory appeal under 28 U.S.C. 1292(b). See also Giovanniello v. N.Y. Law Publ’g Co., 2007 U.S. Dist. Lexis 56694, *3 n.11 (S.D.N.Y. Aug. 6, 2007) (noting conflict of authorities between McGaughey and Genebacher decisions). 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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