CLASS ACTION LITIGATION!

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1 A CLASS ACTION LITIGATION! BNA, INC. REPORT Reproduced with permission from Class Action Litigation Report, Vol. 7, No. 5, 03/10/2006, pp Copyright 2006 by The Bureau of National Affairs, Inc. ( ) FEDERAL LEGISLATION The Class Action Fairness Act has been in place for a year and some patterns are beginning to emerge in federal court interpretations of the law. Defense attorneys Seamus C. Duffy and Michael P. Daly summarize the key holdings, noting the areas of consensus, such as on the definition of commencement, and the ones generating controversy, such as burden of proof in removal and remand situations. The Class Action Fairness Act: The First Year in the New Class Action World BY SEAMUS C. DUFFY AND MICHAEL P. DALY T he Class Action Fairness Act of became law on Feb. 18, In the year since its enactment, courts have struggled with a number of questions that are not answered by its text. They have focused their attention on the scope of CAFA, the effect of postremoval events on a court s jurisdiction, the allocation of the burden of establishing jurisdiction and persuading a court to decline to exercise that jurisdiction, and 1 Pub. L. No , 119 Stat. 4 (2005). The authors are attorneys in the Philadelphia office of Drinker Biddle & Reath LLP whose practices concentrate on class action and other complex commercial litigation. The views expressed in this article are solely their own. Mr. Duffy can be reached at Seamus.Duffy@dbr.com and Mr. Daly can be reached at Michael.Daly@dbr.com. the proper procedure for taking an appeal. These issues are discussed below. I. When Has an Action Commenced? CAFA applies to any civil action commenced on or after the date of enactment of CAFA, i.e., February 18, Congress s failure to define the term commenced has given rise to two major interpretive problems. The first question that arose was whether an action that was filed in state court is commenced anew in federal court when it is removed. In the days that followed CAFA s enactment, many defendants made that very argument. They were uniformly rejected. 3 It is now indisputable that commenced refers to commence- 2 See 28 U.S.C note. 3 See, e.g., Pritchett v. Office Depot Inc., 420 F.3d 1090, (10th Cir. 2005); Knudsen v. Liberty Mut. Ins. Co., 411 F.3d 805, 806 (7th Cir. 2005); Natale v. Pfizer Inc., 424 F.3d 43, 44 (1st Cir. 2005); Bush v. Cheaptickets Inc., 425 F.3d 683, 687 (9th Cir. 2005); Pfizer Inc. v. Lott, 417 F.3d 725, 726 (7th Cir. 2005). COPYRIGHT 2006 BY THE BUREAU OF NATIONAL AFFAIRS, INC., WASHINGTON, D.C ISSN

2 2 ment in state court, 4 not removal. Otherwise, CAFA would apply retroactively to any class action, which was not Congress s intent. 5 The second question that arose was whether a new action is commenced when an amended complaint is filed in an action that was pending in state court before CAFA s effective date. The first court to reach this issue was the Seventh Circuit in Knudsen v. Liberty Mutual Insurance Co. 6 In Knudsen, the plaintiffs amended their class definition because they were not members of the class as originally defined. The defendant removed the action, arguing that a new action had been commenced. Although the Seventh Circuit disagreed, it opined that other amendments could commence new actions if they did not relate back to the original complaint: Liberty Mutual paints a picture of crafty lawyers tending a garden of pre-2005 class actions, in which they plant new claims by amendment so that the 2005 Act never comes into play. As we have already hinted, however, a new claim for relief..., the addition of a new defendant, or any other step sufficiently distinct that courts would treat it as independent for limitations purposes, could well commence a new piece of litigation for federal purposes even if it bears an old docket number for state purposes. Removal practice recognizes this point: an amendment to the pleadings that adds a claim under federal law (where only state claims had been framed before), or adds a new defendant, opens a new window of removal. We imagine, though we need not hold, that a similar approach will apply under the 2005 Act, perhaps modeled on Fed. R. Civ. P. 15(c), which specifies when a claim relates back to the original complaint (and hence is treated as part of the original suit) and when it is sufficiently independent of the original contentions that it must be treated as fresh litigation.... Maybe that lies in store. 7 4 Although actions are usually commenced upon the filing of the complaint, in some states actions are not commenced until the filing fee is paid, the clerk determines that the complaint is procedurally sufficient, or service on the defendants is made. See Schorsch v. Hewlett-Packard Co., 417 F.3d 748, (7th Cir. 2005); Dinkel v. General Motors Corp., 400 F. Supp. 2d 289, 294 (D. Me. 2005); Eufaula Drugs Inc. v. TDI Managed Care Servs. Inc., No , 2005 WL , at *3 (M.D. Ala. Dec. 14, 2005); Main Drug Inc. v. Aetna U.S. Healthcare Inc., No , 2005 WL , at *5 (M.D. Ala. Dec. 14, 2005); Patterson v. Morris, No , 2006 WL , at *5 (E.D. La. Jan. 25, 2006). 5 Early versions of CAFA would have permitted the removal of actions in which a class was certified on or after its effective date. See H.R. 516, 109th Cong. 7 (2005). But Congress chose to eliminate that category of cases from CAFA s scope. See 28 U.S.C note; see also 151 Cong. Rec. S1067, 1080 (daily ed. Feb. 8, 2005) (statement of Sen. Dodd); 151 Cong. Rec. H721, 753 (daily ed. Feb. 17, 2005) (statement of Rep. Goodlatte) F.3d 805 (7th Cir. 2005). 7 Id. at The relation back analysis anticipated by Knudsen has been embraced by virtually every court to confront this issue. Practically every kind of amendment has now been examined under the relation back test. After some initial uncertainty, it can now be said with confidence that an amendment will commence a new action if it converts an individual action into a class action, 8 or adds new claims for relief that are fundamentally different than those previously pleaded. 9 An amendment will also commence a new action if it adds a new defendant, 10 provided that the new defendant did not know or have reason to know that the plaintiff meant to name it as a defendant originally. 11 But an amendment may not commence a new action if it simply adds new class representatives, 12 amends or expands the class definition, 13 clarifies factual allegations, 14 corrects a misno- 8 See Plummer v. Farmers Group Inc., 388 F. Supp. 2d 1310, (E.D. Okla. Sep. 15, 2005) (amendment was a de facto commencement of a new suit that was removable pursuant to CAFA ). 9 See Knudsen v. Liberty Mut. Ins. Co., 435 F.3d 755, 758 (7th Cir. 2006) ( [A] novel claim tacked on to an existing case commences a new litigation for purposes of the Class Action Fairness Act. ); Schorsch, 417 F.3d at 749 ( [T]acking a wholly distinct claim for relief onto an old suit likewise might commence a new proceeding. ); Heaphy v. State Farm Mut. Auto. Ins. Co., No , 2005 WL , at *4 (W.D. Wash. Aug. 15, 2005) (adding consumer fraud claims to plain vanilla breach of contract claims commences new action). But see Richina v. Maytag Corp., No , 2005 WL , at *3 (E.D. Cal. Oct. 26, 2005). 10 See Knudsen, 411 F.3d at ( If in the future Liberty Mutual Fire Insurance Company should be added as a defendant, it could enjoy a right to remove ); Schorsch, 417 F.3d at 749 ( a defendant added after February 18 could remove because suit against it would have been commenced after the effective date ); Adams v. Federal Materials Co., No , 2005 WL , at *4 (W.D. Ky. July 28, 2005); Brown v. Kerkhoff, No , 2005 WL , at *13 (S.D. Iowa Oct. 19, 2005); see also Dinkel, 400 F. Supp. 2d at 293 ( Here, the late service upon the Removing Defendants, commencing the lawsuit as to them after CAFA became effective, made Dinkel s entire lawsuit properly removable under CAFA. ). If the new defendant was already a party, however, a new action may not be commenced if the plaintiff amends the complaint in order to advance claims directly against that party for the first time. See Werner v. KPMG LLP, No , 2006 WL , at *12 (S.D. Tex. Feb. 7, 2006). 11 See, e.g., Eufaula Drugs Inc. v. Scripsolutions, No , 2005 WL , at *4 (M.D. Ala. Oct. 6, 2005). 12 See Phillips v. Ford Motor Co., 435 F.3d 785, 787 (7th Cir. 2006) ( Substitution of unnamed class members for named plaintiffs who fall out of the case because of settlement or other reasons is a common and normally an unexceptional ( routine ) feature in class action litigation.... ); Plubell v. Merck & Co., 434 F.3d 1070, 1073 (8th Cir. 2006) ( Both the original and the amended pleadings set forth exactly the same conduct by Merck; the only difference is the class representative. ); Morgan v. American Int l Group Inc., No , 2005 WL , at *3 (N.D. Cal. Sep. 8, 2005); Boxdorfer v. DaimlerChrysler Corp., 396 F. Supp. 2d 946, (C.D. Ill. Oct. 25, 2005); Phillips v. Ford Motor Co., No , 2005 WL , at *2 (S.D. Ill. Oct. 17, 2005); Berry v. Volkswagen of America Inc., No , 2006 WL , at *1 (W.D. Mo. Feb. 15, 2006). But see Hall v. State Farm Mut. Ins. Co., No , slip op. at 2 (E.D. Mich. Aug. 19, 2005) (adding new class representative commenced new action); Heaphy, 2005 WL , at *4-5 (adding new class representative will commence new action if he was not a member of originallydefined class). 13 See Knudsen, 411 F.3d at 807 ( [T]he change in class definition does not present a novel claim for relief or add a new party. ); Schorsch, 417 F.3d at 751 ( Amendments to class definitions do not commence new suits. ); Schillinger v. Union Pac. R.R. Co., 425 F.3d 330, 334 (7th Cir. 2005) ( [T]he expansion of a proposed class does not change the parties to the litigation nor does it add new claims. ); Smith v. Collinsworth, No , 2005 WL , at *3 (E.D. Ark. Dec. 21, 2005); COPYRIGHT 2006 BY THE BUREAU OF NATIONAL AFFAIRS, INC., WASHINGTON, D.C. CLASS ISSN

3 3 mer, 15 or was the result of a scrivener s error or mistake. 16 Litigants should take care, however, when relying on decisions from other jurisdictions. Because the relation back question turns on state law, 17 the result may be different depending on where the action was originally filed. Not every court embraced the decision to import the relation back analysis into CAFA. The first to question Knudsen was Plummer v. Farmers Group Inc. 18 In Plummer, an individual plaintiff moved for leave to amend her complaint in order to bring claims on behalf of a class of similarly situated plaintiffs. After CAFA became law, the motion was granted and the defendants removed on the theory that the amendment had commenced a new action. Although it followed Knudsen and concluded a new action had been commenced, the court noted its dissatisfaction with the relation back analysis: While that is the ruling, the Court must say that it is not overly enamored with either the analytical framework or the result that framework produces. The Court would prefer a bright line test: i.e., that a claim is commenced with the filing of the original complaint.... Such a test, with no exceptions, would not only be logical (i.e. a claim commences when it commences) but also predictable. Multifactor, sliding scale, balancing tests do more than leave lawyers and litigants mired in unpredictability; they also put too much power in the hands of federal judges. 19 After Knudsen was criticized by Plummer, it was rejected by Weekley v. Guidant Corp. 20 In Weekley, anindividual complaint was amended and converted into a nationwide class action. The defendant removed, claiming that the amendment commenced a new action because it did not relate back to the original pleading. The court concluded that whether the amendment related back is irrelevant because CAFA s use of the term Boxdorfer, 396 F. Supp. 2d at ; Judy v. Pfizer Inc., No , 2005 WL , at *3 (E.D. Mo. Sep. 14, 2005); Berry, 2006 WL , at *1 ( The issue is not the number of plaintiffs, the issue is whether Defendant had notice it would have to defend those claims. ). But see Senterfitt v. SunTrust Mortg. Inc., 385 F. Supp. 2d 1377 (S.D. Ga. 2005) (expanding class can commence new action). 14 See Lee v. Citimortgage Inc., No , 2005 WL , at *1 (E.D. Mo. Oct. 5, 2005); Smith, 2005 WL , at *3; Phillips, 2005 WL , at *1; Judy, 2005 WL , at *3; New Century Health Quality Alliance Inc. v. Blue Cross & Blue Shield of Kansas City Inc., No , 2005 WL , at *1-4 (W.D. Mo. Sep. 13, 2005). 15 See Morgan, 2005 WL , at *2; Eufaula Drugs Inc., 2005 WL , at *4; New Century Health Quality Alliance, 2005 WL , at *3 ( The Court does not see how this correction constitutes an addition of a new party such that a new piece of litigation would commence after the effective date of CAFA. ). 16 See Schillinger, 425 F.3d at 333 ( This case should not come to federal court if the only ground for jurisdiction is a clerical error, however careless. ); Heaphy, 2005 WL , at *3 (finding that jurisdiction should not turn on the short lived, mistaken addition of a related party.... Plaintiffs did not and do not intend to assert claims against a new defendant. ). 17 See Phillips, 435 F.3d at 787; Schorsch, 417 F.3d at F. Supp. 2d 1310 (E.D. Okla. 2005). 19 Id. at F. Supp. 2d 1066 (E.D. Ark. 2005). civil action makes it about as clear and simple as a statute can be. 21 It explained as follows: Pleadings may be amended, but amending pleadings does not commence a civil action. By definition, a civil action must already have been commenced before a pleading can be amended. Some claims asserted in the initial complaint may be dismissed, voluntarily or involuntarily, during the course of the action. Other claims may be added during the course of the action. Those new claims may dramatically change the action. Those claims may or may not relate back to the original complaint for limitations purposes. Nevertheless, a civil action, viewed as the entirety of the case or the entirety of the proceeding, commenced when the initial complaint was filed. 22 Under this reasoning, no amendment, no matter how dramatic, will ever commence a new action or trigger removal rights under CAFA. Although Weekley was initially followed by other lower courts in the Eighth Circuit, 23 it has since been rejected. In Plubell v. Merck & Co., 24 the plaintiff amended the complaint in order to name a new class representative after learning that the original class representative had not used the defendant s product. The defendant removed. The district court ordered remand and the defendant appealed. On appeal, the Eighth Circuit framed the question as whether the amendment relates back or is instead a new action. 25 Although it offers little analysis, Plubell clearly sides with Knudsen and, at least implicitly, rejects Weekley. Thus, all persuasive authority holds that an amendment will commence a new action under CAFA if it does not relate back to the original pleading. Whether future decisions align with Knudsen or Weekley remains to be seen. Until then, plaintiffs who amend class action complaints in state court do so at their peril. II. What Qualifies as a Class Action? CAFA permits the removal of class actions. 26 Actions that do not qualify as class actions are not within its scope. 27 CAFA defines a class action as any civil action filed under Rule 23 of the Federal Rules of Civil Procedure or similar State statute or rule of judicial procedure authorizing an action to be brought by 1 or more representative persons as a class action. 28 Read broadly, that definition could include any representative action that is brought by an individual on behalf of a class and is sufficiently similar to traditional class actions. Could it include civil actions filed by state attorneys general on behalf of the citizens of their state? 21 Id. at Id. 23 See Comes v. Microsoft Corp., 403 F. Supp. 2d 897, 903 (S.D. Iowa 2005); Brown v. Lee, No , slip op. at 2-3 (E.D. Ark. Oct. 21, 2005); Smith, 2005 WL , at *2; Hot Spring County Solid Waste Auth. v. UnitedHealth Group, No , 2006 WL , at *2-3 (W.D. Ark. Jan. 13, 2006) F.3d 1070 (8th Cir. 2006). 25 Id. at U.S.C. 1332(d)(2). 27 See Tedder v. Beverly Enters. Inc., No , 2005 WL , at *2 (E.D. Ark. Dec. 12, 2005); Fisher v. Beverly Enters. Inc., No , 2005 WL , at *2 (E.D. Ark. Dec. 12, 2005) U.S.C. 1332(d)(1)(B). CLASS ACTION LITIGATION REPORT ISSN BNA

4 4 Most state attorneys general thought the civil actions they file would be swept into federal court by CAFA. 29 So did many in Congress: [CAFA] makes it impossible for States to pursue actions against defendants who have caused harm to the State s citizens. State attorneys general often pursue these claims under State consumer protections statutes, antitrust laws, often with the attorney general acting as the class representative for the consumer of the State. Under this bill, would we want these cases to be thrown into Federal court and severely impede the State s ability to enforce its own laws for its own citizens? That is what will happen. That is what will take place. 30 In fact, some proposed amending CAFA in order to create an attorney general carve out. 31 The carve out would have made it clear that cases brought by State attorneys general are excluded from the provisions of the class action bill and would not be forced into Federal court. 32 Anxious to have CAFA signed into law as soon as possible, CAFA s proponents resisted this attempt to amend it. They suggested that the carve out was unnecessary because, although facially similar, class actions and attorney general actions are fundamentally different: State attorneys general have authority under the laws of every State in this country to bring enforcement actions to protect their citizens. These suits, known commonly as parens patriae cases, are similar to class actions to the extent that the attorney general represents a large group of people. But let me be perfectly clear that they are not class actions. There is no certification process, there are no representative class members named in the complaint, and plaintiffs attorneys who stand to gain millions of dollars in fees. Rather, they are unique lawsuits authorized under State constitutions or State statutes that are brought on behalf of the citizenry of a particular State.... As such, [CAFA] in no way affects these lawsuits Cong. Rec. S1067, 1089 (letter to Sens. Frist and Reid); 151 Cong. Rec. H721, 740 (same). 30 Id. at 738 (statement of Rep. Conyers). 31 Id. at 744 (same). 32 Id. at 746 (same); see also id. at 741 (statement of Rep. Udall); id. at 749 (statement of Rep. Nadler) Cong. Rec. S1149, (daily ed. Feb. 9, 2005) (statement of Sen. Hatch). 34 Id. at 1160 (statement of Sen. Specter); id. at 1162 (statement of Sen. Cornyn); id. at 1163 (statement of Sen. Grassley); 151 Cong. Rec. H721, 746 (statement of Rep. Sensenbrenner) F. Supp. 2d 749 (D.N.J. 2005). Many of CAFA s proponents agreed. 34 CAFA passed without amendment. It contains neither an attorney general carve out nor an affirmative statement that such actions are within its scope. Surprisingly, only one decision, Harvey v. Blockbuster Inc., 35 has addressed this issue. In that case, New Jersey s attorney general brought an action to recover civil penalties for alleged consumer fraud. The defendant removed. The court noted that CAFA had not been amended to exclude such actions from its scope, but concluded that they still did not qualify as class actions. But rather than determining whether the action was sufficiently similar to traditional class actions to be considered within CAFA s scope, the court relied entirely on the statements of the individual legislators who had spoken against the attorney general carve out. 36 Thus, the issue has yet to be carefully considered. 37 Once it is, it is possible that qui tam actions will not be treated as class actions because they are brought on behalf of the state rather than a class of plaintiffs, but attorney general actions will be treated as class actions so long as the procedural protections for absent class members are sufficiently similar to those in traditional class actions. Indeed, a contrary result would elevate form over substance and would ignore Congress s desire for CAFA to be read broadly in order to expand federal jurisdiction. III. Can Post-Removal Events Erase Federal Jurisdiction? Generally, jurisdiction is determined at the time of removal, and subsequent events, including subsequent amended complaints, do not divest courts of their jurisdiction. 38 Accordingly, courts reject plaintiffs attempts to manufacture grounds for remand by filing an amended complaint that lowers the amount in controversy, 39 omits previously-pleaded federal claims, 40 or substitutes non-diverse parties for diverse ones. 41 Original drafts of CAFA did not address whether CAFA would incorporate that rule. After a bipartisan compromise, 42 the final version of CAFA provides that the composition of a proposed class is determined as of the date on which the action was filed or, if the original pleading was not removable, the date of the amended pleading or other paper that gives rise to jurisdiction. 43 In other words, a snap shot of the class is taken, thereby freeing courts and litigants from constantly reexamining the issue. 44 Because CAFA s exceptions are properly viewed as abstention provisions, this is consistent with prior law. 45 However, 1332(d)(7) only deals with the composition of the class. 46 Although CAFA was clearly intended to put an end to forum shopping and jurisdictional gam- 36 Id. at See Chrysler Corp. v. Brown, 441 U.S. 281, 311 (1979) ( The remarks of a single legislator, even the sponsor, are not controlling in analyzing legislative history. ). 38 See Pullman Co. v. Jenkins, 305 U.S. 534, 537 (1939); St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, (1938). 39 See Angus v. Shiley Inc., 989 F.2d 142, 145 (3d Cir. 1993). 40 See Hammond v. Terminal R.R. Ass n, 848 F.2d 95, 97 (7th Cir. 1988). 41 See Cobb v. Delta Exps. Inc., 186 F.3d 675, 680 (5th Cir. 1999) Cong. Rec. S7689, 7710 (daily ed. July 7, 2004) (statement of Sen. Dodd); 151 Cong. Rec. S1067, 1078 (same) U.S.C. 1332(d)(7). 44 S. Rep. No , at 44 (1st Sess. 2005); 150 Cong. Rec. S7689, 7710 (statement of Sen. Dodd); 151 Cong. Rec. S1067, 1078 (statement of Sen. Dodd). 45 See Passa v. Derderian, 308 F. Supp. 2d 43, 56 (D.R.I. 2004) ( [O]nce a court has determined that abstention is not required, this question is not typically revisited during later stages of the litigation. ). 46 Presumably, the rule that subsequent changes in a defendant s citizenship do not divest courts of their jurisdiction still applies under CAFA. See 15 James Wm. Moore et al., Moore s Federal Practice (1)(B)(ii) (3d ed. 1999) COPYRIGHT 2006 BY THE BUREAU OF NATIONAL AFFAIRS, INC., WASHINGTON, D.C. CLASS ISSN

5 5 ing, 47 its text does not specifically address what effect other post-removal events will have on a court s jurisdiction. To date, only a handful of decisions have addressed this issue. Most have followed the traditional rule that jurisdiction is determined at the time of removal, not after. 48 Thus, attempts to circumvent CAFA by filing amended complaints that lower the amount in controversy below $5,000,000, 49 or erase minimal diversity, 50 have been unsuccessful. Attempts to dismiss newly-added defendants have, however, enjoyed varying degrees of success. If the addition of the defendant was the result of a clerical error or mistake, courts have permitted the plaintiff to correct that mistake and refused to use it as a basis of jurisdiction. 51 If the addition of the defendant was not the result of a clerical error or mistake, the courts are split. Two early decisions permitted the dismissal and remanded the action, concluding that CAFA never applied to the original defendants. 52 For example, in Brown v. Kerkhoff, 53 the plaintiffs amended their complaint in order to add new defendants, only to voluntarily dismiss those defendants after they removed the action. The court remanded the action: Although, as Defendants note, a plaintiff may not manipulate the process to defeat federal jurisdiction and force a remand once the case has been properly removed, that type of manipulation typically arises in diversity cases where an event subsequent to removal causes the amount in controversy to drop below the statutory threshold, and Cong. Rec. H721, (statement of Rep. Sensenbrenner) ( This legislation will streamline jurisdictional inquiries by putting an end to all of the gaming that takes place under the current system.... Current law is also clear that once a complaint is properly removed to Federal court, the Federal court s jurisdiction cannot be ousted by later events. Thus, for example, changes in the amount in controversy after the complaint has been removed would not subject a lawsuit to be remanded to State court. ); see also Pritchett, 420 F.3d at 1097 ( [CAFA] was designed, in the first place, to curtail jurisdictional gaming and forum-shopping ). 48 See Schillinger, 425 F.3d at 333; Schwartz v. Comcast Corp., No , 2005 WL , at *3 (E.D. Pa. July 29, 2005); Chavis v. Fidelity Warranty Servs. Inc., No , 2006 WL , at *5 (D.S.C. Feb. 13, 2006); Isaacsv.Pfizer Inc., No , slip op. at 8 (W.D. Okla. June 21, 2005); Robinson v. Holiday Universal Inc., No , 2006 WL , at *3 (E.D. Pa. Feb. 23, 2006); Robinson v. Cheetah Transp., No , 2006 WL , at *1 (W.D. La. Feb. 27, 2006); see also Fiore v. First American Title Ins. Co., No , 2005 WL , at *3 n.7 (S.D. Ill. Dec. 13, 2005). 49 See Chavis, 2006 WL , at *5 ( To the extent Plaintiffs allege in their motion to remand and their reply brief that the amount in controversy is less than $5,000,000, the court notes that post-removal events... do not deprive a federal court of diversity jurisdiction. ); Isaacs, slip op. at 8 ( the plaintiff s initial, rather than her amended, complaint determines whether subject matter jurisdiction exists. ). 50 See Schwartz, 2005 WL , at *3 ( Schwartz s attempt to clarify the definition of the proposed class in his amended complaint and thus eliminate diversity jurisdiction will not... defeat subject matter jurisdiction. ). 51 See Schillinger, 425 F.3d at 333; Heaphy, 2005 WL , at *3. 52 See Kerkhoff, 2005 WL , at *13; Robb v. Stericycle Inc., No , 2005 WL at *9 (W.D. La. August 19, 2005) ( [CAFA] does not apply to the claims against the original defendants.... ). 53 No , 2005 WL (S.D. Iowa Oct. 19, 2005). where a plaintiff fraudulently or improperly joins a defendant to either defeat... or manufacture jurisdiction. This case presents a different question: whether Plaintiffs decision to add parties or change claims allows all Defendants, new and old, to avail themselves of CAFA s removal provisions. If CAFA is not and never has been applicable to Defendants, they cannot say Plaintiffs manipulated the process by dismissing the Removal Defendants because Defendants cannot be harmed by the subsequent unavailability of a right (e.g., removal) they never possessed. 54 The court reasoned that the original defendants could not ride the... coattails of the newly-added defendants because, as it read Knudsen, the applicability of CAFA should be determined from the point of view of each defendant. 55 Recent decisions have reached the opposite conclusion. 56 For example, in Dinkel v. General Motors Corp., 57 several defendants were served after CAFA s effective date. After they removed the action, the plaintiff voluntarily dismissed them and moved for remand. The court concluded that post-removal events could not defeat jurisdiction: Dinkel s later dismissal of the Removal Defendants cannot retroactively make the lawsuit improperly removed, and Dinkel cannot undo the transformation of his lawsuit that occurred when he served the Removal Defendants after ninety days from his original state court filing. The plain language of CAFA makes clear that any single defendant can remove without the consent of other defendants and that it is the entire lawsuit that is removed, not merely the claims against that defendant.... It is the action that is removable, not claims against particular defendants. When the Removal Defendants removed this class action to federal court they did not remove only the claims against them; they removed the entire class action. Dinkel cannot now unring the bell by dismissing the Removal Defendants and trying to return the lawsuit to its status on February 17, The court rejected Kerkhoff because its reasoning incorrectly focuses on the defendants rather than upon the court s subject matter jurisdiction over the entire class action. 59 These recent decisions are better reasoned because they are consistent with prior removal practice and Congress s intent that jurisdiction be determined at the time of removal. By contrast, Kerkhoff permits the sort of jurisdictional gaming that CAFA was meant to prevent, and ignores the fact that CAFA grants courts jurisdiction over entire actions, not individual defendants. Dismissing the claims against a newly added defendant does not mean that jurisdiction over an action was lacking at the time of removal and, as a result, should not lead to remand. 54 Id. at * Id. at * See Dinkel, 400 F. Supp. 2d at 294; Holiday Universal, 2006 WL , at * F. Supp. 2d 289 (D. Me. 2005). 58 Id. at Id. at 294 n.6; see also Holiday Universal, 2006 WL , at *3 ( Under CAFA, any single defendant can remove without the consent of the other defendants, and the entire lawsuit is removed, not merely the claims against the removing defendant. ). CLASS ACTION LITIGATION REPORT ISSN BNA

6 6 Because some courts have tolerated plaintiffs postremoval jurisdictional gaming, however, newly added defendants should consider answering a complaint immediately after removal. Doing so would make it difficult for plaintiffs to voluntarily dismiss the claims against them. 60 Although plaintiffs could still seek leave of court to do so, they would ostensibly have to offer some legitimate reason for the dismissal. IV. Who Bears the Burden of Proof? When assessing whether they have jurisdiction over a removed action, courts have traditionally placed the burden of proof on the removing defendant, not the remanding plaintiff. 61 They have done so not because the jurisdictional statutes require it, but because the limited nature of federal jurisdiction counsels in favor of narrowly construing them. In the context of CAFA removals, that logic is no longer valid. Congress intended CAFA to broaden access to federal court, and expected it to be construed broadly as a result. 62 Indeed, the Senate Report clearly shows that Congress intended that plaintiffs would bear the burden of proving that jurisdiction does not exist or that a court should decline its jurisdiction pursuant to one of CAFA s remand provisions. 63 CAFA s proponents echoed that sentiment. 64 Should traditional burden of proof rules still apply? After a year of litigation, the courts have yet to reach a clear consensus on this question. Some have given effect to CAFA s legislative history. The first was Berry v. American Express Publishing Corp., 65 which reasoned as follows: Although the lack of any burden-shifting provisions may be an opaque means of preserving the status quo... it is equally possible that it was due to legislative oversight, the inability of the Legislature to foresee, or for statutes to address all circumstances. Alternatively, and more plausibly, the failure to address the burden of proof in the statute reflects the Legislature s expectation that the clear statements in the Senate Report would be sufficient to shift the burden of proof. The Court notes, with some irony, that the original diversity statute does not contain any reference to the burden of proof. Plaintiff fails to explain how the failure to incorporate the burden of proof in Section 1332(d) should be assigned more or less meaning than the failure to incorporate any burden of proof into the original test. In these circumstances, the Court finds that the failure to explicitly legislate changes on the burden of proof in interstate class actions has little interpretative value. 66 Many courts have followed Berry and, consistent with CAFA s unambiguous legislative history, have allocated 60 See Fed. R. Civ. P. 41(a)(1); see also Robb, 2005 WL , at *5. 61 See 15 Moore s Federal Practice , See S. Rep. No , at 43; 151 Cong. Rec. H721, (statement of Rep. Sensenbrenner). 63 S. Rep. No , at See 151 Cong. Rec. H721, (statement of Rep. Sensenbrenner); id. at 732 (statement of Rep. Goodlatte) F. Supp. 2d 1118, (C.D. Cal. 2005). 66 Id. at the burden of proof to the opponent of federal jurisdiction. 67 Other courts have refused to do so, concluding that, absent express statutory language to the contrary, the burden of proof should still be borne by the proponent of federal jurisdiction. They have reasoned that, because CAFA s text is silent, it is not ambiguous and resorting to its legislative history for guidance is inappropriate. The first was Schwartz v. Comcast Corp., 68 which explained as follows: I am... hesitant to read into the statute a Congressional intent to shift the longstanding burden of proof for establishing diversity jurisdiction, where Congress expressly enacted numerous other intended changes discussed by the Judiciary Committee in its Report to the exclusion of the change with respect of the burden of proof.... Congress failed to expressly abrogate the rule with respect to the burden of proof in establishing diversity jurisdiction. I can draw only one conclusion from this omission: by making substantive changes with respect to the aggregation rule, but failing to express a concomitant change in the burden of proof, Congress implicitly acknowledged and adopted the longstanding rule that a removing defendant bears the burden of proof for establishing diversity jurisdiction. 69 In Brill v. Countrywide Home Loans Inc., 70 the Seventh Circuit sided with Schwartz: [W]hen the legislative history stands by itself, as a naked expression of intent unconnected to any enacted text, it has no more force than an opinion poll of legislators less, really, as it speaks for fewer.... The rule that the proponent of federal jurisdiction bears the risk of non-persuasion has been around for a long time. To change such a rule, Congress must enact a statute with the President s signature (or by a two-thirds majority to override a veto). A declaration by 13 Senators will not serve. 71 Although these decisions make too much of CAFA s silence, 72 other courts have followed them and have re- 67 See Natale v. Pfizer Inc., 379 F. Supp. 2d 161, 168 (D. Mass. 2005); Harvey v. Blockbuster Inc., 384 F. Supp. 2d 749, 752 n.4 (D.N.J. 2005); Waitt v. Merck & Co., No , 2005 WL , at *2 (W.D. Wash. July 27, 2005); In re Textainer P ship Sec. Litig., No , 2005 WL , at *3 (N.D. Cal. July 27, 2005); Yeroushalmi v. Blockbuster Inc., No , 2005 WL , at *3 (C.D. Cal. July 11, 2005); Heaphy, 2005 WL , at *2; Lussier v. Dollar Tree Stores Inc., No , 2005 WL , at *1 (D. Or. Sep. 8, 2005); see also Dinkel, 400 F. Supp. 2d at (citing Berry); Yescavage v. Wyeth Inc., No , 2005 WL , at *2 (M.D. Fla. Aug. 30, 2005) (citing Natale but concluding CAFA did not apply); Chavis, 2006 WL , at *4. 68 No , 2005 WL (E.D. Pa. July 29, 2005). 69 Id. at *7. However, the court recently denied the plaintiff s motion to remand, concluding that the defendant had satisfied its burden of proof. See Schwartz v. Comcast Corp., No , 2006 WL (E.D. Pa. Feb. 28, 2006) F.3d 446 (7th Cir. 2005). 71 Id. at Legislative silence is a poor proxy for legislative intent. See Zuber v. Allen, 396 U.S. 168, 185 & n.21 (1969); Girouard v. United States, 328 U.S. 61, 69 (1946) ( It is at best treacherous to find in congressional silence alone the adoption of a controlling rule of law. ). But even if CAFA s silence gave rise to a presumption of congressional intent to adopt a controlling rule of law, that presumption would clearly be rebutted by its legislative history. See Ankenbrandt v. Richards, 504 U.S. 689, 701 (1992) COPYRIGHT 2006 BY THE BUREAU OF NATIONAL AFFAIRS, INC., WASHINGTON, D.C. CLASS ISSN

7 7 fused to allocate the burden of proof to the plaintiff in accordance with CAFA s legislative history. 73 Interestingly, only one court has had occasion to differentiate between the burden of establishing federal jurisdiction pursuant to 1332(d)(2) and the burden of proving that the composition of the class falls within the parameters of 1332(d)(3) and (d)(4). 74 Putting aside whether Congress shifted the burden of proof with regard to the existence of jurisdiction, it created a framework under which courts can decline to exercise their jurisdiction. Subsections (d)(3) and (d)(4) are, therefore, properly viewed as abstention provisions rather than exceptions to jurisdiction. Although they are colloquially called exceptions, that terminology is imprecise because they are not exceptions to diversity jurisdiction. Rather, they permit courts to decline their jurisdiction, which they can only do if they have jurisdiction in the first place. Plaintiffs should bear the burden of proof under subsections (d)(3) and (d)(4) because they are asking courts to decline their jurisdiction. Federal courts have an unflagging obligation to exercise the jurisdiction that has been conferred upon them. 75 As a result, they properly place the burden of proof on those that ask them to abstain from doing so. The fact that CAFA abstention is statutory rather than judicial should not affect the analysis. Courts have treated similar statutes as abstention provisions rather than exceptions to jurisdiction and, as a result, have allocated the burden of proof to the party seeking abstention. 76 The result should be no different in applying CAFA s abstention provisions. V. How and When Should Appeals Be Taken? Traditionally, remand orders could not be appealed. 77 Under CAFA, however, a court of appeals may accept an appeal from an order of a district court granting or denying a motion to remand a class action 73 See Ongstad v. Piper Jaffray & Co., 407 F. Supp. 2d 1085, (D.N.D. 2006); Plummer, 388 F. Supp. 2d at 1317; Fiore, 2005 WL , at *2; Judy, 2005 WL , at *2 (dicta); Werner, 2006 WL , at *5 (dicta); Rodgers v. Central Locating Serv. Ltd., No , 2006 WL , at *5 (W.D. Wash. Feb. 1, 2006); see also Rippee v. Boston Market Corp., No , 2005 WL , at *4 & n.2 (S.D. Cal. Oct. 14, 2005) (suggesting defendants might bear burden of proof). Some have questioned the interpretive value of the Senate Report because it was released only after the law s enactment. Rodgers, 2006 WL , at *9 n.3. However, the Senate Report is substantially similar to those that accompanied prior versions of CAFA and, although it was ordered to be printed on February 28, it was submitted to Congress before CAFA became law. See 151 Cong. Rec. S978 (Feb. 3, 2005). 74 See Cheetah Transp., 2006 WL , at *1-3 (finding that the removing party bears the burden of showing that federal jurisdiction exists but the burden of proving the application of CAFA s exceptions rests with the party opposing removal ). 75 See Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716 (1996); Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976). 76 See New England Power & Marine Inc. v. Town of Tyngsborough, 292 F.3d 61, 67 (1st Cir. 2002) (interpreting 28 U.S.C. 1334(c)); Passa, 308 F. Supp. 2d at 57 (interpreting 28 U.S.C. 1369(b)); Renaissance Cosmetics Inc. v. Development Specialists Inc., 277 B.R. 5, 14 (S.D.N.Y. 2002) (concluding that party seeking abstention pursuant to 1334(c) bears the burden of proof). 77 See 28 U.S.C. 1447(d). to the State court from which it was removed if application is made to the court of appeals not less than 7 days after entry of the order. 78 This seemingly straightforward provision has caused considerable confusion. 79 The first source of confusion is that, by its terms, CAFA requires that appeals be taken not less than 7 days after entry of the order. 80 If read literally, it would impose a seven day waiting period before an appeal could be taken, and no appeal filed after that waiting period would ever be untimely. 81 Remand orders could be appealed years later. The courts of appeals that have reached this issue have concluded that CAFA contains a scrivener s error. 82 In Pritchett v. Office Depot Inc., 83 the Tenth Circuit found that there is no plausible reason why the text of Act would instead impose a seven-day waiting period followed by a limitless window for appeal. 84 In Amalgamated Transit Union Local 1309 v. Laidlaw Transit Services Inc., 85 the Ninth Circuit agreed: We see no logical purpose attained by requiring a party to wait seven days before seeking to appeal an order granting or denying a motion to remand, and then allowing that party to seek appellate review at any time in the future after the period has passed. That result is entirely illogical. 86 In light of Congress s stated intent to impose time limits on appeals, 87 both courts found that 1453(c)(1) is one of the rare cases in which a literal application of the statute will produce a result demonstrably at odds with the intentions of its drafters. 88 Thus, at least in the Ninth and Tenth circuits, appellants must take an appeal no later than seven days after the entry of the lower court s order. Although their reasoning is sound, if a party intends to take an appeal to a Court of Appeals that has yet to rule on this issue, it would be prudent to do so on the seventh day after the entry of the order, which is neither less then nor more than seven days later. 89 Aside from the proper time for taking an appeal, CAFA also leaves doubt as to the proper procedure for taking an appeal. It provides that courts of appeals may accept an appeal if application is made to the court of appeals. 90 Although that language implies that such appeals are permissive, CAFA does not explicitly require appellants to seek permission before taking an appeal, and phrase accept an appeal could imply that a notice of appeal has already been filed with the 78 See 28 U.S.C. 1453(c)(1). 79 See Amalgamated Transit Union Local 1309 v. Laidlaw Transit Servs. Inc., 435 F.3d 1140, 1142 (9th Cir. 2006) ( Although this subsection is only one sentence long, parsing its language is a much more lengthy undertaking. ) U.S.C. 1453(c)(1) (emphasis added). 81 See Bush, 425 F.3d at See Pritchett, 420 F.3d at 1093 n.2; Amalgamated Transit Union, 435 F.3d at 1145; see also Bush, 425 F.3d at 685 (noting the apparent drafting error ) F.3d 1090 (10th Cir. 2005). 84 Id. at 1093 n F.3d 1140 (9th Cir. 2006). 86 Id. at S. Rep. No , at Pritchett, 420 F.3d at 1093 n.2 (quoting United States v. Ron Pair Enters., 489 U.S. 235, 242 (1989)); see also Amalgamated Transit Union, 435 F.3d at See Pritchett, 420 F.3d at 1093 n.2; Bush, 425 F.3d at See 28 U.S.C. 1453(c)(1). CLASS ACTION LITIGATION REPORT ISSN BNA

8 8 lower court. 91 Given this ambiguity, the Ninth Circuit in Amalgamated Transit Union looked to CAFA s legislative history for guidance. It concluded that Congress intended to create a class of discretionary appeals and, as a result, appellants must file a petition for permission to appeal pursuant to Federal Rule of Appellate Procedure See Amalgamated Transit Union, 435 F.3d at Id. at COPYRIGHT 2006 BY THE BUREAU OF NATIONAL AFFAIRS, INC., WASHINGTON, D.C. CLASS ISSN