CAFA jurisdiction

The Fifth Circuit’s recent opinions about CAFA jurisdiction have focused on two main issues.  The first is the definition of a “mass action,” which like a class action can justify federal diversity jurisdiction; the second is the scope of the “local controversy” exception to CAFA jurisdiction, a kind of abstention that applies if several statutory requirements are satisfied.

“Mass action.”  The Fifth Circuit concluded that a consumer suit brought by the Mississippi Attorney General was a “mass action” in State of Mississippi v. AU Optronics Corp., 701 F.3d 696 (2012), but the Supreme Court reversed 9-0 on January 14, 2014.    After review of CAFA’s language and structure, that Court concluded that an action brought on behalf of consumers by a state was not a “mass action” that could allow removal, since it has only one plaintiff, and the claims of the relevant consumers cannot be counted without “unwieldy inquiries.”  The Supreme Court characterized the “mass action” provision of CAFA as a “backstop” to prevent the repackaging of a class action.

“Local controversy” exception.  
  • In Williams v. Homeland Insurance, the Court affirmed the denial of a motion to remand, concluding that the “local controversy” exception to CAFA jurisdiction was satisfied.  The opinion reminds that “[t]he parties moving for remand bear the burden of proof that they fall within an exception to CAFA jurisdiction.”  657 F.3d 287 (5th Cir. 2011).  In this challenge to discounts made by a PPO program, the Court concluded that adding a claims administrator as a new party did not change the fact that ”significant relief” was still sought from the in-state entity that operated the PPO network, thus satisfying that element of the local controversy exception.  The Court went on to state that “a class arbitration is not a class action,” and that as a result, a prior arbitration did not implicate the requirement of the exception that no other class action have been filed against a defendant in the previous three years.
  • The Court found CAFA jurisdiction in Opelousas General Hospital v. FairPay Solutions, 655 F.3d 358 (5th Cir. 2011).  The plaintiff sued a medical bill review company and two of its clients, alleging that discounts violated Louisiana workers compensation laws.  All class members were from Louisiana and one of the clients was based there, so the question addressed was whether the conduct of that defendant was a “significant basis of all the claims asserted.”   Bypassing an issue for procedural reasons about whether extrinsic evidence may be considered, the Court found no allegations or evidence that allowed an evaluation of that party’s conduct in the alleged wrongful scheme.  The Court also rejected the argument that potential “solidary” (joint and several) liability could satisfy this statutory requirement.  (The author of this blog was counsel for Petitioner in this matter.)
  • The exception was discussed incidentally in Horn v. State Farm Lloyds, No. 12-40410 (Dec. 21, 2012), in which the parties agreeed: “State Farm agrees not to remove any Hurricane Ike cases filed by your firm to Federal Court.”   Roughly a year later, the firm filed a 100,000-member class action against State Farm, who removed the case.  State Farm argued that the agreement was intended to resolve large numbers of individual claims and extending it to a class action was not consistent with the specific consideration given.  Among its contentions, State Farm argued that the waiver was inconsistent with CAFA’s elimination of the requirement of unanimous consent to removal.  The Fifth Circuit rejected that argument, noting that it was not clear that CAFA jurisdiction would apply given the general makeup of the class.