Class Action Can’t Be Remanded To State Court Just Because The Plaintiff Says It’s Uncertifiable

When was the last time you saw a plaintiffs’ lawyer seeking to represent a class argue that the class couldn’t be certified? Readers might wonder whether this is a trick question. In a sense, it is. In Hoffman v. Nutraceutical Corp. (pdf), the Third Circuit upheld the denial of a motion to remand a class action to state court, rejecting the argument—made by the named plaintiff himself!—that a class could not be certified under controlling circuit precedent. The Third Circuit acknowledged that the plaintiff was right about the governing law, but pointed out that the relevant jurisdictional inquiry was whether the stakes placed in issue by the proposed complaint satisfy the Class Action Fairness Act’s $5 million amount-in-controversy requirement—not whether the requirements of Rule 23 are satisfied.

So what gives? It turns out that—according to the Third Circuit—named plaintiff Harold Hoffman “is an attorney who has made a habit of filing class actions in which he serves as both the sole class representative and sole class counsel.” And that’s what Mr. Hoffman had done here by filing a putative class action in New Jersey state court against a nutritional supplement company—offering to serve as both class representative and class counsel. The company removed the case to federal court, and Mr. Hoffman moved to remand the case to state court. The district court rejected that motion, and—after the case was dismissed on the merits—Hoffman contended on appeal that the case should have been returned to state court because it was a “legal certainty” that the $5 million amount in controversy could not be met in his case. As summarized by the Third Circuit, Mr. Hoffman argued that “because [he] is both the sole class representative and the sole attorney for the class, the purported class cannot possibly be certified under established Third Circuit law. … Thus, he reasons, the amount in controversy of the action—as least while the case remains in federal court—is tantamount to the value of Hoffman’s individual claim, roughly $200, rather than the aggregate value of the class members’ claims, which would easily exceed $5 million.”

Mr. Hoffman was correct that, under the Third Circuit’s precedent—like the prevailing rule in many other federal circuits—a named plaintiff cannot serve as class counsel. That is so because, as a number of federal courts have explained, a class representative cannot adequately monitor the class counsel—and guard against counsel’s incentives to maximize attorneys’ fees rather than the class’s recovery—when the class rep is class counsel.

The plaintiff in Hoffman suggested that state courts might tolerate class actions in which the named plaintiff is the class counsel even though federal courts will not. That argument, however, runs afoul of the very reason CAFA was enacted: to avoid the application of lax certification standards to class actions involving claims worth $5 million or more. For that reason, the Third Circuit rightly rejected Mr. Hoffman’s attempt at an end-run around CAFA.

Topics:  CAFA, Class Action, Class Certification, Nutritional Supplements, Pharmaceutical, Remand, Standing

Published In: Civil Procedure Updates, Products Liability Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Mayer Brown - Class Defense Blog | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »