Must Claims Severed From A CAFA Class Action Be Remanded To State Court? The Fifth Circuit Says No.

Following Hurricane Katrina, the State of Louisiana filed a class action to recover under homeowners’ insurance policies that the state had received by assignment through a disaster relief program.  The insurers successfully removed to federal court based on CAFA jurisdiction, and challenged the assignability of the homeowners’ contractual rights.  Finding that Louisiana law required a policy by policy examination of each anti-assignment clause, the district court ordered the individual claims severed from the collective action.  The state complied, filing 1,504 amended complaints.  However, the district court then found that these individual cases no longer enjoyed federal jurisdiction, and remanded them to state court.

On appeal, the Fifth Circuit examined two competing principles: first, the principle that jurisdictional facts are determined at the time of removal, regardless of post-removal events; and second, that an action severed from the original case must have an independent jurisdictional basis.  The court found that the second principle only applied to claims that enjoyed supplemental jurisdiction, not original jurisdiction.  Examining the language in CAFA, specifically the use of the word “filed” in § 1332(d)(1)(B), the court further decided that CAFA was concerned with the status of an action when filed, not how it subsequently evolved.  The court also relied on the Senate Report in CAFA’s statutory history, which stated that a federal court’s jurisdiction, based on proper removal, could not be “ousted” by later events.  Because the State of Louisiana’s claims clearly possessed original federal jurisdiction as an integral part of the class action, the Fifth Circuit found no need for removal, and reversed the district court.

Louisiana v. Am. Nat’l Prop. & Cas. Co., Nos. 14-30071, 14-30072 (5th Cir. Mar. 26, 2014).

Topics:  Assignments, CAFA, Class Action, Homeowner's Insurance, Jurisdiction, Qualified Disaster Relief Payments

Published In: Civil Procedure Updates, General Business Updates, Insurance Updates, Residential Real Estate 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.

© Carlton Fields Jorden Burt | 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 »