Third Circuit Declines CAFA Jurisdictional Appeal

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[author: Jon A. Cipriani]

CAFA defendants mulling their options after a remand order should carefully consider what court they would prefer to be in: litigating on the merits in state court could well foreclose any chance of having the case removed to federal court. That's the lesson of Probola v. Long & Foster Real Estate, Inc., 2012 WL 1959559 (3d Cir. June 1, 2012), which saw the Third Circuit accept, then dismiss as improvidently granted, an appeal from the district court's remand order. 

Plaintiffs alleged that the defendant real estate agency charged unlawful "document fees" on real estate transactions.  On behalf of the putative class, they sued in New Jersey state court for alleged violations of New Jersey fraud and consumer protection states.  Defendant removed to federal district court, claiming federal question jurisdiction and diversity jurisdiction under the Class Action Fairness Act.  The district court remanded the case to state court, and the defendant timely moved for leave to appeal the remand to the Third Circuit.  The Third Circuit granted leave. Contemporaneously, however, the defendant also filed a motion to dismiss the case in state court, which was granted as well.  Plaintiffs filed an appeal in state appellate court, which the Third Circuit only learned of when the parties filed their statement of the case.

The Third Circuit noted that it had granted leave to appeal under 28 U.S.C. § 1453(c)(1), which provides a narrow exception to the strong Congressional policy against appellate review of remand orders.  The exception's purpose is to let the federal circuit courts develop CAFA appellate law without delaying class action litigation.  Toward that end, appellate rulings on remand orders must take place within 60 days from the date the appeal is filed, under 28 U.S.C. § 1453(c)(2).

Probola notes that the narrowness of the exception leads circuit courts to reject appeals that don't present pure CAFA questions.  The court acknowledged that this case would present such a question: specifically, the standard for determining whether a case should be remanded when the parties dispute that the $5 million CAFA amount in controversy requirement has been met.  But the court dismissed the appeal as improvidently granted, given how far the case had already proceeded in state court.  Had the Third Circuit known of the pending state court appeal, it would have denied leave to appeal in the first place.  The court cited the practical problems and confusion that would result from a federal court asserting jurisdiction over a matter that had already been litigated extensively in state court.

Probola provides guidance as to when federal circuit courts will accept CAFA jurisdictional appeals.  It also reminds CAFA defendants that if they truly want to stay in federal court, they may harm their chances of doing so by litigating in state court.