Upholding CAFA’S Intended Purpose


In February 2005, Congress enacted the Class Action Fairness Act of 2005 (CAFA), with the primary intent of modifying and liberalizing the rules concerning federal diversity jurisdiction as they apply to class actions, enabling many large mass actions to be removed to federal court. Since its enactment, plaintiffs have sought to defeat CAFA by various creative stratagems designed to avoid removal. Fortunately, recent federal decisions have given a practical, rather than literal, application to CAFA’s requirements, thereby ensuring its important goals are not defeated by cynical procedural maneuvers.


Under CAFA, a case is removable if it meets three requirements: (1) it involves the monetary claims of 100 or more persons that are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact; (2) the aggregate amount in controversy exceeds $5,000,000; and (3) any plaintiff is a citizen of a state different from any defendant.


In re Abbott Labs., Inc., 698 F.3d 568 (7th Cir. 2012), counsel for plaintiffs sought to avoid CAFA’s jurisdiction by filing 11 separate lawsuits against Abbott, though all alleged personal injuries caused by the company’s prescription medication. Each lawsuit named less than 100 plaintiffs, but taken together, the lawsuits met the numerosity requirement under CAFA. Once plaintiffs sought to consolidate their actions in Illinois state court, Abbott removed the cases under CAFA. However, the district court remanded and Abbott sought permission to appeal under 28 U.S.C. § 1453(c). Eventually, last year, the Seventh Circuit Court of Appeals held that individually filed cases may constitute a mass action where plaintiffs propose that the claims in the separate actions be tried jointly.


More recently, the U.S. Supreme Court rejected a similar attempt by plaintiffs to avoid CAFA jurisdiction.  In Standard Fire Ins. Co. v. Knowles, No. 11-450, --- S. Ct. ---, 2013 WL 1104735 (U.S. March 19, 2013), one class representative entered into a stipulation that aggregate damages in the case were below CAFA’s monetary requirement of $5,000,000. The Supreme Court held, however, that one class representative cannot legally bind the class before class certification and that the non-binding stipulation was ineffective to defeat CAFA removal. The Court said, “To hold otherwise would, for CAFA jurisdictional purposes, treat a nonbinding stipulation as if it were binding, exalt form over substance, and run directly counter to CAFA’s primary objective: ensuring Federal court consideration of interstate cases of national importance.”


Plaintiffs will mostly certainly go back to the drawing board in effort to devise other means for evading CAFA. Nevertheless, these recent decisions are an encouraging development and one can hope they signal a firm determination by federal courts to uphold CAFA’s intended purpose.


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.

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