Wednesday, March 14, 2007

The Ninth Circuit and CAFA

The Class Action Fairness Act kept the Ninth Circuit busy in the early part of this month.  On March 2, in Lowdermilk v. U.S. Bank Nat'l Assoc., the Ninth Circuit determined that, where a plaintiff pleads damages below CAFA's jurisdictional amount, a defendant must prove to a "legal certainty" that the jurisdictional amount is met in order to remove the case to federal court. 

Just four days later, the court issued its opinion in Progressive West Ins. Co. v. Preciado.  In Progressive, the plaintiff insurance company filed a breach of contract suit in California state court against one of its insureds, and its insured filed a "cross-complaint" against Progressive alleging violations of California's unfair competition laws.  Both the original complaint and the cross-complaint were filed before the February 18, 2005 effective date of CAFA. 

In August of 2005, the insured filed an amended cross-complaint to properly allege the elements of a class action.  The insurance company then removed the action to federal court, arguing the existence of federal jurisdiction under CAFA.  The insurance company argued that, under California's relation-back doctrine, the insured commenced a new action after CAFA's effective date.  The Ninth Circuit rejected this argument, saying:

California's relation-back doctrine does not apply in this context.  Because [the insured] commenced his class action lawsuit for purposes of CAFA on February 17, 2005 (the time of the filing of the original cross-complaint), one day before CAFA became effective, [the insurance company] cannot invoke CAFA's removal provisions.

But the Ninth Circuit did not stop at this relatively narrow holding.  It also said:

We must conclude CAFA does not alter the longstanding rule announced in Shamrock that precludes plaintiff/cross-defendants from removing class actions to federal court.  For this reason, [the insurance company] would lack statutory authority to remove the action pursuant to CAFA even if the action had commenced after CAFA's effective date.

Do you think we'll see plaintiffs pleading more cases below the jurisdictional amount to defeat removal of class actions?  Or are there ways to bait would-be class action defendants into first filing suit against the would-be plaintiffs/class representatives?

--Counseller

http://lawprofessors.typepad.com/civpro/2007/03/the_ninth_circu.html

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Comments

Section 1446(b)'s one-year limitation for removal of diversity cases doesn't apply to CAFA removals, so there is no reason for plaintiffs to attempt to evade jurisdiction by disingenuous pleading. That said, the Ninth Circuit standard is precisely backwards: it should require a "legal certainty" that the jurisdictional amount is *not* met before remanding.

Posted by: Ted | Mar 14, 2007 2:13:06 AM

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