Monday, July 26, 2010

Commentary on Recent CAFA Decision (Cappuccitti v. DirecTV)

Last week the Eleventh Circuit issued a very significant (though a bit puzzling) decision on the 2005 Class Action Fairness Act (CAFA). The case is Cappuccitti v. DirecTV, Inc., No. 09-14107,  ___ F.3d ___, 2010 U.S. App. LEXIS 14724, 2010 WL 2803093 (11th Cir. July 19, 2010), covered earlier here. One of CAFA’s most significant changes was an amendment to the diversity jurisdiction statute, codified at 28 U.S.C. § 1332(d), to authorize federal diversity jurisdiction over class actions for which there is (a) minimal diversity between the parties, and (b) an aggregate amount in controversy in excess of $5,000,000. Neither party in Cappuccitti disputed that federal subject matter jurisdiction was proper under § 1332(d); DirecTV's appeal challenged only the district court’s refusal to compel arbitration. But the Eleventh Circuit raised the jurisdictional issue sua sponte and dismissed the case entirely. It held that even if a class action’s aggregate amount-in-controversy exceeds $5,000,000, CAFA jurisdiction applies only if at least one class member’s claim exceeds the $75,000 threshold that applies for ordinary diversity jurisdiction under 28 U.S.C. § 1332(a).

It is difficult to see how this result follows from CAFA’s text. CAFA’s § 1332(d) created a new category of diversity jurisdiction over class actions that is distinct from the general form of diversity jurisdiction set forth in § 1332(a). The only situation where the two overlap is for so-called “mass actions” -- cases that are not class actions but nonetheless include more than 100 plaintiffs with related claims. Section 1332(d)(11) provides that such “mass actions” can trigger CAFA jurisdiction, but only for plaintiffs whose claims exceed § 1332(a)’s $75,000 threshold. See 28 U.S.C. § 1332(d)(11)(B)(i). Cappuccitti, however, is a true class action brought pursuant to Federal Rule of Civil Procedure 23. So § 1332(d)(11)’s provisions for “mass actions” don’t apply, leaving no textual basis for incorporating § 1332(a)’s $75,000 threshold into § 1332(d). 

Thus, § 1332(d)’s plain text provides that as long as a class action’s aggregate amount in controversy exceeds $5 million, it doesn’t matter whether any individual class member’s claim exceeds $75,000 (or any other amount). CAFA’s legislative history confirms that this was exactly what Congress intended. According to the Senate Judiciary Committee’s report (S. Rep. 109-14), CAFA responded to “the nonsensical result under which a citizen can bring a ‘federal case’ by claiming $75,001 in damages for a simple slip-and-fall case against a party from another state, while a class action involving 25 million people living in all fifty states and alleging claims against a manufacturer that are collectively worth $15 billion must usually be heard in state court (because each individual class member's claim is for less than $75,000).” [S. Rep. 109-14, at p.11 (emphasis added)]. In further critiquing the pre-CAFA approach to diversity jurisdiction over class actions, the Senate Report explained [at p.69]:

[T]he process of assessing whether a class action complies with the current jurisdictional amount requirement is also often “an expensive and time consuming process,” requiring discovery on the nature and value of the named plaintiffs' claims. As noted previously, in some federal Circuits, the jurisdictional amount requirement in a class action is satisfied by showing that any member of the proposed class is asserting damages in excess of $75,000, and in other Circuits, the question is whether each and every member of the putative class has individually an amount in controversy exceeding $75,000. Again, this time-consuming issue, often requiring significant amounts of record review and fact-finding, is litigated very frequently in the many class actions that are removed to federal court under current law. [CAFA] will make the resolution of class action jurisdictional issues easier -- not harder. . . . [I]t will be much easier to determine whether the amount in controversy presented by a purported class as a whole (that is, in the aggregate) exceeds $5 million than it is to assess the value of the claim presented by each and every individual class member, as is required by the current diversity jurisdictional statute.

[S. Rep. 109-14, at p.11 (emphasis added)].

My purpose here is not to defend CAFA. One can certainly question whether, as a policy matter, federal diversity jurisdiction should have been expanded to cover these kinds of class actions. And CAFA does contain several instances of problematic drafting (see, e.g., here and here). But the issue addressed in Cappuccitti is not one of them. The court’s holding is very hard to square with CAFA’s text and purpose.

--A
 

http://lawprofessors.typepad.com/civpro/2010/07/commentary-on-recent-cafa-decision-cappuccitti-v-directv.html

Adam Steinman, Class Actions, Recent Decisions, Subject Matter Jurisdiction | Permalink

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