Civil Procedure & Federal Courts Blog

Decision of Interest: Ninth Circuit on the Class Action Fairness Act

The Ninth Circuit’s recent decision in Westwood Apex v. Contreras (No. 11-55362), 2011 WL 1744960, considers which kinds of defendants may remove a class action to federal court under the Class Action Fairness Act’s removal provision (28 U.S.C. § 1453(b)). The opinion by Judge Milan Smith begins:

The Class Action Fairness Act of 2005 (CAFA), Pub. L. No. 109-2, 119 Stat. 4, confers federal jurisdiction over class action lawsuits where the amount in controversy exceeds $5,000,000 and the adversaries are minimally diverse. When a class action satisfying these conditions is filed in state court, Section 5 of CAFA provides that “such action may be removed by any defendant without the consent of all defendants.” 28 U.S.C. § 1453(b). In this appeal, we address whether CAFA Section 5, 28 U.S.C. § 1453(b), allows a party joined to an action as a defendant to a counterclaim (an additional counterclaim defendant) to remove the case to federal court. We hold that § 1453(b) does not permit additional counterclaim defendants to remove an action to federal court, and we affirm the district court’s decision to remand this case to state court.

The court explains:

Since the Supreme Court’s decision in Shamrock Oil & Gas Corporation v. Sheets, 313 U.S. 100 (1941), “defendant” for purposes of designating which parties may remove a case under § 1441 has been limited by a majority of the courts to mean only “original” or “true” defendants; “defendant” in Chapter 89, thereby, excludes plaintiffs and non-plaintiff parties who become defendants through a counterclaim. . . . Likewise, the Shamrock Oil rule has been extended to preclude removal by third-party defendants to an action. . . .

This accepted understanding of “defendant” as excluding plaintiff/counterclaim defendants and third-party defendants survived the enactment of § 1453(b).

Judge Jay Bybee writes a concurring opinion that begins: “I join Judge M. Smith’s opinion in full, but I write separately to emphasize that Congress may wish to reexamine the applicability of the original defendant rule in the Class Action Fairness Act context.”

For more coverage, see CAFA Law Blog.

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SCOTUS Cert Grant of Interest: Mims v. Arrow Financial

Last week the Supreme Court granted certiorari in Mims v. Arrow Financial Services LLC (No. 10-1195), which presents the question: Did Congress divest the federal district courts of their federal-question jurisdiction under 28 U.S.C. § 1331 over private actions brought under the Telephone Consumer Protection Act?

SCOTUSblog’s case file is available here, which contains links to the Eleventh Circuit’s opinion below and the cert-stage briefs.

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Johnson on Securities Class Actions in State Court

Professor Jennifer Johnson (Lewis & Clark) has posted on SSRN a draft of her article, Securities Class Actions in State Court, which is forthcoming in the University of Cincinnati Law Review.  Here’s the abstract:

Over the past two decades, Congress has gradually usurped the power of state regulators to enforce state securities laws and the power of state courts to adjudicate securities disputes. This Paper evaluates the impact of Congressional preemption and preclusion upon state court securities class actions. Utilizing a proprietary database, the Paper presents and analyzes a comprehensive dataset of 1500 class actions filed in state courts from 1996-2010. The Paper first examines the permissible space for state securities class actions in light of Congressional preclusion and preemption embodied in the 1998 Securities Litigation Uniform Standards Act (SLUSA) and Class Action Fairness Act of 2005 (CAFA). The Paper then presents the state class action filing data detailing the numbers, classifications, and jurisdictions of state class action cases that now occupy the state forums. First, as expected, the data indicates that there are few traditional stock-drop securities class actions litigated in state court today. Second, in spite of the debate over the impact of SLUSA and CAFA on 1933 Act claims, very few plaintiffs attempt to litigate these matters in state court. Finally, the number of state court class actions involving merger and acquisition (M&A) transactions is skyrocketing and now surpasses such claims filed in federal court. Moreover, various class counsel file their M & A complaints in multiple jurisdictions. The increasingly large number of multi-forum M&A class action suits burden the defendants and their counsel, the judiciary and even plaintiffs’ lawyers themselves. The paper concludes that absent effective state co-ordination, further Congressional preemption is possible, if not likely.

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Decision of Interest: Fifth Circuit on Mandamus Review of District Court's Refusal to Remand

Last week the U.S. Court of Appeals for the Fifth Circuit issued a decision in In Re Crystal Power Co., Ltd. (No. 11-40115). In March the same panel had issued a writ of mandamus instructing the district court to remand the case to state court (2011 WL 944371). The more recent decision (2011 WL 1833874) withdraws that order and denies the mandamus petition. With some very robust footnotes omitted, Judge Patrick Higginbotham writes:

We are now persuaded that the petition does not meet the stringent demands of the All Writs Act for extraordinary relief. Supreme Court precedent does not ordinarily allow mandamus review of district court decisions that, while not immediately appealable, can be reviewed at some juncture. The Court has instructed that our review of an erroneous refusal to remand must await appeal from a final judgment, even when this forces the parties to submit to proceedings before a tribunal that lacks competent jurisdiction over their dispute. To the same end, the Court has advised that the ordinary costs of trial and appeal are not a sufficient burden to warrant mandamus relief.

Three questions remain. First, whether a zone of review under the All Writs Act remains for cases where post-judgment review of an interlocutory order is an illusion—where the promise of review at some later time is not meaningful. Second, whether mandamus may remain available when delay would cause greater hardship than the normal cost of trying a case to judgment. Third, whether the precedent of this circuit can be defended on these grounds.

Since Crystal Power has not proffered any reason why post-judgment review would be ineffective or why the cost of delay would be atypical, we can leave these questions to another day.

In footnote 5, Judge Higginbotham notes that Supreme Court decisions on the propriety of mandamus relief in this situation "cast a heavy shadow on certain case law of this circuit. See, e.g., In re Hot-Hed, Inc., 477 F.3d 320, 322 (5th Cir. 2007) (granting mandamus where district court’s denial of remand was based on clearly erroneous assertion of federal question jurisdiction); In re Dutile, 935 F.2d 61, 63–64 (5th Cir. 1991) (granting mandamus where district court denied remand on an explicitly non-removable claim). Adding to the confusion, other circuits have held that when a district court denies a motion to dismiss for lack of subject-matter jurisdiction, rather than a motion to remand, mandamus relief may be available. See, e.g., Bell v. Sellevold, 713 F.2d 1396, 1402–05 (8th Cir. 1983); First Jersey Sec., Inc. v. Bergen, 605 F.2d 690, 700–02 (3d Cir. 1979); United States v. Boe, 543 F.2d 151, 157–61 (C.C.P.A. 1976); BancOhio Corp. v. Fox, 516 F.2d 29, 32–33 (6th Cir. 1975); Erie Bank v. U.S. Dist. Ct. for the Dist. of Colo., 362 F.2d 539, 540–41 (10th Cir. 1966)."

Additonal coverage in BNA's U.S. Law Week (79 U.S.L.W. 2566). Six law professors had joined an amicus brief urging rehearing of the Fifth Circuit's earlier ruling.

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Decision of Interest: Eighth Circuit on CAFA and 1447(c)'s Remand Deadline

In a decision issued earlier this month, the Eighth Circuit considered the deadline for seeking a remand to state court based on the “Local Controversy” exception to jurisdiction under the Class Action Fairness Act (CAFA). See 28 U.S.C. § 1332(d)(4). The case is Graphic Communications v. CVS Caremark, No. 11-1067 (Mar. 11, 2011), 2011 WL 855672, 2011 U.S. App. LEXIS 4747. The defendant argued that the plaintiffs' remand motion, filed more than three months after removal to federal court, was untimely under 28 U.S.C. § 1447(c), which provides: “A motion to remand the case on the basis of any defect other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal.”

The unanimous opinion, authored by Judge Kermit Edward Bye, reasoned that the Local Controversy exception “operates as an abstention doctrine, which does not divest the district court of subject matter jurisdiction.” But the court also held that the applicability of CAFA’s Local Controversy exception “was not a ‘defect’ within the meaning of section 1447(c).” Therefore, § 1447(c)’s 30-day deadline did not apply either.

So what is the deadline? The court explained: “[T]he mere fact that the statutory time limitation on raising motions to remand does not apply does not mean that non-1447(c) remands are necessarily authorized at any time. Indeed, we do not believe the applicable time limitation for the instant motion to remand is equivalent to the anytime-before-judgment (or even on appeal) standard applicable for subject matter jurisdiction.” Instead, a motion to remand based on the local controversy exception must be “brought within a reasonable time frame,” which is the standard “for remands not covered by § 1447(c).” The Eighth Circuit sent the case back to the district court to resolve whether the plaintiffs had filed their remand motion within a “reasonable time frame.”

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(Hat Tip: Scott Dodson)

Decision of Interest: More on Removal Deadlines

We covered earlier the Fourth Circuit’s en banc decision in Barbour v. International Union, which perpetuated a circuit split over how to calculate removal deadlines in multiple-defendant cases. That same week, the Ninth Circuit weighed in on the other side of the divide. The decision is Destfino v. Reiswig, 2011 WL 182241, 2011 U.S. App. LEXIS 1375. Per Chief Judge Kozinski:

We adopt the later-served rule as the wiser and more equitable approach. This rule doesn't go so far as to give already-served defendants a new thirty-day period to remove whenever a new defendant is served, as that could give a defendant more than the statutorily prescribed thirty days to remove. See 28 U.S.C. § 1446(b). Rather, we hold that each defendant is entitled to thirty days to exercise his removal rights after being served. Because [the later-served defendant] removed the case within thirty days from when it was served, the removal was timely.

(Hat Tip: Benjamin Roesch)

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Decision of Interest: En Banc Fourth Circuit Divides Sharply Over Removal Deadline

In its recent decision Barbour v. International Union (2011 WL 242131, 2011 U.S. App. LEXIS 1695), the en banc Fourth Circuit splits 7-5 over how to apply federal removal requirements when faced with “the defendants-served-on-different-days dilemma.” At issue in Barbour are 28 U.S.C. § 1446(b)'s 30-day deadline for removing a state-court case to federal court, and the “rule of unanimity,” which requires that all defendants join in the removal.

The en banc majority in Barbour adopts what it calls the “McKinney Intermediate Rule” (named for an earlier Fourth Circuit decision). From Judge Hamilton's opinion:

“[T]he McKinney Intermediate Rule requires a notice of removal to be filed within the first-served defendant's thirty-day window, but gives later-served defendants thirty days from the date they were served to join the notice of removal.” (emphasis added)

As the Barbour majority acknowledges, this approach conflicts with decisions from several other circuits that use the “Last-Served Defendant Rule,” which allows “each defendant, upon formal service of process, thirty days to file a notice of removal pursuant to § 1446(b).” E.g., Bailey v. Janssen Phramaceutica, Inc., 536 F.3d 1202, 1209 (11th Cir. 2008) (emphasis added). In Barbour, five Fourth Circuit judges (in an opinion authored by Judge Agee) would have followed the Last-Served Defendant Rule.

The Barbour majority recognizes that its rejection of the Last-Served Defendant Rule could deprive later-served defendants of any opportunity to remove a case when an earlier-served defendant misses its 30-day deadline. But it reasons that an earlier-served defendant who fails to remove within the 30-day deadline has, essentially, consented to remain in state court. That consent forecloses removal. As the majority explains: “If the first-served defendant decides not to remove, later-served defendants are not deprived of any rights under § 1446(b), because § 1446(b) does not prevent them from removing the case; rather, it is the rule of unanimity that does.”

So viewed, what later-served defendants are actually losing under the Fourth Circuit approach is “an opportunity to persuade earlier-served defendants to join a notice of removal.” To this point, the majority responds that “it is difficult to believe that Congress intended to protect this power of persuasion when it enacted § 1446(b).”

For additional coverage, see BNA’s U.S. Law Week (79 U.S.L.W. 2013) and How Appealing.

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(Hat Tips: Tom Rowe & Shaun Shaughnessy)

Walsh on Lack of Subject Matter Jurisdiction over Health Care Reform Challenges

Professor Kevin Walsh (Richmond) has posted on SSRN his essay, The Ghost that Slayed the Mandate. Here’s the abstract:

Virginia v. Sebelius is a federal lawsuit in which Virginia seeks the invalidation of President Obama’s signature legislative initiative of healthcare reform. Virginia seeks declaratory and injunctive relief to vindicate a state statute declaring that no Virginia resident shall be required to buy health insurance. To defend this state law from the preemptive effect of federal law, Virginia contends that the federal legislation’s individual mandate to buy health insurance is unconstitutional. Virginia’s lawsuit is one of the most closely followed and politically salient federal cases in recent times. Yet neither the federal government nor any other legal commentator has previously identified the way in which the very features of the case that contribute to its political salience also require that it be dismissed for lack of statutory subject-matter jurisdiction. The Supreme Court has placed limits on statutory subject-matter jurisdiction over declaratory judgment actions in which a state seeks a declaration that a state statute is not preempted by federal law - precisely the relief sought in Virginia v. Sebelius. These limits insulate federal courts from the strong political forces surrounding lawsuits that seek federal court validation of state nullification statutes. This Essay identifies these heretofore neglected limits, shows why they demand dismissal of Virginia v. Sebelius, and explains why it is appropriate for federal courts to be closed to this type of suit.

(Hat Tip: PrawfsBlawg)

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Eleventh Circuit Reverses Itself on CAFA: Cappuccitti v. DirecTV

This summer we covered (and critiqued) the Eleventh Circuit’s decision in Cappuccitti v. DirecTV, Inc., 611 F.3d 1252 (11th Cir. July 19, 2010), which had interpreted the jurisdictional provisions of the Class Action Fairness Act (CAFA). The July decision held that CAFA jurisdiction is available only if at least one class member’s claim exceeds the $75,000 threshold required for ordinary diversity jurisdiction under 28 U.S.C. § 1332(a). On Friday, the Eleventh Circuit panel reversed itself:

"Subsequent reflection has led us to conclude that our interpretation was incorrect. Specifically, CAFA’s text does not require at least one plaintiff in a class action to meet the amount in controversy requirement of 28 U.S.C. § 1332(a)."

The new decision is available here, on Westlaw at 2010 WL 4027719, and on Lexis at 2010 U.S. App. LEXIS 21348.

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(Hat Tip: Scott Dodson)

Facebook and Subject Matter Jurisdiction: With Friends Like These...

Earlier this summer, Paul Ceglia filed a lawsuit in a Buffalo, New York state court claiming he’s entitled to an 84% stake in Facebook. Mark Zuckerberg, the defendant and Facebook CEO, removed the case to U.S. District Court for the Western District of New York on diversity grounds. Zuckerberg contends that he’s a citizen of California and the plaintiff is a citizen of New York.

Last month the plaintiff filed a motion to remand the case, arguing that Zuckerberg is still domiciled in New York, thus destroying diversity of citizenship. Zuckerberg filed his opposition to remand this week.

For additional coverage of the pending litigation, see here, here, and here.

The docket is available via Justia and PACER (case number 1:10-cv-569, Ceglia v. Zuckerberg), and oral argument is scheduled for October 13.

Zuckerberg’s citizenship for diversity purposes has already been the subject of a published federal court decision. In ConnectU LLC v. Zuckerberg, 482 F. Supp. 2d 3 (D. Mass. 2007) (Hat Tip: Kevin Clermont), the court held that as of September 2, 2004, Zuckerberg was still domiciled with his parents in New York. That decision was reversed on other grounds.

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Skinner on International Law Violations and "Arising Under" Jurisdiction

Professor Gwynne Skinner (Willamette University College of Law) has posted "When Customary International Law Violations 'Arise Under the Laws of the United States'" on SSRN.  It will be published in the Brooklyn Journal of International Law.

The abstract states:

For years, scholars have been vigorously debating the precise role of customary international law within our federal legal system, including whether such is federal common law and whether claims for violation of customary international law arise under the “Laws of the United States” for purposes of both Article III and general federal questions jurisdiction, found at 28 U.S.C. § 1331. This question also remains unresolved by the U.S. Supreme Court. Yet, it is a question that is timely, given the increasing number of non-citizens and citizens alike that bring claims for violations of customary international law in U.S. court. 

In this Article, I conclude that common law claims for violations of customary international law arise under the “laws of the United States” for general federal question jurisdiction and within Article III, but only where such claims or defenses to them implicate uniquely federal interests, such as foreign relations. I do not take this position because the law of nations itself is, or historically was, part of the “laws of the United States” for Article III and 1331 purposes; in fact, the law of nations probably was not considered to be the “law of the United States” per se when each was enacted. Rather, I take this position for two other reasons. First, certain enclaves of federal common law have developed over time to include certain norms and rules of customary international law – i.e., those that affect uniquely federal interests such as foreign relations – and federal courts have the judicial authority to continue to develop such law when uniquely national interests are at stake. Second, federal common law has evolved to become “law of the United States” for purposes of both Article III and 28 U.S.C. §1331.

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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.

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Decision of Interest on the Class Action Fairness Act (CAFA)

This week the Eleventh Circuit issued a decision interpreting 28 U.S.C. § 1332(d), the new form of diversity jurisdiction created by the 2005 Class Action Fairness Act (CAFA). In Cappuccitti v. DirecTV, Inc., No. 09-14107,  ___ F.3d ___, 2010 WL 2803093, 2010 U.S. App. LEXIS 14724 (11th Cir. July 19, 2010), the court holds that even if the class action’s aggregate amount-in-controversy exceeds § 1332(d)’s $5,000,000 requirement, CAFA diversity jurisdiction is available only if at least one class member’s claim exceeds the $75,000 threshold required for ordinary diversity jurisdiction under 28 U.S.C. § 1332(a). From the opinion:

We hold that in a CAFA action originally filed in federal court, at least one of the plaintiffs must allege an amount in controversy that satisfies the current congressional requirement for diversity jurisdiction provided in 28 U.S.C. § 1332(a). . . . If we held that § 1332(a)'s $75,000 requirement for an individual defendant did not apply to § 1332(d)(2) cases, we would be expanding federal court jurisdiction beyond Congress's authorization. We would essentially transform federal courts hearing originally-filed CAFA cases into small claims courts, where plaintiffs could bring five-dollar claims by alleging gargantuan class sizes to meet the $5,000,000 aggregate amount requirement. While Congress intended to expand federal jurisdiction over class actions when it enacted CAFA, surely this could not have been the result it intended.

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(Hat Tip: Jay Tidmarsh)

SCOTUS cert. grant in Henderson v. Shinseki: Once more into the jurisdictional-vs.-nonjurisdictional breach

The Supreme Court has been struggling in recent years to distinguish "jurisdictional" requirements from "nonjurisdictional" ones, in a line of cases that includes Arbaugh v. Y & H Corp., 546 U.S. 500 (2006), Bowles v. Russell, 551 U.S. 205 (2007), John R. Sand & Gravel Co. v. United States, 552 U. S. 130 (2008), and Reed Elsevier v. Muchnick, 130 S. Ct. 1237 (2010). As covered here, the topic came up again in last week’s decision in Morrison v. Australia National Bank. The Court looks to tackle the issue once more in a case for which it granted certiorari yesterday: Henderson v. Shinseki (No. 09-1036). The question presented is:

Section 7266(a) of Title 38, U.S.C., establishes a 120-day time limit for a veteran to seek judicial review of a final agency decision denying the veteran's claim for disability benefits. Before the decision below, the Federal Circuit in two en banc decisions held that Section 7266(a) constitutes a statute of limitations subject to the doctrine of equitable tolling under this Court's decision in Irwin v. Department of Veterans Affairs, 498 U.S. 89 (1990). In the divided en banc decision below, however, the Federal Circuit held that this Court's decision in Bowles v. Russell, 551 U.S. 205 (2007), superseded Irwin and rendered Section 7266(a) jurisdictional and not subject to equitable tolling.

The question presented is whether the time limit in Section 7266(a) constitutes a statute of limitations subject to the doctrine of equitable tolling, or whether the time limit is jurisdictional and therefore bars application of that doctrine.

The lower court decision is at 589 F.3d 1201, and the Supreme Court docket is here.

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Congressional Hearing on the Removal Clarification Act of 2010 (H.R. 5281)

The House Judiciary Committee's Subcommittee on Courts and Competition Policy is holding a hearing this afternoon (5/25/2010, 2:00 p.m.) on H.R. 5281, the "Removal Clarification Act of 2010."

The bill would amend the federal officer removal statute (28 U.S.C. § 1442) to provide that "civil action[s]" removable under § 1442 "include any proceeding in which a judicial order, including a subpoena for testimony or documents, is sought or issued" from a federal officer. The bill would also exempt federal officer removal rulings from 28 U.S.C. § 1447(d)'s bar on appellate review of district court remand orders.

Go to the following links for the bill's text and legislative history and more information about the hearing. A link to a live webcast is available here, or you can stop by 2141 Rayburn House Office Building. The witness list includes:

Beth S. Brinkmann
Deputy Assistant Attorney General, Civil Division
U.S. Department of Justice
Washington, DC

Irvin B. Nathan
General Counsel
Office of the General Counsel
U.S. House of Representatives
Washington, DC

Lonny S. Hoffman
George Butler Research Professor of Law
University of Houston Law Center
Houston, TX

Arthur D. Hellman
Professor of Law
University of Pittsburgh School of Law
Pittsburgh, PA

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Stories of interest in the current U.S. Law Week

The current issue of U.S. Law Week includes the following stories:

(1) Twombly, Iqbal Introduce More Subjectivity To Rulings on Dismissal Motions, Judge Says (78 U.S.L.W. 2667) reports on a discussion of Twombly and Iqbal that occurred at a recent meeting of the ABA Litigation Section.

(2) Federal Law Includes Permissive Claims Within Supplemental Jurisdiction Definition (78 U.S.L.W. 1699) reports on a recent First Circuit decision (Global NAPs Inc. v. Verizon New England Inc., No. 09-1308, 2010 WL 1713240, 2010 U.S. App. LEXIS 8929) that applies the supplemental jurisdiction statute (28 U.S.C. § 1367) to counterclaims.

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SCOTUS Decision In Hertz Corp. v. Friend: Where Is A Corporation's Principal Place Of Business?

Today the Supreme Court issued a unanimous decision in Hertz Corp. v. Friend, covered earlier here, here, and here. The opinion, per Justice Breyer, begins:

The federal diversity jurisdiction statute provides that "a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business." 28 U.S.C. § 1332(c)(1) (emphasis added). We seek here to resolve different interpretations that the Circuits have given this phrase. In doing so, we place primary weight upon the need for judicial administration of a jurisdictional statute to remain as simple as possible. And we conclude that the phrase "principal place of business" refers to the place where the corporation’s high level officers direct, control, and coordinate the corporation’s activities. Lower federal courts have often metaphorically called that place the corporation’s "nerve center." We believe that the “nerve center” will typically be found at a corporation’s headquarters. 

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Decision of Interest on the Class Action Fairness Act (CAFA)

A recent Seventh Circuit decision holds that the denial of class certification in federal court does not eliminate federal subject-matter jurisdiction under the Class Action Fairness Act (CAFA). Therefore, when a case is removed to federal court under CAFA and class certification is denied, the case should remain in federal court and should not be remanded.

The case is Cunningham Charter Corp. v. Learjet Inc., No. 09-8042, ___ F.3d ___, 2010 WL 199627, 2010 U.S. App. LEXIS 1452 (7th Cir. Jan. 22, 2010). Writing for the panel, Judge Posner reasoned:

[I]f a state happened to have different criteria for certifying a class from those of Rule 23, the result of a remand because of the federal court's refusal to certify the class could be that the case would continue as a class action in state court. That result would be contrary to the Act's purpose of relaxing the requirement of complete diversity of citizenship so that class actions involving incomplete diversity can be litigated in federal court.

He added: "Our conclusion vindicates the general principle that jurisdiction once properly invoked is not lost by developments after a suit is filed."

(Hat Tip: BNA's US Law Week)

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Tyler on United States v. Klein

This paper might be of special interest to federal courts teachers who teach United States v. Klein. Professor Amanda L. Tyler (George Washington University Law School) has posted "The Story of Klein: The Scope of Congress's Authority to Shape the Jurisdiction of the Federal Courts" on SSRN.  It will be published in Jackson & Resnik's Federal Courts Stories.

The abstract states:

Almost 140 years after the Supreme Court handed down the decision, the Civil War-era case of United States v. Klein continues to baffle students and scholars alike. Indeed, as one observer has written, “Klein is sufficiently impenetrable that calling it opaque is a compliment.” But making sense of the decision has taken on new importance. For much of its history, Klein has stood as the only occasion on which the Supreme Court has struck down a limitation on federal court jurisdiction drafted as such by Congress. During the 2007 Supreme Court Term, however, the Court once again resisted an encroachment on its jurisdiction framed in such terms, and thereby invited a new round of debate over what limits govern Congress’s authority to shape the jurisdiction and powers of the judicial branch.

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CAFA and the Home State Exception

(Cross posted at Prawfsblawg).

Even if you're not a civ pro buff you've probably heard of the Class Action Fairness Act (CAFA).  Enacted in 2005, CAFA allows some class actions based in state law to proceed in federal court, even if they don't meet the normal 1332 diversity requirements.  CAFA's proponents touted the statute as a national remedy for class action “abuses” in state courts in which state law procedural devices were blamed for empowering litigants to bring “nationwide” class actions in states with plaintiff-friendly law. 

But what of genuinely local class actions? To protect such lawsuits, CAFA's drafters crafted some exceptions for local actions, one for actions where two thirds of the class are citizens of the state where the action was filed , and one for local controversies.   CAFA's home state exception has the power to change class action practice, and this might not be a bad thing.   A Seventh Circuit decision from last week, In re Sprint Nextel Corp., illustrates a few of the new issues.

The plaintiffs, Sprint and Nextel customers from Kansas, accuse Sprint of conspiring with other wireless companies to artificially inflate text messaging rates.  There was nothing special here about Kansas, and this is the sort of action that pre-CAFA might have been brought as a nationwide consumer class action.  Here, however, the lawsuit has been confined to residents of a single state, clearly with the hope that the action would remain in Kansas state court. 

This looks like a new trend in class action practice -- filing smaller state-wide class actions to avoid the CAFA net.  At first blush this might look like a new breed of forum shopping to the tune of 50 separate class actions.  How could that be efficient?  This, however, assumes that the nationwide class action was an efficient method of litigation to begin with.  The Supreme Court has already noted that nationwide class actions present serious choice of law issues, or manageability and predomination issues if the laws of many different states must be applied.  The CAFA home state exception might be forcing some of the smaller, more local class actions that the plaintiff bar initially resisted in the Phillips Petroleum v. Shutts context.

While some plaintiffs' attorneys have retooled to bring nationwide class actions on a state by state basis, the defense bar has started to look to the nationwide nature of the class for their salvation.  In Sprint Nextel, the defendants argued that the denominator in the two thirds number should be all possible plaintiffs in a nationwide class, rather than all members of the class in Kansas (remember, not Kansas subscribers are Kansas citizens).  The Seventh Circuit rejected this argument, but the reversal of state and national focus among plaintiffs and defendants is interesting to watch.

The Seventh Circuit remanded the case to the district court to allow the plaintiff class a chance to prove the Kansas citizenship of two thirds of the class.  But prove their citizenship the plaintiffs must -- guesswork flowing from the class definition won't cut it. 

This illustrates a final observation about the CAFA home state exception:  more exceptions equal more litigation.  And like other threshold matters in class action practice, determining the citizenship of the class requires discovery and findings of fact.  In this new breed of local/nationwide class actions CAFA's minimum diversity requirement turns out to demand more work of the courts, and not less.

RJE