June 20, 2013 Articles

CAFA Jurisdiction after Class-Certification Denial

Courts appear to be reaching a consensus that denial does not destroy CAFA jurisdiction.

By Matthew Stein and Aaron T. Morris

One of the great mysteries of our time is if a court retains subject-matter jurisdiction conferred by CAFA, 28 U.S.C. § 1332(d)(2) (often referred to, including here, as “CAFA jurisdiction”) after class certification is denied or the plaintiff indicates that no class-certification motion will be filed (by withdrawal of the class allegations, or otherwise).

After some disagreement (see Samuel v. Univ. Health Servs., 805 F. Supp. 2d 284, 287 & n.3 (E.D. La. 2011)), courts appear to be reaching a consensus that class-certification denial does not destroy CAFA jurisdiction.  The Sixth, Seventh, Eighth, Ninth, and Eleventh Circuits have all reached this conclusion, and no circuit has held the contrary. See Burdette v. Vigindustries, Inc., No. 10-1083-JAR, 2012 WL 5505095, at *2 & n.15 (D. Kan. Nov. 13, 2012); Samuel, 805 F. Supp. 2d at 287; Buetow v. A.L.S. Enters., Inc., 650 F.3d 1178, 1182 n.2 (8th Cir. 2011). This is still an emerging consensus, however, as demonstrated by decisions by courts outside those circuits, which have dismissed or called for briefing on the issue. See Spelman v. Bayer Corp., C/A No. 7:10-91-TMC, slip op. at 11 (D.S.C. Dec. 17, 2012) (stating without analysis that, “[a]s Plaintiff’s motion for class certification is denied, the court no longer has jurisdiction under [CAFA, 28 U.S.C.] § 1332(d)(2)(A),” and dismissing); P.R. Coll. Of Dental Surgeons v. Triple S Mgmt. Inc., — F. Supp. 2d —, 2013 WL 1010684, at **13–14 (D.P.R. Mar. 13, 2013) (denying class certification and ordering the parties “to brief the question whether jurisdiction still exists under CAFA following this order”).

There appear to be three principal reasons underlying the consensus: (1) cases are “filed” as class actions regardless of what happens with class certification; (2) CAFA jurisdiction is a type of diversity jurisdiction, and the normal rules of diversity jurisdiction are that post-filing or ‑removal events do not impact subject-matter jurisdiction; and (3) continuing federal court jurisdiction avoids a jurisdictional “ping-pong game.” Samuel, 805 F. Supp. 2d at 287–91. That “game” refers to a situation where certification is improper under federal Rule 23 but proper under a state’s different rule; if certification denial destroys CAFA jurisdiction, then every time the federal court denied class certification the case would be remanded to a state court that could certify a class, allowing a fresh removal to federal court. The situation is unlikely to occur in cases initially filed in federal court, as it is difficult for courts to “remand” those cases to state court. See In re TJX Cos. Retail Sec. Breach Litig., 564 F.3d 489, 501 (1st Cir. 2009) (reversing order “transferring” nonremoved case to state court).)

But what of successful motions to strike class allegations? Should those motions be treated differently than class-certification denials? After all, a successful motion to strike other aspects of a complaint could impact a federal court’s subject-matter jurisdiction. See, e.g., Wiggins v. N. Am. Equitable Life Assurance Co., 644 F.2d 1014, 1016–17 (4th Cir. 1981) (after striking punitive damages claim on defendant’s motion, no diversity jurisdiction because legal certainty plaintiff could not recover more than the jurisdictional threshold). Even though similar in name to traditional motions to strike, the answer appears to be no: a successful motion to strike class allegations has the same impact on CAFA jurisdiction as class-certification denial does.

This is the conclusion in a recent decision by a federal court in West Virginia, and it appears to be supported by how courts approach motions to strike class allegations.

In the recent decision Carter v. Allstate Insurance Co., the court granted a motion to strike class allegations but denied remand, reasoning that post-removal events (the defendant's successful motion to strike class allegations) did not alter the jurisdictional facts at the time of removal.  No. 5:12-CV-72, 2012 WL 3637239, at *11 (N.D. W. Va. Aug. 21, 2012) (following Faktor v. Lifestyle Lift, No. 1:09-cv-511, 2009 WL 1107908, at *3 (N.D. Ohio Apr. 23, 2009)). In doing so, the court expressly “questioned the vitality” of an earlier contrary decision by a California federal court “after the Ninth Circuit’s subsequent opinion in United Steel” (this was the Ninth Circuit’s decision holding that class-certification denial did not destroy CAFA jurisdiction). Id. at *11 n.5.

The Carter analysis makes sense, given how federal courts analyze motions to strike class allegations. Unlike most motions to strike (which are governed by Rule 12(f)), this type of motion is authorized by Rule 23(d)(1)(D), which gives courts the authority to “require that pleadings be amended to eliminate allegations about representation of absent persons and that the action proceed accordingly,” if, as one court explained, “the court determines a class is not maintainable using the standards found in subdivisions (a) and (b) of Rule 23.” Jimenez v. Allstate Indem. Co., No. 07-cv-14494, 2010 WL 3623176, at *3 n.2 (E.D. Mich. Sept. 15, 2010); see also Tietsworth v. Sears, Roebuck & Co., 720 F. Supp. 2d 1123, 1146 (N.D. Cal. 2010).  Because the court is required to undertake a Rule 23 analysis before granting the motion, the motion is “for all practical purposes, identical to an opposition to a motion for class certification.”  Korman v. Walking Co., 503 F. Supp. 2d 755, 762 (E.D. Pa. 2007).

Consequently, if a motion to strike is practically identical to a class-certification opposition, then a successful one should be treated no differently than a successful class-certification motion—that is, it is a post-filing or -removal event that does not affect CAFA jurisdiction.

Of course, a court may come to a different conclusion. For example, in Duvio v. Viking Range Corp., No. 12-1430, 2013 WL 1180948, at **7–8 (E.D. La. Mar. 20, 2013), after striking the class allegations, the court stated that “[t]he case shall now be assessed as an individual action” and remanded it for lack of diversity jurisdiction. But in cases like that, there is still a benefit to a successful motion to strike class allegations: The class allegations have been stripped from the complaint.

Keywords: litigation, class actions, derivative suits, CAFA, class certifications

Matthew Stein and Aaron T. Morris – June 20, 2013