October 27, 2016 Practice Points

    District Court: CAFA Class Actions Lacking Article III Standing Must Be Remanded to State Court, Not Dismissed

    Practitioners should weigh this potential outcome carefully when considering whether to challenge standing in a class action pending in federal court.

    By Matthew Mall

    The Northern District of Ohio recently provided another reminder that defendants should think twice before challenging Article III standing in a class action removed to federal court. Two times in the last month, the district court accepted a defendant’s Article III standing argument only to remand the class action to state court instead of dismissing it. See Schartel v. One Source Technology, LLC, 2016 WL 6024558 (N.D. Ohio Oct. 14, 2016); Disalvo v. Intellicorp Records, Inc., 2016 WL 5405258 (N.D. Ohio Sept. 27, 2016).

    In both Schartel and Disalvo, the plaintiff brought a claim under the Fair Credit Reporting Act, and the defendant removed the case to federal court and moved to dismiss. Each defendant argued that its respective plaintiff had not suffered any concrete injury-in-fact under the Supreme Courts’ decision in Spokeo, Inc. v. Robbins, and thus that the case must be dismissed for lack of Article III standing. And in each case, the court agreed that the plaintiff lacked standing.

    Instead of dismissing the cases, however, the court remanded them to state court. In doing so, the court rejected the defendants’ argument that dismissal is appropriate in light of the federal policies, recognized in the Class Action Fairness Act, in favor of keeping class actions in federal courts and against “jurisdictional gamesmanship” in class actions. The defendants also advocated unsuccessfully for a “futility” exception to remand, which would require dismissal when a plaintiff also fails to meet the applicable state law standing requirements. None of these arguments persuaded the district court. The court held that that even in class actions removed under CAFA, the “mandatory language of [28 U.S.C.] § 1447(c) requires remand where the Court does not have subject matter jurisdiction.”

    The Supreme Court’s decision in Spokeo has understandably generated increased scrutiny on Article III standing issues in class actions. But the decisions in Schartel and Disalvo reflect a trend towards remanding, rather than dismissing, CAFA class actions for lack of Article III jurisdiction. See, e.g., Polo v. Innoventions Int’l, LLC, 833 F.3d 1193 (9th Cir. 2016) (“a removed case in which the plaintiff lacks Article III standing must be remanded to state court”); Khan v. Children’s Nat’l Health Sys., ---- F. Supp. 3d ----, 2016 WL 2946165 (D. Md. May 19, 2016) (remanding class action after finding lack of Article III standing); Wallace v Conagra Foods Inc., 747 F.3d 1025 (8th Cir. 2014) (same). Practitioners should weigh this potential outcome carefully when considering whether to challenge standing in a class action pending in federal court.

    Matthew Mall is a partner with Parker Poe Adams & Bernstein LLP in Raleigh, North Carolina.

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