May 26, 2014 Articles

Navigating CAFA Removal and Remand Strategies

Decisions concerning removal and remand under CAFA have exhibited an interesting dichotomy.

By Jennifer L. Gray – May 26, 2014

In the wake of the U.S. Supreme Court’s decision last year in Standard Fire Insurance Co. v. Knowles, 133 S. Ct. 1345 (2013), federal-circuit and district-court decisions concerning removal and remand under the Class Action Fairness Act (CAFA), 28 U.S.C. § 1332(d), have exhibited an interesting dichotomy. Some courts have adhered to the legislative-intent-focused underpinning of Knowles, while othershave embraced a strict, textual approach. Generally, decisions involving how the amount in controversy is calculated for class-action removal have expanded the scope of CAFA jurisdiction, while decisions involving the requirements for mass-action removal have narrowed the scope of CAFA jurisdiction. In the mass-action cases, courts have exhibited a reluctance to permit removal where doing so appears inconsistent with a strict textual reading of CAFA provisions, even when the result is inconsistent with CAFA’s goals of ensuring federal-court consideration of nationwide litigation.

Knowles held that a class-action plaintiff could not avoid CAFA removal by stipulating that the amount in controversy was below the CAFA threshold of $5 million. Prior to Knowles, courts were split as to whether such stipulations were effective to defeat CAFA removal. The Supreme Court held that because a putative class member has no power to bind absent class members prior to the certification of a class, a stipulation is not effective in establishing the amount in controversy and therefore could not provide a basis to avoid CAFA jurisdiction. The Court explained that its decision was grounded in the legislative intent behind CAFA—to expand federal jurisdiction over class actions. The Court cautioned against “treat [ing] a nonbinding stipulation as if it were binding, exalt[ing] form over substance, and run[ning] directly counter to CAFA’s primary objective: ensuring federal court consideration of interstate cases of national importance.” Knowles, 133 S. Ct. at 1350 (internal quotation marks omitted).

In the wake of Knowles, courts have generally moved away from strict requirements regarding proof of the amount in controversy, favoring more lenient standards consistent with Knowles’s focus on CAFA’s legislative intent. For example, the several courts that have had the occasion to consider the burden-of-proof standard for establishing the amount in controversy have acknowledged that a rigid requirement of proving damages to “a legal certainty” is inconsistent with Knowles.

In Rodriguez v. AT&T Mobility Servs. LLC, 728 F.3d 975 (9th Cir. 2013), for example, the Ninth Circuit reviewed a remand order entered prior to Knowles, that had been based on a stipulation that damages sought were below the CAFA threshold. In light of Knowles, the Ninth Circuit reversed and remanded as the stipulation plainly ran afoul of the holding in Knowles. The Ninth Circuit used that opportunity to address the burden-of-proof standard in light of Knowles, an issue the Supreme Court had left open. Existing Ninth Circuit precedent required that a defendant opposing remand establish the amount in controversy to a legal certainty. The Ninth Circuit viewed that standard as inconsistent with Knowles, and held that a defendant need only prove the amount in controversy by a preponderance of the evidence. See also Rea v. Michael’s Stores, 742 F.3d 1234 (9th Cir. 2014) (reversing remand in light of Rodriguez v. AT&T Mobility where district court had improperly applied the burden of proof for establishing amount in controversy); Cutrone v. MERS, No. 14–455, 2014 WL 1492715 (2d Cir. Apr. 17, 2014) (“[R]removal clocks” under CAFA not triggered until the plaintiff serves the defendant with an initial pleading or other document that explicitly specifies the amount of monetary damages sought or sets forth facts from which an amount in controversy in excess of $5 million can be ascertained). Cf. Perritt v. Westlake Vinyls Co., No. 14–30145, 2014 WL 1410256 (5th Cir. Apr. 15, 2014) (defendant failed to meet preponderance-of-evidence standard where the defendants failed to provide a “reliable metric” for determining the nature and extent of the plaintiffs’ damages).

In another favorable decision for defendants, the Eleventh Circuit recently held that the amount-in-controversy requirement could be established where a demand for relief is framed in terms of declaratory judgment rather than monetary damages. In South Florida Wellness v. Allstate Insurance Co., No. 14-10001, 2014 WL 576111 (11th Cir. Feb. 14, 2014), the plaintiff, a medical center, asserted that the defendants had underpaid claims by approximately $68 million—the difference between the formula for reimbursement that the defendant insurance company had used and the formula the plaintiffs asserted should have been used. The defendants removed the case. In response, the plaintiffs argued that because it wasn’t directly seeking money damages, it would be “too speculative” to value the declaratory relief at issue as exceeding CAFA’s $5 million threshold because not every class member would necessarily file the claims required to collect on the declaratory judgment. The Eleventh Circuit rejected the plaintiffs’ contention that because additional action would need to be taken after the suit to convert the judgment into dollars, the amount in controversy was too speculative to support removal. The court also held that the relevant inquiry in determining the amount in controversy is “how much will be put at issue.” The Eleventh Circuit also reaffirmed that “the value of injunctive or declaratory relief is the value of the object of the litigation measured from the plaintiff’s perspective.” Id. (internal citations omitted).

South Florida Wellness should be helpful to defendants in removing not only cases that expressly seek declaratory relief but also those in which the plaintiff argues that the defendant’s amount-in-controversy calculation is erroneous or too speculative. The Eleventh Circuit reaffirmed that CAFA’s amount-in-controversy requirement turns on the maximum potential value of the claims as of the date of removal.

Notwithstanding the recent rulings that appear to expand CAFA jurisdiction, many courts have adopted a strict textual approach when the dispute turns on other CAFA removal requirements. Adhering to the axiom that plaintiffs are the masters of their complaints, courts have allowed plaintiffs, in some cases, to avoid CAFA removal even where cases have been structured in illogical and inefficient ways for the obvious purpose of avoiding removal. One example of these types of cases is actions brought by state attorneys general or private citizens pursuant to state laws that allow parens patriae suits. In a number of such cases, defendants had argued that these actions were filed on behalf of classes of citizens to recover damages on their behalf, and in every way functioned as class actions. Circuit courts were split as to whether such suits should be considered class or mass actions for CAFA removal purposes. The U.S. Supreme Court recently weighed in. In Mississippi ex rel. Hood v. AU Optronics Corp., 134 S. Ct. 736 (2014), the Court held that such parens patriae actions do not qualify as mass actions under CAFA. CAFA generally permits removal of mass actions where the claims of “100 or more persons are proposed to be tried jointly.” 28 U.S.C. § 1332(d)(11)). In Mississippi ex rel. Hood v. AU Optronics Corp., the Supreme Court held that this language refers to named plaintiffs only and does not encompass unnamed persons who are real parties in interest. 134 S. Ct. at 737. Construing “plaintiffs” to include unnamed real parties in interest would stretch the meaning of “plaintiff” beyond its common understanding as a party who brings a civil suit. Id. See also Bauman v. Chase, 2014 WL 983587 (9th Cir. Mar. 6, 2014) (extending this analysis to cases filed by nongovernment plaintiffs suing in a parens patriae capacity.). Cf. Addison Automatics, Inc. v. Hartford Cas. Ins. Co., 731 F.3d 740 (7th Cir. Oct. 2013) (upholding CAFA removal where plaintiff sued in individual capacity but only had standing as a class representative and thus was effectively suing on behalf of a class).

Relying on courts’ strict adherence to CAFA terms regarding the number of plaintiffs bringing a mass action, a common tactic by the plaintiffs’ bar to avoid CAFA removal is to subdivide a large group of plaintiffs into multiple subgroups—each with fewer than the minimum 100 required for mass-action removal—and to file identical complaints for each subgroup. The plaintiffs also avoid or deny any admission that the cases will be tried together—another key element for mass-action removal. Courts have generally permitted these tactics to preclude removal.

Scimone v. Carnival Corp., 720 F.3d 876 (11th Cir. 2013), illustrates this tactic. This case involved the cruise ship Costa Concordia, which sank off the coast of Italy. Passengers sued the cruise line and new plaintiffs were added to the complaint as they were identified. Eventually, 104 plaintiffs were identified. Rather than amend the complaint to add the final group—which would have put the number of plaintiffs over the CAFA removal threshold—the initial plaintiffs dismissed their complaint and filed two new suits. The new complaints were identical except that one was filed by plaintiffs whose names started with the letters A–L and the second by plaintiffs with names starting with M–Z. In some cases, spouses or family members were split apart into different actions. The defendants attempted to remove on the grounds that, taken together, the two complaints satisfied CAFA. The Eleventh Circuit disagreed, reasoning that the plaintiffs did not claim that they intended to try to cases jointly. In fact, they had asserted the opposite—that they intended to try the two batches of related claims in two separate trials. Nor had the court consolidated the two actions. CAFA does not allow the defendant to create jurisdiction by proposing a single joint trial. Thus, because there was no express request for a single trial, no CAFA jurisdiction existed.

The Ninth Circuit reached a similar conclusion in Romo v. Teva Pharmaceuticals, 731 F.3d 918, 921 (9th Cir. 2013). There, the plaintiff’s counsel divided the products-liability claims of more than 1,500 individuals into 41 separate lawsuits, with no case exceeding 100 plaintiffs. The plaintiffs had filed a motion to “coordinate the lawsuits for all purposes,” pursuant to a California procedural rule that allowed for such coordination. The defendants attempted to remove on the grounds that the plaintiffs’ petition to coordinate the cases effectively increased the number of plaintiffs above 100. On appeal to the Ninth Circuit, the key issue was whether the plaintiffs had proposed that their claims be “tried jointly.” The defendants argued that the petition to coordinate was tantamount to a request for a joint trial because the California rule relied on expressly contemplated that coordinated cases would continue through trial before a single judge. The Ninth Circuit disagreed, finding that because there had been no express request for a joint trial, CAFA jurisdiction did not exist. One judge dissented on the grounds that the plaintiffs had clearly demonstrated an intent to try the cases jointly by seeking coordination of the cases and justifying their request by asserting a need to avoid inconsistent judgments. The dissenting judge warned that the panel’s decision effectively amounts to a rule that plaintiffs must expressly request a single joint trial to trigger removal under CAFA and provides a very clear and simple road map for plaintiffs to avoid CAFA removal. The Ninth Circuit subsequently granted en banc review of this decision.

Recently, in Parson v. Johnson & Johnson, Nos. 13–6287, 2014 WL 1399750 (10th Cir. Apr. 11, 2014), the Tenth Circuit was faced with a similar fact pattern and reached the same conclusion. The court affirmed the remand of 11 identical cases involving 702 plaintiffs asserting claims against a medical-device manufacturer. The complaints each contained language stating that the claims within the complaint would be consolidated for pretrial and discovery purposes, but the complaints also contained express disclaimers of any request that the claims be jointly tried. Citing Scimone and Romo, among other cases, the court observed that in none of these cases had other courts found that a proposal for a joint trial was present solely because the plaintiffs had filed multiple cases each containing fewer than 100 plaintiffs. In accord with these cases, the Eleventh Circuit held that because there was no request for a joint trial, remand was proper. Accord Abrahamsen v. ConocoPhillips, Co., 503 F. App’x 157, 160 (3d Cir. 2012); Anderson v. Bayer Corp., 610 F.3d 390, 392 (7th Cir. 2010); Tanoh v. Dow Chem. Co., 561 F.3d 945, 950–51 (9th Cir. 2009).

Not all courts have taken such a literal approach to mass-action removal. In Atwell v. BostonScientific, 740 F.3d 1160 (8th Cir. 2013), the Eighth Circuit confronted a fact pattern similar to those in cases discussed above. The plaintiffs had subdivided a mass action into three separate cases and moved to consolidate the cases before one judge. The plaintiffs indicated that they intended to select a bellwether case to try and argued that assignment to a single judge was necessary to avoid “conflicting pretrial rulings,” but the plaintiffs had not specifically requested a joint trial. The Eighth Circuit reversed the district court’s remand, finding that the plaintiff’s conduct demonstrated an intent to have a joint trial on the merits, and thus CAFA mass action jurisdiction was present.

Cases such as ScimoneRomo, and Parson  have effectively provided plaintiffs with a road map for avoiding CAFA removal, at least where the plaintiffs are known and the case can be pled as a mass action. Given that these mass-action rulings turn on factors that are completely in the plaintiffs’ control, defendants face a difficult task in opposing remand in these cases. The only avenue for opposing these efforts appears to be demonstrating that the plaintiffs’ conduct evidences intent to try separate cases together. While most courts have appeared unwilling to infer such intent absent an express request for a joint trial, at least some courts have recognized that this approach undermines the Supreme Court’s admonition in Knowles not to exalt form over substance and contravenes CAFA’s goal of ensuring “federal court consideration of interstate cases of national importance.”

Keywords: litigation, corporate counsel, Standard Fire Insurance Co. v. Knowles, Class Action Fairness Act, CAFA, SchimoneRomoParson


Jennifer L. Gray is a shareholder with Greenberg Traurig, LLP, in Los Angeles, California, and New York, New York.