Duane Morris Class Action Review - 2023 - Report - Page 86
CHAPTER 5
CAFA Rulings in Class Actions
I.
Executive Summary
The Class Action Fairness Act of 2005 (CAFA), 28 U.S.C. §§ 1332(d), is a staple of
class action litigation. Signed into law by President George W. Bush on February 18,
2005, the CAFA expands federal subject-matter jurisdiction over significant class action
lawsuits and mass actions in the United States. Functionally, the CAFA provides a
mechanism for defendants – primarily employers and businesses – to remove class
actions from state courts to federal courts. In practice, use of the CAFA is a defense
weapon for corporate defendants in seeking the optimal venue in which to defend class
action litigation. As a result, the CAFA impacts forum-selection strategies of plaintiffs’
lawyers – and defense counsel alike – in the class action space.
The CAFA does more than facilitate the removal of class actions from state court to
federal court. It also regulates the selection of class counsel; toughens certain pleadings
standards; tightens control over the range of attorneys’ fees that may be awarded in
class action settlements; facilitates appeals of class certification orders; reduces the
ability of plaintiffs’ counsel to dictate choice of forum in the class action and mass action
context; and regulates the settlement process in class action settlements.
As defined in the text of the CAFA, “class action lawsuits are an important and valuable
part of the legal system when they permit the fair and efficient resolution of legitimate
claims of numerous parties by allowing the claims to be aggregated into a single action
against a defendant that has allegedly caused harm.” 28 U.S.C. § 1711(a)(1). The
declared purposes of the CAFA are to: “(1) assure fair and prompt recoveries for class
members with legitimate claims; (2) restore the intent of the framers of the United States
Constitution by providing for Federal court consideration of interstate cases of national
importance under diversity jurisdiction; and (3) benefit society by encouraging
innovation and lowering consumer prices.” 28 U.S.C. § 1711(b).
As a result, the CAFA has played a major role in large “bet-the-company” class actions.
The plaintiffs’ class action bar has traditionally maintained success in achieving class
certification in state courts, particularly those with locally elected judges who may be
hostile toward out-of-state defendants. Prior to the implementation of the CAFA, in order
for a federal court to maintain jurisdiction, there needed to be a monetary threshold of
$75,000 met by every plaintiff in the case, and all named plaintiffs in a class action had
to be citizens of states differing from those of all defendants. This made it relatively easy
for the plaintiffs’ class action bar to secure venue in state court. Even in cases where
plaintiffs sought to certify nationwide classes, defendants would find it nearly impossible
to secure removal to federal court.
That scenario changed with the CAFA, as jurisdictional implications have become much
more defendant-friendly under the CAFA. If any putative class member is from a
different state than any defendant, diversity jurisdiction is satisfied under the CAFA,
85
© Duane Morris LLP 2023
Duane Morris Class Action Review – 2023
