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July 19, 2019
by: Colin E. Flora
We shift our attention to an interesting issue of federal class-action procedure that was well illustrated by two cases decided just a day apart: when does a federal court cease to have jurisdiction over a putative class action? As we’ve previously discussed, the Class Action Fairness Act (“CAFA”) permits federal jurisdiction over class action cases even when federal jurisdiction would otherwise be inappropriate. But, if the entire purpose of CAFA is to allow federal jurisdiction over class actions, what happens when a court has denied a motion to certify a class? For that, we turn to two recent decisions from the Second and Third Circuits.
From the Third Circuit comes Coba v. Ford Motor Co. After summary judgment in favor of Ford led the district court to deny class certification as moot, the named plaintiff filed an appeal to the Third Circuit. As a threshold matter, the Third Circuit realized that it must address whether the district court retained jurisdiction after denying class certification:
Because § 1332(d) provides original jurisdiction only over “class action[s],” that ruling raises the question whether the District Court still had jurisdiction when it entered its final summary judgment order in August of 2017. Thus, before we address the merits of this appeal, we must consider an issue of first impression for our Court: If a federal court properly exercises jurisdiction pursuant to § 1332(d) at the time a claim is filed or removed, does a subsequent denial of class certification divest the court of subject-matter jurisdiction?
Joining “every other Circuit Court to address this question”— citing decisions from the Second, Fifth, Seventh, Eighth, Ninth, and Eleventh Circuits—the Third Circuit ruled that it does not.
The following day, the Second Circuit proved that there is a slight nuance to that general rule. A class had actually been certified in Gale v. Chicago Title Insurance Co. After a change in Supreme Court precedent, the class was decertified. Following decertification, the “Plaintiffs informed the court that in order to facilitate the resolution of the case they would be willing to litigate the case in their individual capacities rather than as a class action.” At the behest of the Defendants, the Plaintiffs withdrew their class allegations by way of filing an amended complaint that omitted class allegations. In so doing, however, they completely changed the jurisdictional landscape.
The Second Circuit recognized that jurisdiction was appropriate when the case was filed, pursuant to CAFA. Further, jurisdiction remained even after decertification for the same reasons as the Third Circuit had just expressed inCoba. “Therefore, the only question before [the court wa]s whether the filing of the [amended complaint], which omitted all class-action allegations, divested the District Court of CAFA jurisdiction and required dismissal. [The court] agree[d] that it did.”
That seemingly anomalous outcome was, in the esteem of the Second Circuit, mandated by the Supreme Court’s Rockwell International Corp. v. United States opinion. Despite not being a CAFA case, the guidance of Rockwellindicated “that both‘the state of things’ and ‘the alleged state of things’ must support jurisdiction. ‘[W]hen a plaintiff files a complaint in federal court and then voluntarily amends the complaint, courts look to the amended complaint to determine jurisdiction.’” By replacing one complaint with another, the omission of the facts necessary to establish jurisdiction in the latter acts to deprive the court of jurisdiction. “Therefore, by removing all class-action allegations in the [amended complaint], Plaintiffs divested the District Court of CAFA jurisdiction.”
Notably, had the case been filed in state court to begin with, then the proper remedy would not have been dismissal. For those familiar with my prior writings, you may think that I mean it would not have been dismissed because the proper remedy would have been remand. That is a smart but incorrect conclusion. Instead of adhering to a straight-forward concept such as remand resulting where jurisdiction now becomes lacking, the Supreme Court, as summarized by the Second Circuit, decided that federal courts maintain jurisdiction to prevent plaintiffs from amending their complaints “to frustrate a defendant’s federal right to remove the case and to be heard in a federal court.” Mind you, that proposition is despite the fact that “a plaintiff is the master of his or her complaint”.
In my esteem, the proposition that a plaintiff cannot amend so as to “frustrate a defendant’s federal right to remove” is indefensible. Either a federal court does or does not have jurisdiction. It is the plaintiff who decides what claims to pursue and if those claims are not subject to federal jurisdiction, there is no rational basis for a defendant to get to be in federal court just because it wants to be.
To be clear, this portion of the Second Circuit’s opinion is purely dicta and may well not be followed in subsequent cases. The portion of the Rockwell decision on which the court relies is itself dicta and not even squarely in line with the Second Circuit’s conclusion: “It is true that, when a defendant removes a case to federal court based on the presence of a federal claim, an amendment eliminating the original basis for federal jurisdiction generally does not defeat jurisdiction. But removal cases raise forum-manipulation concerns that simply do not exist when it is the plaintiff who chooses a federal forum and then pleads away jurisdiction through amendment.”
Regardless of what is proper when the case has been removed, this is a particularly bad result for plaintiffs who brought their actions directly in federal court. Without federal jurisdiction and the possibility that statutes of limitation have long since passed, plaintiffs may be left to find refuge in journey’s account statutes or be left with the doors to courthouses closed.
If class certification is denied, then jurisdiction is retained under CAFA in the Second, Third, Fifth, Sixth, Seventh, Eighth, Ninth, and Eleventh Circuits.
If class allegations are dropped from an amended complaint, then CAFA jurisdiction is removed in at least the Second Circuit. If the case was initially filed in federal court, then the result is dismissal. If the case was removed to federal court, then weak dicta support retaining jurisdiction.
Join us again next time for further discussion of developments in the law.
Coba v. Ford Motor Co., 930 F.3d 174 (3d Cir. 2019) (Krause, J.).
Gale v. Chicago Title Ins. Co., 929 F.3d 74 (2d Cir. 2019) (Parker, J.).
Rockwell Int’l Corp. v. United States, 549 U.S. 457, 127 S. Ct. 1397, 167 L. Ed. 2d 190 (2007) (Scalia, J.).
Colin E. Flora, 7th Circuit Examines Boundaries of Class Action Fairness Act, Hoosier Litig. Blog (Oct. 4, 2013).
Colin E. Flora, Is The Defense Bar Inadvertently Creating Exclusive State Court Jurisdiction For Statutory Damages Cases By Invoking Spokeo, Inc. v. Robins?, 9 Litigation Commentary & Rev. 11 (January/February 2017).
Colin E. Flora,Saving a Claim After Dismissal: Indiana’s Journey’s Account Statute, Hoosier Litig. Blog (Apr. 18, 2015).
*Disclaimer: The author is licensed to practice in the state of Indiana. The information contained above is provided for informational purposes only and should not be construed as legal advice on any subject matter. Laws vary by state and region. Furthermore, the law is constantly changing. Thus, the information above may no longer be accurate at this time. No reader of this content, clients or otherwise, should act or refrain from acting on the basis of any content included herein without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue.