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CAFA Law Blog Information, cases and insights regarding the Class Action Fairness Act of 2005

CAFA Does Not Fill the Lacunae Created by Lack of Article III Standing

Posted in Case Summaries

Wallace v Conagra Foods Inc., 2014 WL 1356860 (8th Cir. April 4, 2014).

On an appeal challenging the district court’s order dismissing an action for lack of subject matter jurisdiction due to lack of Article III standing, the Eighth Circuit made the following findings:

  1. CAFA does not abrogate the Article III standing’s injury in fact requirement and replace it with injury in law;
  2. On a case removed from a state court, if a federal court finds that it lacks subject matter jurisdiction, it must remand the case to the state court, and not dismiss it.

This opinion explains that the consumers brought an action in the state court against the defendant, who manufactures Hebrew National meat products (notably hot dogs) using beef slaughtered by AER Services, Inc. (“AER”). The slaughtering of the beef took place in the facilities of another entity, American Foods Group, LLC (“AFG”), which then sold the meat classified as kosher to the defendant and sold any remaining meat to third parties. AER employed the religious slaughterers who perform the “shechitah” (i.e., the ritual slashing of the cow’s throat) along with the other individuals responsible for marking particular meat as kosher. One such individual is supposed to inspect the freshly slaughtered carcass while another examines the lungs for signs of injury. If a lung cannot hold air because, for example, there is a small perforation, the meat should be deemed non-kosher. A third party kosher certification entity named Triangle K, Inc., nominally monitored whether AER, AFG, and the defendant complied with the kosher rules. Triangle K was a for-profit New York company owned and run by Ayreh Ralbag, an orthodox rabbi.

The plaintiffs contended that the defendant promoted these kosher requirements as a reason to purchase Hebrew National products, which cost more than similar non-kosher competitors. As American consumers sought purer foods prepared in accordance with strict safety standards, the kosher food industry expanded by catering to non-religious consumers. Like the consumers bringing this case, an increasing number of Americans chose to pay more for Hebrew National’s supposedly kosher products based on the defendant’s representations that the kosher label was a guarantee of quality and superior taste. The plaintiffs contended that manufacturing quotas–not kosher rules–were the deciding factor as to whether any batch of meat harvested at the AFG slaughterhouses was ultimately designated as kosher or non-kosher. The plaintiffs brought this action alleging that the defendant’s misrepresented that Kosher was the “New Organic”, which led them to pay an unjustified premium for the defendant’s ostensibly kosher beef.

This case began as a state class action filed in Minnesota state court. The defendant removed to federal court in the District of Minnesota, then moved for dismissal pursuant to Federal Rules 12(b)(1) and (6). Although the defendant itself first invoked federal jurisdiction, the defendant submitted that the federal district court lacked subject matter jurisdiction because (1) the consumers’ claims were “barred” by the First Amendment, and (2) the consumers lacked Article III standing. After the District Court granted the defendant’s motion, the consumers appealed.

At the very outset, the Eighth Circuit noted that the plaintiffs did not have an Article III standing because they failed to demonstrate an injury in fact. In other words, the plaintiffs failed to show that any of the particular packages of Hebrew National beef they personally purchased contained non-kosher beef.

The plaintiffs then argued that Congress extended federal jurisdiction to the causes of action as alleged by the plaintiffs meant the they need only show a bare statutory violation–injury in law rather than an injury in fact–to satisfy Article III. The Eighth Circuit remarked that to interpret CAFA as a congressional attempt to extend federal jurisdiction to cases involving no injury in fact would force it to presume–without any basis in the statutory text, and in contradiction to long-settled constitutional precedent–that Congress intended to stretch, if not breach, the constitutional limits on federal jurisdiction. The Eighth Circuit remarked that one cannot assume the people’s elected representatives would so casually disregard the Constitution they have sworn to uphold. To the contrary, recognizing that Congress is predominantly a lawyer’s body, it can be assumed that the elected representatives know the law.

The Eighth Circuit remarked that Congress clearly incorporated Article III’s traditional limits into CAFA. In drafting the Act, Congress was not required to restate existing standing law, nor to specify that Article III limited CAFA’s reach, because Congress legislates against the background of standing. The Eighth Circuit remarked that the Congress passed CAFA to 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. The Eighth Circuit concluded that this stated purpose was wholly inconsistent with the notion Congress wished to reject Article III’s historic injury in fact requirement.

Accordingly, The Eighth Circuit concluded that CAFA does not purport to extend federal jurisdiction to state claims–if any exist–permitting recovery for bare statutory violations without any evidence the plaintiffs personally suffered a real, non-speculative injury in fact.

The Eighth Circuit nevertheless, disagreed with the District Court’s finding of dismissing the case. The Eighth Circuit explained that when case originally filed in federal court does not belong there because the plaintiffs lack Article III standing, generally the appropriate remedy is to dismiss without prejudice. If, on the other hand, the case did not originate in federal court but was removed there by the defendants, the federal court must remand the case to the state court from whence it came. Further, the Eighth Circuit remarked that if at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case should be remanded.

Because this case began in the First Judicial District Court, Dakota County, Minnesota, the Eighth Circuit concluded that is where this case must return. Accordingly, the Eighth Circuit vacated the District Court’s judgment, reversed the district court’s dismissal with prejudice, and remand to the District Court with instructions to return this case to the Minnesota state court for lack of federal jurisdiction. –JR