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

Post Filing Changes To The Nature Of Class Actions Filed In The Federal Courts Under CAFA Does Not Divest The Federal Courts Of Its Jurisdiction

Posted in Case Summaries

Wright Transportation Inc v Pilot Corporation, 841 F.3d 1266 (11th Cir. 2016).

The United States Court of Appeals for the Eleventh Circuit (the “Eleventh Circuit”) found that there was no distinction between the actions brought before a federal court asserting jurisdiction under the Class Action Fairness Act (“CAFA”), and the actions brought in the state court asserting federal jurisdiction under CAFA. The Eleventh Circuit, accordingly, reversed an order from the United States District Court for the Southern District of Alabama (the “District Court”) dismissing the plaintiff’s complaint as only the state law claims remained; finding that changes to the nature of the claims asserted in a lawsuit after asserting jurisdiction under CAFA, does not divest the District Court of its jurisdiction over such an action.

The plaintiff, Wright Transportation, Inc. (“Plaintiff”), was a trucking company from Alabama, and it had a fuel-discount contract with the defendants Pilot Corporation, Pilot Travel Centers LLC, d.b.a. Pilot Flying J (collectively, “Pilot”), and its named employees. Plaintiff brought this putative class action, on behalf of others who had fuel-discount contracts, in the District Court, alleging that certain Pilot employees systematically shortchanged some trucking companies with whom Pilot had discount agreements by failing to give them the agreed-upon benefits.

Plaintiff alleged that Pilot targeted customers whom it considered to be unsophisticated, including small businesses that lacked resources to easily discover Pilot’s scheme and Latino customers who might face a language barrier.

Plaintiff brought several claims under both the state and federal law before the District Court, including claims for: (1) racketeering; (2) conspiracy to commit racketeering; (3) breach of contract under state law; (4) deceptive trade practices in violation of state law; (5) unjust enrichment under state law; (6) fraudulent misrepresentation under state law; (7) negligent misrepresentation under state law; and (8) suppression of the proper discounts owed to the class members under state law.

Although, many of the claims were based under state law, Plaintiff alleged it was proper for the District Court to exercise federal jurisdiction over all of the claims for four independent reasons: (1) federal-question jurisdiction for the racketeering claims under 28 U.S.C. § 1331; (2) diversity jurisdiction under 28 U.S.C. § 1332(a); (3) jurisdiction under CAFA; and (4) supplemental jurisdiction under 28 U.S.C. § 1367.

The District Court granted part of the defendants’ motion to dismiss, with respect to the Plaintiff’s racketeering claims as well several of the state law claims. While this action was pending, a rival class action suit reached a court-approved settlement in the United States District Court for the Eastern District of Arkansas (the “Arkansas Court”).

Even before the Arkansas settlement reached final approval, Plaintiff and the defendants acknowledged the judicial approval of this settlement would deprive the Plaintiff of standing to pursue its class claims. The Arkansas Court approved the settlement before the District Court’s ruling on the motion to dismiss; therefore, in keeping with the parties’ acknowledgment, the District Court dismissed all of the class claims asserted in the complaint.

Thereafter, six separate lawsuits pending against the defendants in five other federal judicial districts across the country were consolidated with the Plaintiff’s action into one multi-district litigation proceeding (“MDL”). The MDL Court later found new information that deprived it of diversity jurisdiction over the Plaintiff’s action. The defendants urged the MDL Court to retain jurisdiction over the Plaintiff’s suit because the it originally asserted its claims under CAFA.  Without deciding the question of jurisdiction under CAFA, the MDL Court remanded the case to the District Court.

On remand to the District Court, Plaintiff moved to dismiss its remaining claims without prejudice so that it could re-file in an Alabama state court. The defendants argued the District Court had original jurisdiction under CAFA and, alternatively, it should continue to retain supplemental jurisdiction.  The District Court found there was no compelling reason for exercising supplemental jurisdiction over the Plaintiff’s state law claims and dismissed them without prejudice.

The defendants appealed to the Eleventh Circuit.

The defendants argued that CAFA conferred original jurisdiction over all of the Plaintiff’s claims at the time when the it filed them, such that jurisdiction could not have been divested when the class claims were later dismissed. Plaintiff argued the District Court’s dismissal of the class claims after settlement of the competing class action destroyed jurisdiction under CAFA.

 The Eleventh Circuit rejected the Plaintiff’s argument, noting the settlement occurred after the it filed its complaint. The Eleventh Circuit explained that a post-filing action that does away with class claims is not an amendment to the complaint, and there is no basis for distinguishing cases originally filed under CAFA from those removed to a District Court.  

 Based thereon, the Eleventh Circuit held that CAFA continued to confer original federal jurisdiction over the remaining state law claims. The Eleventh Circuit further opined there was no need for it to analyze supplemental jurisdiction, noting that supplemental jurisdiction only has a role in cases under CAFA that also have state law claims that were never subject to jurisdiction under CAFA.  Here, neither party disputed that all eight claims were properly plead as claims subject to jurisdiction under CAFA.

Accordingly, the Eleventh Circuit reversed the District Court’s ruling and remanded for further proceedings.

Yaron Shaham