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

District Court Holds Denial of Class Certification Deprives Action of CAFA Jurisdiction

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Karhu v. Vital Pharmaceuticals, Inc., 2014 WL 1274119 (S.D. Fla. March 27, 2014).

A district court in Florida dismissed this action finding that it lacked subject matter jurisdiction after denial of a motion for class certification.  The court explained that the denial of certification meant that the plaintiff’s action was, from the beginning, inappropriate for class treatment, and hence, it could not exercise jurisdiction under CAFA.

The plaintiff brought a class action in the federal court purporting to sue on behalf of all persons in the United States who purchased VPX Meltdown Fat Incinerator (“Meltdown”)–a dietary supplement manufactured and marketed by the defendant.  The plaintiff asserted claims for breach of express warranty, unjust enrichment, and for violation of the Magnusson-Moss Warranty Act, Florida Deceptive and unfair Trade Practices Act, and New York General Business Law section 349.  The defendant advertised that consumers could use Meltdown to burn fat and achieve rapid fat loss.  The plaintiff claimed that the product was ineffective for its advertised purposes, and sought to enjoin the defendant from making any further misrepresentations.  After the plaintiff’s class certification motion was denied, he maintained the suit only in his individual capacity, asserting various claims to recover amounts he overpaid when he purchased a bottle of Meltdown for $23.34.

The District Court issued a sua sponte order to show cause, directing the plaintiff to explain why his action should not be dismissed for subject matter jurisdiction.  The District Court noted that upon denial of the motion for class certification, the plaintiff’s remaining individual claims did not appear to satisfy the criteria for subject matter jurisdiction under the CAFA.

In his pleadings, the plaintiff had asserted that CAFA, as expressed in 28 U.S.C. § 1332(d), vested the court with subject matter jurisdiction.  Section 1332 provides that a district court will have subject matter jurisdiction over the action filed pursuant to Fed. R. Civ. P. 23, if it satisfied CAFA’s other jurisdictional requirements, before or after entry of a class certification order by the court.  In other words, a district court may exercise CAFA jurisdiction over a putative class action prior to making a class certification ruling—presuming the plaintiff has satisfied CAFA’s other jurisdictional prerequisites—or after granting certification in a class certification order.

The District Court noted that federal courts are divided regarding the effect of a denial of class certification on CAFA subject matter jurisdiction.  Some courts have held that a mid-litigation denial of class certification does not destroy the CAFA jurisdiction that put the suit in federal court at the outset.  Others have held that a denial of class certification brings an end to CAFA subject matter jurisdiction.

The plaintiff contended that, within the Eleventh Circuit, federal jurisdiction under CAFA did not depend on certification.  The plaintiff relied on Vega v. T-Mobile USA, Inc., 564 F.3d 1256 (11th Cir. 2009), where the Eleventh Circuit overruled the district court’s class certification analysis and held that a proposed class was not amenable to Rule 23 certification.  In a footnote to its discussion of numerosity, the Eleventh Circuit noted that even if it were later found that the narrowed class members were fewer than 100, post-removal events (including non-certification) did not deprive the federal courts of subject matter jurisdiction.  (Editors’ Note: See the CAFA Law analysis of Vega posted on May 19, 2011.)

The District Court noted that the issue in Vega was the propriety of the district court’s grant of class certification, and the Eleventh Circuit’s footnoted discussion of the jurisdictional impact of a plaintiff’s failure to satisfy numerosity requirement was dicta.  In addition, the District Court pointed to Walewski v. Zenimax Media, Inc., 502 F. App’x. 857 (11th Cir. 2012), wherein the Eleventh Circuit addressed a situation in which a district court had dismissed an action upon denial of class certification, and found that absent class certification, a federal court lacks subject matter jurisdiction over a plaintiff’s individual claim.

The District Court noted that a number of courts holding that a denial of class certification does not impact subject-matter jurisdiction have treated the denial as a change in jurisdictional facts, such as a change in the citizenship of a party. See, e.g., Cunningham Charter Corp. v. Learjet, Inc., 2010 WL 199627 (7th Cir. Jan. 22, 2010).  (Editors’ Note: See the CAFA Law Blog analysis of Cunningham posted on Feb. 3, 2010).  Because changes in the facts underlying subject-matter jurisdiction do not deprive a tribunal of jurisdiction once vested, those courts have determined that a denial of class certification also does not impact subject-matter jurisdiction.  The District Court remarked, however, that it did not view its denial of class certification as a shift in the jurisdictional facts underlying the plaintiff’s suit.  Instead, the denial was a legal conclusion that the plaintiff’s action was, from the beginning, inappropriate for class treatment.

Finding no alternative basis for subject matter jurisdiction, the District Court found that it lacked subject matter jurisdiction to try this action, and accordingly, dismissed the action without prejudice.