In the Words of Buster Poindexter: “Hot! Hot! Hot!” Analysis of Date of Senate Judiciary Committee Report, And Critique of Second Circuit’s Blockbuster Burden of Proof Ruling.

By McGlinchey Stafford on January 26, 2007

In its findings regarding burden of proof in Galeno v. Blockbuster, the Second Circuit conceded that Congress displayed an aim to broaden federal jurisdiction over interstate class actions. (Editors’ Note: See the CAFA Law Blog analysis of Blockbuster posted on January 24, 2007). But the Court failed – as have most other courts looking at this issue – to consider Section 2 of CAFA. Section 2 – CAFA’s “Findings and Purposes” – articulates that the Congressional purpose behind the statute is to change the status quo to sweep more class actions into federal court, using minimal diversity, than was formerly possible under pre-CAFA complete diversity statutes and jurisprudence.

To the extent the question whether Congress intended to change the burden of proof upon removal under CAFA is vague from looking at Section 2, then that ambiguity under standard principles of statutory interpretation calls for the courts to seek guidance from the legislative history. Significantly, every court that has looked at CAFA’s legislative history on this point (whether or not that history was actually considered substantively in the court’s analysis) acknowledges that the Senate Judiciary Committee Report and other legislative history expressly state that the threshold burden of proof is on the party opposing minimal diversity jurisdiction upon removal. This, of course, is contrary to the prior, court-made rule governing cases involving complete diversity jurisdiction. Moreover, no court has ever suggested that, within CAFA’s legislative history itself, Congressional intent is ambiguous in any way on this clearly stated point.

In disregarding the new burden of proof standard expressly stated in the legislative history, the appellate courts that have looked at this question have, among other things, ignored Section 2 of CAFA (like the Brill and Blockbuster courts did), and otherwise have attempted to discredit the Senate Judiciary Committee Report by noting – like the Second Circuit did here in Blockbuster – that the Committee “issued” its Report ten days following CAFA’s enactment into law. (Editors’ Note: See the CAFA Law Blog analysis of Brill posted on November 2, 2005).

As stated by the Second Circuit in Blockbuster: “Moreover, the Senate report was issued ten days after the enactment of the CAFA statute, which suggests that its probative value for divining legislative intent is minimal.” However, while not entirely clear, it appears that the Report may have been issued to the Senate before CAFA’s enactment, but was printed and made available to the public after its enactment (see discussion below). More important, though, neither the Second Circuit nor other courts attempting to discredit the Report on this ground have ever persuasively explained how or why the Report’s issuance/printing/publication date should marginalize the intent of Congress revealed inside.

The fundamental problems with these courts’ position – that they may freely ignore the Report because its February 28, 2005 issuance/printing/publication date is 10 days after CAFA’s February 18, 2005 enactment – are at least three-fold.

First, many of these same courts are otherwise diligently scouring the Report and CAFA’s other legislative history for answers to a myriad of separate questions arising under CAFA. If, in fact, the Report has no authoritative or precedential value on the jurisdictional burden of proof question based on its date, then logically that same Report can have no authoritative or precedential value regarding any other CAFA ambiguity or question. For example, the Seventh Circuit in Brill was openly hostile to consideration of the Report, which it sought to discredit on the threshold burden of proof issue in holding that the burden on removal is on the defendant. Yet, the Seventh Circuit later in Hart v. FedEx Ground Package System, Inc., 2006 U.S. App. Lexis 20431 (7^th Cir. Aug. 9, 2006) relied on that very same Report in concluding that the burden of proof as to CAFA’s jurisdictional exceptions is on the plaintiff. According to Hart, “[I]t is also worth noting that this outcome is consistent with the legislative history of CAFA. The Senate Judiciary [Committee] unambiguously signaled where it believed the burden should lie.” Hart, 2006 U.S. App. Lexis 20431, *18. (Editors’ Note: See the CAFA Law Blog analysis of Hart posted on August 21, 2006).

Second, CAFA’s legislative history includes both a House Sponsors’ Statement and the Senate Judiciary Committee Report, both of which expressly state that Congress reallocated the threshold jurisdictional burden of proof in minimal diversity removal contests to the party opposing jurisdiction. The House Sponsor’s Statement was inserted into the house record on February 17, 2005, before CAFA was signed into law the next day. 151 Cong. Rec. H723-02, at H727-29 (daily ed. February 17, 2005). Because this Sponsor’s Statement relates to the intent of the drafters of CAFA, it deserves to be accorded substantial weight in interpreting the statute. See e.g., Fed. Energy Admin. v. Algonquin SNG, Inc., 426 U.S. 548, 564 (1976).

Third, while the Report was “ordered to be printed on” February 28, 2005 the record reflects that it may have been actually submitted to Congress before CAFA was signed into law. See 151 Cong. Rec. S978 (Feb. 3, 2005).

On February 3, 2005, the "following reports of the committees were submitted" to the Senate . . . "S.5 A bill to amend the procedures that apply to consideration of interstate class actions." 151 Cong. Rec. S978. This agrees with the Senate rules that call for a committee to render its report to the entire Senate when a bill is forwarded for consideration. Saying this in a different way, the Report on CAFA was apparently available to the entire Senate on February 3, 2005, before the Senate’s consideration of the bill began the following week. Further, the Report itself provides that the Report was to accompany S.5. S. Rep 109-14. Finally, there is no indication in the Congressional Record that the Senate Judiciary Committee needed to meet again to discuss CAFA, as the Senate Judiciary Committee had finished its work on CAFA and was moving on to other matters. Consideration of S.5 was at that point before the entire Senate.

Moreover, during the debate before the Senate on S.5, Senator Spector, the first speaker, noted the existence of the Senate Judiciary Committee Report on CAFA, and commended the Committee on its diligent work and the strong "bipartisan vote of 13-5" in reporting the measure to the full Senate favorably. 151 Cong. Rec. S1001. Therefore, the record indicates that the Report was issued to and before the Senate when the Senate considered the Class Action Fairness Act.

However, regardless whether the Report was issued, published or printed after enactment of CAFA, those courts choosing to disregard the legislative history contained in that Report have offered no legal basis for doing so. The Supreme Court has expressed a distinct preference for looking to Committee Reports in determining the legislative history of an act. In fact, the Court has noted that “the authoritative source for finding the Legislature’s intent lies in the Committee Reports on the bill, which ‘represent the considered and collective understanding of those Congressmen involved in drafting and studying proposed legislation,’ Zuber v. Allen 396 U.S. 168, 186, 90 S.Ct. 314, 324, 24 L.Ed.2d 345 (1969).” Garcia v. United States, 469 U.S. 70, 76, 105 S.Ct. 70, 83 L.Ed. 2d 472 (1984).

Significantly, this remains true even if the Committee Report is issued after the statute is enacted. See United States v. Culbert, 435 U.S. 371, 374-75, 98 S.Ct. 1112, 1114-15, 55 L.Ed.2d 349 (1978). In Culbert, the Court considered Senate Report No. 1189, issued in 1937, when analyzing the legislative history of the Anti-Racketeering Act of 1934, enacted three years earlier. (“Although the cited report was issued in 1937, it was intended to provide ‘a complete picture’ of the earlier work of the Copeland Committee.” United States v. Culbert, 435 U.S. 371, 375n.6, 98 S.Ct. 1112, 1115, 55 L.Ed.2d 349 (1978)). If the Supreme Court considered a committee report issued three years after the enactment of a law, to determine the legislative intent of the earlier enacted statute, then a report some courts say was issued days after the passage of CAFA should be considered by the courts.

The Blockbuster court never addressed Section 2 of CAFA, which is one reason why the ruling is flawed. But, as specifically acknowledged by the Third Circuit in its recent Morgan v. Gay decision (Editors’ Note: See the CAFA Law Blog analysis of Morgan posted on January 19, 2007) in discussing Section 2 of CAFA, CAFA’s “Findings and Purposes” “broadly indicate an intent by Congress to make federal courts more available to class action litigants.” The Morgan court noted that Section 2 does not specifically reference CAFA’s burden of proof, but said it “should take more than a few lines in a Senate Judiciary Committee Report and some vague language in a statute’s “Findings and Purposes” section” to reverse the existing rule (governing complete diversity) on burden of proof. (emphasis added) A fair reading of this statement is that Morgan recognized that Section 2 is vague and ambiguous with respect to the burden of proof question, which should have then, under general rules of statutory interpretation, caused that Court to look to the legislative history for guidance.

For a more complete analysis of these issues and principles, we suggest that you see our law review article: CAFA’s New "Minimal Diversity" Standard For Interstate Class Actions Creates A Presumption That Jurisdiction Exists, With The Burden of Proof Assigned To The Party Opposing Jurisdiction, 25 Miss. C.L. Rev. 7 (2005).

Clearly there is momentum behind Brill and its progeny (like Blockbuster and Morgan) on the CAFA threshold burden of proof issue. However, the hostility shown by these courts to interpreting CAFA to expand federal court jurisdiction over interstate class actions involving minimal diversity, and to considering clearly stated Congressional intent in the legislative history on burden of proof, is not fully supported by the reasons offered so far by these courts.