United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Service Workers Intern. Union, AFL-CIO, CLC v. Shell Oil Co., 2010 WL 1571190 (9th Cir. (Cal.) Apr 21, 2010).

The Ninth Circuit reversed the district court’s remand order holding that if a defendant properly removed a putative class action, a district court’s subsequent denial of class certification does not divest the court of jurisdiction.

The plaintiffs brought a class action in California state court alleging that the defendants’ oil refineries violated California Business & Professions Code and failed to provide meal periods, rest periods, timely and accurate wage statements, and wages due at the time of termination in violation of the California Labor Code.

The defendants removed the case to federal court asserting jurisdiction under CAFA.  After denying class certification, the district court concluded that it no longer had jurisdiction, and it remanded the case to state court.  The district court reasoned that a denial of class certification is not a post-removal change of a jurisdictional fact, but rather a legal conclusion that CAFA jurisdiction never existed.

Accepting the defendants’ appeal, the Ninth Circuit noted that because the putative class action that the plaintiffs filed in state court satisfied §1332(d)’s numerosity and aggregated amount-in-controversy requirements, the defendants had properly removed the action to federal court before the plaintiffs filed class certification motion.

Considering the object of CAFA, the Ninth Circuit reiterated its previous finding that Congress passed the CAFA “primarily to curb perceived abuses of the class action device which, in the view of CAFA’s proponents, had often been used to litigate multi-state or even national class actions in state courts.”  To achieve its purposes, CAFA provides expanded original diversity jurisdiction for class actions meeting the amount in controversy and minimal diversity and numerosity requirements set forth in §1332(d)(2).  CAFA also covers more than traditional class actions by providing for removal of “mass actions.”

The Ninth Circuit observed that even though CAFA indisputably creates original federal jurisdiction prior to class certification, the statute does not say whether the post-removal denial of class certification divests the federal courts of jurisdiction or whether class certification is a necessary condition to continued jurisdiction.  Section 1332(d) does not explicitly require class certification for continued jurisdiction, nor does §1453 expressly require remand after denial of class certification.

The Ninth Circuit thus noted that only the Seventh and Eleventh Circuits in Cunningham Charter Corp. v. Learjet, Inc., 592 F.3d 805, 806-07 (7th Cir. 2010) and Vega v. T-Mobile USA, Inc., 564 F.3d 1256, 1268 n.12 (11th Cir. 2009), respectively, have squarely considered this issue, and both have held that the post-removal denial of class certification does not divest federal courts of jurisdiction.  (Editors’ Note: See the CAFA Law Blog analysis of Cunningham posted on February 3, 2010).

Specifically, the Vega court found that (1) §1332(d)(5)(B)’s jurisdictional limitation applies to “proposed” classes; (2) jurisdictional facts are assessed at the time of removal; and (3) post-removal events including non- or de-certification do not deprive federal courts of subject matter jurisdiction.

Following Vega, the Seventh Circuit, in Cunningham Charter, reasoned that the federal jurisdictional question must be analyzed as of when the suit is filed as a class action, not when the class is or is not certified.  If the putative class action was properly removed to begin with, the subsequent denial of class certification does not divest the district court of jurisdiction.

Cunningham Charter observed that the idea that a putative class action, once properly removed, stays removed, vindicates the general principle that jurisdiction once properly invoked is not lost by developments after a suit is filed, such as a change in the state of which a party is a citizen that destroys diversity.  Cunningham Charter thus applied the general principle because a class action need not be certified before it can be removed to federal court under CAFA—“section 1332(d)(8) scotches any such inference.”

Thus, agreeing with Vega and Cunningham Charter,the Ninth Circuit concluded that continued jurisdiction under §1332(d) does not depend on certification.