Clausnitzer v. Federal Exp. Corp., — F.Supp.2d —-, 2008 WL 4194837, 21 Fla. L. Weekly Fed. D 326 (S.D. Fla., June 18, 2008) (No. 06-21457CIV-ALTONAGA, 06-21457-CIV/BROWN).

Since Federal Express withdrew its sponsorship of the Orange Bowl, this district court in Florida took revenge and dismissed the case, which presumably led to the filing of the case in Florida state court.  (And I am sure we can guess what will happen to Federal Express in state court.) That would make for an interesting headline. Unfortunately, it is not true because this case was decided long before Federal Express announced that it was terminating its long standing sponsorship of the Orange Bowl. But it is fun to dream up such interesting connections. Back to reality.  Here is what really happened.

While dismissing the action for want of federal subject matter jurisdiction, the Florida District Courtheld that the denial of class certification does not automatically affect CAFA jurisdiction, unless it is clear that there is no foreseeable possibility that the plaintiff may obtain certification in the future.

The plaintiffs brought a collective action against FedEx Corporation (“FedEx”), under the FLSA, and a claim for breach of contract and a claim in quantum meruit under the state law on behalf of a nationwide class of FedEx employees. After the District Court denied certification of the nationwide class on the plaintiffs’ breach of contract claim, the plaintiffs moved for leave to file an amended complaint alleging a class of Florida employees (and presumably then to seek certification of that class), and the Court denied the motion as untimely filed.  

Because class certification had been denied, and the claims of the remaining individual plaintiffs did not exceed $5,000,000 and the amount claimed by any one individual plaintiff did not exceed $75,000, the existence of subject matter jurisdiction was unclear, and as the courts considering the question have not arrived at a uniform result, the District Court requested the positions of the parties on the issue. In response, the parties indicated that CAFA jurisdiction does not survive denial of certification.

As the Eleventh Circuit has not addressed the issue, the District Court was presented with two conflicting paths from which to choose. First, Genenbacher v. CenturyTel Fiber Co. II, LLC, 500 F. Supp. 2d 1014, 1017 (C.D. Ill. 2007) found that denial of certification did not affect subject matter jurisdiction.  (Editors’ Note: See the CAFA Law Blog link to Genebacher posted on February 1, 2008). Genenbacher found that a case brought or removed under CAFA invokes federal court’s diversity jurisdiction; once the court has diversity jurisdiction, subsequent determinations that the plaintiffs cannot establish the jurisdictional facts do not affect the continued jurisdiction of the federal court.

Next, Arabian v. Sony Electronics, Inc., No. 05-cv-1741, 2007 WL 2701340 (S.D. Cal. Sept. 13, 2007), agreed with Falcon v. Philips Electronics N. Am. Corp., 489 F. Supp. 2d 367 (S.D.N.Y. 2007) that where the possibility of certification has been foreclosed, CAFA jurisdiction is no longer available.  (Editors’ Note:  See the CAFA Law Blog analysis of Arabian posted on July 17, 2008). The Falcon and Arabian courts did not rule that denial of certification automatically resulted in the destruction of CAFA jurisdiction, but instead found that in circumstances where it was clear the plaintiffs would be unable to obtain certification under any circumstances, jurisdiction was lacking.

Expanding on Falcon and disagreeing with Genenbacher, the court in Arabian rejected the notion that denial of certification was analogous to a change in jurisdictional facts subsequent to the filing of a diversity suit, and, therefore, found inapplicable the rule of St. Paul Mercury Indem. Co. St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283 (1938).  Moreover, the Arabian court observed that Genenbacher’s failure to take into account the prescription of Fed. R. Civ. P. 12(h)(3) that if the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action.

After thorough consideration of these precedents, the Court was persuaded that Arabian and Falcon were correct, and thus found that subject matter jurisdiction no longer existed in this case.  The Court, however, agreed with Genenbacher to the extent that it elected not to analyze the CAFA amendments to 28 U.S.C. § 1332 in a vacuum, but instead in light of courts’, and more importantly, Congress’ understanding and interpretation of diversity jurisdiction.  

The Court stated that the plain language of the statute was obviously the crucial factor of the analysis. Section § 1332(d)(1)(B) defines “class action” as, “any civil action filed under Rule 23. . . .” Thus, Congress did not explicitly require certification in order for the case to proceed, and instead required only that the case meet the definition of “class action.”  In reference to the residency requirement, the statute speaks of “any member of a class,” and presumably, there can be no class members before the class has been certified. However, neither a “class action” nor “members of a class” are likely to exist at the time a case is filed or removed.  Thus, Congress could not have not intended these to be “facts” necessary to establish jurisdiction, because they would not be facts at the time the case began in federal court.  Instead, the statute requires there to be class allegations, the propriety of which will later be evaluated by the court through the certification process.

Therefore, the Court observed that whether a class exists–is not a “jurisdictional fact” within the meaning of St. Paul Mercury Indem. Co., it is a legal conclusion that the district court must reach in order for jurisdiction to properly exist in the first place.  The jurisdictional facts of a CAFA case are the minimum diversity and the $5,000,000 amount in controversy requirements; facts that are analogous to the complete diversity and $75,000 amount in controversy requirements of general diversity jurisdiction, and facts that, if changed, would not alone destroy jurisdiction.  The existence of a class is not, however, comparable.

Because the plaintiffs could no longer amend their complaint to allege a proper class, there was no possibility the plaintiffs would obtain certification, and jurisdiction under CAFA no longer existed