The recent Eleventh Circuit decision in Cappuccitti v. DirecTV, has already caused quite a stir, with undoubtedly more to come in the immediate future. The CAFA Law Blog has received a number of comments and emails about the decision and its likely effects on class action practice, particularly in the Eleventh Circuit, and the potential national ramifications. We’re happy to feature a guest post from Atlanta lawyer Eric Jon Taylor, with an assist from Jon Chally, both of the firm of Parker, Hudson, Rainer & Dobbs LLP, with their thoughts and observations on Cappuccitti. Take a look, and let us know what you think.
To put Cappuccitti in perspective, we have to review a few years of Eleventh Circuit CAFA interpretation. The real CAFA-restricting story begins in September of 2007. Then, the Eleventh Circuit issued its somewhat controversial opinion in Lowery v. Ala. Power Co., 483 F. 3d 1184 (11th Cir. 2007), where the court construed CAFA in connection with a removal under CAFA’s mass action provisions. (Editors’ Note: See the CAFA Law Blog analysis of Lowery posted on May 15, 2007). The Lowery panel ultimately ordered remand, concluding that the removing defendant had not met its burden of demonstrating the jurisdictional requirements for mass actions. The decision in Lowery did not become controversial because of its holding or even because of its construction of CAFA’s jurisdictional provisions regarding mass actions. Rather, Lowery became controversial because of the court’s dicta regarding the appropriate basis for determining jurisdictional facts on removal. Specifically, the court in Lowery noted that removal is appropriate only if jurisdictional elements are "either stated clearly on the face of the documents before the court or readily deducible from them." 483 F. 3d at 1211. Who is the author of this dicta? The former chief judge of the Eleventh Circuit, Judge Gerald Tjoflat.
To some district courts in the Eleventh Circuit, the restrictive language in Lowery meant that carefully drafted complaints could not be removed to federal court under CAFA. Taken to its extreme, the dicta in Lowery allowed class action plaintiffs to insulate cases from any attempted removal to federal court by merely avoiding express references to damages in excess of $5 million. If the basis for removal, including the amount in controversy, was not disclosed on the face of the complaint, Lowery’s dicta precluded removal entirely. In practice, courts within the Eleventh Circuit denied defendants’ attempts to introduce affidavit testimony or any other evidence regarding the amount in controversy and similarly refused efforts to conduct discovery into CAFA’s jurisdictional elements. See, e.g., Cox v. Triad Isotopes, 2008 U.S. Dist. LEXIS 57634 (S.D. Ala. July 29, 2008). To say the least, Lowery significantly restricted the applicability of CAFA within the Eleventh Circuit. Cappuccitti grew out of the seeds planted in Lowery.
Then, on June 8, 2010, the Eleventh Circuit, in an opinion written by a panel with no overlap to the Lowery panel, gave defense counsel in the Eleventh Circuit a view of light at the end of the tunnel. The Eleventh Circuit limited Lowery to its facts and even expressly acknowledged the court’s "disagree[ment]" with certain potential readings of the Lowery opinion. See Pretka v. Kolten Plaza II, Inc., 2010 U.S. App. LEXIS 11686 (11th Cir. 2010). (Editor’s Note: See CAFA Law Blog analysis of Pretka here.) In Pretka, the court held that Lowery addressed only the type of evidence that a court can consider in determining removal when the removal is attempted under the second paragraph of 28 U.S.C. § 1446(b) — i.e., not a removal on the basis of plaintiff’s original complaint but on some "other paper" on which the removal basis is made clear. In all other removals, including the traditional circumstance of removal immediately following the initial complaint, Lowery "does not limit the type of evidence a defendant may use to establish that the plaintiff’s complaint already is removable." Pretka, 2010 U.S. App. LEXIS, at *44.
Perhaps even more surprising (and helpful to defense counsel), the court in Pretka made clear its "disagree[ment]" with certain language in the Lowery opinion. Thus, the court reiterated that any attempt to extend Lowery beyond the confines of a removal based on the second paragraph of § 1446(b) was simply wrong. In practice, Pretka operates to overturn Lowery and its most CAFA-restricting characteristics. To many defense counsel, Pretka simply restored the unambiguous intent of Congress in enacting CAFA and thereby “righted the wrong” created by the dicta in Lowery. Thus, all appeared well, for a time, for CAFA-holics in the Eleventh Circuit. But there were dark clouds on the horizon.
On July 19, 2010, the court issued its CAFA-esque opinion in Cappuccitti v. DirectTV, Inc., 2010 U.S. App. LEXIS 14724 (11th Cir. July 19, 2010) and again restricted, or maybe more than restricted, CAFA jurisdiction. In Cappuccitti, another opinion written by Judge Tjoflat, the court held that jurisdiction under CAFA can be established only if the plaintiff’s claim in a purported class action puts in controversy at least $75,000. Thus, to the court in Cappuccitti, even if the aggregate amount in controversy in a class action exceeds $5 million, federal courts can exercise jurisdiction under CAFA only if one of the plaintiffs’ claims, standing alone, put in controversy at least $75,000:
We hold that in a CAFA action originally filed in federal court, at least one of the plaintiffs must allege an amount in controversy that satisfies the current congressional requirement for diversity jurisdiction provided in 28 U.S.C. § 1332(a). . . . If we held that § 1332(a)’s $ 75,000 requirement for an individual defendant did not apply to § 1332(d)(2) cases, we would be expanding federal court jurisdiction beyond Congress’s authorization. We would essentially transform federal courts hearing originally-filed CAFA cases into small claims courts, where plaintiffs could bring five-dollar claims by alleging gargantuan class sizes to meet the $ 5,000,000 aggregate amount requirement. While Congress intended to expand federal jurisdiction over class actions when it enacted CAFA, surely this could not have been the result it intended.
2010 U.S. App. 14724, at 12.
While the Court’s holding in Cappuccitti arguably applies only to actions originally filed in federal court and not those removed to federal court by defendants, the reasoning and language in the decision suggest it should apply in the removal context as well.Indeed, a case can be removed under 28 U.S.C. § 1441 only if federal court has original jurisdiction over the matter. Unless a motion for rehearing en banc leads to the court vacating its opinion in Cappuccitti, it is sure to cause concerns for all class action counsel with cases in the Eleventh Circuit.
The court’s holding in Cappuccitti renders CAFA as effective as a caffeine-free coke. If, as the court held, federal court jurisdiction under CAFA is dependent on the named plaintiff putting in controversy at least $75,000 based on the plaintiff’s claim, federal court jurisdiction is only slightly more significant than traditional diversity jurisdiction under 28 U.S.C. §1332(a). Under traditional diversity jurisdiction, federal courts could exercise jurisdiction over class actions if the named plaintiff’s claim put $75,000 in controversy and the named plaintiff and the defendants were completely diverse. While Cappuccitti does not alter CAFA’s “minimal diversity” requirement, Cappuccitti effectively eliminates CAFA’s expansion of federal jurisdiction based on the amount-in-controversy requirement, leaving CAFA-holics with few options.
The Court notes that Cappuccitti is the only decision in which a court of appeals has addressed, much less imposed, the amount-in-controversy requirement found in 28 U.S.C. § 1332(a) — $75,000 for the plaintiff’s claim — on original federal court jurisdiction over class actions under CAFA and 28 U.S.C. § 1332(d)(2). On its face, § 1332(d)(2) — CAFA’s section granting jurisdiction over class actions — does not refer to § 1332(a) and seems to require only an aggregate amount in controversy of $5 million, without regard to the amount in controversy of the named plaintiff’s claim. In fact, the only reference in CAFA to the requirements of § 1332(a) are found in CAFA’s mass action provisions, 28 U.S.C. § 1332(d)(11)(B)(i), which are irrelevant to jurisdiction over class actions. Failure to include a similar reference in § 1332(d)(2), along with CAFA’s unambiguous intent to greatly expand federal court jurisdiction over class actions, strongly suggests that Congress did not intend to impute the requirements of § 1332(a) into § 1332(d)(2).
One thing is certain: the conclusions in Cappuccitti are set forth with crystal clarity. In the Eleventh Circuit, the Cappuccitti opinion has precedential value even if mandate has not yet issued. Unless and until Cappuccitti is vacated, pending an en banc review or certiorari review, the opinion remains in effect. As a result, and for now, the Eleventh Circuit effectively is a de-CAFA-nated circuit.
Eric Jon Taylor
Parker, Hudson, Rainer & Dobbs LLP
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Editor’s Note: As we mentioned before, since all of the Editors of the CAFA Law Blog are lawyers, we have to do our disclaimer, which applies to all guest commentaries, in pure legalese (which is also listed below in our "Disclaimers" section) — "The views and opinions expressed herein are exclusively the personal views of the authors only, unless otherwise attributed. Information and comments provided through CAFA Law Blog do not necessarily represent the views of McGlinchey Stafford, its attorneys or clients, or of the CAFA Law Blog Editors, and should not be attributed to them. The posting of an item on CAFA Law Blog does not mean that McGlinchey Stafford, its attorneys or clients, or CAFA Law Blog Editors approve or disapprove of the selection or contents of that item." There. That’s out of the way. We appreciate Eric’s and Jon’s efforts in providing this post, and solicit readers’ comments on the subject matter. Let us hear from you.