In This Class Action Fairness Act Game, the Ninth Circuit Allows McAtee to Take Ball and Go Home.

By McGlinchey Stafford on July 24, 2007

McAtee v. Capital One, F.S.B., 07-55065 (9^th Cir. 3/14/07), 2007 WL 840370.

Pre-game Warm-up

In California, an amended complaint does not commence a new action for purposes of CAFA removal. The United States Court of Appeal, Ninth Circuit, followed its recent decision in Progressive West v. Preciado, 06-17367, 2007 WL 725717 (9^th Cir. March 6, 2007), and held that adding a new defendant after CAFA’s enactment does not commence a new action. (Editors’ Note: See the CAFA Law Blog analysis of Preciado posted on August 1, 2007).

First Half

Suzanne Ball filed a class suit against Capital One, several of its affiliates and unknown “Doe” defendants under section 17204 of the California Business and Professions Code before the enactment of CAFA. Ball was bounced from the suit when the California voters approved an amendment to section 17204 only allowing persons actually injured to bring representative suits. Enter McAtee, an allegedly injured plaintiff who filed an amended complaint substituting herself for Ball in June 2005, after CAFA’s enactment.

Capital One, with Ball out of the way, took a shot at removal. However, the court rejected Capital One’s contention and ruled under California law an action commences when an original complaint is filed. Thus, McAtee was able to rely on Ball’s filing to get to her home court.

Second Half

After an initial victory giving McAtee home court advantage, she learned that her dispute was not with the named defendants, but with another Capital One entity. In June 2006, she again amended the complaint and substituted Capital One Bank in place of one of the Doe defendants. Arguing a new action commenced for CAFA purposes, Capital One Bank removed to Federal Court. Again, the District Court ruled that Ball’s initial complaint commenced McAtee’s action and remanded the suit.

Timeout

With the possession arrow clearly in McAtee’s favor and the clock winding down, the Ninth Circuit Court of Appeal heard Capital One’s appeal. Relying on its recent decision in Preciado (it actually relied on its reasoning, not the ruling holding a counterclaim could not serve as a basis of removal under well settled precedent), the court held that when a lawsuit is “commenced” for CAFA purposes is determined by state law. Under California law, an action commences when the original complaint in the action is filed, irrespective of any relation back analysis. Therefore, McAtee should be able to take Ball’s original pleading and litigate in state court.

Overtime

With the game over, the court decided to go into a lengthy discussion of the definition of “commence” under California law. The game is over, so if you want to know more about California law on the subject, you will need to click on the opinion link above and read the opinion yourself.

Post-game Wrap-up

The Ninth Circuit should continue to remand actions to the state court when any action is “commenced” prior to CAFA’s enactment, regardless of when the amendment is made and regardless of who the amendment adds. The court was cautious in deciding the matter under California law. Under California law, “any amendment of [the] complaint – whether to add new causes of action, to add or replace plaintiffs, or to add or replace defendants – does not change the commencement date.” Other state laws may provide a different result. Important to the court, was that Capital One did not loose its ability to defend the claim, it merely lost its ability to defend in federal court.