Marshall v. H&R Block Tax Services, Inc., 564 F.3d 826 (7th Cir. 2009)
Avid followers of CAFA Law Blog recall that glorious day back in February 2005 when former President Bush (#43) signed CAFA into law as part of the tort reform fad that had swept the country. Well, even if it was not a nationwide fad, those corporate defense lawyers lucky enough to practice in “Judicial Hellhole” jurisdictions, such as Madison County, Illinois, Civil District Court in New Orleans, or any state court in Mississippi, certainly paid attention.
I paid attention too. Not because I was eager to start filing a bunch of federal court removal papers pontificating on the Congress’s intent in passing CAFA, but instead because I had been conscripted by Tony Rollo of scouring every single court decision that mentioned CAFA (even if it was just in passing) to see if it was worthy of the CAFA Law Blog. Now that was quite a chore – not just because Rollo wanted those cases cited in every brief we filed, irrespective of whether CAFA was implicated – but because nearly every corporate defendant in the country was trying to figure out some crafty way to make their way to federal court under CAFA.
As a result, courts had to start fashioning a whole new body of case law on what it means for a case to “commence” for purposes of CAFA, so that it could be removed to federal court. Generally speaking, the courts imposed a high threshold and required some kind of significant development in the case, such as a completely new cause of action or addition of a new party that would not “relate back” to the original complaint for purposes of the statute of limitations.
One would think that, with the passage of time, the “commencement” issue would become an afterthought (or at least just the subject of spirited debate at weekly CAFA blog meetings).
Justice Posner’s recent opinion on behalf of the Seventh Circuit in Marshall v. H&R Block, however, demonstrates that plaintiff and defense lawyers need to keep CAFA in mind when litigating any class action, even those that were filed before February 2005.
In Marshall, the original complaint had been filed in Madison County Circuit Court in January 2002 – a full three years before CAFA reared its head. In August 2003, the state court certified a defendant class and a nearly nationwide class of Block customers. Several years later (and after CAFA was around), in November 2006, H&R Block moved to decertify the defendant class and the nationwide plaintiff class. The briefing on the motion to decertify was completed in April 2008 and a hearing held in June 2008 (litigation moves quite slowly in Madison County). The state court agreed with H&R Block that the defendant class should be decertified and also that the number of states for the plaintiffs class should be reduced.
H&R Block Services – the company that asked for the decertification order – then removed to federal court, claiming that the order commenced a new case under CAFA because the only defendant left in the case was now jointly and severally liable for the liability of all the entities that had previously been covered by the defendant class. The district court thought that this was quite a novel commencement argument and granted the plaintiffs’ remand motion, but the Seventh Circuit disagreed.
The Court held that the change in liability did not relate back to the original complaint and thus commenced a new case under CAFA. According to the Court, it was of no moment that the change in liability was the result of something that the defendants had requested. Nor did it matter to the Court that there was no formal amendment to the complaint.
The lesson from Marshall is that litigants need to remain on the look-out for CAFA removal possibilities, even for those class actions that were filed before CAFA and still remand pending. And defense lawyers should not cavalierly rule out removal just because the triggering event was something that the defendant caused.