Freeman v. Blue Ridge Paper Products, Inc.  No. 08-6321, 2008 WL 5396249 (6th Cir. Dec. 29, 2008). 

In this case, the Sixth Circuit holds that plaintiffs may not avoid federal jurisdiction under CAFA by dividing their claims into five lawsuits containing identical allegations and parties, but covering successive discrete six-month time periods. The plaintiffs are three hundred landowners along the Pigeon River in Tennessee. They filed suit in state court seeking damages due to nuisance water pollution from the defendant’s upriver paper mill. 

The suit was originally filed as a single suit containing a specific disavowal of recovery in excess of $4.9 million. The defendant removed the case under CAFA, but the federal court remanded it due to failure to meet the amount in controversy requirement. After this remand, the plaintiffs sought to amend the suit to limit the time period for which damages would be requested to a single six-month period. They also filed four other separate suits, identical in all respects except for the time period covered by the allegations. Each lawsuit contained the same paragraph disavowing any recovery in excess of $4.9 million. 

The defendant removed the amended suit and the four new suits, again under CAFA. The federal court consolidated the five cases and, once again, remanded them to state court. The defendant appealed the remand order, pursuant to 28 U.S.C. § 1453(c)(1).

The CAFA issue on appeal was whether the division of the claims into five lawsuits covering different time periods was sufficient to evade federal jurisdiction. The Court of Appeals for the Sixth Circuit said it was not: “The $5 million CAFA threshold appears to be met in this case because the $4.9 million sought in each of the five suits must be aggregated.” 

The court specifically pointed to the plaintiffs’ counsel’s admission during oral argument that avoiding CAFA was the only reason for structuring the claims as five separate lawsuits, and — citing CAFA’s language and the Senate Report describing the rationale for the statute– stated “CAFA was clearly designed to prevent plaintiffs from artificially structuring their suits to avoid federal jurisdiction.” The court limited its holding to situations where plaintiffs attempt to divide up their claims for retrospective relief into separate time periods with no other colorable basis than to frustrate CAFA.

Accordingly, the court held that the case should be analyzed as if the plaintiffs had filed a claim for up to $24.5 million in state court, meaning this amount in controversy is presumed correct unless shown to a legal certainty to be less than the $5 million federal amount in controversy requirement. The court remanded the case to the district court to determine this question.