Hall v. State Farm Mutual Automobile Insurance Company, 2007 WL 215662, No. 05-2530 (6 Cir. January 29, 2007).

If you’ve got a class action removed under CAFA in Michigan with a commencement issue, you should take a look at this one. The Sixth Circuit handed down a per curiam opinion regarding the commencement issue under CAFA when a new party is added.

On December 29, 2004, Hannah Djeljevic filed a class action in Michigan state court alleging that State Farm had committed a breach of contract by failing to ensure proper inspections of seat belts and seat belt systems in vehicles of its insureds that had been involved in collisions. The Michigan state trial court judge proposed to recuse herself based on a potential conflict with the representative plaintiff Djeljevic. Djeljevic, however, made an oral motion to file a second amended complaint to substitute a different class representative. 

The oral motion was granted and an amended complaint was filed on June 1, 2005 substituting John Hall as the named plaintiff. On the same day, State Farm removed the suit to federal court pursuant to CAFA. Hall did not oppose the removal, but the district court did, sua sponte. 

The district court ordered State Farm to show cause why the case should not be remanded to state court for lack of subject matter jurisdiction. State Farm argued that the amended complaint naming Hall as plaintiff was a new complaint that commenced a new action triggering the applicability of the Class Action Fairness Act.

The district court accepted State Farm’s response and exercised jurisdiction over the case without objection from Hall. The Sixth Circuit pointed out that Hall was legally entitled to seek remand and to an interlocutory review of the denial of the motion to remand pursuant to the provisions of CAFA, but did not do so. After the district court retained jurisdiction, State Farm moved to dismiss the complaint. The district court granted the motion, and Hall sought review of both the district court’s subject matter jurisdiction and its dismissal of the case.

The Sixth Circuit began its opinion by noting that CAFA applies to actions commenced on or after February 18, 2005. Hall contended that the action commenced when Djeljevic filed the original complaint in state court, before CAFA’s enactment. Both parties agreed that state law controlled the question, but disputed whether Hall was a party to the state action when it was originally filed and, if not, whether the amended complaint related back, negating commencement of a new lawsuit. 

The first issue as discussed by the Sixth Circuit was whether, under Michigan law, an unnamed member of an uncertified class is a party at the time the action is first filed. The Sixth Circuit examined Michigan state case law and its class action rule. The Sixth Circuit made an Erie guess and concluded that, if faced with this question, the Michigan Supreme Court would find that unnamed putative class members are not technically parties to an action prior to class certification. Therefore, Hall was not a true party at the time the class action was originally filed.

Next, the Sixth Circuit turned to Michigan’s relation-back principles. The court stated that Michigan’s rule had been interpreted through cases holding that the relation-back doctrine does not extend to the addition of new parties.

The court concluded by stating that Hall could not be considered to have been a party to the uncertified class action prior to being designated as a named plaintiff. Additionally, Hall’s substitution as the named plaintiff in the amended complaint constituted the commencement of a new action under Michigan law for purposes of CAFA because it did not relate back to the filing of the original action.

(Editors’ Note:  Footnote 1 to the opinion is a good summary of all of the commencement cases to date, each holding that relation-back of amendments is a state law question.  So, if anyone still has a commencement case lingering, then we recommend you look at footnote 1.  We at the CAFA Law Blog are always looking out for our readers.)