In re Safeco Ins. Co. of America, Case No. 09-8027, 2009 WL 3380355 (7th Cir. Oct. 22, 2009)
We are delighted to bring to you, our smart, sexy CAFA aficionados, a Guest Post from Gabriel Crowson, a talented consumer class action defense lawyer with the Howrey firm in its Chicago office. Without further ado, heeere’s Gabe…
Avid CAFA followers are well aware that CAFA was signed into law more than four years ago in February 2005. And the law only covers class actions commenced on or after February 17, 2005. Pre-CAFA suits, however, can make it to the promised land of CAFA jurisdiction, if certain events happen in the case, such that a new action is “commenced” for purposes of CAFA. Given the passage of time since CAFA’s enactment, one would think that most pre-CAFA class actions would have naturally run their course by now and thus unable to reap the benefits of CAFA. Well, the Seventh Circuit’s recent decision in In re Safeco proves otherwise.
Safeco involved a class action filed in Illinois state court, just a mere 7 days before CAFA became law. The plaintiff claimed that Safeco had used a computerized billing system to underpay claims under car insurance policies in breach of the insurance contracts. After four years of litigation, the state court granted the plaintiff’s motion for class certification and certified a 14-state class composed of consumers with Safeco insurance policies.
Shortly after the class certification order, Safeco removed the case to federal court, arguing that the certification order commenced a new case for purposes of CAFA because it added new claims that did not relate back to the original complaint, citing Knudsen v. Liberty Mut. Ins. Co., 435 F.3d 755 (7th Cir. 2006) (“Knudsen II”) and Marshall v. H&R Block Tax Servs., 564 F.3d 826 (7th Cir. 2009). (Editors’ Note: See the CAFA Law Blog analysis of Knudsen II posted on January 30, 2006 and the analysis of Marshall posted on July 3, 2009). According to Safeco, the definition certified in the state court’s certification order expanded Safeco’s liability from what was alleged in the original complaint.
The district court granted the plaintiff’s motion for remand, but the Seventh Circuit granted Safeco’s request for a discretionary appeal. The Court noted that there was no dispute that CAFA’s minimal diversity jurisdictional requirements were satisfied, namely $5 million in controversy, at least 100 putative class members, and minimal diversity of citizenship. The determinative issue was whether CAFA was even applicable to the case, given that the plaintiff’s original suit was filed before CAFA became law.
To that end, the Court confirmed that events occurring after the filing of a complaint can commence a new action under CAFA, such as the addition of a new party, a new claim for relief, or some other event that courts would treat as independent for limitations purposes. Applying this general rule, the Court concluded that the class definition did not add any new claims against Safeco, primarily because the claims related to the main transaction that was the subject of the suit, namely the computerized billing system. And the Court found that the original complaint put Safeco on notice that it would be liable for the adjustment of claims handled by that billing system, irrespective of which affiliate wrote the policies. The Court, thus, affirmed the district court’s decision to remand the case back to state court.
Even though the Seventh Circuit declined to allow CAFA jurisdiction in Safeco, the case reminds class action litigants that there are several events that occur in a class action that could give rise to CAFA removal. It may not always work, but the benefit of landing in CAFA land means that practitioners need to keep this arrow in their quiver.