Dean Morris LLP , ___ F.3d ___, 2006 WL 1156388 (5th Cir. May 3, 2006).
Safe! That was the call from the U. S. Fifth Circuit Court of Appeals, ruling on the question of when an action is “commenced” under the Class Action Fairness Act, saying that these Louisiana plaintiffs slid into state court just in time by faxing their petitions the day before the law took effect. But a fight broke out in the stands between the Fifth and Seventh Circuits over the scope of appellate review of remand orders under CAFA.
"We want it all," the Seventh Circuit said in Brill v. Countrywide Home Loans, Inc., 427 F.3d 446 (7th Cir. 2005) (see CAFA Law Blog summary posted on November 2, 2005).“When a statute authorized interlocutory appellate review, it is the district court’s entire decision that comes before review.” Since the district court rejected removal under CAFA when remanding, the Seventh Circuit said it could consider whether the lower court’s decision to remand to state court was out of line with the Telephone Consumers Protection Act.
"Bankruptcy is different," the Fifth Circuit said, kicking dirt towards the Seventh Circuit. Federal bankruptcy law clashes with CAFA’s appellate review provision because it includes a provision barring review of an order like the equitable remand order on the table here. A footnote mentioned that this reasoning might create a circuit split. “To the extent that the reasoning in Brill is in tension with today’s decision, we decline to adopt it….” The court’s reach covers a CAFA remand or claims “with an adequate nexus to CAFA.”
Balk? The panel chose not to weigh in on whether CAFA shifts the burden of proving federal jurisdiction to the party attempting to escape back into state court. Federal courts are dividing themselves into the “yes” and “no” columns on this issue, but the Fifth Circuit said that the district court was too vague on this score in this case, and that the issue wasn’t deemed to be critical to the outcome of the appeal. The “undisputed documents in the record . . . answer the jurisdictional question.”
The underlying plaintiffs alleged lenders and a law firm overcharged them during collection and foreclosure proceedings tied to their home loans. All of the Patterson plaintiffs and two of the Bauer plaintiffs were involved in bankruptcy proceedings, so the defendants removed the actions to federal court under CAFA and bankruptcy jurisdiction. Carving out the cases slated for arbitration, the district court sent the remainder back to state court.
As for the remand related to CAFA, the bottom line was whether the borrowers paid the “applicable filing fee” within five days of faxing their petitions to court, as required by Louisiana’s fax filing statute. Unless a party pays the correct amount on time, the fax has “no force or effect,” the court noted.
The lender and law firm defendants argued that the borrowers came up short when they showed up at the clerk’s office to pay $3,039.00, less than the $5,127.00 the clerk asked for on the fax confirmation notice. The borrowers argued they paid what the clerk asked for when they showed up on February 22, even though they received a bill for additional court costs in May. The defendants countered that the action was “commenced” only when the plaintiffs completely settled up with the clerk’s office, which was well after CAFA’s effective date. Running its own tally of who owed what to whom (“Who’s on First?”), the Fifth Circuit concluded that the initial payment of $3,039.00 was “sufficient to cover the petition fee and transmission fee” so the borrowers satisfied the fax filing statute and their action commenced when it was faxed to the court on February 17.
Editors’ Note: See the CAFA Law Blog summary posted on March 29, 2006 regarding the underlying federal district court’s decisions in Patterson v. Morris, No. 05-2177, Civil No. 05-2177, 2006 WL 196996 (E.D.La. Jan 25, 2006), and Bauer v. Morris, No. 05-2178, Civil No. 05-2178, 2006 WL 196996 (E.D.La. Jan 25, 2006), as well as our summary regarding the Fifth Circuit’s earlier ruling in Patterson I posted on June 1, 2006.
Editors’ Note: CAFA Law Blog Co-Editor Anthony Rollo represents a number of the lender defendants in this multiparty class action.