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CAFA Law Blog Information, cases and insights regarding the Class Action Fairness Act of 2005

Step Aside! The Class Action Innovators Have Arrived!

Posted in Legal Publications and Articles

Owen C. Pell, Danielle Audette, Heather Huggins, White & Case LLP, Procedural Innovations To Streamline Complex Cases And The Increasing Role Of State Courts In Complex Litigation

Spring break is around the corner and we know you’ll be looking for a break from US Weekly and In Touch for those long days on the beach (after all, how many stories can you really read about Demi Moore’s melt down, the Teen Moms and Whitney Houston’s last days) . . .so don’t forget to pack this article, which discusses various procedural innovations that have been successful in streamlining complex cases. 

The article first discusses CAFA, which was enacted to curb the widespread abuses of the class action device in state courts. The article noted that five years since its enactment, the success of CAFA is mixed. On the one hand, the number of class actions originally filed in the federal court has nearly tripled, and thus, more large class actions proceed in federal courts. On the other hand, creative tactics by plaintiffs to avoid CAFA removal are meeting with success in certain jurisdictions. 

The creative attempts to avoid CAFA removal have yielded different results, for example (1) the Seventh Circuit followed the Ninth Circuit and gave plaintiffs the “green light” to draft complaints to avoid CAFA jurisdiction; and (2) the Fifth and the Sixth Circuit have interpreted CAFA to have thwarted jurisdictional gamesmanship utilized by the plaintiffs avoid federal jurisdiction. 

There have been instances where courts have applied CAFA exception for securities linked suits. For example in Greenwich Financial Services Distresses Mortgage Fund 3 LLC v. Countrywide Financial Corp., 603 F.3d 23 (2d Cir. 2010), the Second Circuit had an opportunity to apply its prior construction of the CAFA exceptions for securities-linked suits that it set forth in Estate of Pew v. Cardarelli, 527 F.3d 25, 26 (2d Cir. 2008), where it construed CAFA exceptions for securities-linked suits but declined to apply them where an action brought under New York’s consumer fraud statute involving marketing debt securities.

Next, the article explains the CAFA and choice of law issues in class action litigation. Under CAFA, most nationwide or multi-state class actions are pulled into federal court. By their nature, nationwide or multi-state class actions involve the laws of multiple states. This can raise substantial choice of law questions for courts and parties. CAFA does not address the choice of law question that is likely to arise in nationwide or multi-state class or “mass” actions. The article states that the key to defeating class certification in nationwide or multi-state “Bet the Company” cases is for defendants to argue, where possible, that significant true conflicts exist between the forum state’s law and the law(s) of other state(s), such that the federal court will be required to apply multiple states’ laws to the action. 

Under CAFA, which removes most nationwide classes to federal court, choice of law has become one of the more significant obstacles to certification. The authors noted that a recent example of federal court reluctance to allow certification in class actions where multiple state laws will apply was in Sullivan v. DB Investments, Inc., No. 08-2784, 2010 WL 2736947 (3d Cir. Jul. 13, 2010), where the Third Circuit overturned the certification of a nationwide settlement class of indirect diamond purchasers as improper because the case implicated widely varied state antitrust, consumer protection, and unjust enrichment laws, thus precluding a finding that common issues of law predominate. This is because it is improper to certify a nationwide class when the legal right shared by class members purportedly arises under the laws of multiple jurisdictions, but only some of those jurisdictions extend standing to class members to enforce that right.

Happy reading and don’t forget the sunscreen!