When Is a Class Action Not a Class Action?

Federal jurisdiction under the Class Action Fairness Act (“CAFA“) may continue, even after the denial of the class certification motion. Therefore, it’s possible for a products liability case to be litigated in federal court, even if complete diversity does not exist. Judge Posner supported this contention through statutory and policy analysis in Cunningham Charter Corp. v. Learjet, Inc., No. 09-8042, 2010 WL 199627 (7th Cir. Jan. 22, 2010) [PDF].

Cunningham filed suit in state court in an ostensibly small class, purchasers of Learjets who had received a certain warranty. Learjet removed the action pursuant to CAFA, and the plaintiffs moved to certify two classes. The district judge denied both classes because neither could satisfy the requirements of Rule 23. This raised the question, however, of what should happen to federal jurisdiction under CAFA when the district court conclusively rules that the pending case is not a class action? While the district judge ruled that denial of certification terminates federal jurisdiction, the panel reversed and noted that the act is, after all, a fairness act.

Posner’s pithy prose promotes predictability. First, jurisdiction is conferred by 28 U.S.C. 1332(d), which speaks in terms of the filing of the class action, rather than the ultimate decision on certification.

[J]urisdiction attaches when a suit is filed as a class action, and that invariably precedes certification.

Furthermore, 28 U.S.C. 1332(d)(8) states that CAFA applies before or after certification by the court. Therefore, according to Posner, jurisdiction attaches upon filing and is not relinquished. Federal jurisdiction under CAFA is independent of certification. Moreover, as Posner notes, this interpretation keeps the fairness in the fairness act. If jurisdiction hinged on certification, then it would be possible for a district court to decline to certify and remand to state court, where the case could be certified on the state level and proceed as a class action. Such an outcome is not consistent with the purpose of CAFA.

While this may seem like a victory for defendants, my guess is that this will result in further structuring of lawsuits to avoid CAFA entirely, as noted in an earlier post. Posner himself notes in the opinion that if it immediately appears that a case cannot satisfy CAFA, i.e. a frivolous class action, then federal jurisdiction would never attach. The effect of this opinion, then, might be to actually reduce the number of class actions in federal court, rather than to increase the number of actions retaining federal jurisdiction subsequent to denial of certification.

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