cafa removal and remand latest developments

Presenting a live 90‐minute webinar with interactive Q&A

CAFA Removal and Remand: Latest DevelopmentsNavigating Class Action Jurisdictional Ambiguities Amid Evolving Circuit Court Standards

T d ’ f l f

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

TUESDAY, MARCH 29, 2011

Today’s faculty features:

Michael D. Ferachi, Member, McGlinchey Stafford, Baton Rouge, La.

Paul G. Karlsgodt, Partner, Baker Hostetler, Denver

Alfredo Torrijos, Partner, Torrijos Law, Los Angeles

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Cutting Edge Procedural Strategies In Class Actions: Parens Patriae, Removal by

Counterclaim Defendants, And Beyond

Michael Ferachi

Stafford PublicationsTuesday, March 29, 2011y

Michael Ferachi

MemberMemberMcGlinchey Stafford, PLLC

One American Place, 14th FloorBaton Rouge, LA 70825

[email protected]@mcglinchey.com

“CUTTING EDGE”CLASS ACTION PROCEDURAL CLASS ACTION PROCEDURAL

STRATEGIES UNDER CAFA

IMPORTANT NEW TOOL: REMOVAL OF STATE AG REMOVAL OF STATE AG

ACTIONS

• CAFA Now Allows • CAFA Now Allows Removal Of Some State Attorney State Attorney General Actions

IMPORTANT NEW TOOL: REMOVAL OF STATE AG ACTIONS (cont )OF STATE AG ACTIONS (cont.)

• Katrina Canal Breaches Litigation, 524 F.3d 700 (5th Ci 2008) (Cl A ti )(5th Cir. 2008) (Class Action)– Minimal Diversity Existed Because Louisiana

Citizens Were Plaintiffs/Real Parties in InterestCitizens Were Plaintiffs/Real Parties in Interest– Joinder Of These Citizens Waived Sovereign

ImmunityImmunity

IMPORTANT NEW TOOL: REMOVAL OF STATE AG ACTIONS (cont )OF STATE AG ACTIONS (cont.)

• Louisiana v. Allstate Ins. Co 536 F 3d 418 (5th Cir Co., 536 F.3d 418 (5th Cir. 2008) (Parens Patriae Action)Action)– Citizens Were Real Parties

In Interest Seeking Antitrust Treble Damages

– Court Looked at Substance f A tiof Action

– Removal As A “Mass Action” Action

IMPORTANT NEW TOOL: REMOVAL OF STATE AG ACTIONS ( t )OF STATE AG ACTIONS (cont.)

• West Virginia v Comcast Corp• West Virginia v. Comcast Corp., 2010 WL 1257639 (E.D. Pa., Mar. 31, 2010) (Parens Patriae Action):– Circumscribed Group of

Citizens Were Real Parties In Interest Seeking AntitrustInterest Seeking Antitrust Treble/Compensatory Changes

– Removal As A “Class Action”– But Court May Consider

Severance of State’s Claims

IMPORTANT NEW TOOL: REMOVAL OF STATE AG ACTIONS (cont )STATE AG ACTIONS (cont.)

• Missouri v. Portfolio Recovery Associates, Inc., --- F. Supp. 2d ---, 2010 WL 675153 (E.D. Mo., Feb. 24, 2010) (Parens Patriae Action) (Suit Not a “Class Action” ) ( ) (Under CAFA)

• W. Virginia v. CVS Pharmacy, --- F. Supp. 2d ---, 2010 WL 3743876 (S.D. W.Va. Sept. 21, 2010) (Parens Patriae Action) (State was Real Party Interest so CAFA Inapplicable)Inapplicable)


Oklahoma v. BP America, --- F. Supp. 2d ---, No. 09-945 , pp ,(W.D. OK October 29, 2009) (Parens Patriae Action) (Suit Not a “Class Action” Under CAFA);

In re LFT-LCD Flat Panel Antitrust Litigation, N.D. Cal. No. C 07-1827 SI, 2011 WL 560593 (N.D. Cal. Feb. 15, 2011); 2011);

Connecticut v. Moody’s Corp., D.Conn No. 3:10cv546, 2011 WL 63905 (D.Conn. Jan. 5, 2011);( , );


• Ohio v. GMAC Mortgage, No. 10-2537 (N.D. Ohio January 14, 2011)

State of Ohio filed action in state court against Ally, GMAC, and an employee alleging fraudulent and unfair actions in connection with hundreds of mortgage foreclosure actions in Ohio. Defendants removed action foreclosure actions in Ohio. Defendants removed action on diversity grounds. State moved to remand.


• Ohio v. GMAC Mortgage, No. 10-2537 (N.D. Ohio January 14, 2011)

The Court held that the real-parties-in-interest are the specific Ohio homeowners whose mortgages are heldspecific Ohio homeowners whose mortgages are held by GMAC and thus diversity of citizenship exists.


For Removal:It looks like a duck, quacks like a duck, acts like a duck, then it

is a duckis a duck.Lawsuits that resemble a purported class action should be

considered a class action for the purpose of removing AG suits.

Need to convince the court to look behind the labels on a case by case basis to discover the real party in interestby case basis to discover the real party in interest.

Watch for appellate decision in CVS Pharmacy case.


Against Removal:

If the Court is convinced not to look beyond the caption, then you will get sent back down.

If the Court uses a wholesale review and decides that because it is a parens patriae case the real party in interest is the entire state, then you will get sent back down., y g


Against Removal:

Note: Sheep in Wolves’ Clothing: Removing Parens Patriae Suits Under the Class Action Fairness Act, Alexander Lemann 111 Colum L Rev 121 (January 2011)Lemann, 111 Colum. L. Rev. 121 (January, 2011)

Asserts that allowing removal of parens patriae suits underAsserts that allowing removal of parens patriae suits under CAFA works against the Act’s goals, is not supported by its language, and violates principles of federalism.

CREATIVE USES OF CAFA:REMOVAL BY “ADDITIONAL” REMOVAL BY “ADDITIONAL”

COUNTERCLAIM DEFENDANTS

• New Plaintiff Tactic: – Avoiding Federal

Court By Asserting y gClass Actions As Counterclaims In State Court

CREATIVE USES OF CAFA: REMOVAL BY “ADDITIONAL” REMOVAL BY ADDITIONAL

COUNTERCLAIM DEFENDANTS (cont.)

• PRE-CAFA RULE– Shamrock Oil & Gas Corp. v.

Sheets, 313 U.S. 100 (1941), Original State Court Plaintiff Cannot Remove Based On Cannot Remove Based On Counterclaim

– Non-CAFA Removal Provisions I d T Li i R lInterpreted To Limit Removal

– Counterclaim Defendant Invoked State Court JurisdictionState Court Jurisdiction

CREATIVE USES OF CAFA:REMOVAL BY “ADDITIONAL” REMOVAL BY ADDITIONAL


Shamrock Prohibition Also Applied To Bar Removal By – Shamrock Prohibition Also Applied To Bar Removal By “Additional” Counterclaim Defendants

– Exceptions: State of Tex. v. Walker, 142 F.3d 813, 816 p , ,(5th Cir. 1998); Mace Sec. Int’l, Inc. v. Odierna, 2008 WL 3851839 at *4 (S.D. Fla. Aug. 14, 2008); H&R Block Ltd. v Housden 24 F Supp 2d 703 706 (E D Tex 1998)v. Housden, 24 F.Supp. 2d 703, 706 (E.D. Tex. 1998)

CREATIVE USES BY CAFA: REMOVAL BY “ADDITIONAL” REMOVAL BY ADDITIONAL”


• CAFA Dealt Defendants A “New Hand” For Removal

• CAFA Removal Provisions Interpreted To Expand Removal

• Jurisprudence Is Still Developing

CREATIVE USES OF CAFA:REMOVAL BY “ADDITIONAL” REMOVAL BY “ADDITIONAL”


• Palisades Collections v NOCollections v. Shorts, 552 F.3d, 327 (4th Cir 2008)

NO!

327 (4th Cir. 2008) said “NO” to removalremoval



• Palisades – District Court– State Suit By Palisades To

Recover Debt Bought From AT&TAT&T

– Class Action Counterclaim Against PalisadesAgainst Palisades

– AT&T Made “Additional” Counterclaim Defendant

CREATIVE USES OF CAFA: REMOVAL BY “ADDITIONAL” REMOVAL BY “ADDITIONAL”


– AT&T Removed District Court Remanded– District Court Remanded(Yet Removable If Brought As Stand-Alone Brought As Stand Alone Suit Under CAFA)

– Held: CAFA Does Not Held: CAFA Does Not Change Shamrock Rule

CREATIVE USES OF CAFA: REMOVAL BY “ADDITIONAL” REMOVAL BY ADDITIONAL”


• Palisades – 4th Circuit AppealAppeal– Majority Affirmed Remand

(2 – 1)– Strong Dissent– Supreme Court Denied

AT&T’s Cert Petition



• Deutsche Bank Nat’l. Trust Co. v. Weickert,

YES

2009 WL 1011098 (N.D. Ohio 2009) (April 15, 2009) d 2009 WL 2009), and 2009 WL 1954505 (July 2, 2009) S id “YES” T R l• Said “YES” To Removal

CREATIVE USES OF CAFA: REMOVAL BY “ADDITIONAL” REMOVAL BY ADDITIONAL”


• Weickert - District Court– Split From Palisades Majority– Class Action Counterclaim

Against Original Plaintiff And “Additional” Counterclaim Additional Counterclaim Defendants

– Held: CAFA Permits “Addi i l” C l i “Additional” Counterclaim Defendants To Remove

– Settled during Appeal Settled during Appeal



• CAFA Does Not Alter Removal Bar For Counterclaim Defendant Who Was OriginalPlaintiff– Progressive West, Ins. Co. v.

Preciado, 479 F.3d 1014 (9th

Cir 2007) Cir. 2007) – First Bank v. DJL Props, LLC,

598 F3d 915 (7th Cir. 2010)598 3d 9 5 ( C 0 0)

CREATIVE USES OF CAFA: REMOVAL OF THIRD PARTY CLASS REMOVAL OF THIRD PARTY CLASS

ACTION COMPLAINTS

– Some Pre-CAFA Jurisprudence Jurisprudence Supports Removal of Third Party Class Action Complaints

– See Carl Heck Engrs I L f h Inc. v. Lafourche Parish, 622 F.2d 133 (5th

Cir. 1980)Cir. 1980)

Removal in a post-CAFA World: spotting the traps before you step

in themin themPaul G. Karlsgodt, Esq.Baker & Hostetler LLP

303.764.4013www.bakerlaw.com

© 2010 Baker & Hostetler LLP

www.classactionblawg.com

A Brief History of Pre-CAFA Removal StandardsRemoval Standards

• Amount in Controversy = $75,000 for each and y $ ,every class member

• Complete diversity required• All defendants had to consent• Party seeking jurisdiction bore the burden of

fproof• Standard of proof ranged from defendant having

to prove jurisdictional amount by ato prove jurisdictional amount by a preponderance of the evidence to having to prove it to a “legal certainty”

33 Baker Hostetler

Removal Standards After CAFA, 28 U S C § 1332(d)28 U.S.C. § 1332(d)

• Amount in Controversy = $5 million in the aggregate and 100+ members– Interest doesn’t countInterest doesn t count– Punitives – can count if allowed by law and within permitted limits– Injunctive/declaratory relief – Who’s viewpoint? “Either viewpoint”?

• No complete diversity requiredSt d d f f A diff t th b f ?• Standards of proof – Any different than before?– Varies by issue and jurisdiction. See generally Diane B. Bratvold & Daniel J.

Supalla, Standard of Proof to Establish Amount in Controversy when Defending Removal Under the Class Action Fairness Act, 36 Wm. Mitchell L. R 1397 (2010)Rev. 1397 (2010).

– Key threshold issue is whether jurisdiction is clear from complaint– Extrinsic evidence may be necessary, depending on the jurisdiction– Legislative history of CAFA supports liberal interpretationg y pp p– Federal courts still don’t like diversity cases

• Want proof, see Cappuccitti v. DirecTV, Inc., 611 F. 3d 1252 (11th Cir. 2010) (holding that there had to be $75,000 in controversy with at least one plaintiff even after CAFA), vacated after panel reh'g by Cappuccitti v. DirecTV, Inc., 623 F. 3d 1118 (11th Cir 2010)

34 Baker Hostetler

1118 (11th Cir. 2010).

Removal Standards After CAFA, Cont’dCont d

• Consent of all defendants no longer required - 28 U.S.C. g q§ 1453 (b)

• Exceptions– Local controversy – § 1332(d)(4)(A)Local controversy § 1332(d)(4)(A)

• Note that jurisdiction under subsection (d)(3) is still discretionary• Make sure to consider whether similar proceeding filed within

previous 3 years.• Consider whether class members remain citizens of the state at the

time of filing.– Home state - § 1332(d)(4)(B)

Di ti d § 1332(d)(3)– Discretionary remand - § 1332(d)(3) – State actors - § 1332(d)(5)(A)– Certain state law securities issues - § 1332(d)(9)

35 Baker Hostetler

Pre-Removal Questions• Are you sure you would really rather be in federal court?

F d l d ’t l b tt f d f d t– Federal doesn’t always mean better for a defendant– Do you want to make bad law for later cases

• Do any of the statutory exceptions apply?– But is there an exception to the exception (e g the “local controversy”But is there an exception to the exception (e.g., the local controversy

exception applies but there was another case based on similar facts filed within the past 3 years)?

• How are you going to prove the amount in controversy?– Do you have to come up with a creative damages theory in order to– Do you have to come up with a creative damages theory in order to

prove the amount in controversy?– You do know that the positions you take on removal will be used against

you on class certification, right?Maybe you can just wait– Maybe you can just wait

• If jurisdiction isn’t clear from the complaint (or worse, the allegations in the complaint would defeat jurisdiction),– Do you have facts to prove otherwise?

36 Baker Hostetler

– Would you need discovery to prove otherwise?

Preparing the Removal Noticep g• Read or re-read

CAFA’s removal provisions 28 U S C § 1332(d)– CAFA’s removal provisions, 28 U.S.C. § 1332(d).– The removal statute 28 U.S.C. § 1441 et seq. (including § 1453!)– The latest developments on www.cafalawblog.com– The judge’s prior opinions on removal/remand

Pl d ll t i l f t• Plead all material facts.– Plead facts, not conclusions, showing why the jurisdictional amount is satisfied.– Don’t forget to deal with all the jurisdictional issues: e.g. amount in controversy,

citizenship, the size of the class, and whether the case is a “class action.”If you anticipate a motion to remand prepare the response in advance and make– If you anticipate a motion to remand, prepare the response in advance and make sure the removal notice includes all the necessary jurisdictional facts.

• Don’t be late. See 28 U.S.C. § 1446(b) (30 days from the date of “receipt by the defendant, through service or otherwise . . .”).

• Don’t forget the details --• Don t forget the details --– Make sure you answer too (state court response deadline may occur before the

30-day removal deadline). See also FRCP 81(c) (setting forth answer deadlines if answer is not filed in state court).

– Send notice to opposing parties to the state court. § 1446(d)

37 Baker Hostetler

pp g p § ( )– Include other documents required by § 1446(a) with the removal notice.

Responding to the Motion to RemandRemand

• Be careful how you characterize the argument on t i tamount in controversy

– “amount in controversy” does not equal “damages”• Make sure to tailor your response to the proper standard

f f i j i di tiof proof in your jurisdiction– Can and should you submit facts outside the pleadings?– Can you ask for discovery? See, e.g., Anwar v. Fairfield

Greenwich Ltd No 09 Civ 0118 (VM) (THK) Slip op (S D N YGreenwich Ltd., No. 09 Civ. 0118 (VM) (THK), Slip op. (S.D.N.Y., May 1, 2009).

– How much factual proof is necessary?– Are you better off waiting until after the record is more fully y g y

developed?• If remand is discretionary, what’s the compelling reason

why the federal court should keep it?

38 Baker Hostetler

Appealing a Remand Orderpp g

• Don’t miss the deadline “not more than 10 daysDon t miss the deadline not more than 10 days after entry of the order.” 28 U.S.C. § 1453(c)(1).

• Absent extension, motion deemed denied if not ,ruled on within 60 days. § 1453(c)(2).

• Make sure that the record is complete.p• Before you appeal, ask again whether you can

live with the case being litigated in state court. Do you want to risk turning an unfavorable decision into binding precedent?

39 Baker Hostetler

Events Affecting Continuing Jurisdiction Post RemovalJurisdiction Post-Removal

• What if the class is not certified or decertified?– See Cunningham Charter Corp. v. Learjet, Inc., 592 F.3d 805

(7th Cir. 2010) (holding that jurisdiction survives denial of class certification).

– But cf. County of Nassau v. Hotels.com, 577 F.3d 89 (2nd Cir. 2009) (suggesting that jurisdiction depended on whether elements of class certification were established).

What if ne facts tending to sho a lack of j risdiction• What if new facts tending to show a lack of jurisdiction come to light? – See 28 U.S.C. § 1446(b) (“If the case stated by the initial

pleading is not removable ” then within 30 days of receipt of thepleading is not removable,” then within 30 days of receipt of the document from which jurisdiction can be ascertained) and 28 U.S.C. § 1453(b) (1-year limitation does not apply).

– But was the case “commenced” before February 18 2005?

40 Baker Hostetler

But was the case commenced before February 18, 2005?.

Chicago • Cincinnati • Cleveland • Columbus • Costa Mesa • DenverHouston • Los Angeles • New York • Orlando • Washington, DC

www.bakerlaw.com

© 2010 Baker & Hostetler LLP

CAFA R l CAFA Removal and Remand: and Remand:

Plaintiff Liti ti Litigation StrategiesStrategies

Alfredo TorrijosTorrijos | Law(213) 784-2511

alfredo@torrijoslaw [email protected] 29, 2011

Torrijos | Law

Plaintiffs defeat removal before filingPlaintiffs defeat removal before filing

Obviously, the choices you make before filing a class action determine

How will I define the class?

What defendants will I name?

whether you will be able to preclude removal –or obtain remand

State

Or

Federalor obtain remand Federal

What causes of

What state will I file

action will I assert?

in?

43

Torrijos | Law

CAFA, however, limits your optionsCAFA, however, limits your options

Before CAFA After CAFA

Number of Class Members No requirement At least 100

Citizenship Complete Diversity Minimal DiversityCitizenship (all named plaintiffs and all defendants) (even one putative class member and one defendant)

Amount in Controversy

$75,000 (for named plaintiff; no aggregation)

$5,000,000(aggregated)

Time Limit for Removal

One year after commencement of the action

No absolute limit; 30 days after receipt of complaint or later paper from which removability may be ascertained

Appeal of Remand Order None By application to Court of Appeals within 7 days of

entry of remand order

Consent of all Defendants Required Not Required

44

Torrijos | Law

How small is your class?How small is your class?

• CAFA does not apply if you have a small class (<100 b $5 illi i t d )members or <$5 million in aggregate damages)

• Just don’t get cuteThe plaintiffs in Freeman v Blue Ridge Paper Products Inc– The plaintiffs in Freeman v. Blue Ridge Paper Products, Inc., 551 F. 3d 405 (6th Cir. 2008) sought to avoid CAFA jurisdiction by filing five separate cases, all identical except that they each covered a different six month periodp

– Sixth Circuit, finding were broken-up using artificial time periods simply in order to avoid CAFA, held that amount in controversy threshold had been met by aggregating the $4.9 million in d ht i h f th fi l i tdamages sought in each of the five complaints

• But “mass actions” might be different. See Anderson v. Bayer Corp 610 F 3d 390 (7th Cir 2010)

45

Bayer Corp., 610 F.3d 390 (7th Cir. 2010)

Torrijos | Law

Use the exceptionsUse the exceptionsHome State Exception

28 U.S.C. § 1332(d)(4)(B) Local Controversy Exception

28 U.S.C. § 1332(d)(4)(A)Discretionary Exception

28 U.S.C. § 1332(d)(3)If 2/3 or more of the putative class members and primary defendant are citizens of the filing state the court shall decline jurisdiction

A district court shall decline to exercise jurisdiction if:

- greater than 2/3 of putative class members are citizens of the state in which the action was filed;

If more than 1/3 but less than 2/3 of the putative class members and primary defendant are citizens of the filing state the court may decline jurisdiction on consideration of:

- at least one defendant from whom significant relief is sought is a citizen of the state in which the action was filed;

- the principal injuries allegedly d b th d f d t ’ d t

j- the role of the forum state’s law;- the presence of national and/or

interstate issues;- the nexus between the forum

and the class, the defendants, and th ll d hcaused by the defendants’ conduct

occurred in the state in which the action was filed; and

- there has been no class action asserting the same or similar factual allegations against any of the

the alleged harm;- the dispersion of class

members among other states; and- the existence during the past

three years of actions involving the same or similar claimsallegations against any of the

defendants during the three years preceding filing of the action.

same or similar claims.

46

Torrijos | Law

The home state exceptionThe home state exception

• Define your class carefully

• The plaintiffs in Jackson v. Sprint Nextel Corp., 2011 U.S. Dist. LEXIS 7005, (N.D. Ill. Jan. 21, 2011) filed a putative class action on behalf of all individuals who:putative class action on behalf of all individuals who: – purchased texting from Sprint (a Kansas corporation) – had a Kansas cell phone number

i d th i ll h bill t K ili dd d– received their cell phone bill at a Kansas mailing address, and – paid a Kansas USF fee

• 7th Circuit reversed the remand holding the trial court7 Circuit reversed the remand, holding the trial court could not draw conclusions about citizenship of class members based solely on the class definition

In re Sprint Nextel 593 F 3d 669 (7th Cir 2010)

47

– In re Sprint Nextel, 593 F.3d 669 (7th Cir. 2010)

Torrijos | Law

Jackson v Sprint NextelJackson v. Sprint Nextel• On remand to the trial court, plaintiffs conducted

di t bt i d t d t i f ti fdiscovery to obtain updated customer information from Sprint, conducted a random telephone survey and used voter registration, driver licenses and other information

ll t d th i t t f th h did t d tcollected on the internet for those who did not respond to the survey

• Eventually plaintiffs successfully renewed their motion• Eventually, plaintiffs successfully renewed their motion for remand

• However plaintiffs could have saved a lot of time andHowever, plaintiffs could have saved a lot of time and money if they had simply defined their class as “all Kansas citizens who purchased text messaging from Sprint Nextel”

48

Sprint Nextel

Torrijos | Law

The local controversy exceptionThe local controversy exception

• Unlike the home state exception (which looks only at the citizenship f th “ i d f d t”) th l l t tiof the “primary defendant”), the local controversy exception

examines the citizenship of any defendant from whom “significant relief is sought”

• The plaintiffs in LaFalier v. State Farm Fire & Cas. Co., 2010 U.S. App. LEXIS 17588 (10th Cir. 2010), filed suit against State Farm and two individuals responsible for administering a trust set-up by the state to address the underlying natural disaster

• State Farm’s argument that the trust defendants were named solely for the purpose of defeating CAFA jurisdiction was rejected and thefor the purpose of defeating CAFA jurisdiction was rejected and the court held that the trust defendants were local defendants from whom significant relief was sought and whose conduct formed a significant basis for the claims asserted

49

significant basis for the claims asserted

Torrijos | Law

Even if CAFA applies file in state courtEven if CAFA applies, file in state court

• Your defendant might be fine with state court

• The defendant might fail to seek removal in time

At th l t th d f d t ill h th b d f• At the very least the defendant will have the burden of establishing the amount in controversy and its state of citizenship

50

Torrijos | Law

Just rememberJust remember

If CAFA applies to your case…

51

Torrijos | Law

You’ll likely end-up in federal courtYou ll likely end up in federal court

Percent change in 3 d Ci it 400% iPercent change in class action filings and removals

3rd Circuit: 400% increase

9th Circuit: 375% increase

11th Circuit: 350% increase

based on diversity jurisdiction between

11 Circuit: 350% increase

Southern District of CA: 1,350% increase

Central District of CA: 475% increase

2002-2003 and 2005-2007

Sothern District of FL: 675% increase

District of NJ: 650% increase

Western District WA: 750% increaseEmery G. Lee III & Thomas E. Willging, The Impact of the Class Action Fairness Act of 2005 on the Federal Courts, Federal Judicial Center,

April 2008.

Western District WA: 750% increase

52

Torrijos | Law

The real questionThe real question

• Clearly, CAFA has succeeded in increasing the number a class actions that are being litigated in federal court

• The real question is:

Does it matter?

53

Torrijos | Law

Attorneys certainly think it mattersAttorneys certainly think it matters

Plaintiff attorneys who Attorney’s Plaintiff Defendantfiled their class actions in state court are much more likely to believe

Attorney s Impression

Plaintiff Attorneys

Defendant Attorneys

Federal Judges More Likely to Be Favorable

5% 74%y

that state judges would be favorable to their case than defendant

Be Favorable

State Judges More Likely to

52% <1%

attorneys who removed class actions to federal court

yBe Favorable

No Difference 37% 18%

Thomas E. Willging & Shannon R. Wheatman, Attorney Choice of Forum in Class Action Litigation: What Difference Does It Make?, 81 Notre Dame L.

Rev. 591, 625 tbl.6 (2006).

Don’t Know 7% 8%

54

Torrijos | Law

It does matterIt does matter…

One study found Denial of Class One study found that federal judges were over two times

27%25%

30%Certification

more likely to deny class certification

12%

10%

15%

20%

than their state counter parts.

Thomas E. Willging & Shannon R. Wheatman,

0%

5%

State FederalThomas E. Willging & Shannon R. Wheatman,

Attorney Choice of Forum in Class Action Litigation: What Difference Does It Make?, 81 Notre Dame L.

Rev. 591, 635 tbl.11 (2006).

55

Torrijos | Law

or maybe not…or maybe not

However that sameHowever, that same study found that the percentage of cases

OutcomeState (N=118)

Federal (N = 165)

Class Certified 24 (20%) 37 (22%)p gcertified in state and federal courts were

Certification denied

15 (12%) 44 (27%)

No action taken on certification

79 (67%) 84 (51%)

essentially the sameThomas E. Willging & Shannon R. Wheatman,

Attorney Choice of Forum in Class Action Litigation: Wh t Diff D It M k ? 81 N t D L

on certification

What Difference Does It Make?, 81 Notre Dame L. Rev. 591, 635 tbl.11 (2006).

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Torrijos | Law

What accounts for the discrepancy?What accounts for the discrepancy?While in both federal and state forums theand state forums the majority of cases filed as class actions Outcome

State (N=118)

Federal (N = 165)

never receive a ruling on class certification, federal judges are

Class Certified 24 (20%) 37 (22%)

Certification denied

15 (12%) 44 (27%)

federal judges are much more likely than their state court

No action taken on certification

79 (67%) 84 (51%)

counterparts to rule on (i.e., deny) class certification

57

certification

Torrijos | Law

A difference without a differenceA difference without a difference

• As plaintiff attorneys we really don’t care if our cases die a quick death in federal court (through the denial of class certification) or a slow death in state court– (Actually I care very much I would much rather have(Actually, I care very much. I would much rather have

the quick death)

• Perhaps factors other than the likelihood of certification,Perhaps factors other than the likelihood of certification, account for our beliefs?

58

Torrijos | Law

Other factors are (at worst) neutralOther factors are (at worst) neutral

• In their study, Willging & Wheatman not only found that the rates of certification are essentially the same between state and federal court, they also found that:– The rates of dismissal on the merits were the same (40% in stateThe rates of dismissal on the merits were the same (40% in state

court vs. 39% in federal court)– The recovery per class member was better in federal court ($350

per class member in state court vs $517 in federal court)per class member in state court vs. $517 in federal court)– The likelihood of monetary recovery or settlement is better in

federal court (33% in state court vs. 44% in federal court)And the amount of attorneys fees were the same (27% of total– And the amount of attorneys fees were the same (27% of total monetary recovery in state court vs. 29% in federal court)

59

Torrijos | Law

Is there really no difference?Is there really no difference?

• If we accept the findings reported by Willging & Wheatman (note that there are some very good reasons for being cautious about this), then it probably makes no difference whether you litigate a class action in state ordifference whether you litigate a class action in state or federal court

• Does CAFA even matter?Does CAFA even matter?

Why are we here?

60

Torrijos | Law

One difference that mattersOne difference that matters

• Historically, state courts have been more willing to apply a single forum’s law to all class members’ claims and therefore have been more likely to certify nationwide class actionsclass actions– Stephen B. Burbank, The Class Action Fairness Act of 2005 in

Historical Context: A Preliminary View, 156 University of Pennsylvania Law Rev 1439 1504-1509 (2008)Pennsylvania Law Rev. 1439, 1504 1509 (2008)

• In contrast, federal courts, especially since the 1990’s have been much less willing to apply a singlehave been much less willing to apply a single jurisdiction’s law to a nationwide class

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Torrijos | Law

Predominance and choice of lawPredominance and choice of law

• Federal courts examine the choice of law issues in terms of whether the predominance and s periorit req irements of R le 23(b)(3)the predominance and superiority requirements of Rule 23(b)(3) have been satisfied

• Even where courts find that a nationwide, state-law governed classEven where courts find that a nationwide, state law governed class otherwise meets Rule 23(a) and 23(b)(3) criteria, the choice-of-law inquiry will ordinarily make or break certification

• “If more than a few of the laws of the fifty states differ, the district judge would face an impossible task of instructing a jury on the relevant law, yet another reason why class certification would not be the appropriate course of action ”the appropriate course of action.– In re American Med. Sys., Inc., 75 F.3d 1069, 1085 (6th Cir. 1996)

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Torrijos | Law

Death of the nationwide class?Death of the nationwide class?

• The simple fact is that if you bring a nationwide class action that requires the application of multiple states’ laws, your chances of obtaining certification in federal court are very, very smallcourt are very, very small

• And since under CAFA most class actions that are brought on behalf of a nationwide class will be subject tobrought on behalf of a nationwide class will be subject to removal, state courts do not offer an alternative

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Torrijos | Law

Redefining the nationwide classRedefining the nationwide class

• The alternative for plaintiffs is to file state-only class actions

• While this will not – with the notable exception of the state (or states) where the primary defendant is a citizen – necessarily preclude federal jurisdiction pursuant to CAFA it does provide plaintiffs with a method of dealingCAFA, it does provide plaintiffs with a method of dealing with the predominance and choice-of-law issue

• Does the new “nationwide” class action consist of 50Does the new nationwide class action consist of 50 separate class actions?

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Torrijos | Law

Revisiting Sprint NextelRevisiting Sprint Nextel

• Pre-CAFA, this case probably would have been brought as a nation ide cons mer class actionnationwide consumer class action

• The plaintiffs, however, confined the class to just a single state (Kansas) clearly for the sole purpose of remaining in state court( ) y p p g

• Ironically, the defendants in Sprint-Nextel sought protection from the nationwide nature of class actions, arguing that that the denominator i th t thi d b h ld b ll l i tiff i ti id lin the two thirds number should be all plaintiffs in a nationwide class, rather than just the members of the class in Kansas. In re Spint Nextel Corp., 593 F.3d 669 (7th Cir. 2010).

• This argument was rejected by the 7th Circuit, but clearly strategies will keep evolving as class action practice continues to adjust to CAFA

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Torrijos | Law

Thank youThank you

Alfredo TorrijosAlfredo TorrijosTorrijos | Law

(213) [email protected]

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