Cross-posted at Forbes.com’s “On The Docket”
The U.S. Court of Appeals for the Eleventh Circuit last week either completely misread the Class Action Fairness Act (“CAFA”) or entirely ignored its own precedents to reach a preferred conclusion in Cappuccitti v. DirecTV, 09-14107 (July 19, 2010). Either way, this controversial opinion virtually eliminates the federal courts as a forum for class actions and in the process thoroughly ignores the intent of Congress. Incredibly, the court reached this conclusion entirely on its own initiative and without providing either party an opportunity to brief the issue.
In Cappuccitti, the plaintiff filed a class action in federal court under CAFA, alleging minimal diversity and an amount in controversy exceeding $5,000,000, and also alleging facts allowing the court to infer that the class exceeded 100 members. Under CAFA, that should have been more than sufficient to establish jurisdiction, and it would have been consistent with the purpose of CAFA, which the court acknowledged was “to situate more class actions in federal court ab initio and to make it easier for defendants in a state court class action to remove the action to federal court.”
Although the order on appeal was the district court’s denial of DirecTV’s motion to compel arbitration, the 11th Circuit, acting sua sponte, held that the district court lacked subject matter jurisdiction under CAFA. The appeals court based its decision on the fact that there was no allegation that any single plaintiff in the mass action had a claim that exceeded the pre-CAFA amount-in-controversy requirement, for general diversity jurisdiction, of $75,000.00.
But the 11th Circuit’s decision is based on a fundamental misreading of CAFA that produces an absurd result, and that result conflicts with existing jurisprudence – from the 11th Circuit itself – that a defendant removing a class action from state to federal court, under CAFA, need not prove that any single plaintiff has a claim exceeding $75,000.
Indeed, the court’s holding is based on 28 U.S.C. §1332(d)(11)(B)(i), which states, in relevant part, that “jurisdiction shall exist only over those plaintiffs whose claims in a mass action satisfy the jurisdictional amount requirements under subsection (a),” and it is subsection (a) that establishes the requirement for general diversity jurisdiction that the claim exceed the sum or value of $75,000. But §1332(d)(11)(B)(i) – by its express terms – applies only to “mass actions,” not to class actions like Cappuccitti. And the court cites to no provision in CAFA – nor could it because there is none – that applies the jurisdictional minimum in subsection (a) to class actions. To the contrary, CAFA provides that, “[i]n any class action, the claims of the individual class members shall be aggregated to determine whether the matter in controversy exceeds the sum or value of $5,000,000.”
Although Cappuccitti is a class action, not a mass action, the 11th Circuit’s opinion goes on to discuss mass actions at length and relies heavily on discussion of CAFA’s mass action provisions in Lowery v. Alabama Power Co., 483 F.3d 1184 (11th Cir. 2007), even though it conceded that in Cappuccitti it “face[s] a situation different from that in” Lowery, where the issue was removal of a mass action. Moreover, the 11th Circuit’s recent opinion in Pretka v. Kolter City Plaza, Inc., 10-11471 (11th Cir. June 8, 2010), clarifies that the holding of Lowery is limited to one proposition – that a defendant cannot remove a class action under CAFA based on a purely speculative assertion that the amount in controversy exceeds $5 million – and that virtually everything else in Lowery is dicta. Nevertheless, the Cappuccitti panel, authored by the same judge who authored Lowery, cites Lowery frequently but completely ignores Pretka. And the only case it cites for the proposition that the $75,000 jurisdictional minimum applies to CAFA – Abrego Abrego v. Dow Chemical Co., 443 F.3d 676 (9th Cir. 2006) – is a mass action case, not a class action!
Literal application of Cappuccitti leads to any number of absurd results that could not have been intended by Congress. For example, under Cappuccitti, plaintiffs cannot file a class action in federal court under CAFA unless one of the named plaintiffs has a claim of at least $75,000. That was the case in Cappuccitti, where – barring rehearing or rehearing en banc – the plaintiff now finds herself having to refile her action in state court. But if that action is refiled in state court – with exactly the same allegations as to diversity, class size, and amount in controversy – Pretka makes it clear that the defendant has a right to remove the action back to federal court. Indeed, under Pretka, the defendant would have no burden whatsoever to show that any single plaintiff has a claim worth in excess of $75,000.
In sum, Cappuccitti is hopelessly in conflict with Pretka – and countless other cases – as well as with the core purpose of Congress in enacting CAFA. At best, it creates an expensive detour on the way to CAFA’s stated goal of increasing federal jurisdiction over class actions that could otherwise be heard only in state court. At worst, it could nullify clear congressional intent, making the federal courts, at least in the 11th Circuit, unavailable to class-action defendants, and even class-action plaintiffs who would otherwise file in federal court.