On October 15, 2010, a panel of the U.S. Court of Appeals for the Eleventh Circuit reversed an earlier opinion that would have severely undermined the Class Action Fairness Act (CAFA).  The decision was a victory for WLF, which argued in a brief filed in Cappuccitti v. DirecTV, Inc. that the panel’s earlier decision to dismiss the case for lack of federal jurisdiction under CAFA not only was contrary to binding circuit precedent, but wholly subverted the plain text of CAFA, which looks only to the aggregated amount of the claims of a class and not at the individual amount of any particular claim.

Agreeing with WLF, the Eleventh Circuit granted panel rehearing and replaced its prior opinion, explaining that “subsequent reflection has led us to conclude that our interpretation [of CAFA] was incorrect.”  The panel’s rehearing and reversal restores sanity to the application of CAFA in the Eleventh Circuit.  It is somewhat unusual for a panel of federal appellate judges to admit error, but in this case they had no better choice.  The panel’s earlier opinion was utterly unsupported by CAFA’s text or legislative history and ignored congressional intent.

The case arose in connection with a consumer class action filed in the U.S. District Court for the Northern District of Georgia by consumers challenging DirecTV’s assessment of early-termination fees for subscribers who chose to cancel their satellite television service before the expiration of their contractual commitment.  The fees at issue for each member of the class were, at most, in the hundreds of dollars, but the aggregate amount in controversy easily exceeded $5 million—the threshold amount in controversy under CAFA.  The plaintiffs thus asserted, and DirecTV did not dispute, that federal jurisdiction existed under CAFA.

On interlocutory appeal of the district court’s denial of a motion to compel arbitration, however, the appeals court panel stunningly declined to rule on the substance of the appeal.  Instead, acting sua sponte and without even providing the parties an opportunity to brief the jurisdictional issue, the appeals court ruled that the trial court lacked jurisdiction to hear the case under CAFA and remanded the case for dismissal.  The panel based its decision on its view that in a CAFA action originally filed in federal court, at least one of the plaintiffs must allege an amount in controversy of more than $75,000—the threshold for ordinary diversity jurisdiction.  But, as WLF pointed out in its brief, the primary goal of CAFA was to expand federal jurisdiction over large, multi-state class actions that did not satisfy the traditional requirements for diversity jurisdiction.  In other words, CAFA was intended to replace the $75,000 amount-in-controversy requirement for class actions.