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CAFA Class Action Defense Removal Cases–Springman v. AIG: Seventh Circuit Affirms Denial Of Plaintiff’s Motion To Remand Class Action To State Court Upholding Removal Jurisdiction Under Class Action Fairness Act (CAFA)

Jun 4, 2008 | By: Michael J. Hassen

Amendment of Class Action Complaint to Add Party-Defendant Years after Plaintiff Learned Defendant’s Identity Constituted a New Action Under Class Action Fairness Act of 2005 (CAFA) thereby Creating CAFA Removal Jurisdiction over Class Action Seventh Circuit Holds

In July 2003, plaintiff file a putative class action in Illinois state court against AIG Claim Services and Illinois National Insurance Company for violations of state fraud and consumer protection laws; the class action complaint alleged that AIG Claim Services, in processing claims under Illinois National insurance policies, systematically underpaid accident insurance benefits. Springman v. AIG Marketing, Inc., 523 F.3d 685, 686 (7th Cir. 2008). In December 2003, defense attorneys disclosed that AIG had not adjusted plaintiff’s claim; plaintiff did not inquire further until October 2004, at which time he learned that at affiliate, AIG Marketing, had handled the claim underlying the class action. Id. Nonetheless, plaintiff waited another three years before seeking leave to file an amended class action complaint to sue AIG Marketing in place of AIG Claim Services, id. The state court granted the motion, and defense attorney removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA). Id. AIG Claim Services could not have removed the class action itself because the class action complaint had been filed well before CAFA’s effective date, id. Plaintiff’s lawyer moved to remand the class action to state court, but the motion was denied, id. The Seventh Circuit affirmed.

The question before the Circuit Court was whether the substitution of AIG Marketing for AIG Claim Services constituted “the commencement of a suit against AIG[ Marketing] within the meaning of the Class Action Fairness Act, thus enabling removal of the entire suit.” Springman, at 686-87 (citing 28 U.S.C. § 1453(b)). After reaffirming the Seventh Circuit’s law, adoption by all but one other circuit courts, that post-filing acts may affect whether a class action complaint is removable under CAFA, see id., at 687 (citations omitted), the Court reiterated the federal removal doctrine, which permits removal based on post-filings acts if, inter alia, the amended complaint “adds a new defendant.” Id. (citation omitted).

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CAFA Class Action Defense Cases–Korn v. Polo Ralph Lauren: California Federal Court Denies Motion To Remand Class Action To State Court Holding Defense Established Class Action Alleging Song-Beverly Act Violations Involved More Than $5 Million

May 21, 2008 | By: Michael J. Hassen

Defense Evidence in Support of Removal of Class Action to Federal Court Adequately Established Removal Jurisdiction under Class Action Fairness Act (CAFA) California Federal Court Holds

Plaintiff filed a putative class action lawsuit in California state court against Polo Ralph Lauren alleging violations of California’s Song-Beverly Act; specifically, the class action complaint alleged that defendant requested personal information from customers as part of credit card transactions in violation of California Civil Code § 1747.08. Korn v. Polo Ralph Lauren Corp., 536 F.Supp.2d 1199, 1202 (E.D. Cal. 2008). Defense attorneys removed the class action to federal court alleging removal jurisdiction under the Class Action Fairness Act (CAFA); plaintiffs moved to remand the class action to state court on the grounds that defendant failed to establish the requisite diversity or amount in controversy. Id. As the district court explained, “CAFA grants district courts original jurisdiction over civil class actions filed under federal or state law in which any member of a class of plaintiffs is a citizen of a state different from any defendant and the amount in controversy for the putative class members in the aggregate exceeds the sum or value of $5,000,000, exclusive of interest and costs.” Id. (citing 28 U.S.C. § 1332(d)(2)). The district court refused to remand the class action to state court, holding that defendant sufficiently established CAFA removal jurisdiction.

Plaintiff first argued that Polo Ralph Lauren did not establish that it was not a citizen of California, Korn, at 1201; the district court rejected this argument, noting that plaintiff is bound by the judicial admission in his complaint that defendant is a Delaware corporation with its principal place of business in New Jersey, id., at 1203. Accordingly, the federal court held plaintiff “bound by the allegations in his complaint that assert defendant’s citizenship, for purposes of diversity jurisdiction, is in Delaware and New Jersey.” Id. Plaintiff next argued that the defense failed to establish the $5,000,000 amount in controversy requirement. Id., at 1201. While the class action complaint did not seek a specific amount of damages, the district court observed that the class action seeks “statutory civil penalties for the alleged violations [of] up to $1000 per violation.” Id., at 1202. Further, as part of the documentation supporting removal of the class action to federal court, defense attorneys had submitted a declaration establishing that Polo Ralph Lauren had “processed more than 5,000 credit card transactions over the last year in the state of California.” Id. The district court held that this was sufficient.

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CAFA Class Action Defense Cases–Pew v. Cardarelli: Second Circuit Holds District Court Erred In Remanding Class Action Because Exception To CAFA Removal Jurisdiction Limited To “Disputes Over The Meaning Of The Terms Of A Security”

May 19, 2008 | By: Michael J. Hassen

District Court Erred in Remanding Class Action to State Court because while Class Action Complaint Involved Sale of Securities it was Premised on Fraudulent Concealment of Company’s Financial Condition so Exception to CAFA (Class Action Fairness Act) Removal Jurisdiction did not Apply Second Circuit Holds

Plaintiffs filed a putative class action in New York state court against various defendants, including Agway (the issuer) and PriceWaterhouseCoopers (its auditor), alleging violations of New York’s consumer fraud statute; specifically, the class action complaint asserted “that officers of an issuer – abetted by the issuer’s auditor – failed to disclose, while marketing certain debt certificates, that the issuer was insolvent.” Estate of Pew v. Cardarelli, 527 F.3d 25 (2d Cir. 2008) [Slip Opn., at 3]. Plaintiffs had filed a prior class action complaint in New York state court alleging Agway failed to disclose in financial statements that it was insolvent, and was discharging its debts through the issuance of new certificates; defense attorneys removed that class action to federal court, so plaintiffs amended the class action “to plead essentially the same acts of concealment under New York’s consumer fraud law.” Id., at 5. The district court subsequently granted a defense motion to dismiss with prejudice the federal securities claims, but dismissed without prejudice the remaining state law claim based on its decision not to exercise supplemental jurisdiction over it. Id., at 6. Plaintiffs then filed another class action in New York state court that sought relief only under New York law, id. Defense attorneys again removed the class action to federal court, asserting removal jurisdiction existed under the Class Action Fairness Act of 2005 (CAFA), id. The district court granted plaintiffs’ motion to remand the class action to state court on the ground that it “falls within an exception to CAFA’s removal provision for actions ‘that relate[] to the rights, duties (including fiduciary duties), and obligations relating to or created by or pursuant to any security.” Id., at 6-7. The Second Circuit granted a defense request for permission to appeal, and reversed.

Agway was an agricultural supply and marketing cooperative that sought to raise money by issuing unsecured, fixed-interest debt instruments (money market certificates). Pew, at 4. The question presented was whether the class action’s “state-law consumer fraud claim” falls within the exception to CAFA jurisdiction, as determined by the district court. Id., at 13. Finding that “the imperfect drafting of the status makes it ambiguous,” id., and elsewhere describing CAFA’s text as “cryptic,” see id., at 19, the Circuit Court examined the statute’s wording, context and legislative history. Based on its analysis, the Second Circuit held that even though the Agway Certificates are “securities” and create “obligations” and “rights” in the holders, id., at 18, the exception to CAFA did not apply because the gravamen of the class action complaint “does not ‘relate[] to’ those rights; rather, it is a state-law consumer fraud action alleging that Agway fraudulently concealed its insolvency when it peddled the Certificates.” Id., at 19. In sum, the Court held that Congress intended to reserve the exception to CAFA removal jurisdiction for “‘disputes over the meaning of the terms of a security,’ such as how interest rates are to be calculated, and so on.” Id., at 23. Accordingly, it concluded that the district court erred in remanding the class action to state court and reversed. Id.

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CAFA Class Action Defense Cases–Brooks v. GAF: South Carolina Federal Court Remand Class Action To State Court For Lack Of Requisite Amount In Controversy But Expressly Prohibits Plaintiffs From Recovering Damages In Excess Of Prayer

May 8, 2008 | By: Michael J. Hassen

As Master of Class Action Complaint Plaintiffs Successfully Limited Amount in Controversy so as to Preclude Removal Jurisdiction on Diversity Grounds or under CAFA (Class Action Fairness Act) Necessitating Remand of Class Action to State Court, but South Carolina Federal Court Expressly Limits Plaintiffs’ Individual and Class Action Recovery to Limits Pleaded in Class Action Complaint

Plaintiffs filed a putative class action lawsuit in South Carolina state court against GAF Materials “alleging claims for negligence, negligent representation, breach of warranty, breach of implied warranties, fraud, a violation of the South Carolina Unfair Trade Practices Act (‘SCUPTA’), and unjust enrichment.” Brooks v. GAF Materials Corp., 532 F.Supp.2d 779, 780 (D.S.C. 2008). The class action complaint alleges the class “suffered property damage as a result of the Defendant’s defective roofing materials” and seeks compensatory and punitive damages, but in order to avoid removal jurisdiction the class action complaint expressly states that the “amount in controversy for the entire proposed Class does not exceed five million dollars” and that “[t]he Plaintiffs’ individual recovery, as well as any putative Class Members individual recovery, exclusive of interest and costs, is not to exceed $74,999.00.” Id. Defense attorneys removed the suit to federal court under the Class Action Fairness Act (CAFA), and plaintiffs’ moved to remand the action to state court. Id. Defense attorneys originally removed the class action in May 2006, but the district court granted plaintiffs’ motion to remand “because the amount in controversy does not exceed $75,000, exclusive of interest and costs, for diversity jurisdiction under 28 U.S.C. § 1332.” Id., at 780. After plaintiffs amended their class action complaint, defense attorneys again removed the action to federal court but the district court remanded the action “for lack of jurisdiction based on the one-year cap on removal set forth in 28 U.S.C. § 1446(b),” id., at 780-81, but the court subsequently rescinded its remand order and requested briefing on whether the amount in controversy exceeded $5 million for purposes of CAFA removal jurisdiction, id., at 781.The district court granted the motion.

In analyzing whether the Class Action Fairness Act authorized removal of this lawsuit, the district court stressed that “Plaintiffs have placed a clear limitation on damages in their complaint.” Brooks, at 782. The Court held at page 782, “the court declines to ‘adopt any approach under which the court will be required to undertake its own independent review of the amount in controversy despite a specific limitation on damages in the plaintiff’s complaint.’” As the master of their complaint, plaintiffs are entitled to limit damages sought therein in order to avoid removal jurisdiction, and they effectively did so here. Id. Accordingly, the district court granted plaintiffs’ motion to remand the class action to state court, finding that the amount in controversy requirement had not been met. Id., at 782-83. However, the federal court expressly barred plaintiffs from playing games with removal. The court’s remand order expressly states, “with respect to all claims, the Plaintiffs are barred from recovering a total amount of damages, including actual damages, punitive damages, treble damages, and statutory attorney’s fees, exceeding five million dollars ($5,000,000), exclusive of interest and costs for the putative class action, and the Plaintiffs are barred from recovering a total amount of damages, including actual damages, punitive damages, treble damages, and statutory attorney’s fees, exceeding seventy-four thousand nine hundred ninety-nine dollars ($74,999.00), exclusive of interest and costs, for any individual claims.” Id., at 783.

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CAFA Class Action Defense Cases–In re Katrina Canal: Fifth Circuit Affirms Denial Of Motion To Remand Class Action To State Court Holding State Sovereignty Did Not Preclude Removal Of Class Action Under CAFA Because Citizens Were Class Members

Apr 23, 2008 | By: Michael J. Hassen

Class Action by State on Behalf of Itself and Citizens Properly Removed under Class Action Fairness Act (CAFA) because State’s Sovereign Immunity not Applicable to Citizens Fifth Circuit Holds

Louisiana’s Attorney General Louisiana filed a putative class action against more than 200 insurance companies on behalf of the State and numerous Louisiana citizens based on defendants’ alleged failure to pay for covered insurance claims arising out of Hurricanes Katrina and Rita; the class action complaint alleged only state law claims, and sought compensatory, declaratory and injunctive relief. In re Katrina Canal Litig. Breaches, 524 F.3d 700, 2008 WL 1118176, *1 (5th Cir. 2008). Defense attorneys removed the class action to federal court asserting removal jurisdiction under the Class Action Fairness Act (CAFA) and the Multiparty Multiform Trial Jurisdiction Act (MMTJA). Id., at *1, *3. Louisiana moved to remand the class action to state court, “arguing that CAFA did not apply and that Louisiana enjoyed sovereign immunity from involuntary removal to federal court in that it was suing in its state court to enforce state law.” Id., at *1. The district court denied the motion; because it found that removal jurisdiction existed under CAFA, it did not reach the issue of whether jurisdiction also existed under MMTJA. Id., at *3. The Fifth Circuit granted the State’s petition under CAFA for permission to appeal the remand order under CAFA, and then affirmed.

On appeal, Louisiana argued “CAFA does not apply, and that even if it does apply by its terms, it cannot abrogate sovereign immunity from federal process, or at the least Congress did not clearly do so in CAFA.” In re Katrina, at *3. (Louisiana also raised arguments under MMTJA, but the Fifth Circuit did not address this issue so we do not discuss it here.) The only aspect of CAFA removal jurisdiction challenged on appeal was diversity; specifically, Louisiana argued that a state is not a person for purposes of diversity jurisdiction and, further, that “it has not filed a class action as defined by CAFA.” Id. The Fifth Circuit held that this was not the relevant inquiry, because “Louisiana seeks relief for both the State and the citizens as “recipients” of insurance.” and the citizens adequately satisfied the minimal diversity required by CAFA. Id. The “difficult question” addressed by the Circuit Court was whether state sovereignty barred removal. Id.

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CAFA Class Action Defense Cases–Lussier v. Dollar Tree: Ninth Circuit Upholds Denial Of Attorney Fees For Flawed Removal Of Class Action Under Class Action Fairness Act Because Basis For Removal Was Objectively Reasonable

Apr 22, 2008 | By: Michael J. Hassen

Following Remand of Labor Law Class Action to State Court on Grounds that Class Action had been “Commenced” Prior to Effective Date of Class Action Fairness Act of 2005 (CAFA) thus Precluding Removal Jurisdiction under CAFA, District Court did not Abuse its Discretion in Refusing to Award Plaintiffs Attorney Fees because Defense Removed Class Action under a Novel Theory of First Impression Ninth Circuit Holds Plaintiffs filed a class action lawsuit against Dollar Tree Stores alleging various labor law violations.

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CAFA Removal Class Action Defense Cases-Alicea v. Circuit City: New York Federal Court Awards Plaintiff Attorney Fees Following Remand Of Class Action To State Court Holding Removal Jurisdiction Did Not Reasonably Exist Under Class Action Fairness Act

Mar 3, 2008 | By: Michael J. Hassen

Defense Removal of Class Action to New York Federal Court under CAFA (Class Action Fairness Act of 2005) was not Objectively Reasonable thus Warranting Award of Attorney Fees to Plaintiff Following Remand of Class Action to State Court

Plaintiff filed a putative class action lawsuit in New York state court against Circuit City. Alicea v. Circuit City Stores, Inc., 534 F.Supp.2d 432, 2008 WL 344695, *1 (S.D.N.Y. 2008). The class action complaint, a copy of which may be found here, alleged that Circuit City’s “return policy and imposition of a ‘restocking fee’ in the amount of 15% of the purchase price of certain returned items” violated New York General Business Law § 349. Defense attorneys removed the class action to federal court on the ground that removal jurisdiction existed under the Class Action Fairness Act of 2005 (CAFA); plaintiff’s lawyer moved to remand the class action complaint to state court arguing that Circuit City had failed to establish that the $5 million amount-in-controversy requirement had been met for CAFA removal jurisdiction. Alicea, at *1. Plaintiff also sought attorney fees under 28 U.S.C. § 1447(c), id. The district court granted the motion to remand the class action to state court, and in the order summarized here, awarded plaintiff attorney fees under § 1447(c). (The order remanding the class action to state court may be found here.)

As a threshold matter, the district court noted that “the standard governing the application of section 1447(c)…is whether the removing party ‘lacked an objectively reasonable basis for seeking removal.’” Alicea, at *1 (quoting Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005)). The federal court also “‘recognize[d] the desire to deter removals sought for the purpose of prolonging litigation and imposing costs on the opposing party, while not undermining Congress’ basic decision to afford defendants a right to remove as a general matter, when the statutory criteria are satisfied.’” Id. (quoting Martin, at 140). Here, defense attorneys argued that a reasonable basis existed for removing the class action under CAFA because “(1) it was ‘unclear to defendant whether plaintiff was seeking treble damages’…, (2) ‘at the time of removal, it objectively appeared that plaintiff’s claims were not limited to New York State consumers’…, and (3) ‘the costs of compliance would extend in perpetuity,’ and thus ‘CAFA’s jurisdictional limits would have been easily met.’…” Id. The district court rejected each of these arguments.

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BP CAFA Removal Class Action Defense Cases-Eatinger v. BP: Kansas Federal Court Refuses To Remand Class Action To State Court Holding Removal Jurisdiction Exists Under Class Action Fairness Act (CAFA)

Feb 21, 2008 | By: Michael J. Hassen

Amount in Controversy Required for Removal Jurisdiction under CAFA (Class Action Fairness Act) not Defeated by Plaintiff’s Statement in Class Action Complaint that Damages “May” not Exceed $5 Million Kansas Federal Court Holds

Plaintiff filed a class action lawsuit in Kansas state court against BP America on behalf of royalty owners alleging that BP engaged in self-dealing and “failed to properly account and pay royalties to the plaintiff and the class”; defense attorneys removed the class action to federal court arguing that removal jurisdiction existed under the Class Action Fairness Act (CAFA). Eatinger v. BP America Prod. Co., 524 F.Supp.2d 1342, 2007 WL 4395068, *1 (D. Kan. 2007). Plaintiff’s lawyer moved to remand the class action to state court on the ground that the amount in controversy failed under either test because the class action complaint specifically pleads amounts in controversy below the jurisdictional requirements. Id. The district court denied the motion to remand.

The district court noted plaintiff did not dispute diversity,” Eatinger, at *5; accordingly, the jurisdictional issue is whether the amount in controversy requirement is met. Accordingly, “the single matter in dispute” is whether “the requisite amount in controversy” had been shown, id., at *1. Defense attorneys submitted that, based on the definition of the proposed class, “the minimum amount of total royalty payments alleged to be in controversy to be at least $693,000,000” so unless the alleged underpayment is less than .7215009% the amount in controversy exceeds $5,000,000. Id. Moreover, the defense argued that plaintiff’s individual claim places in excess of $440,000 at issue, so unless he claims less than a 16% underpayment his amount in will exceed $75,000. Id. Plaintiff’s lawyer responded that central to BP’s arguments is the claim that plaintiff has “refused to stipulate to an amount of damages at stake,” and advanced various objections to this reasoning, id., at *2. Defense attorneys countered that requiring more than its percentage-based calculations of damages “would create a virtually impossible standard of proof,” id. Additionally, plaintiff’s “vague statement in the initial complaint that the amount in controversy ‘may’ exceed $5 million,” combined with his refusal to stipulate otherwise, “is sufficient to establish jurisdiction in federal court.” Id.

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CAFA Class Action Defense Cases-Toller v. Sagamore: Arkansas Federal Court Delays Ruling On Motion To Remand Class Action Against Insurer Pending Additional Evidence Of Amount In Controversy For Removal Under Class Action Fairness Act (CAFA)

Feb 13, 2008 | By: Michael J. Hassen

In Motion for Remand of Class Action Against Insurer for Failure to Provide No-Fault Insurance, both Plaintiff and Defense Failed to Present Admissible Evidence of Amount in Controversy so Court had Insufficient Evidence to Determine Whether Removal Jurisdiction Existed Under CAFA (Class Action Fairness Act) Arkansas Federal Court Holds

Plaintiff filed a putative class action in Arkansas state court against her automobile insurance carrier, Sagamore Insurance, alleging various breaches of the terms of the auto policy. Toller v. Sagamore Ins. Co., 514 F.Supp.2d 1111, 1113-14 (E.D. Ark. 2007). The class action complaint alleged that Sagamore “has consistently issued automobile liability insurance policies without providing no-fault coverages or obtaining waivers of such coverage as required by Arkansas law.” Id., at 1114. Defense attorneys removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA); plaintiff’s lawyer moved to remand the class action on the ground that removal jurisdiction did not exist under CAFA because the requisite amount in controversy had not been established. Id. The district court found that it lacked sufficient evidence from either side to rule on the remand motion and, accordingly, held the motion in abeyance pending receipt of such evidence.

Plaintiff’s class action alleged that Sagamore issued her an automobile insurance policy without providing her no-fault coverage and without obtaining from her a waiver of such coverage in writing. Toller, at 1114. Following a car accident in which she suffered $48,000 in medical costs, Toller filed her lawsuit alleging that Sagamore wrongly denied her claim. The class action complaint provided no further information regarding alleged damages, and plaintiff did not limit her damages to an amount under $75,000. Id. The relief sought in the complaint includes attorney fees, penalties for breach of contract, and declaratory and injunctive relief, but the class action provides that “the amount in controversy will not exceed the sum or value of $4,999,999, and she specifically waives any amount of compensatory damages, restitution, interest, costs, and attorneys’ fees above that amount.” Id. Defense attorneys removed the class action to federal court alleging both diversity jurisdiction and CAFA removal jurisdiction: we do not discuss here the district court’s conclusion that the requirements for diversity jurisdiction had not been met, see id., at 1116-18; rather, we discuss here solely removal jurisdiction under CAFA, and Sagamore’s argument “that this case is a class action, that the class has more than 100 members, that the amount in controversy exceeds $5,000,000, and that minimal diversity exists, so this Court has jurisdiction pursuant to the Class Action Fairness Act, codified at 28 U.S.C. § 1332(d),” id., at 1114.

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CAFA Class Action Defense Cases-Main Drug v. Aetna: Eleventh Circuit Dismisses For Lack Of Jurisdiction Appeal From District Court Refusing To Remand Class Action Removed Under Class Action Fairness Act (CAFA)

Feb 11, 2008 | By: Michael J. Hassen

Failure to Timely Seek Permission to Appeal Denial of Motion to Remand Class Action Complaints Removed to Federal Court under CAFA (Class Action Fairness Act) Required Dismissal of Appeals for Lack of Jurisdiction Eleventh Circuit Holds

Plaintiff, a pharmacy, filed a putative class action against insurance/pharmacy benefit management companies for misrepresentation, breach of contract, unjust enrichment and conspiracy, alleging that defendants failed to reimburse pharmacies “according to an agreed-upon formula for brand name prescriptions dispensed to Defendants’ insureds.” Main Drug, Inc. v. Aetna U.S. Healthcare, Inc., 455 F.Supp.2d 1323, 1324 (M.D. Ala. 2006). Defense attorneys removed the action to federal court asserting, inter alia, federal court jurisdiction under the Class Action Fairness Act of 2005 (CAFA), 28 U.S.C. § 1332(d). Id. Plaintiffs moved to remand the class action to state court, arguing that the defense had not established the requisite $5 million amount-in-controversy, id. The district court held that even under CAFA the defense bears the burden of establishing removal jurisdiction, but concluded that the defense had satisfied the amount in controversy requirement. Our summary of that district court order may be found here. Plaintiffs filed notices of appeal with the Eleventh Circuit; the Circuit Court dismissed the appeals for lack of jurisdiction. Main Drug, Inc. v. Aetna U.S. Healthcare, Inc., 475 F.3d 1228 (11th Cir. 2007).

The Eleventh Circuit noted the two consolidated class action lawsuits had been filed prior to CAFA’s effective date but the clerk of the court did not issue the summons until after CAFA’s effective date. Defense attorneys removed the class actions to federal court, and plaintiffs’ lawyers filed motions to remand arguing that the class action complaints had been filed before CAFA went into effect. The district court denied the motion. Main Drug, at 1229. Plaintiffs appealed the denial of the motion to remand within seven (7) days of the district court order, but never sought permission to appeal pursuant to Rule 5. Id. The Circuit Court explained at pages 1229 and 1230,

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