[Note to subscribers: I’ve made a correction in this post to fix an error in Prof. Hellman’s name.  If you’ve read it already, there are no substantive changes.]

The Federal Courts Jurisdiction and Venue Clarification Act of 2011 (Public Law 112-63) becomes effective today, January 6, 2012, with respect to new cases commenced in state or federal court from today forward.  It makes a series of changes, some significant and others quite minor, to federal statutes governing jurisdiction, venue and removal.  I will explain here what I see as the potential impact of this on class actions.  For comprehensive summaries of the changes, I recommend Professor Arthur Hellman’s recent articles on Jurist summarizing the new law and describing its lengthy prior history and some missing pieces.  Pepper Hamilton also has a detailed summary that is even more comprehensive than Prof. Hellman’s articles.  House Report 112-10 provides Congress’s most comprehensive summary.  But none of these sources discuss the potential class action impact, which I will focus on here:

The new law makes some changes that apply directly to removal of class actions on the basis that one of the named plaintiffs has an individual claim worth more than $75,000.  These changes also raise some interesting questions about how these new provisions might impact Class Action Fairness Act removals.  Here is the new language in 28 U.S.C. § 1446:

(c) Requirements; Removal Based on Diversity of Citizenship.—

(1) A case may not be removed under subsection (b)(3) on the basis of jurisdiction conferred by section 1332 more than 1 year after commencement of the action, unless the district court finds that the plaintiff has acted in bad faith in order to prevent a defendant from removing the action.

(2) If removal of a civil action is sought on the basis of the jurisdiction conferred by section 1332(a), the sum demanded in good faith in the initial pleading shall be deemed to be the amount in controversy, except that

(A) the notice of removal may assert the amount in controversy if the initial pleading seeks

(i) nonmonetary relief; or

(ii) a money judgment, but the State practice either does not permit demand for a specific sum or permits recovery of damages in excess of the amount demanded; and

(B) removal of the action is proper on the basis of an amount in controversy asserted under subparagraph (A) if the district court finds, by the preponderance of the evidence, that the amount in controversy exceeds the amount specified in section 1332(a).

(3)(A) If the case stated by the initial pleading is not removable solely because the amount in controversy does not exceed the amount specified in section 1332(a), information relating to the amount in controversy in the record of the State proceeding, or in responses to discovery, shall be treated as an `other paper’ under subsection (b)(3).  [Emphasis added.]

Class actions in which a named plaintiff has a claim for more than $75,000 are not that common, but when that is the case the federal court has supplemental jurisdiction over the putative class members’ claims under the Supreme Court’s decision in Exxon Mobil Corp. v. Allapattah Services, Inc., 545 U.S. 546 (2005).  One tactic some plaintiffs’ lawyers have used to try to prevent removal of these cases is to state in the complaint that the named plaintiffs are each seeking less than $75,000.  Sometimes affidavits under oath or formal stipulations to that effect are also attached to the complaint.  Prof. Hellman describes in his article how Congress deleted provisions from the proposed bill that would have expressly authorized this kind of stipulation.  Instead, as long as state law does not allow a demand for a specific amount in a complaint or allows recovery in excess of what the complaint demands, the defendant’s notice of removal will control the amount in controversy under the statute, as long as it meets the preponderance of the evidence test.  This should help defendants successfully remove more of these types of cases to federal court. It is rare that state law prohibits a plaintiff from ever recovering more than they ask for in their initial complaint.

What I find particularly interesting is Congress’s failure to expressly address the impact of this on the Class Action Fairness Act (CAFA).  One tactic plaintiffs’ lawyers have been using in class actions is to have the named plaintiff try to limit the amount of the putative class members’ claims in the aggregate to below the $5 million threshold for CAFA jurisdiction.  No court of appeals has directly addressed this, although the Eighth Circuit is poised to do so, as I noted in a recent post.  For defendants in class actions, this is a much bigger issue than in the $75,000 context because the vast majority of class actions seek relatively small amounts on behalf of each class member, and thus it is rare that a named plaintiff has at least $75,000 at stake. 

The new Section 1446(c) applies only to Section 1332(a), which is the traditional $75,000 diversity jurisdiction section.  It does not expressly apply to CAFA, which is Section 1332(d).  I think there are at least two potential ways to interpret this.  First, it may be that Congress expects that in a class action a named plaintiff cannot ask for a specific amount of damages on behalf of a putative class or limit the damages of the putative class to a specific sum because the named plaintiff has no authority to act on behalf of putative class members before certification.  That would be consistent with the Supreme Court’s decision this year in Smith v. Bayer Corp., where the Court said that putative class members are not bound by what happens in a case before certification and notice.  (It would also be consistent with what the Fifth, Sixth and Seventh Circuits have said on the stipulation issue.  District courts have disagreed on the enforceability of stipulations and there is some dicta in other court of appeals decisions that plaintiffs’ lawyers and some district courts have relied on.)  Second, it may be that Congress expects that what it has now enacted for traditional diversity jurisdiction would be applied by courts, at least by analogy, to CAFA removals.  The federal courts in CAFA cases have generally applied other basic principles of removal jurisdiction to CAFA removals, on the assumption that Congress would presume those principles to apply, while making appropriate exceptions to those principles as necessary based on the purpose, intent and language of CAFA.  The final House Report does not shed any light on what is intended with respect to CAFA but the lengthy prior legislative history (which I have not yet studied) might provide some guidance.

While this new law was not made expressly applicable to pending cases that were filed before today, it may demonstrate Congress’s intent behind pre-existing law where there were gaps in that law, and thus provide courts with some guidance in resolving pending cases.


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Photo of Wystan Ackerman Wystan Ackerman

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you…

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you have something to say.  For those looking for my detailed law firm bio, click here.  If you want a more light-hearted and hopefully more interesting summary, read on:

People often ask about my unusual first name, Wystan.  It’s pronounced WISS-ten.  It’s not Winston.  There is no “n” in the middle.  It comes from my father’s favorite poet, W.H. (Wystan Hugh) Auden.  I’ve grown to like the fact that because my name is unusual people tend to remember it better, even if they don’t pronounce it right (and there is no need for anyone to use my last name because I’m always the only Wystan).

I grew up in Deep River, Connecticut, a small town on the west side of the Connecticut River in the south central part of the state.  I’ve always had strong interests in history, politics and baseball.  My heroes growing up were Abraham Lincoln and Wade Boggs (at that time the third baseman for the Boston Red Sox).  I think it was my early fascination with Lincoln that drove me to practice law.  I went to high school at The Williams School in New London, Connecticut, where I edited the school newspaper, played baseball, and was primarily responsible for the installation of a flag pole near the school entrance (it seemed like every other school had one but until my class raised the money and bought one at my urging, Williams had no flag pole).  As a high school senior, my interest in history and politics led me to score high enough on a test of those subjects to be chosen as one of Connecticut’s two delegates to the U.S. Senate Youth Program, which further solidified my interest in law and government.  One of my mentors at Williams was of the view that there were far too many lawyers and I should find something more useful to do, but if I really had to be a lawyer there was always room for one more.  I eventually decided to be that “one more.”  I went on to Bowdoin College, where I wrote for the Bowdoin Orient and majored in government, but took a lot of math classes because I found college math interesting and challenging.  I then went to Columbia Law School, where I was lucky enough to be selected as one of the minions who spent their time fastidiously cite-checking and Blue booking hundred-plus-page articles in the Columbia Law Review.  I also interned in the chambers of then-Judge Sonia Sotomayor when she was a relatively new judge on the Second Circuit, my only connection to someone who now has one-ninth of the last word on what constitutes the law of our land.  I graduated from Columbia in 2001, then worked at Skadden Arps in Boston before returning to Connecticut and joining Robinson+Cole, one of the largest Connecticut-based law firms.  At the end of 2008, I was elected a partner at Robinson+Cole.

I’ve worked on class actions since the start of my career at Skadden.  Being in the insurance capital of Hartford, we have a national insurance litigation practice and I was fortunate to have the opportunity to work on some prominent class actions arising from the 2004 hurricanes in Florida and later Hurricane Katrina, including cases involving the applicability of the flood exclusion, statutes known as valued policy laws, and various other issues.  My interest and experience in class actions gradually led me to focus on that area.

In Connecticut courts I’ve defended various kinds of class actions that go beyond insurance, including cases involving products liability, securities, financial services and consumer contracts.

My insurance class action practice usually takes me outside of Connecticut.  I’ve had the pleasure of working on cases in various federal and state courts and collaborating with great lawyers across the country.  While class actions are an increasingly large part of my practice, I don’t do exclusively class action work.  The rest of my practice involves litigating insurance coverage cases, often at the appellate level.  That also frequently takes me outside of Connecticut.  A highlight of my career thus far was working on Standard Fire Ins. Co. v. Knowles, the U.S. Supreme Court’s first Class Action Fairness Act case.  I was Counsel of Record for Standard Fire on the cert petition, and had the pleasure of working with Ted Boutrous on the merits briefing and oral argument.

I started this blog because writing is one of my favorite things to do and I enjoy following developments in class action law, writing about them and engaging in discussion with others who have an in interest in this area.  It’s a welcome break from day-to-day practice, keeps me current, broadens my network and results in some new business.

When I’m not at my desk or flying around the country trying to save insurance companies from the plaintiffs’ bar, or attending a conference on class actions or insurance litigation (for more on those, see the Seminars/Programs page of this blog), I often can be found playing or reading with my young daughter, helping my wife with her real estate and mortgage businesses, reading a book about history or politics, or watching the Boston Red Sox (I managed to find bleacher seats for Game 2 of the 2004 World Series when Curt Schilling pitched with the bloody sock).  When the weather is good I also love to take the ferry to Block Island, Rhode Island and ride a bike or walk the trails there. If you go, I highly recommend the Clay Head Trail.