The Subcommittee on the Constitution of the U.S. House of Representatives Judiciary Committee recently held a hearing on potential amendments to the Class Action Fairness Act of 2005 (“CAFA”).  The hearing, held seven years after CAFA’s enactment, was intended to address the impact the statute has had on class action litigation and what improvements or modifications, if any, are needed.  An article by Jessie Kokrda Kamens in the Bloomberg BNA Class Action Litigation Report and an article by John O’Brien in Legal Newsline summarize the hearing, and  the House Judiciary Committee website has a webcast and the hearing testimony.  The article in Class Action Litigation Report describes the Republican and Democratic subcommittee leaders’ positions as follows:

[Subcommittee chairman Rep. Trent] Franks [R-Ariz.] expressed concern in his opening statement that CAFA has introduced a new form of forum shopping where attorneys choose to file their cases in particular federal circuits that have proven friendlier to class actions. He also disapproved of some courts’ requirement that defendants must prove to a legal certainty that the amount in controversy in a suit is over CAFA’s $5 million threshold for removal.

Rep. Jerrold Nadler (D-N.Y.), ranking member of the subcommittee, said in his opening statement, “Far from reducing frivolous, time-consuming and expensive litigation, CAFA appears to have encouraged such litigation by enmeshing courts in lengthy battles of threshold questions that threaten meaningful access to the courts.”

Class action plaintiffs’ attorney Thomas Sobol recommended that CAFA be amended to make it easier for single-state class actions to remain in state court.  He argued that CAFA, together with Multidistrict Litigation (MDL) procedures, have resulted in single-state class actions that should be litigated in state courts being removed to federal court, consolidated in an MDL, and then having class certification denied because the federal court finds it unmanageable to resolve the numerous differences in state law among the various jurisdictions.  He also argued that the Supreme Court’s decision in AT&T v. Concepcion, upholding arbitration provisions that ban class actions, is unfair to consumers. 

John Beisner of Skadden Arps, representing the U.S. Chamber of Commerce’s Institute for Legal Reform, noted the successes that CAFA has made in reducing improper nationwide class actions in state courts.  He highlighted the 90% decrease in class actions filings in Madison County, Illinois, for example, following the enactment of CAFA.  He recommended that Congress consider fixing the requirement some circuits have imposed that a defendant establish the amount in controversy to a “legal certainty,” arguing that was inconsistent with CAFA’s intent to make it easier for defendants to remove cases to federal court.  He also recommended consideration of an amendment to address settlements that provide little benefit to anyone but the plaintiffs’ lawyers or provide chiefly cy pres relief together with attorneys’ fees.  Beisner also noted that some federal courts are certifying classes that include many putative class members that have not really sustained any injury. 

Professor Martin Redish of the Northwestern University School of Law also argued that settlements where the primary relief consists of cy pres relief (e.g., a contribution to a nonprofit organization to do work that might aid the class members) are an abuse of the class action device, and suggested that Congress either prohibit cy pres awards or impose a requirement that the district court find that a substantial portion of the class will actually receive compensation.

From the perspective of someone who is in the trenches defending class actions, most of them brought against insurance companies, I see a couple of potential loopholes in CAFA that were not addressed in this hearing and are worthy of consideration (although neither of these issues are fully resolved by the courts).  Under CAFA, if no defendant is a citizen of the state where suit is brought, the case is always removable if the amount in controversy is over $5 million.  This is because neither the “home state” nor the “local controversy” exception applies if there is no in-state defendant.  In insurance cases this is a common scenario because putative class actions are rarely filed in the insurance company’s home state, and it is rarely proper to name more than one insurer in the same case or to name some other in-state defendant.  That means that the only way plaintiffs’ lawyers can try to keep a case in state court is to keep the amount in controversy under $5 million.  There are two ways they have attempted to do this:

  1. The time period for the putative class is shortened to some period far shorter than the statute of limitations to keep the amount in controversy down.  If permitted, this tactic seems to defeat the purpose of CAFA because the plaintiffs’ attorneys, if they win the first “under $5 million” case, they can push for a larger settlement and/or potentially use collateral estoppel in bringing other “under $5 million” cases covering other short time periods.  The courts of appeals have not squarely addressed the propriety of this tactic, but it is something Congress could easily fix by requiring the use of the statute of limitations time period in calculating the amount in controversy.
  2. A purportedly binding “stipulation” is signed by the named plaintiff that he or she will not seek or accept more than $5 million on behalf of the proposed class.  The Eighth Circuit upheld this tactic in Rolwing v. Nestle Holdings, Inc. where otherwise there was over $12 million in controversy.  As I said in my prior post about Rolwing, these stipulations, if permitted, essentially make CAFA avoidable whenever a plaintiff’s attorney would like, as long as they can find a client willing to execute the stipulation.  While the Eighth Circuit’s opinion is unlikely to be the last word from the courts on this issue, it is something Congress could correct either by prohibiting these stipulations or reducing CAFA’s $5 million threshold to the $75,000 threshold for ordinary federal diversity jurisdiction.

These issues may not be as evident to those involved who are at the center of the debate over potential amendments to CAFA because the plaintiffs’ lawyers who tend to bring the largest, high-profile nationwide and multistate class actions do not tend to use these tactics (they may find them ethically questionable), and defense counsel who tend to defend the largest cases would not see these tactics being used.  But they are becoming an increasingly serious problem and are worthy of consideration in any potential CAFA reform.

Email this postTweet this postLike this postShare this post on LinkedIn
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.