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This guest post was written by Sean Costello. Mr. Costello is an associate resident in the Atlanta office of Jones Day. This post is entirely his work. It, of course, represents only his views, and not the views of his clients or firm:
The Federal Judicial Center released its Fourth Interim Report on the Class Action Fairness Act last week. You can find it here. This latest report is the most comprehensive examination of CAFA’s impact on the federal courts and class actions to date, and it’s worth a look if you have an interest in CAFA’s effects on class action litigation. I have guest-posted before about the FJC’s second and third interim reports [here and here, so I thought I’d highlight some of the report’s conclusions and offer a few comments about this latest report, as well.
First, this isn’t a scoop. Unlike the second and third interim reports, the FJC’s latest report has gotten some attention already, so you’re not reading about it here first or exclusively. The folks at Product Liability Law 360 published an article late last week pointing to “kinks” in CAFA, using the FJC’s Fourth Interim Report as the springboard for that discussion. See Ron Zapata, Kinks Persist in Class Action Fairness Act: Experts, Product Liability Law 360 (April 9, 2008). You need a subscription to read the article, but here’s a link to the website. It’s a good article, and worth a read. Heck, it even quotes Herrmann on the scourge of nationwide class actions.
Second, as you might have expected, the FJC’s latest report shows that class action filings have increased post-CAFA, just like the earlier interim reports. This time, however, the FJC researchers had a lot more data to work with. Moreover, they don’t merely conclude that class actions have increased; they conclude that “[c]lass action activity in the federal courts has increased dramatically.” Fourth Interim Report at 12. Specifically, the researchers “found a 72 percent increase in class action activity in the eighty-eight district courts . . . studied.” Id. at 1. What you might not have expected is that the largest increase in class action filings in federal court can’t be pinned on CAFA. Federal question cases (mainly Fair Labor Standards Act cases) accounted for a substantial percentage of class actions in the federal system post-CAFA. Id. at 3. The FJC compared July-December 2001 with January-June 2007 and found that federal labor law class actions accounted for nearly 25 percent of all class actions in the earlier period, but accounted for almost 47 percent of all class actions in the latter period! So, for all of those critics of CAFA who argued that Congress had effectively “federalized” class actions through changes in procedural and jurisdictional law, the numbers suggest that the federalization of substantive law remains a pretty good scapegoat for those who think such developments are a bad thing.
Third, with respect to diversity-based class actions, original class action filings remain at much higher levels than before CAFA, while removals have returned to just about their pre-CAFA levels. Pre-CAFA, there were about 12 original diversity class action filings per month, on average. Post-CAFA, the average is 34.5. Id. at 2. While removals of diversity-based class actions increased substantially in the months immediately after CAFA, they have tapered off significantly and are now about where they were before CAFA. From March 2005 through June 2006, there were, on average, about 25 removals of diversity-based class actions per month, compared to about 17 per month pre-CAFA. But in the July 2006 through June 2007 period, that number had declined to 18 per month. Id. at 6. The FJC researchers read all of this to “strongly suggest that CAFA has altered class action plaintiffs’ forum choices.” Id. at 7.
I think there are at least two parts to this explanation. First, for about a year after CAFA was passed, the remand battles centered around a couple of issues: when does a case “commence” under CAFA (CAFA applies only to cases commenced on or after its effective date); and who has the burden of establishing jurisdiction under CAFA. There were debates over whether removing a case effectively “commenced” it (allowing removal of a case filed months or years before), whether filing or service “commenced” a case (the answer depends on whether state law defines “commence” as filing or service), and to what extent changes in claims or parties effectively “commenced” a case as to all or certain defendants, entitling one or more of them to remove it. As time passed, the question of whether a case was commenced on or after CAFA’s effective date became less likely to be of any significance, and, thanks to the fact that CAFA allows for appellate review of remand decisions, the federal appellate courts generally came up with fairly uniform approaches to the issue, though there are some exceptions.
In addition, there were countless debates about who has the burden of establishing jurisdiction and what sort of proof is required to do so. Winners have been declared in these debates, too, and, for better or worse, there are now established rules that plaintiffs and defendants understand – or are expected to understand – even if they don’t agree. In other words, a lot of CAFA’s blank slate has been filled in. For the most part, litigants know if a case is going to be in federal court under CAFA or not, and they don’t waste time on expensive, time-consuming battles over jurisdiction. Initially, I thought that plaintiffs might at least make defendants go to the trouble and expense of removing a case. I guess the plaintiffs’ bar is not as sadistic as I thought. Second, perhaps the class action plaintiffs’ bar has learned that, just as there were “magnet courts” in the state system, there are courts in the federal system that are more likely to certify class actions than other courts, and the class action plaintiffs’ bar is now focusing efforts in those courts. Thus, maybe the class action plaintiffs’ bar is not simply resigned to being in federal court; they are now learning to take advantage of the situation. Which brings me to the next finding of the FJC report.
Fourth, there’s a certain amount of bunching up going on. While there were more class actions in virtually every federal court post-CAFA (except, curiously, Minnesota, where both original filings and removals actually declined after CAFA), id. at 9, some circuits and district courts are seeing a lot more class actions than other circuits and district courts. The FJC’s statistics tell a remarkable story. Comparing the period 2002-2003 with the July 2005-June 2007 period, the Eastern District of Louisiana “saw an elevenfold increase” in original, diversity-based class action filings; the District of New Jersey and the Southern District of Florida each saw seven times as many original, diversity-based class action filings after CAFA than they saw before CAFA; and the Central District of California saw five times as many such cases. Id. at 10.
This could suggest that there are “magnet courts” in the federal system, just as there were (and still are) in the states. In fact, that’s one possibility suggested by the Product Liability Law 360 article I mentioned at the outset. Maybe; maybe not. You’d have to look behind the numbers to draw any sound conclusions. Plus, there are other possibilities – including external forces – that might help explain why there were such whopping increases during the time frame studied. To take one obvious example, Hurricane Katrina struck in August 2005 (the same year that CAFA took effect), and it famously spawned a number of class action lawsuits, most of which were filed in the Eastern District of Louisiana, which had never been known as a jurisdiction hostile to class actions. Moreover, as bad as things might get in a particular district, there’s always Rule 23(f), and, ultimately, the United States Supreme Court to ensure that Rule 23 doesn’t become the bludgeon it had become in the state system. Thus, it would seem that any “magnet court” phenomenon in the federal system would be short-lived. Indeed, just look at what happened recently in the McLaughlin lights cigarette class action that Judge Weinstein certified in the Eastern District of New York. As Herrmann and Beck discussed in a post last week, the Second Circuit decertified that case in devastating fashion. What had threatened to be one of the largest class actions in history was “snuffed out,” thanks to Rule 23(f)’s interlocutory appeal option.
Finally, the trends that the FJC spotted in its earlier interim reports have held true. Personal injury class actions have remained flat post-CAFA. In the post-CAFA world, there have been, on average, just over six such cases filed or removed per month, compared with just over seven in the pre-CAFA period. According to the FJC researchers, this is not a statistically significant difference. Fourth Interim Report at 12. At the same time, consumer “protection” or fraud class actions have multiplied. Post-CAFA, nearly 10 such class actions have been filed in or removed to federal court every month, on average That’s a threefold increase over the pre-CAFA period, when there were only 2.81 such filings and removals per month. Id. As I observed in an earlier guest post, and as many others have pointed out as well, the consumer fraud class action has taken the place of the personal injury class action as the class action plaintiff bar’s lawsuit of choice.
The FJC researchers have promised future reports examining CAFA’s effect on judicial workload “by hanging the contours of class certification” (whatever that means), “other pretrial aspects of class action litigation, and judicial review of settlements.” Id. That should make for some interesting reading. It might even yield some insights into how the federal courts are actually handling class actions that they had rarely dealt with before CAFA. Can’t wait. You’ll read about it here, though you might not read about it here first.