Class Action Fairness Act of 2005: With Commentary and Analysis by Georgene M. Vairo of the Moore's Federal Practice Board of Editors

After years of controversy, Congress enacted the Class Action Fariness Act of 2005 ("CAFA"). The Act, ironically named according to its detractors, is designed to thwart a crucial aspect of the forum selection battle. The essential purpose of CAFA is to provide expanded federal jurisdiction over state claim-based class actions. CAFA provides for expanded federal jurisdiction over class actions by providing jurisdiction based on minimal diversity, and an aggregated amount in controversy in excess of $5 Million. It further contains a removal provision that allows for any such case filed as a class action in state court to be removed to federal court. It also contains provisions aimed at curbing "coupon" class actions. The political nature of this legislation cannot be disputed. Signed into law by the President on February 18, 2005, CAFA was co-sponsored in the House of Representatives by 60 Republicans and 13 Democrats. The purpose of the Act, as Senator Arlen Specter, Chair of the Senate Judiciary Committee, put it, is "to prevent judge shopping to States and even counties where courts and judges have a prejudicial predisposition on cases." The goal of the CAFA, therefore, appears to be a replay of events that took place about 100 years ago. As the United States became more industrialized after the Civil War and the turn of the 19th Century, and business entities came to the forefront of the economy, Congress expanded federal jurisdiction to accommodate industry. This article reviews the purpose of CAFA. It then covers the provisions of the Consumer Class Action Bill of Rights, which are designed to prevent abuses of the class action device by restricting plaintiffs' attorneys fees and other devices. The article then analyzes the expansion of diversity jurisdiction, and its complicated exceptions. It then explores the new mass action provisions, and the new removal provisions, which are designed to make it easier for defendants to remove cases to federal court by depriving plaintiffs' attorneys of some of the pleading strategies that they had used to remain in state court. The discussions on the provisions of CAFA also highlight some of the practical problems attorneys and the courts are likely to face, as well as other issues that the Act raises. It also explores who the winners and losers are likely to be. For example, most observers believe that nationwide consumer class actions will take the biggest hit, because the federal courts generally have been reluctant to certify such class actions. If the federal courts refuse to certify these cases, however, plaintiffs' lawyers will adapt and file actions state by state, structuring the class in each case with an aim towards triggering the mandatory or discretionary remand provisions. It may not be in the defendants' interest for there to be such a balkanization of class actions. Indeed, CAFA's numerous provisions will lead to complex forum selection battles. But will the federal courts act as defendants expect? Federal courts recently have certified the type of sprawling national classes that one might have thought were inappropriate for class certification after Amchem. What happens when it is in the defendants' best interest to dispose of a litigation by awarding coupons to a nationwide class? Will CAFA prevent them from obtaining certification of a settlement class? Finally, it is interesting to look at CAFA through the prism of the Supreme Court's federalism decisions. CAFA will channel state claim-based litigation to the federal courts, where the presumption is that class certification will generally be denied. There certainly is a role for Congress and the federal courts to play in ensuring fair play to all parties. Moreover, it has long been understood that Congress may provide subject matter jurisdiction based on minimal diversity. The question to ask now, however, is whether legislation essentially ousting the state courts from resolving mass tort and other complex state claim-based class action litigation violates the spirit or letter of the Supreme Court's recent federalism decisions. Nonetheless, in the near term, defendants are likely to exercise their expanded right to remove, and plaintiffs are certain to test the contours of some of the more opaque statutory provisions, such as the one-third/two-thirds provisions, in an attempt to keep control of the forum. Indeed, as this article has argued, questions persist about how the statutory changes will work. Given the political origins of CAFA, it will be interesting to see whether its proponents have made the right bet.