Source: http://www.globalclassactionsblog.com/author/michael-bloom/
Timestamp: 2019-04-24 20:44:40+00:00

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UNITED STATES – The Consumer Financial Protection Bureau (“CFPB”) recently announced that it intends to limit the scope of mandatory arbitration clauses contained in consumers’ agreements with credit card companies and other consumer financial institutions. To this point, credit card companies have been able to obstruct efforts by aggrieved consumers to bring class actions by invoking mandatory arbitration provisions in their contracts, known as “free pass” clauses. Under those provisions, aggrieved consumers must redress their injuries in arbitration rather than participating in any sort of group action in state or federal court. In most instances, though, the injuries suffered by consumers are relatively small—deterring consumers from incurring the costs of filing an arbitration action. Thus, according to a study by the CFPB released in March, few actions are ever brought to hold consumer finance companies accountable for their alleged misconduct.
Last week, the CFPB published an outline in which it detailed the rules it intends to promulgate to prevent consumer finance companies from invoking their oppressive “free pass” provisions. According to the CFPB, among other possible rules, it is considering a rule that would render mandatory arbitration provisions inapplicable to cases filed as class actions unless a court denies class certification on the consumers’ claim or the court dismisses the class allegations. The CFPB believes that there are three primary benefits of its proposal: (1) a day in court for consumers; (2) a deterrent effect that would incentivize companies to comply with the law to avoid lawsuits; and (3) increased transparency.
The CFPB’s outline can be found here.
UNITED STATES — On December 15, 2014, the Supreme Court of the United States issued a decision in Dart Cherokee Basin Operating Co., LLC v. Owens, 2014 U.S. Lexis 8435, 37 (U.S. Dec. 15, 2014) that will be helpful to putative class action defendants seeking to remove their cases from state court to federal court pursuant to 28 U.S.C. § 1446(a). The court held that § 1446(a) means exactly what is says – that is, defendants seeking to remove cases to federal court are only required to file a “short and plain statement” setting forth their grounds for removal, and need not file accompanying evidentiary submissions.
Under § 1446(a), “[a] defendant or defendants desiring to remove any civil action from a State court shall file in the district court of the United States for the district and division within which such action is pending a notice of removal signed pursuant to Rule 11 of the Federal Rules of Civil Procedure and containing a short and plain statement of the grounds for removal . . .” A circuit split emerged as to whether defendants seeking removal in class actions brought pursuant to the Class Action Fairness Act (“CAFA”) must affirmatively establish the jurisdictional threshold amount in controversy, by submitting evidence, in their notices of removal. The Fourth and Seventh Circuit Courts of Appeals found that the pleading standard for defendants seeking removal was the same standard imposed on plaintiffs in drafting an initial complaint. The Tenth Circuit, however, imposed a heightened burden on defendants and required them to include evidence establishing the amount in controversy in their notices of removal. The Supreme Court, drawing on the legislative history of § 1446 and the inequities in imposing a more stringent pleading burden on defendants than the “plausibility” standard that plaintiffs must satisfy, held, “as specified in § 1446(a), a defendant’s notice of removal need include only a plausible allegation that the amount in controversy exceeds the jurisdictional threshold.” 2014 U.S. Lexis 8435 at *14.
The Court’s decision, however, does not prevent plaintiffs from challenging the district court’s jurisdiction based on the amount in controversy – it merely delays the challenge process. Under § 1446(c)(2)(B), “[R]emoval . . . is proper on the basis of an amount in controversy asserted . . . if the district court finds, by the preponderance of the evidence, that the amount in controversy exceeds” the jurisdictional threshold. Under that provision, plaintiffs (or the district court) can challenge the amount in controversy asserted by defendants in their notices of removal. Dart Cherokee, 2014 U.S. Lexis 8435 at *12. “In such a case, both sides submit proof and the court decides, by a preponderance of the evidence, whether the amount-in-controversy requirement has been satisfied.” Id. Thus, while class action defendants are only required to make a “plausible allegation” in a notice of removal that the amount in controversy threshold is satisfied, they must still be prepared to defend an immediate challenge to their amount in controversy allegation.
Notably, a group of Justices led by Justice Scalia, dissented from the Court’s opinion. They did not take issue with the merits of the Court’s opinion, though. Rather, they submitted that the Court did not have jurisdiction over the question presented because, in the case at issue, the Tenth Circuit refused to hear the petitioner’s appeal from the district court’s order remanding the class action back to state court. The majority argued that jurisdiction was proper because the Tenth Circuit “relied on the legally erroneous premise that the District Court’s decision was correct.” Id. at *16.

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