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CAFA Update: Denial of Class Certification Does Not Divest Federal District Court of CAFA Jurisdiction

April 26, 2010
In United Steel, Paper & Forestry, Rubber, Manufacturing, Energy, Allied Industrial & Service Workers Int'l Union, AFL-CIO, CLC, v. Shell Oil Co., et al., ___ F.3d ___, 2010 WL 1571190 (9th Cir. 2010), plaintiffs filed a putative class action alleging defendants violated California Business & Professions Code § 17200 and the California Labor Code. Defendants removed the case to federal court pursuant to the Class Action Fairness Act (CAFA). Because defendants established that minimal diversity of citizenship existed, there were more than 100 members in the proposed class, and the amount in controversy exceeded $5 million, the removal was proper. Id. at *1.

After removal plaintiffs moved for class certification. The district court denied certification and then granted plaintiffs' motion to remand, holding that the case no longer satisfied CAFA's jurisdictional requirements because there was “no reasonably foreseeable possibility” that a class action would be certified." Id.

The Ninth Circuit reversed the remand order. The court observed that CAFA clearly creates original federal court jurisdiction before class certification; Section 1332(d)(8) provides that CAFA applies to any class action before or after the entry of a class certification order. Id. at *3. Thus, Congress did not intend class certification to be a prerequisite to federal jurisdiction. Moreover, the well-established general rule is that once federal jurisdiction is properly invoked it will not be lost by later developments, such as a change in a party' s citizenship, St. Paul Mercury Indemnity Co. v, Red Cab Co., 303 U.S. 283, 293-95 (1938). Id. Had Congress intended to alter the general rule it could have done so by expressly requiring remand after the denial of class certification. Id. Because Congress did not do so, the court held that once a defendant properly removes a putative class action, a district court's subsequent denial of class certification does not divest the court of jurisdiction, and it should not remand the case to state court. Id. at *4.

In upholding the district court's continuing CAFA jurisdiction after denying class certification, the Ninth Circuit joined the Seventh and Eleventh Circuits. See Cunningham Charter Corp. v. Learjet, Inc., 592 F.3d 805, 806-07 (7th Cir. 2010); Vega v. T-Mobile USA, Inc., 564 F.3d 1256, 1268 n. 12 (11th Cir. 2009). These decisions are essential to promoting CAFA's goal of resolving important interstate class action issues in federal courts. A contrary decision allowing remand would have permitted the plaintiff to re-litigate the certification issue in state court and perhaps obtain certification under more generous state standards. See Cunningham Charter Corp., 592 F.3d at 805. United Steel, Cunningham Charter Corp., and Vega will be important decisions for defense counsel seeking to achieve a federal resolution of claims pleaded as significant, interstate class actions.
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