Class Action

CAFA Class Action Defense Cases–Admiral Insurance v. Abshire: Fifth Circuit Affirms Remand Of Class Action Holding Amended Complaint Did Not Commence Civil Action Under Class Action Fairness Act (CAFA)

By Michael J. Hassen

District Court did not Err in Remanding Class Action to State Court because Addition of Class Action Allegations to Ninth Amended Complaint did not Commence a Civil Action under CAFA (Class Action Fairness Act) and Addition of New Plaintiffs and Claims did not Commence a Civil Action under CAFA Fifth Circuit Holds

In the early 1990s, plaintiffs, as purchasers of “life insurance policies, annuities, and corporate notes from three Louisiana companies” – Public Investors Life Insurance Co. (PILCO), Public Investors (PI) and Midwest Life Insurance (MLI) – filed a class action in Louisiana state court against the State of Louisiana and other defendants after all three companies failed; the class action complaint alleged “negligent, intentional, and criminal acts (regulatory and otherwise) that they claim contributed to these failures.” Admiral Ins. Co. v. Abshire, ___ F.3d ___, 2009 WL 1887381, *1 (5th Cir. 2009). The original lawsuits were not styled as class actions; rather, originally more than 1300 plaintiffs filed three lawsuits in two different Louisiana state courts. Id. Eventually, the three lawsuits were consolidated and a ninth amended complaint was filed that sought class action treatment. Id. Defense attorneys removed the ninth amended class action complaint to federal court pursuant to the Class Action Fairness Act of 2005 (CAFA). Id. The district court remanded the lawsuit to state court, but denied plaintiffs’ motion for fees and costs associated with securing remand, id. Both sides appealed and the Fifth Circuit affirmed both the remand order and the denial of fees and costs.

The state-court complaint was amended to seek class action treatment because plaintiffs’ counsel lost contact with about 250 of the plaintiffs and an advisory opinion from the Ethics Advisory Service Committee of the Louisiana State Bar Association “determined that [plaintiffs’] attorneys would violate the Rules of Professional Conduct if they tried or settled the claims of plaintiffs with whom they had lost contact, using only the powers of attorney that these plaintiffs had executed at the time of retainer.” Abshire, at *1. Plaintiffs’ counsel initially sought to withdraw as counsel for those clients, but subsequently pursued the class action route in order to resolve the ethical issues created by loss of contact with their clients. Id., at *1-*2. Defense attorneys removed the lawsuit to federal court immediately after the ninth amended complaint was filed, id., at *2. Plaintiffs moved to remand the class action on the ground that it had been “commenced” long before CAFA’s February 18, 2005 effective date; the district court agreed, id. Pursuant to 28 U.S.C. § 1447(c), plaintiffs requested attorneys’ fees and costs incurred in winning remand, arguing that the State’s removal of the class action to federal court under CAFA was “objectively unreasonable.” Id., at *3. The district court refused to award fees “because case law in the area was unsettled at the time of removal.” Id.

Full post as published by Class Action Defense Blog on July 21, 2009 (boomark / email).