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: CAFA Law Blog - Information, cases and insights regarding the Class Action Fairness Act of 2005

Love May Not Be Eternal, But CAFA Is; It Does Not Disappear On Denial Of Class Certification.

Delsing v. Starbucks Coffee Corp., Slip Copy, 2010 WL 1507642 (D. Minn. Apr 14, 2010)(No. 08-CV-1154PJS/JSM).

Who would have thought that the tip jar at Starbucks would amount to a federal case? The Court refused to remand the action to state court concluding that CAFA jurisdiction over an action depends on whether the action was filed as a class action, and not on whether the action was eventually certified as a class action.

Two former baristas of Starbucks Coffee Corporation brought a class action challenging the manner in which Starbucks distributed tips placed by customers in tip jars. After Starbucks removed this action to federal court pursuant to CAFA, the District Court denied the plaintiffs' motion for class certification. The plaintiffs then moved to remand the case to state court, arguing that CAFA jurisdiction did not survive a denial of class certification. 

In absence of a decision by the U.S. Eighth Circuit, and given the divided opinion of the federal courts on the issue, the Court found most persuasive the recent opinion of the Seventh Circuit in Cunningham Charter Corp. v. Learjet, Inc., 592 F.3d 805 (7th Cir. 2010), which found that CAFA jurisdiction is established as long as a lawsuit is filed as a class action, and does not disappear if a motion for class certification is later denied. The Court noted that Seventh Circuit's conclusion reflected the language of the statute because CAFA, § 1332(d)(1)(B), defines ‘class action' as ‘any civil action filed under Fed. R. Civ. P. 23 or analogous state law. (Editors' Note: See the CAFA Law Blog analysis of Cunningham Charter published on February 3, 2010).

The Court next noted that 28 U.S.C. § 1332(d)(8) provides that 'this subsection'--meaning CAFA as a whole--applies 'to any class action before or after the entry of a class certification order.' Section 1332(d)(1)(C) defines 'class certification order' as 'an order issued by a court approving the treatment of some or all aspects of a civil action as a class action.' Thus, the plaintiffs argued that given that CAFA applies only 'before or after the entry of a class certification order,' and given that CAFA defines 'a class certification order' as an order granting a motion to certify a class, then when no order granting a motion to certify a class is entered, there simply is no time 'before or after the entry of a class certification order'--that is, no time when CAFA applies. 

The Court noted that several federal courts have agreed with this reading of CAFA, including a judge in Minnesota, in Avritt v. Reliastar Life Ins. Co., No. 07-1817 (JNE/JJG), 2009 WL 1703224, at *2 (D. Minn. June 18, 2009). (Editors' Note: See the CAFA Law Blog analysis of Avritt published on August 28, 2009).

Disagreeing with the plaintiffs, the Court commented that under the 'plaintiffs' reading of CAFA, after a class action is removed to federal court, jurisdiction would neither exist nor not exist; instead, the lawsuit would float in some kind of suspended animation. Only when a court decides whether to certify a class would the court and the parties know whether the court has jurisdiction over the lawsuit. If certification was denied, then not only would the court have no jurisdiction going forward, but the court would be deemed to have never had jurisdiction. Everything that came before the court's decision on class certification would be wiped out. If certification wase granted, then the court would have jurisdiction--both retroactively and prospectively--unless the court later changed its mind and decertified the class, in which case jurisdiction would again disappear retroactively.' 

Thus, the Court remarked that the plaintiffs' reading made it impossible to know until months or years into a lawsuit whether a federal court has authority to hear that lawsuit, which was contrary to the Court's reading of CAFA--under which jurisdiction turns on whether a lawsuit is filed as a class action. If the plaintiffs were correct, a court could go along ruling on various discovery disputes and dispositive motions, only to find that it never had any power over the case in the first place. Not only would this be extremely wasteful, but it would be inconsistent with the general principles that the 'existence of federal jurisdiction is determined as of the time the complaint is filed,' and that 'jurisdiction once properly invoked is not lost by developments after a suit is filed.'

Finally, the Court observed that if Congress intended CAFA jurisdiction to turn on depending on class certification and not on filing of a class action, Congress would have said so clearly. Thus, the Court agreed with Cunningham Charter that the poorly drafted language found in § 1332(d)(8) probably was intended to do nothing more than permit a defendant named in a putative class action to 'wait until a class is certified before deciding whether to remove the case to federal court.'

Full post as published by CAFA Law Blog - Information, cases and insights regarding the Class Action Fairness Act of 2005 on June 25, 2010 (boomark / email).