CAFA Amendment Issues
Gregory P. Joseph*
When is a state court class action complaint sufficiently amended to render the action subject to the Class Action Fairness Act (‛CAFA“), even though the case was originally commenced prior to the enactment of CAFA? Is the expansion of the plaintiffs’ claim sufficient? The addition of a defendant? What if the new defendant is promptly dismissed? This column will explore some of these issues.
What Is Commencement? Section 9 of CAFA, Pub. L. 109-2, § 9, provides that: ‛The amendments made by this Act shall apply to any civil action commenced on or after the date of enactment of this Act.“ Every Circuit to consider the issue has concluded that a state court action is ‛commenced“ for purposes of CAFA on the date that the plaintiff originates the action in state court (by filing or service, as state law may provide), not on the date that the defendant removes it. See Bush v. Cheaptickets, Inc., 425 F.3d 683, 687-88 (9th Cir. 2005); Natale v. Pfizer, Inc., 424 F.3d 43, 44 (1st Cir. 2005); Pritchett v. Office Depot, Inc., 420 F.3d 1090, 1097 (10th Cir. 2005); Pfizer v. Lott, 417 F.3d 725, 726-27 (7th Cir. 2005).
The critical date is February 18, 2005. If the action was ‛commenced“ on or after that date, CAFA applies. If the action was commenced prior to that date, CAFA does not apply, unless there is a post-CAFA development that constitutes re-commencement and renders the action subject to CAFA. Amendment of the complaint is a development that can, but need not, constitute re-commencement for purposes of CAFA.
Statute of Limitations Test. In the leading case in the area, Knudsen v. Liberty Mut. Ins. Co., 411 F.3d 805 (7th Cir. 2005), the Seventh Circuit held that a routine amendment of a complaintwould not render a state court action subject to CAFA, but that the addition of a new claim or new defendant might suffice. The test articulated by the Seventh Circuit is whether the plaintiff has taken a ‛step sufficiently distinct that the courts would treat it as independent for limitations purposes....“ Id. at 807.
Addition of a Defendant. The plaintiffs in Knudsen amended their complaint in an effort to add as a defendant the corporate affiliate against whom they actually had a claim. They did not name the proper (or even an existing) entity, and the original defendant removed before the state court addressed this infirmity. The Seventh Circuit held that the original defendant could not remove because no real party had actually been added, and the action was remanded. Id. at 807-08.
The holding of Knudsen is a reminder that CAFA added 28 U.S.C. § 1453(b) to eliminate the otherwise-universal requirement that all defendants must join in a notice of removal (under 28 U.S.C. § 1446(b)). Under § 1453(b), a CAFA ‛action may be removed by any defendant without the consent of all defendants.“ Knudsen holds that, where the addition of a defendant is the act that renders CAFA applicable, the newly-named defendant may remove. 411 F.3d at 807-08. So, too, however, may the preexisting party, under the plain language of § 1453(b). The problem in Knudsen was that no new defendant had actually been added — rather ‛a non-party corporate sibling“ had simply ‛been mentioned“ in the amended complaint. Id. at 808. Compare Adams v Federal Materials Co., 2005 U.S. Dist. LEXIS 15324, at *13-*16 (W.D. Ky. July 28, 2005) (addition of new defendant against which statute of limitations commenced with amendment rendered action removable by all defendants).
Expansion of Claim. Class action plaintiffs are ingenious in inventing ways to expand their claims. Quantitative types of class expansion include, for example, broadening the claim to encompass additional products that allegedly contain the same defective part, or expanding the class geographically to increase the number of persons allegedly harmed. Schorsch v. Hewlett-Packard Co., 417 F.3d 748 (7th Cir. 2005), was of the former variety — after CAFA was enacted, the plaintiffs amended their state court complaint to allege that a defective HP part existed in two additional HP products. The Seventh Circuit held that, because the same defective part remained at the heart of the proceeding, this was no more than a ‛workaday change routine in class action suits“ and was insufficient to constitute commencement of the action for purposes of CAFA. Id. at 751.
The plaintiffs in Schillinger v. Union Pacific R.R., 425 F.3d 330 (7th Cir. 2005), amended their complaint geographically — they expanded their class from one comprising Illinois plaintiffs to a nationwide class of plaintiffs over whose property the defendants had a right-of-way. The defendants argued that this was sufficient to constitute re-commencement under CAFA because they now had to deal with multiple states’ laws, and the potential damages exposure had grown geometrically. The Seventh Circuit rejected the argument, holding that ‛the potential for a larger amount of legal research and discovery in and of itself is not a significant enough step to create a new litigation.“ Id. at 334. In applying the statute of limitations test, the Seventh Circuit looked primarily at state law to determine whether a new statute had been triggered by the expansion of the claims, but the Court noted that it was an open question whether federal law (which appeared to be the same) should govern the issue. See id. at 335.
Scale of the amendment is a material consideration for the court. The plaintiff in Senterfitt v. SunTrust Mortgage, Inc., 385 F.Supp.2d 1377 (S.D. Ga. 2005), expanded his class claims from a four-year period of alleged misconduct by the defendant to encompass a twenty-year period. The Southern District of Georgia held that this amendment commenced the action anew for purposes of CAFA because the original complaint had not adequately put the defendant on notice of the claims it would be obliged to defend and would work unfair prejudice — thus preventing the claims from relating back. Id. at 1380-81. The Senterfitt Court took pains to distinguish complaint amendments that would only ‛slightly enlarge“ the class. Id.
Similarly, Heaphy v. State Farm Auto. Ins. Co., 2005 U.S. Dist. LEXIS 25651, at **11-*14 (W.D. Wash. Aug. 15, 2005), held that the addition of a new plaintiff with qualitatively different claims rendered a pre-CAFA class action removable because, as in Senterfitt, the claims of the ‛new, unrelated plaintiff“ did not adequately put the defendant on notice of the claims it would have to defend and did not, therefore, relate back for statute of limitations purposes.
Fleeting Defendants. If the addition of a defendant renders an action removable under CAFA, the plaintiff may reconsider whether the added defendant is worth the switch in forum and choose promptly to dismiss it. Does dismissal of the defendant that made the case removable mean that the case is now remandable? Not necessarily.
The District of Maine held in Dinkel v. General Motors Corp., 2005 U.S. Dist. LEXIS 27237 (D. Me. Nov. 9, 2005), that, if removal is properly effected at a time when jurisdiction exists, the plaintiff cannot ‛‘unring the bell’ by dismissing“ the defendants whose addition re-commenced the action for purposes of CAFA. Id. at *12-*13. The Dinkel Court reasoned that: ‛The plain language of CAFA makes it clear that any single defendant can remove without the consent of other defendants and that it is the entire lawsuit that is removed, not merely the claims against that defendant....“ Id. at *12
The holding of Dinkel is consistent with the reasoning of the Seventh Circuit in Schillinger, even though the Seventh Circuit reached the opposite result and remanded. The plaintiffs in Schillinger accidentally included in the caption of their amended complaint a corporation that they had earlier dismissed (prior to the enactment of CAFA). The Seventh Circuit held that this ‛scrivener’s error“ was properly corrected by the plaintiffs’ voluntary dismissal of the erroneously-named entity, and that the case should be remanded. Schillinger, 425 F.3d at 333-34.
At the same time, however, the Schillinger Court stressed that it would have viewed the situation differently if the plaintiffs had ‛amended simply to destroy diversity,“ in which case ‛the district court should not remand.“ Id. at 333. But see Brown v. Kerkhoff, 2005 U.S. Dist. LEXIS 242346 (S.D. Iowa Oct. 19, 2005) (remanding action to state court after the newly-added defendants were voluntarily dismissed on the theory that the original defendants could not ‛ride the ... coattails“ of the dismissed parties into federal court).
Misnomers. Consistently with the ‛scrivener’s error“ approach of Schillinger, several courts have held that the correction of a misnomer (misnaming a defendant who is on notice of the claim) does not render pre-CAFA action removable. See, e.g., New Century Health Quality Alliance, Inc. v. Blue Cross and Blue Shield of KC, 2005 U.S. Dist. LEXIS 24722, at *15-*16 (W.D. Mo. Sept. 13, 2005); Morgan v. AIG, Inc., 2005 U.S. Dist. LEXIS 20393, at *8 (N.D. Cal. Sept. 8, 2005); Eufaula Drugs, Inc. v. ScripSolutions, 2005 U.S. Dist. LEXIS 24821, at *11 (S.D. Ala. Oct. 6, 2005).
Post-Dismissal Amendment. If a state court has dismissed a pre-CAFA class action complaint with leave to replead, and the amended complaint is filed subsequent to the enactment of CAFA, that, alone, is insufficient to trigger CAFA, provided that the essence of the claim has not changed. See, e.g., Richina v. Maytag Corp., 2005 U.S. Dist. LEXIS 25284, at *7-*8 (E.D. Cal. Oct. 26, 2005); Lee v. CitiMortgage, Inc., 2005 U.S. Dist. LEXIS 22571, at *5 (E.D. Mo. Oct. 5, 2005). In other words, the same statute of limitations/significant step analysis applies regardless of whether the amended complaint is filed on the initiative of the plaintiffs or is necessitated by state court dismissal of the prior pleading.
Mr. Joseph is a Fellow of the American College of Trial Lawyers and a past Chair of the Litigation Section of the American Bar Association. He can be reached at email@example.com. ©2005 Gregory P. Joseph
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