Commercial Litigation and Arbitration

Where Counsel Files Multiple Suits, Each <100 Plaintiffs, and Doesn't Propose Joint Trial, CAFA Removal Improper — Maybe OK If State Court Sua Sponte Orders Joint Trial — Good Quote re Stretching Opinion’s Reasoning Beyond Its Breaking Point

Scimone v. Carnival Corp., 720 F.3d 876 (11th Cir. 2013):

In 2012, one of Appellants' cruise ships, the Costa Concordia, ran aground off the coast of Italy. In the wake of the accident, many of the Costa Concordia's passengers sued Appellants (collectively referred to in this opinion as "Carnival"), filing dozens of actions in forums both in the United States and around the world. This appeal concerns two separate actions in particular, filed by groups of fifty-six and forty-eight plaintiffs in the Circuit Court of the Eleventh Judicial Circuit of Florida. Carnival removed both actions to the United States District Court for the Southern District of Florida, claiming that the district court had subject-matter jurisdiction under the mass-action provision of the Class Action Fairness Act of 2005 ("CAFA"), Pub. L. No. 109-2, 119 Stat. 4 (codified in scattered sections of 28 U.S.C.). Both groups of plaintiffs moved for remand to the state court on the ground that the district court lacked jurisdiction, and the district court granted plaintiffs' motions in February 2013.

We granted Carnival permission to appeal in order to resolve an issue of first impression in this Circuit: whether a defendant has the right, pursuant to 28 U.S.C. §§ 1332(d)(11), 1441, and 1453, to remove multiple and separate lawsuits to federal court as mass actions if the lawsuits in the aggregate contain 100 or more plaintiffs whose claims revolve around common questions of law or fact, but neither the plaintiffs nor the state court have proposed that 100 or more persons' claims be tried jointly. Under the plain language of CAFA and § 1332(d)(11), the district court lacked subject-matter jurisdiction over the plaintiffs' two separate actions unless they proposed to try 100 or more persons' claims jointly. Consequently, the cases were improvidently removed and should have been remanded, and we affirm the district court's order. ***

Every other court of appeals confronted with this question has come to the same conclusion: that plaintiffs have the ability to avoid § 1332(d)(11)(B)(i) jurisdiction by filing separate complaints naming less than 100 plaintiffs and by not moving for or otherwise proposing joint trial in the state court. In Anderson v. Bayer Corp., more than 100 plaintiffs, in what the Seventh Circuit described as five "mostly identical complaints," sued Bayer in state court, all claiming that Bayer's medication Trasylol injured them. 610 F.3d 390, 392 (7th Cir. 2010). None of the cases standing alone involved more than 100 plaintiffs, but Bayer argued that the "plaintiffs c[ould] not avoid federal diversity jurisdiction [under § 1332(d)(11)(B)(i)] by carving their filings into five separate pleadings." Id. Much like we have done, the Seventh Circuit pointed out that 28 U.S.C. § 1332(d)(11)(B)(ii)(II) specifically excludes claims joined upon the defendant's motion. This exclusion informed the Seventh Circuit's interpretation of § 1332(d)(11)(B)(i) and implied that plaintiffs were able to avoid federal jurisdiction, since "Congress appears to have contemplated that some cases which could have been brought as a mass action would, because of the way in which the plaintiffs chose to structure their claims, remain outside of CAFA's grant of jurisdiction." Id. at 393. And this conclusion was consistent with the general principle that plaintiffs, as masters of their complaints, ordinarily may choose to include or omit parties in order to obtain their desired forum. See id. The Seventh Circuit therefore interpreted the "[t]he mass action provision [to] give[] plaintiffs the choice to file separate actions that do not qualify for CAFA jurisdiction." Id. "Of course, subsequent action by the plaintiffs in state court might render these claims removable," but nothing in the plaintiffs' conduct in the state court had indicated the desire to try 100 or more persons' claims jointly. Id. at 394. Therefore, the Seventh Circuit concluded that there was "no federal jurisdiction under CAFA." Id.

Similarly, in Tanoh v. Dow Chemical Co., an earlier Ninth Circuit case cited by Anderson in support of its disposition, the defendants removed seven actions (each with fewer than 100 plaintiffs) to federal court pursuant to CAFA. 561 F.3d 945, 950-51 (9th Cir. 2009). All 664 plaintiffs in the seven actions alleged that Dow Chemical exposed them to toxic chemicals. Id. Like here, the defendants argued that the plaintiffs "sought to avoid federal jurisdiction by filing several separate state court actions in groups fewer than one hundred." Id. at 951 (internal quotation mark omitted). The Ninth Circuit concluded that, "[b]y its plain terms, [CAFA] does not apply to plaintiffs' claims in this case, as none of the seven state court actions involves the claims of one hundred or more plaintiffs, and neither the parties nor the trial court has proposed consolidating the actions for trial." Id. at 953. The Third Circuit has agreed with the Seventh and the Ninth Circuits, albeit in an unpublished opinion. Abrahamsen v. ConocoPhillips, Co., 503 F. App'x 157, 160 (3d Cir. 2012) (when 123 plaintiffs filed four separate complaints, none of which had 100 or more plaintiffs, "[t]he plain text of CAFA clearly preclude[d] jurisdiction" because "Plaintiffs did not propose to try their claims jointly").

Footnote 1. As we have done, the Seventh and Ninth Circuits left open the possibility that a state court's sua sponte decision to conduct a joint trial on 100 or more persons' claims would suffice. See Anderson, 610 F.3d at 394 n.2; Tanoh, 561 F.3d at 956.

Carnival levels two abstract, policy-based objections to our conclusion and the decisions of those other circuits: first, that we have violated the basic principle that "courts will not permit plaintiff to use artful pleading to close off defendant's right to a federal forum," Federated Dep't Stores, Inc. v. Moitie, 452 U.S. 394, 397 n.2, 101 S. Ct. 2424, 69 L. Ed. 2d 103 (1981) (internal quotation mark omitted); and, second, that we have ignored the purpose of the statute, which was to expand federal jurisdiction over class and mass actions and to facilitate their removal. The problem with the first objection is that Carnival presupposes that which it first has to prove: that it is entitled to a federal forum for two complaints that, on their face, each involve less than 100 claims. Carnival is only entitled to a federal forum if the plaintiffs filed a single complaint in state court that involved 100 or more persons' claims or otherwise proposed a joint trial for multiple complaints that in the aggregate contain 100 or more plaintiffs. The problem with the second objection is that there is no indication that Congress's purpose in enacting CAFA was to strip plaintiffs of their ordinary role as masters of their complaint and allow defendants to treat separately filed actions as one action regardless of plaintiffs' choice. Contrary to Carnival's position, the jurisdictional exclusion of claims joined only on a defendant's motion speaks to precisely the opposite intent: to continue to repose in plaintiffs the ability to choose a state forum as long as they do not join 100 or more persons' claims. In fact, the primary purpose behind CAFA's amendments to 28 U.S.C. § 1332 was to eliminate the complete-diversity and individual-amount-in-controversy requirements that applied to all other diversity suits in favor of the more forgiving requirements of minimal diversity and a $5 million total amount in controversy. See S. Rep. No. 109-14, at 10 (2005) ("The current rules [i.e., complete diversity and the $75,000 individual-amount-in-controversy requirement] governing federal jurisdiction have the unintended consequence of keeping most class actions out of federal court . . . ."). What the plaintiffs have done in this case does not defeat Congress's intent to remove those impediments to federal adjudication of class actions.

Nor are we persuaded by the authorities Carnival cites. The two cases upon which it most heavily relies -- Standard Fire Insurance Co. v. Knowles, 133 S. Ct. 1345, 185 L. Ed. 2d 439 (2013), and Freeman v. Blue Ridge Paper Products, Inc., 551 F.3d 405 (6th Cir. 2008) -- dealt with different issues and not with the mass-action provision at issue in this case. In Knowles, the question was whether the lead plaintiff in a class-action lawsuit could avoid federal removal jurisdiction by stipulating prior to class certification that he, and the class he sought to represent, would not seek more than $5 million in damages. See 133 S. Ct. at 1347. The relevant statutory provision provided that "to determine whether the amount in controversy exceeds the sum or value of $5,000,000," the "claims of the individual class members shall be aggregated." 28 U.S.C. § 1332(d)(6). The district court in Knowles aggregated the class members' claims and found that the amount in controversy exceeded $5 million but nonetheless remanded on the basis of Knowles's stipulation. Knowles, 133 S. Ct. at 1348. The Supreme Court reversed because "[t]he stipulation Knowles proffered to the District Court . . . does not speak for those he purports to represent . . . . because a plaintiff who files a proposed class action cannot legally bind members of the proposed class before the class is certified." Id. at 1348-49. In light of the nonbinding nature of Knowles's stipulation, the Supreme Court concluded that § 1332(d)(6) obligated a district court to determine whether it had jurisdiction based on its own calculation of the aggregate amount in controversy. Id. at 1350.

The holding of Knowles, which concerns a different section of the statute, plainly does not address the issue presented in this case. Carnival nevertheless places great significance on the part of the opinion that states:

To hold [that plaintiff's stipulation determined the bounds of federal jurisdiction] would, for CAFA jurisdictional purposes, treat a nonbinding stipulation as if it were binding, exalt form over substance, and run directly counter to CAFA's primary objective: ensuring Federal court consideration of interstate cases of national importance. It would also have the effect of allowing the subdivision of a $100 million action into 21 just-below-$5-million state-court actions simply by including nonbinding stipulations; such an outcome would squarely conflict with the statute's objective.

Id. (internal quotation marks and citation omitted). Carnival urges us to read this passage as stating a broad rule that CAFA does not allow plaintiffs to structure their lawsuits to avoid CAFA jurisdiction. As we see it, this stretches the Supreme Court's analysis far past its breaking point. The passage pertains to the amount-in-controversy requirement and to the unique situation where a lead plaintiff merely creates the appearance of a smaller amount in controversy with a nonbinding stipulation to that effect. It cannot be read to suggest that all sections of CAFA strip plaintiffs of their traditional role as masters of their complaint, particularly where, as in this case, the plaintiffs' decision to proceed in two separate lawsuits does not merely create the appearance of two trials but would actually result in two trials in state court.

Freeman, Carnival's Sixth Circuit authority, also dealt with CAFA's amount-in-controversy requirement. In that case, the same class brought the same claim in five different actions, divided only by artificial time limits that ensured that each action putatively fell under the $5 million amount-in-controversy threshold of 28 U.S.C. § 1332(d)(2). Freeman, 551 F.3d at 406. Freeman held that all five actions nonetheless collectively fell within CAFA's jurisdiction, and that plaintiffs could not artificially structure their class-action lawsuits to avoid the $5 million amount-in-controversy requirement. Id. at 407. Both Knowles and Freeman, which concerned class actions rather than mass actions, never had occasion to interpret the "are proposed to be tried jointly" language of § 1332(d)(11)(B)(i) or its interaction with the jurisdictional exclusion of § 1332(d)(11)(B)(ii)(II) -- which together make clear that plaintiffs retain the ability to avoid federal jurisdiction simply by not proposing joint trial of 100 or more persons' claims. To put it another way, this case deals with a precondition to even treating the plaintiffs' two separate lawsuits as a class action in the first place, whereas Freeman and Knowles dealt with whether a class action or group of class actions satisfied § 1332(d)'s amount-in-controversy requirement for federal jurisdiction -- two very different questions.

The long and short of this case is that, in order for the district court to have subject-matter jurisdiction, 28 U.S.C. § 1332(d)(11)(B)(i) requires a proposal for joint trial of 100 or more persons' claims. But the forty-eight plaintiffs in Scimone II and the fifty-six plaintiffs in Abeid-Saba never filed a single complaint naming 100 or more plaintiffs and never moved for consolidation or a joint trial on part or all of their two separate actions. In other words, they never proposed joint trial of 100 or more persons' claims. In the face of the letter of the statute, the district court's remand order was proper.

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