Readers know that the Class Action Fairness Act expanded federal jurisdiction over certain class actions. An interesting set of issues has arisen over whether and when federal jurisdiction remains after class proceedings take a turn. In a recent decision, the Seventh Circuit held that CAFA jurisdiction survives even after class allegations are removed from the complaint. In re Burlington Northern Santa Fe Railway Corp., 2010 WL 1980172 (7th Cir., 5/19/10).
Plaintiffs were a class of local property owners who filed a complaint in Wisconsin state court against Burlington Northern Santa Fe Railway Company. They alleged that BNSF’s failure to inspect and maintain a railroad trestle caused their town to flood in July 2007, damaging their property. Defendants removed. After the district court denied a remand motion, plaintiffs asked for leave to amend their complaint to omit the class allegations. The district court allowed the amendment, noting that it would streamline the litigation. The court also construed the plaintiffs’ motion as an implied motion to remand the case, which it granted. The district court explained that its revised jurisdictional analysis was based on the amended complaint, and that since the new complaint did not contain class allegations, it did not provide jurisdiction under CAFA.
The Seventh Circuit disagreed: jurisdiction under CAFA is secure, even though, after removal, the plaintiffs amend their complaint to eliminate the class allegations. The well-established general rule is that jurisdiction is determined at the time of removal, and nothing filed after removal affects jurisdiction. CAFA is, at base, an extension of diversity jurisdiction. Even in cases filed originally in federal court, later changes that compromise diversity do not destroy jurisdiction.
The court also analogized to its recent conclusion in Cunningham Charter Corp. v. Learjet, Inc., 592 F.3d 805 (7th Cir.2010). The court there held that in a case removed under CAFA, jurisdiction survives even if the district court denies class certification. Id. at 806-07; see also United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int’l Union, AFL-CIO, CLC v. Shell Oil Co., 2010 WL 1571190, at *3-4 (9th Cir. Apr.21, 2010). CAFA jurisdiction attaches when a case is filed as a class action; keeping the case in federal court after removal minimizes the expense and delay caused by shuttling a case from court to court and furthers CAFA’s purpose of allowing putative class actions to be litigated in federal court.
When the post-removal change is not the district court’s denial of class certification but is instead the plaintiffs’ decision not to pursue class certification, the same considerations of expense and delay apply, said the court. In addition, allowing plaintiffs to “amend away” CAFA jurisdiction after removal would present a significant risk of forum manipulation. CAFA’s legislative history reflects an awareness of the latter concern, citing the existing rule that jurisdiction cannot be ousted by later events. Otherwise plaintiffs who believed the tide was turning against them could simply amend their complaint months (or even years) into the litigation to require remand to state court. See S.Rep. No. 109-14, at 70-71 (2005)