Applying the Jurisdictional Provisions of the Class Action Fairness Act of 2005: In Search of a Sensible Judicial Approach

Abstract

On February 18, 2005, President Bush signed the Class Action Fairness Act of 2005 (CAFA), which had been passed by the 109th Congress. The stated purpose of the legislation was “[t]o amend the procedures that apply to consideration of interstate class actions to assure fairer outcomes for class members and defendants, and for other purposes.”The Republican-controlled Congress was concerned that class actions were creating a drag on the economy by forcing corporate defendants to settle unwarranted suits in order to avoid the risk of exposure to possibly ruinous judgments. In many cases, such settlements provided nothing more than coupons of little or no value to the class members, while awarding excessively large attorneys' fees to class council. To make matters worse, plaintiffs' attorneys had been able to “game” the system by manipulating the named plaintiffs and defendants in order to avoid federal diversity jurisdiction. They then could bring a large number of such class actions in a handful of state court jurisdictions, where judges were known for providing inadequate supervision of class certification and approval of settlements.In addition to the question of how plaintiffs must prove the citizenship of the class members, other issues which will affect whether the home-state and local controversy exceptions have any effect will be the following: how the courts define “primary” or “significant” defendant and what proof they require of this; what kind of leeway the courts grant to plaintiffs in defining the class members; and how the courts apply the factors in the intermediate tier (when between one-third and two-thirds of plaintiffs are in-state citizens).This Article will examine these procedural issues involved in making the determination of whether a class action should be remanded to state court or remain in federal court. It will argue that in order to accomplish Congress's stated goal of allocating cases of an interstate nature to federal courts and truly local cases to state courts, the federal courts must not impose unreasonable or impossible standards of proof for plaintiffs to meet.