If it's not a class action, it is a class action...or is it?
Slim Pickens rides again.
I began my analysis of the Class Action Fairness Act of 2005 by expressing concern over a provision that would automatically convert some non-class actions into class actions which could be removed to federal court. I ended that post by saying "I will update this analysis--especially if after further study I find my interpretation to be incorrect." I do need to revise my initial interpretation. It is not incorrect, but its scope needs to be scaled down (at this point, anyway).
As for the title of this post, what in the wide, Wide World of Sports is a-goin' on here? Have I lost my mind? That is definitely within the realm of possibility, and yet the title of this post is accurate. And just how is that possible?
...It is a class action; the cause of my concern
It is possible because of subsection (11) of what is the brand new 28 U.S.C. § 1332(d). Subsection (11) opens with this:
But what is a "mass action?" The answer is provided in the second portion of subsection (11):
This calls for a bit of a tangent. Statutes are interpreted according to "rules of construction." There are many of these rules, but two are especially pertinent to this discussion. The U.S. Supreme Court said in the case of Connecticut Nat'l Bank v. Germain, 503 U.S. 249 (1992), "We have stated time and again that courts must presume that a legislature says in a statute what it means and means in a statute what it says there." And the Supreme Court stated the next rule in Barnhart v. Sigmon Coal Co., 534 U.S. 438 (2002): "[I]t is a general principle of statutory construction that when Congress includes particular language in one section of a statute but omits it in another section of the same act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion." Apply these two rules to "monetary relief claims," and the conclusion is that the phrase does not mean the same thing as "amount in controversy."
This is significant because (as shown in The Class Action Fairness Act of 2005 and its removal provisions), "amount in controversy" does not include interests and costs, which are claims for monetary relief. Now you might think that this is a distinction without a difference because for a "mass action" to get removed, the "amount in controversy" requirement still applies. That is true, but there are still problems. Put on your tin foil hat and follow along...
The next problematic piece of poor drafting is "the plaintiffs' claims." The "monetary relief claims" are the claims made by the plaintiffs, and since that term is not defined, "the plaintiffs' claims" also remains undefined.
The real key to having a mass action declared a class action is the existence of "common questions of law or fact among the plaintiffs' claims. However, if one does not know what is meant by "plaintiffs' claims," it is not possible to determine whether those claims have common questions of law or fact.
Section 1332(d)(11)(A) and (B)(i), taken together and standing alone, leave the door open for varying interpretations and results. Also, they provide a potential for manipulation of the system by defendants. Here is a possible scenario...Ten separate lawsuits are filed in state court. Each suit has 10 plaintiffs and the same defendant. In each case, the amount in controversy is $500,000. Although each lawsuit alleges similar injuries, each one is based on different actions by the defendant. In other words, the facts on which each suit is based are slightly different from every other case. However, each of the suits seeks recovery of attorneys' fees and costs, and those claims are all based on identical law. Based on the foregoing facts, the defendant successfully moves to have all 10 cases consolidated into one. Now there is a "mass action" which can be removed to federal court. Proponents of the Class Action Fairness Act of 2005 and tort reform in general complain about "forum shopping" by plaintiffs. This means that plaintiffs look for favorable jurisdictions and venues in which they are more likely to win and then structure their lawsuits to make sure the cases are tried in those places. Indeed, forum shopping is a legitimate concern, but what my scenario presents is blatant forum shopping by defendants, and that is just as big a potential problem.
Now remember that I prefaced my scenario by saying it is based on "Section 1332(d)(11)(A) and (B)(i), taken together and standing alone," and I will maintain that if there is nothing to limit the effect of these two provisions, big problems lie ahead. However, there is more to § 1332(d)(11).
...It is not a class action; the greatest reduction of my concern
The chances of the preceding scenario occurring are reduced greatly by one part of subsection (11)(B)(ii). This provision sets out four circumstances under which a mass action will not be considered a class action subject to removal. To me, the most important one is (II), which says that subsection (A) will not apply to cases in which "the claims are joined upon motion of a defendant." I interpret this language to mean that defendants will not be able to get several different, separately filed cases to be consolidated into one action and then have the consolidated case declared a "mass action" which will become a "class action" and get removed to federal court.
If my interpretation is correct--and I hope it is--my fears about the effects of the Class Action Fairness Act of 2005 will be reduced.
Other limitations on mass action=class action
Section 1332(d)(11)(B)(ii)(I) says that a mass action is not removable as a class action if "all of the claims in the action arise from an event or occurrence in the State in which the action was filed, and that allegedly resulted in injuries in that State or in States contiguous to that State[.]" Thus, a mass action could be somewhat multi-state in nature and not be suject to removal.
Section 1332(d)(11)(B)(ii)(III) says that a mass action is not removable as a class action if "all of the claims in the action are asserted on behalf of the general public (and not on behalf of individual claimants or members of a purported class) pursuant to a State statute specifically authorizing such action[.]" Most statutes which would allow such a lawsuit do not allow for the recovery of monetary damages by private citizens, so it is questionable whether such lawsuits could satisfy the amount in controversy requirement. Also, many of these statutes permit only the state government to bring such lawsuits. In other words, this provision does not seem to have any significant effect one way or the other.
Section 1332(d)(11)(B)(ii)(IV) says that a mass action is not removable as a class action if "the claims have been consolidated or coordinated solely for pretrial proceedings." Sometimes several cases--usually involving the same defendants--will be consolidated for discovery matters. "Discovery" means the investigative and evidence-gathering activities before the trial. These include depositions, written questions (interrogatories), and requests for documents. Such consolidations are done to increase efficiency (for the courts and the parties) and avoid contradictory decisions between different courts. The fact that such consolidations will not result in the removal of mass actions also reduces my fears and concerns.
What is the effect of § 1332(d)(11)?
I am not sure what the answer is. On the one hand, it seems to allow for many non-class actions to automatically be converted to class actions which would then be removed to federal court. This would increase the number of class actions in federal court, which in turn would lead to the chilling effect I mentioned in An initial look at the new class action law. On the other hand, the limitations described above greatly reduce the ability of defendants to utilize the automatic conversion and removal process. As a result, it is difficult to ascertain the purpose of § 1332(d)(11).
Nonetheless, I think I know one effect it will have. Instead of filing one large suit, plaintiffs' lawyers will begin filing several smaller suits in order to avoid conversion to a class action and subsequent removal to federal court. If my interpretation of § 1332(d)(11)(B)(ii) is correct, there will then be nothing that a defendant can do to get the cases to federal court pursuant to the Class Action Fairness Act of 2005. Thus, while the Act might somehow reduce the number of class actions or mass actions being filed, it could very well increase the total amount of litigation in state courts.
Oops.
I began my analysis of the Class Action Fairness Act of 2005 by expressing concern over a provision that would automatically convert some non-class actions into class actions which could be removed to federal court. I ended that post by saying "I will update this analysis--especially if after further study I find my interpretation to be incorrect." I do need to revise my initial interpretation. It is not incorrect, but its scope needs to be scaled down (at this point, anyway).
As for the title of this post, what in the wide, Wide World of Sports is a-goin' on here? Have I lost my mind? That is definitely within the realm of possibility, and yet the title of this post is accurate. And just how is that possible?
...It is a class action; the cause of my concern
It is possible because of subsection (11) of what is the brand new 28 U.S.C. § 1332(d). Subsection (11) opens with this:
(A) For purposes of this subsection and section 1453, a mass action shall be deemed to be a class action removable under paragraphs (2) through (10) if it otherwise meets the provisions of those paragraphs.As a result, a "mass action"--which is not a class action--will automatically be deemed to be a class action.
But what is a "mass action?" The answer is provided in the second portion of subsection (11):
(B)(i) As used in subparagraph (A), the term "mass action" means any civil action...in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs' claims involve common questions of law or fact, except that jurisdiction shall exist only over those plaintiffs whose claims in a mass action satisfy the jurisdictional amount requirements under subsection (a).This provision might seem clear, but it is in fact poorly written. Let's start with the first major problem, the phrase "monetary relief claims." This term is not defined anywhere in the Act. One could reasonably assume that this is the same as "amount in controversy." However, if that is the case, it also reasonable to assume that Congress would have used the term "amount in controversy."
This calls for a bit of a tangent. Statutes are interpreted according to "rules of construction." There are many of these rules, but two are especially pertinent to this discussion. The U.S. Supreme Court said in the case of Connecticut Nat'l Bank v. Germain, 503 U.S. 249 (1992), "We have stated time and again that courts must presume that a legislature says in a statute what it means and means in a statute what it says there." And the Supreme Court stated the next rule in Barnhart v. Sigmon Coal Co., 534 U.S. 438 (2002): "[I]t is a general principle of statutory construction that when Congress includes particular language in one section of a statute but omits it in another section of the same act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion." Apply these two rules to "monetary relief claims," and the conclusion is that the phrase does not mean the same thing as "amount in controversy."
This is significant because (as shown in The Class Action Fairness Act of 2005 and its removal provisions), "amount in controversy" does not include interests and costs, which are claims for monetary relief. Now you might think that this is a distinction without a difference because for a "mass action" to get removed, the "amount in controversy" requirement still applies. That is true, but there are still problems. Put on your tin foil hat and follow along...
The next problematic piece of poor drafting is "the plaintiffs' claims." The "monetary relief claims" are the claims made by the plaintiffs, and since that term is not defined, "the plaintiffs' claims" also remains undefined.
The real key to having a mass action declared a class action is the existence of "common questions of law or fact among the plaintiffs' claims. However, if one does not know what is meant by "plaintiffs' claims," it is not possible to determine whether those claims have common questions of law or fact.
Section 1332(d)(11)(A) and (B)(i), taken together and standing alone, leave the door open for varying interpretations and results. Also, they provide a potential for manipulation of the system by defendants. Here is a possible scenario...Ten separate lawsuits are filed in state court. Each suit has 10 plaintiffs and the same defendant. In each case, the amount in controversy is $500,000. Although each lawsuit alleges similar injuries, each one is based on different actions by the defendant. In other words, the facts on which each suit is based are slightly different from every other case. However, each of the suits seeks recovery of attorneys' fees and costs, and those claims are all based on identical law. Based on the foregoing facts, the defendant successfully moves to have all 10 cases consolidated into one. Now there is a "mass action" which can be removed to federal court. Proponents of the Class Action Fairness Act of 2005 and tort reform in general complain about "forum shopping" by plaintiffs. This means that plaintiffs look for favorable jurisdictions and venues in which they are more likely to win and then structure their lawsuits to make sure the cases are tried in those places. Indeed, forum shopping is a legitimate concern, but what my scenario presents is blatant forum shopping by defendants, and that is just as big a potential problem.
Now remember that I prefaced my scenario by saying it is based on "Section 1332(d)(11)(A) and (B)(i), taken together and standing alone," and I will maintain that if there is nothing to limit the effect of these two provisions, big problems lie ahead. However, there is more to § 1332(d)(11).
...It is not a class action; the greatest reduction of my concern
The chances of the preceding scenario occurring are reduced greatly by one part of subsection (11)(B)(ii). This provision sets out four circumstances under which a mass action will not be considered a class action subject to removal. To me, the most important one is (II), which says that subsection (A) will not apply to cases in which "the claims are joined upon motion of a defendant." I interpret this language to mean that defendants will not be able to get several different, separately filed cases to be consolidated into one action and then have the consolidated case declared a "mass action" which will become a "class action" and get removed to federal court.
If my interpretation is correct--and I hope it is--my fears about the effects of the Class Action Fairness Act of 2005 will be reduced.
Other limitations on mass action=class action
Section 1332(d)(11)(B)(ii)(I) says that a mass action is not removable as a class action if "all of the claims in the action arise from an event or occurrence in the State in which the action was filed, and that allegedly resulted in injuries in that State or in States contiguous to that State[.]" Thus, a mass action could be somewhat multi-state in nature and not be suject to removal.
Section 1332(d)(11)(B)(ii)(III) says that a mass action is not removable as a class action if "all of the claims in the action are asserted on behalf of the general public (and not on behalf of individual claimants or members of a purported class) pursuant to a State statute specifically authorizing such action[.]" Most statutes which would allow such a lawsuit do not allow for the recovery of monetary damages by private citizens, so it is questionable whether such lawsuits could satisfy the amount in controversy requirement. Also, many of these statutes permit only the state government to bring such lawsuits. In other words, this provision does not seem to have any significant effect one way or the other.
Section 1332(d)(11)(B)(ii)(IV) says that a mass action is not removable as a class action if "the claims have been consolidated or coordinated solely for pretrial proceedings." Sometimes several cases--usually involving the same defendants--will be consolidated for discovery matters. "Discovery" means the investigative and evidence-gathering activities before the trial. These include depositions, written questions (interrogatories), and requests for documents. Such consolidations are done to increase efficiency (for the courts and the parties) and avoid contradictory decisions between different courts. The fact that such consolidations will not result in the removal of mass actions also reduces my fears and concerns.
What is the effect of § 1332(d)(11)?
I am not sure what the answer is. On the one hand, it seems to allow for many non-class actions to automatically be converted to class actions which would then be removed to federal court. This would increase the number of class actions in federal court, which in turn would lead to the chilling effect I mentioned in An initial look at the new class action law. On the other hand, the limitations described above greatly reduce the ability of defendants to utilize the automatic conversion and removal process. As a result, it is difficult to ascertain the purpose of § 1332(d)(11).
Nonetheless, I think I know one effect it will have. Instead of filing one large suit, plaintiffs' lawyers will begin filing several smaller suits in order to avoid conversion to a class action and subsequent removal to federal court. If my interpretation of § 1332(d)(11)(B)(ii) is correct, there will then be nothing that a defendant can do to get the cases to federal court pursuant to the Class Action Fairness Act of 2005. Thus, while the Act might somehow reduce the number of class actions or mass actions being filed, it could very well increase the total amount of litigation in state courts.
Oops.
posted by WCharles @ 3/02/2005 05:31:00 PM
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