Class Act: Best Practices for Defending Class Actions
A Practitioner’s Guide To
Removing Class Actions
Caroline H. Gentry, Esq.
Porter Wright Morris & Arthur LLP
One South Main Street, Suite 1600
Dayton, OH 45402
CAVEAT: The information below does not identify every issue or include an exhaustive
analysis of each Circuit’s case law. In addition, some of these issues are unsettled and
evolving. This guide is therefore only a starting point. Practitioners should carefully
check and confirm each applicable legal proposition in their relevant jurisdiction.
Class actions filed in state court can be removed to federal court if: (1) there is federal
question jurisdiction;1 (2) there is diversity jurisdiction;2 (3) removal is authorized by the
Class Action Fairness Act (“CAFA”);3 or (4) removal is authorized by the Securities
Litigation Uniform Standards Act (“SLUSA”).4 Common questions relating to each type
of removal are answered below.
1
28 U.S.C. §§ 1331 & 1441(a).
28 U.S.C. §§1332, 1441(a) & 1441(b).
3
28 U.S.C. §§ 1332(d) & 1453.
4
15 U.S.C. §§ 77p & 78bb.
2
TABLE OF CONTENTS
FEDERAL QUESTION JURISDICTION
When can a class action be removed based on federal question jurisdiction?
How is citizenship determined?
When does the 30-day deadline begin to run?
DIVERSITY JURISDICTION
When can a class action be removed based on diversity jurisdiction?
How is the amount in controversy determined?
How are various types of relief valued for amount-in-controversy purposes in a diversity case,
where class members’ damages usually cannot be aggregated?
What materials may a court consider when determining whether removal is proper?
Do federal courts allow jurisdictional discovery after removal?
CAFA JURISDICTION
When can a class action be removed under CAFA?
What types of class actions are not removable under CAFA?
Who can remove and what burden of proof applies?
How is citizenship determined under CAFA?
How do defendants prove that the amount in controversy exceeds $5 million?
How are various types of relief valued for amount-in-controversy purposes in a CAFA case,
where class members’ damages can be aggregated?
Can a plaintiff avoid CAFA by disclaiming a recovery greater than $5 million?
Can a plaintiff avoid CAFA by dividing a class action into several smaller class actions?
When will a federal court decline to exercise jurisdiction over a class action removed under
CAFA?
What is the home state controversy exception?
What is the local controversy exception?
What is the interests of justice exception?
What is a primary defendant?
What is a significant defendant?
Can a party appeal an order granting or denying a motion to remand a class action removed
under CAFA?
Does CAFA jurisdiction continue to exist even if a class is not certified?
What are mass actions and when can they be removed under CAFA?
Are actions filed by State attorneys general removable under CAFA?
SLUSA JURISDICTION
When can a class action be removed under SLUSA?
What is a covered class action?
What is the effect of removing a class action under SLUSA?
2
FEDERAL QUESTION JURISDICTION
When can a class action be removed based on federal question jurisdiction?
A class action can be removed based on federal question jurisdiction when: (1) one or more of
the claims arise under the Constitution, laws or treaties of the United States;5 (2) no defendant
is a citizen of the forum state;6 (3) all of the defendants join in or consent to the removal;7 and
(4) the 30-day deadline for removal is met.8
How is citizenship determined?
A corporation is a citizen of the State in which it was incorporated and the State in which it has
its principal place of business.9 An insurer sued in a direct action that does not name the
insured as a defendant is also deemed to be a citizen of the State in which the insured is a
citizen.10
An unincorporated association is deemed to have the citizenship of each of its members.11
An individual’s citizenship is based on domicile, which is not necessarily his place of
residence.12 A person’s domicile is his “true, fixed and permanent home and principal
establishment, and to which he has the intention of returning whenever he is absent
therefrom.”13 Relevant factors include where a person “exercises civil and political rights, pays
taxes, owns real and personal property, has driver’s and other licenses, maintains bank
accounts, belongs to clubs and churches, has places of business or employment, and maintains
a home for his family.”14
When does the 30-day deadline begin to run?
The notice of removal must be filed “within 30 days after the receipt by the defendant, through
service or otherwise, of a copy of the initial pleading” or service of the summons if the initial
pleading is not required to be served.15 The general rule is that “[t]he 30-day removal clock
does not begin to run until the defendant receives a pleading or other paper that affirmatively
and unambiguously reveals that the predicates for removal are present.”16 Although a
defendant must “apply a reasonable amount of intelligence” when determining whether a
plaintiff’s statements meet the amount in controversy in a case removed based on diversity or
CAFA jurisdiction (for example, by averaging and then multiplying the alleged damages-per-
5
28 U.S.C. §1331.
28 U.S.C. § 1441(b)(2).
7
28 U.S.C. § 1446(b)(2)(A).
8
28 U.S.C. § 1446(b).
9
28 U.S.C. § 1332(c)(1).
10
28 U.S.C. § 1332(c)(1).
11
V&M Star, LP v. Centimark Corp., 596 F.3d 354, 355 (6th Cir. 2010).
12
Kanter v. Warner-Lambert Co., 265 F.3d 853, 857 (9th Cir. 2001).
13
McCormick v. Aderholt, 293 F.3d 1254, 1257-58 (11th Cir. 2002).
14
Preston v. Tenet Healthsystem Mem. Med. Ctr., Inc., 485 F.3d 793, 801 (5th Cir. 2007).
15
28 U.S.C. § 1446(b)(1).
16
Walker v. Trailer Transit, Inc., 727 F.3d 819, 824 (7th Cir. 2013).
6
3
class member by the alleged number of class members), it is not required to extrapolate from
the plaintiff’s allegations or engage in guesswork.17
If the case stated in the initial pleading is not removable, a notice of removal may be filed within
30 days after the defendant receives, through service or otherwise, “a copy of an amended
pleading, motion, order or other paper from which it may first be ascertained that the case is one
which is or has become removable.”18 Information that is contained in the record of the state
proceeding or in responses to discovery constitutes an “other paper” that allows removal within
30 days.19 Courts broadly interpret the term “other paper” to include confidential settlement
correspondence privileged under state law20 and deposition testimony,21 among other things.
Notably, courts have held that a case can be removed even if the 30-day deadline never began
to run, such as when removal is based on a defendant’s own investigation or estimate of
damages.22
DIVERSITY JURISDICTION
When can a class action be removed based on diversity jurisdiction?
A class action can be removed based on diversity jurisdiction when: (1) there is complete
diversity (i.e., the citizenships of all plaintiffs are diverse from the citizenships of all
defendants);23 (2) no defendant is a citizen of the forum state;24 (3) all defendants join in or
consent to the removal;25 (4) the amount in controversy for at least one named plaintiff exceeds
$75,000 exclusive of interest and costs;26 (5) the case is removed less than one year after the
action was filed absent a showing of bad faith by the plaintiff;27 and (6) the 30-day deadline for
removal is met.28
How is the amount in controversy determined?
The sum demanded in good faith in the initial pleading is generally deemed to be the amount in
controversy. However, the notice of removal may assert a different amount if the initial pleading
seeks nonmonetary relief or if state practice either does not permit demand of a specific sum, or
permits recovery of damages in excess of the amount demanded.29 If the notice of removal
17
Hartis v. Chicago Title Ins. Co., 694 F.3d 935, 945-46 (8th Cir. 2012); Kuxhausen v. BMW Fin. Servs.
NA LLC, 707 F.3d 1136, 1140-41 (9th Cir. 2013).
18
28 U.S.C. § 1446(b)(3).
19
28 U.S.C. § 1446(c)(3)(A).
20
Babasa v. LensCrafters, Inc., 498 F.3d 972, 974-75 (9th Cir. 2007).
21
Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 885-87 (9th Cir. 2010).
22
Walker v. Trailer Transit, Inc., 727 F.3d 819, 824 (7th Cir. 2013); Roth v. CHA Hollywood Med. Ctr., 720
F.3d 1121 (9th Cir. 2013). But see Pretka v. Kolter City Plaza II, Inc., 608 F.3d 744, 767 (11th Cir. 2010)
(suggesting that a defendant must remove within 30 days of the initial pleading or receipt of an “other
paper”).
23
28 U.S.C. §1332(a).
24
28 U.S.C. § 1441(b)(2).
25
28 U.S.C. § 1446(b)(2)(A).
26
Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 125 S. Ct. 2611 (2005).
27
28 U.S.C. §§ 1446(c)(1) & 1446(c)(3)(B).
28
28 U.S.C. § 1446(b).
29
28 U.S.C. § 1446(c)(2).
4
states a different amount, the court will allow removal if it finds by a preponderance of the
evidence that the amount in controversy exceeds $75,000.30
The court analyzes the operative pleading at the time of removal.31 Therefore, a plaintiff cannot
deprive the court of subject-matter jurisdiction by later amending her complaint to eliminate the
factual predicates for removal.32
How are various types of relief valued for amount-in-controversy purposes in a
diversity case, where class members’ damages usually cannot be aggregated?
When a class action is removed based on diversity jurisdiction, the value of the class members’
claims cannot be aggregated for purposes of meeting the amount-in-controversy requirement33
unless they have a common and undivided interest.34 In most cases, aggregation will not be
permitted. The amount-in-controversy in non-aggregated cases is calculated as follows:
The compensatory damages with respect to a single named plaintiff may be included.
Courts focus on whether the type of damages is legally available, rather than on whether
an amount greater than the jurisdictional requirement is likely to be awarded.35
The removing defendant can include punitive damages if they could be awarded.36 The
court will consider any state-law limitations on the ratio or amount of punitive damages.37
When assessing the amount in controversy for a single named plaintiff in a class action,
only the pro rata share of that plaintiff’s award of punitive damages may be included.38
The removing defendant can include the value of injunctive relief unless it is
immeasurable or too speculative.39 Courts are split on whether to value injunctive relief
from the plaintiff’s perspective40 or the defendant’s perspective.41 In either case, the
value must be assessed with respect to a single named plaintiff. 42
Reasonable attorneys’ fees may be included if they could be awarded, although courts
differ as to whether they include projected attorneys’ fees43 or are limited to attorneys’
fees incurred as of the date of removal.44 When assessing the amount in controversy for
30
28 U.S.C. § 1446(c)(2)(B).
In re Burlington N. Santa Fe Railway Co., 606 F.3d 379, 380-81 (7th Cir. 2010).
32
Hargis v. Access Capital Funding, LLC, 674 F.3d 783, 789-90 (8th Cir. 2012).
33
Werwinski v. Ford Motor Co., 286 F.3d 661, 666 (3rd Cir. 2002); Crawford v. F. Hoffman-La Roche Ltd.,
267 F.3d 760, 765 (8th Cir. 2001).
34
Friedman v. New York Life Ins. Co., 410 F.3d 1350, 1353-57 (11th Cir. 2005).
35
Kovacs v. Chesley, 406 F.3d 393, 396-97 (6th Cir. 2005).
36
Frederick v. Hartford Underwriters Ins. Co., 683 F.3d 1242, 1244 (10th Cir. 2012); Back Doctors Ltd. v.
Metropolitan Prop. & Cas. Ins. Co., 637 F.3d 827, 830-31 (7th Cir. 2011).
37
Raskas v. Johnson & Johnson, 13-1996, 2013 U.S. App. LEXIS 13063, *7-8 (8th Cir. June 26, 2013).
38
Everett v. Verizon Wireless, Inc., 460 F.3d 818, 827-28 (6th Cir. 2006) (citing cases).
39
Mann v. Unum Life Ins. Co. of Am., 505 Fed. Appx. 854, 856 (11th Cir. 2013).
40
Kanter v. Warner-Lambert Co., 265 F.3d 853, 858-60 (9th Cir. 2001).
41
Lovell v. State Farm Mut. Auto. Ins. Co., 466 F.3d 893, 897 (10th Cir. 2006).
42
Del Vecchio v. Conseco, Inc., 230 F.3d 974, 977-78 (7th Cir. 2000).
43
Hanlon v. Chrysler Corp., 150 F.3d 1011, 1029 (9th Cir. 1998).
44
ABM Security Servs., Inc. v. Davis, 646 F.3d 475, 479 (7th Cir. 2011).
31
5
a single named plaintiff in a class action, only the pro rata share of that plaintiff’s award
of attorneys’ fees may be included. 45
What materials may a court consider when determining whether removal is
proper?
A removing defendant must file “a short and plain statement of the grounds for removal,
together with a copy of all process, pleadings, and orders served upon” it.46 Courts also allow
defendants to submit and rely upon affidavits, declarations or other documentation.47
Do federal courts allow jurisdictional discovery after removal?
Courts are split on this issue. The Seventh Circuit has held that parties have the right to
conduct such discovery.48 The Ninth Circuit permits discovery but cautions that a remand order
may be preferable because the parties can conduct jurisdictional discovery in state court and
then remove again if warranted.49 The Eleventh Circuit does not permit jurisdictional discovery,
reasoning that even requesting such discovery is “tantamount to an admission that the
defendants do not have a factual basis for believing that jurisdiction exists” in violation of Rule
11.50
CAFA JURISDICTION
When can a class action be removed under CAFA?
A class action can be removed under CAFA when: (1) there is minimal diversity (i.e., the
citizenship of at least one plaintiff is diverse from the citizenship of at least one defendant);51 (2)
there are at least 100 putative class members;52 (3) the amount in controversy based upon the
class members’ aggregated claims exceeds $5 million exclusive of interest and costs;53 (4) the
primary defendants are not states, state officials, or other governmental entities against whom
the district court may be prevented from ordering relief,54 and (5) the 30-day deadline for
removal is met.55
45
Spielman v. Genzyme Corp., 251 F.3d 1, 6-10 (1st Cir. 2001). But see Grant v. Chevron Phillips Chem.
Co. L.P., 309 F.3d 864, 866 (5th Cir. 2002) (attorneys’ fees allocated solely to named plaintiffs in
accordance with Louisiana statute).
46
28 U.S.C. § 1446(a).
47
Vodenichar v. Halcón Energy Props., Inc., 733 F.3d 497 (3rd Cir. 2013); Rodriguez v. AT&T Mobility
Servs. LLC, 728 F.3d 975, 981 (9th Cir. 2013); Blockbuster, Inc. v. Galeno, 472 F.3d 53, 56-57 (2d Cir.
2006); Hart v. FedEx Ground Package Sys., Inc., 457 F.3d 675, 682 (7th Cir. 2006). But see Pretka v.
Kolter City Plaza II, Inc., 608 F.3d 744, 767 (11th Cir. 2010) (allowing defendant to rely on evidence not
received from the plaintiff only if removing within 30 days of the initial pleading).
48
Hart, 457 F.3d at 682.
49
Abrego v. Dow Chem. Co., 443 F.3d 676, 691 (9th Cir. 2006).
50
Lowery v. Ala. Power Co., 483 F.3d 1184, 1215-18 (11th Cir. 2007).
51
28 U.S.C. § 1332(d)(2).
52
28 U.S.C. § 1332(d)(5)(B).
53
28 U.S.C. § 1332(d)(2).
54
28 U.S.C. § 1332(d)(5)(A).
55
28 U.S.C. § 1446(b).
6
The following rules do not apply to class actions removed under CAFA: (a) the rule requiring
removal within one year, (b) the rule that no defendant can be a citizen of the forum state, and
(c) the rule that all defendants must join in or consent to the removal.56 Also, none of the named
plaintiffs need to demonstrate that his or her amount in controversy exceeds $75,000.
What types of class actions are not removable under CAFA?
CAFA does not authorize federal jurisdiction over any class action that solely involves a claim:
(1) concerning a covered security as defined by the Securities Act of 1933 and the Securities
Exchange Act of 1934; (2) relating to the internal affairs or governance of a corporation or other
business entity and brought under the laws of the state in which the business entity is organized
or incorporated; or (3) relating to the rights, duties and obligations related to any security as
defined by the Securities Act of 1933 and associated regulations.57 The party seeking remand
bears the burden of proving that one of these exceptions apply.58
Who can remove and what burden of proof applies?
Only named defendants, not third-party defendants59 or counterclaim defendants,60 can remove
a class action under CAFA.
The removing defendant bears the burden of proving that the Court has jurisdiction.61 Most
courts apply a preponderance of the evidence standard.62 The Third Circuit applies a legal
certainty standard.63 The Ninth Circuit previously applied the legal certainty standard but no
longer does so, after concluding that the Supreme Court’s decision in Standard Fire Ins. Co. v.
Knowles, 133 S. Ct. 1345 (2013) requires a preponderance of the evidence standard.64
How is citizenship determined under CAFA?
With one exception, the general rules for determining citizenship apply. The sole difference is
that under CAFA an unincorporated association, just like a corporation, is “a citizen of the State
where it has its principal place of business and the State under whose laws it is organized.”65
Some courts require that there be facts in evidence if citizenship is disputed and disallow
reliance on “guesswork,”66 whereas other courts may permit assumptions in certain cases.67
56
28 U.S.C. § 1453(b).
28 U.S.C. § 1332(d)(9).
58
Appert v. Morgan Stanley Dean Witter, Inc., 673 F.3d 609, 619 (7th Cir. 2012).
59
In re Mort. Elec. Reg. Sys., Inc., 680 F.3d 849, 853-54 (6th Cir. 2012).
60
Westwood Apex v. Contreras, 644 F.3d 799, 801 (9th Cir. 2011).
61
Abrego v. Dow Chem. Co., 443 F.3d 676, 685 (9th Cir. 2006).
62
E.g., Frederick v. Hartford Underwriters Ins. Co., 683 F.3d 1242, 1246 (10th Cir. 2012); Pretka v. Kolter
City Plaza II, Inc., 608 F.3d 744, 752 (11th Cir. 2010); Bell v. Hershey Co., 557 F.3d 953, 958 (8th Cir.
2009); Amoche v. Guarantee Trust Life Ins. Co., 556 F.3d 41, 50 (1st Cir. 2009); Smith v. Nationwide
Prop. & Cas. Ins. Co., 505 F.3d 401, 404 (6th Cir. 2007); Meridian Sec. Ins. Co. v. Sadowski, 441 F.3d
536, 540-41 (7th Cir. 2006).
63
Frederico v. Home Depot, 507 F.3d 188, 197 (3d Cir. 2007); Morgan v. Gay, 471 F.3d 469 (3d Cir.
2006).
64
Rodriguez v. AT&T Mobility Servs. LLC, 728 F.3d 975, 977 (9th Cir. 2013).
65
28 U.S.C. § 1332(d)(10).
66
In re Sprint Nextel Corp., 593 F.3d 669, 674 (7th Cir. 2010).
57
7
Courts may take judicial notice of U.S. census data regarding the relocation rate from a certain
state.68
How do defendants prove that the amount in controversy exceeds $5 million?
A removing defendant faces the challenging task of proving that the amount in controversy
exceeds $5 million without making harmful concessions or proffering evidence that establishes
the plaintiff’s case for damages. A common approach is to submit evidence that establishes
that if the plaintiff proves her allegations, then the amount in controversy will be met because of
the size of the class, the types of damages that are legally available, and the likely damages per
class member.69 Defendants should be careful to avoid relying on unsupported assumptions.70
How are various types of relief valued for amount-in-controversy purposes in a
CAFA case, where class members’ damages can be aggregated?
Unlike cases removed based on diversity jurisdiction, CAFA allows all of the class members’
damages to be aggregated for amount-in-controversy purposes, including compensatory
damages. Notably, where the plaintiff seeks to recover some portion of a defendant’s sales,
profits or charges, courts have allowed the removing defendant to use the total amount of sales,
profits or charges to satisfy the $5 million amount-in-controversy requirement unless it is legally
impossible that such an amount could be recovered.71
The general rules with respect to injunctive relief, punitive damages and attorneys’ fees apply,
except that CAFA allows the total value of these types of relief to be aggregated for purposes of
reaching the $5 million threshold.
Can a plaintiff avoid CAFA by disclaiming a recovery greater than $5 million?
No. The Supreme Court recently held that “a plaintiff who files a proposed class action cannot
legally bind members of the proposed class before the class is certified.”72 District courts should
ignore such a stipulation when determining whether the $5 million amount-in-controversy
requirement has been met.73
67
Preston v. Tenet Healthsystem Mem. Med. Ctr., Inc., 485 F.3d 793, 798-802 (5th Cir. 2007);
Mondragon v. Capital One Auto Finance, 13-56699, 2013 U.S. App. LEXIS 23856, *2, 8-9, 12 (9th Cir.
Nov. 27, 2013).
68
Hollinger v. Home State Mut. Ins. Co., 654 F.3d 564, 571-72 (5th Cir. 2011).
69
E.g., Rodriguez v. AT&T Mobility Servs. LLC, 728 F.3d 975, 977 (9th Cir. 2013); Blomberg v. Service
Corp. Int’l, 639 F.3d 761, 763-64 (7th Cir. 2011).
70
E.g., Bartnikowski v. NVR, Inc., 307 Fed. Appx. 730, 735-39 (4th Cir. 2009).
71
Raskas v. Johnson & Johnson, 13-1996, 2013 U.S. App. LEXIS 13063, *5-9 (8th Cir. June 26, 2013)
(citing cases); McGee v. Sentinel Offender Servs., LLC, 719 F.3d 1236, 1241 (11th Cir. 2013); Lewis v.
Verizon Comms., Inc., 627 F.3d 395, 399-402 (9th Cir. 2010); Strawn v. AT&T Mobility LLC, 530 F.3d
293, 298-99 (4th Cir. 2008); Spivey v. Vertrue, Inc., 528 F.3d 982, 985-86 (7th Cir. 2008).
72
Standard Fire Ins. Co. v. Knowles, 133 S. Ct. 1345, 1348-49 (2013).
73
Standard Fire, 133 S. Ct. at 1350.
8
Can a plaintiff avoid CAFA by dividing a class action into several smaller class
actions?
Courts have reached different conclusions. The Sixth Circuit has held that plaintiffs cannot
avoid CAFA by dividing one action into several smaller class actions,74 whereas the Eighth
Circuit has allowed plaintiffs to do so.75
When will a federal court decline to exercise jurisdiction over a class action
removed under CAFA?
CAFA contains three “exceptions” that either require or allow a federal court to decline to
exercise jurisdiction: (1) the home state controversy exception, (2) the local controversy
exception, and (3) the interests of justice exception. These exceptions are not jurisdictional and
therefore can be waived.76 The party seeking remand bears the burden of proving that a
particular exception applies.77
What is the home state controversy exception?
The home state controversy exception requires a federal court to decline jurisdiction if 2/3 or
more of the class members and all of the primary defendants are citizens of the forum state.78
What is the local controversy exception?
The local controversy exception requires a federal court to decline jurisdiction if: (1) 2/3 or more
of the class members are citizens of the forum state; (2) at least one defendant from whom
significant relief is sought, and whose alleged conduct forms a significant basis for the claims, is
a citizen of the forum state; (3) the principal injuries were incurred in the forum state; and
(4) during the prior three years, no class actions with the same or similar claims were filed
against any of the defendants.79
What is the interests of justice exception?
The interests of justice exception permits a federal court to decline jurisdiction if: (1) between
1/3 and 2/3 of the class members and the primary defendants are citizens of the forum state;
and (2) the interests of justice and totality of the circumstances favor declining jurisdiction when
considering whether (a) the claims involve matters of national or interstate interest, (b) the
claims are governed by the laws of the forum state or the laws of other states, (c) the class
action was pled in a manner that seeks to avoid federal jurisdiction, (d) there is a distinct nexus
between the forum in which the action was filed and the class members, defendants or the
alleged harm, (e) there is a substantially larger number of class members who are citizens of
the forum state and the citizenship of other class members is dispersed among a substantial
74
Freeman v. Blue Ridge Paper Prods., Inc., 551 F.3d 405, 407-09 (6th Cir. 2008).
Marple v. T-Mobile Central LLC, 639 F.3d 1109, 1110-11 (8th Cir. 2011).
76
Visendi v. Bank of Am., N.A., 733 F.3d 863, 869 (9th Cir. 2013) (citing cases); Gold v. New York Life
Ins. Co., 730 F.3d 137, 141-42 (2d Cir. 2013).
77
Vodenichar v. Halcón Energy Props., Inc., 733 F.3d 497 (3rd Cir. 2013); Serrano v. 180 Connect, Inc.,
478 F.3d 1018, 1024 (9th Cir. 2007).
78
28 U.S.C. § 1332(d)(4)(B).
79
28 U.S.C. § 1332(d)(4)(A).
75
9
number of states, and (f) during the prior three years, one or more class actions with the same
or similar claims were filed.80
What is a primary defendant?
CAFA uses but does not define the term “primary defendant.” Some courts construe it to refer
to defendants that are directly liable to the plaintiffs, as opposed to defendants that may be
liable under theories of vicarious liability, contribution or indemnification.81 Other courts
construe it to refer to those defendants that will sustain the greatest loss if liability is established,
based upon the number of class members affected and the amount of the expected loss.82 The
Third Circuit has held that both approaches should be used.83
What is a significant defendant?
A significant defendant is an in-state defendant whose conduct forms a significant basis for the
asserted claims, and from whom significant relief is sought.84 Courts apply a comparative
analysis to determine whether a particular defendant is significant.85
Can a party appeal an order granting or denying a motion to remand a class
action removed under CAFA?
Remand orders generally are not appealable.86 However, CAFA allows remand orders to be
appealed and gives the court of appeals discretion to decide whether or not to accept the
appeal. The petition for leave to appeal must be submitted not more than 10 days after entry of
the order denying or granting the motion to remand.87
Does CAFA jurisdiction continue to exist even if a class is not certified?
Yes. Because jurisdiction is determined as of the time of removal, post-removal events such as
a denial of class certification do not divest the court of jurisdiction.88
What are mass actions and when can they be removed under CAFA?
“Mass actions” are certain civil actions in which the claims of 100 or more named plaintiffs who
seek monetary relief are proposed to be tried jointly on the ground that their claims involve
common questions of law or fact.89 Mass actions do not include civil actions in which (1) all of
the claims arise from an event or occurrence in the forum state that allegedly resulted in injuries
in the forum state or contiguous states; (2) the claims are joined upon the motion of a
defendant; (3) the claims are asserted on behalf of the general public pursuant to a state statute
authorizing such an action, rather than on behalf of individual claimants or class members; or
80
28 U.S.C. § 1332(d)(3).
Vodenichar v. Halcón Energy Props., Inc., 733 F.3d 497 (3rd Cir. 2013) (citing cases).
82
Id.
83
Id.
84
28 U.S.C. § 1332(d)(4)(A)(i)(II).
85
Opelousas Gen. Hosp. Auth. v. FairPay Solutions, Inc., 655 F.3d 358, 361 (5th Cir. 2011); Evans v.
Walter Indus., Inc., 449 F.3d 1159, 1166-68 (11th Cir. 2006).
86
28 U.S.C. § 1447(d).
87
28 U.S.C. § 1453(c)(1).
88
Cunningham Charter Corp. v. Learjet, Inc., 592 F.3d 805, 806-07 (7th Cir. 2010).
89
28 U.S.C. § 1332(d)(11)(B)(ii); State of Miss. ex rel. Hood v. AU Optronics Corp., 134 S. Ct. 736 (2014).
81
10
(4) the claims were consolidated or coordinated solely for pretrial proceedings.90 Mass actions
are deemed to be class actions for purposes of CAFA.91
Notably, under the “mass action” provision the Court can only exercise jurisdiction over the
claims of plaintiffs for whom the amount in controversy exceeds $75,000.92 Courts have not yet
addressed whether it is sufficient for only one plaintiff to satisfy this amount-in-controversy
requirement, or whether at least 100 plaintiffs must do so, to allow the action to be removed in
the first instance.93
Are actions filed by State attorneys general removable under CAFA?
No. Courts have held that parens patriae actions brought by State attorneys general do not
constitute a “class action” for purposes of CAFA,94 and the Supreme Court recently held that
they also cannot be considered a “mass action” under the theory that the real parties in interest
are the State’s consumers, rather than the State plaintiff itself.95
SLUSA JURISDICTION
When can a class action be removed under SLUSA?
A class action can be removed under SLUSA when it: (1) is filed by a private party, (2) is a
covered class action, (3) is based on state law, (4) alleges that the defendant misrepresented or
omitted a material fact or employed a manipulative device or contrivance, and (5) asserts that a
defendant did so in connection with the purchase or sale of a covered security.96
What is a covered class action?
A covered class action includes a single lawsuit that seeks damages on behalf of a class,
although it must have more than 50 class members if it is without reference to issues of
individualized reliance on an alleged misstatement or omission.97 A covered class action also
include groups of lawsuits filed in the same court where damages are sought on behalf of more
than 50 persons and the lawsuits are joined, consolidated or otherwise proceed as a single
action for any purpose.98 Covered class actions do not include shareholder derivative actions.99
What is the effect of removing a class action under SLUSA?
A class action that is properly removed under SLUSA must be dismissed because a suit based
on the fraudulent sale of securities regulated under federal law cannot be based upon state
law.100
90
28 U.S.C. § 1332(d)(11)(B)(ii).
28 U.S.C. § 1332(d)(11)(A).
92
28 U.S.C. § 1332(d)(11)(B)(i).
93
Hood ex rel. Miss. v. JP Morgan Case & Co., 737 F.3d 78, 86 n.4 (5th Cir. 2013).
94
Purdue Pharma L.P. v. Kentucky, 704 F.3d 208, 212-13 (2d Cir. 2013) (citing cases).
95
State of Miss. ex rel. Hood v. AU Optronics Corp., 134 S. Ct. 736 (2014).
96
15 U.S.C. §§ 77p(b), 77p(c), 78bb(f)(1) & 78bb(f)(2).
97
15 U.S.C. § 77p(f)(2)(A)(i).
98
15 U.S.C. § 77p(f)(2)(A)(ii).
99
15 U.S.C. § 77p(f)(2)(B).
100
15 U.S.C. §§ 77p(b) & 78bb(f)(1).
91
11