United States: Eleventh Circuit Confirms Scope Of Original Jurisdiction Under Class Action Fairness Act

Martin Durkin is a Partner and Michael Grill is an Associate in the the Chicago office

HIGHLIGHTS:

  • In Wright Transportation, Inc. v. Pilot Corporation, et al., the U.S. Court of Appeals for the Eleventh Circuit held that the U.S. Class Action Fairness Act of 2005 (CAFA) confers original federal jurisdiction over state law claims brought under CAFA even when related class action claims are dismissed.
  • CAFA jurisdiction, like conventional diversity jurisdiction, is not destroyed by post-filing events. Thus, CAFA jurisdiction "is not easily defeated."
  • Because CAFA vests federal district courts with original jurisdiction over remaining state law claims, district courts need not analyze supplemental jurisdiction in such circumstances.

In Wright Transportation, Inc. v. Pilot Corporation, et al., the U.S. Court of Appeals for the Eleventh Circuit considered whether a district court retains original jurisdiction over state law claims following the dismissal of class action claims brought under the U.S. Class Action Fairness Act of 2005 (CAFA), codified at 28 U.S.C. §1332(d). CAFA conveys original subject matter jurisdiction to federal courts when the aggregated claims of the class members exceed $5 million, the proposed class has at least 100 members and at least one class member is a citizen of a state different from any defendant.

The Wright case was unique in that prior appellate decisions addressed only suits that were filed in state court and then removed to federal court pursuant to CAFA. In Wright, plaintiff Wright Transportation Inc. initially filed all of its claims – state and federal – in federal court, alleging that jurisdiction existed under CAFA. After its class claims were dismissed, Wright sought to dismiss and refile its state law claims in Alabama state court. Defendants argued that, under CAFA, the federal district court could not divest itself of original jurisdiction over the remaining claims. The Eleventh Circuit agreed.

Background

Wright was a customer of Pilot Corporation, the nation's largest operator of over-the-road diesel fuel truck stops. Wright filed a class action lawsuit in the U.S. District Court for the Southern District of Alabama in July 2013, alleging that certain Pilot employees withheld rebates and discounts owed to Wright and other customers. A court-approved settlement of a competing class suit in the Eastern District of Arkansas subsequently deprived Wright of standing to pursue its class claims. The defendants thereafter filed a motion to dismiss Wright's remaining claims. The Alabama district court granted the motion in part, allowing Wright to maintain only its breach of contract and unjust enrichment claims pursuant to Alabama law.

Following a series of motions and procedural events, Wright moved to dismiss its own complaint, without prejudice, for lack of subject matter jurisdiction. Absent its class claims, Wright argued that the district court should decline to exercise supplemental jurisdiction over the state law claims. The defendants opposed the motion to dismiss, arguing that the district court was vested with original jurisdiction over Wright's claims, pursuant to CAFA.

With only the state law claims left to resolve, the district court analyzed the issue as one of supplemental jurisdiction, which district courts may exercise at their discretion. The court declined to exercise its supplemental jurisdiction and dismissed the lawsuit in its entirety. Wright then filed a lawsuit in Alabama state court, raising nearly identical claims to those in its federal action. Several defendants appealed the district court's order dismissing the federal lawsuit and also filed a motion to abate Wright's state court suit.

The Appeal

On appeal, defendants argued that when original jurisdiction is conferred under CAFA, "it sticks for the entire life of the case, such that it could not be destroyed by later events," including a rival class settlement or failure to obtain class certification. Wright argued that the district court's dismissal of the class claims destroyed CAFA jurisdiction.

The Eleventh Circuit first reviewed its own precedent, as well as precedent from the Seventh, Fifth and Second Circuits, for the proposition that, at least in cases removed to federal court, post-removal events "do not oust CAFA jurisdiction." But the court explained that the difference between CAFA cases originally filed in federal court versus those removed from state courts can be material. Removal cases "present concerns about forum manipulation that counsel against allowing a plaintiff's post-removal amendments to affect jurisdiction." But when a plaintiff first files in federal court, as Wright did, forum manipulation is a lesser concern. District courts may therefore consider post-filing amendments to federal pleadings when such amendments drop all class claims when considering jurisdiction.

However, the court held that this difference did not destroy original jurisdiction. The court noted that Wright's class claims were not eliminated through amendment, but rather were dismissed by the district court. Because all of Wright's claims – state and federal – were brought pursuant to CAFA at the time they were filed, the district court had original jurisdiction over each claim. Thus, "CAFA continue[d] to confer original federal jurisdiction over the remaining state-law claims in this suit." The Eleventh Circuit further clarified that the district court's analysis of the issue as one of supplemental jurisdiction was incorrect. District courts need only invoke supplemental jurisdiction when the case involves individual state law claims that were never subject to CAFA jurisdiction.

Considerations for Litigants

The Eleventh Circuit's decision clarifies that original jurisdiction will follow both state and federal claims that are initially filed in federal court pursuant to CAFA, even when all of the plaintiff's class claims are dismissed after filing, subject to three exceptions below. This holding is consistent with precedent that focused on removal cases, which held that original federal jurisdiction follows claims that are removed from state to federal courts pursuant to CAFA. In the removal context, original federal jurisdiction will survive despite post-removal actions, including dismissal, lack of certification or pleading amendments that may otherwise eliminate the class claims.

However, in the context of cases originally filed in federal court, the Wright court cautioned that CAFA will not convey original federal jurisdiction when 1) a plaintiff that originally files in federal court subsequently amends its complaint to eliminate all of its class claims, 2) a plaintiff brings state claims separate from and never subject to CAFA and 3) claims purportedly filed under CAFA are dismissed because they are frivolous or lack the expectation that a class may eventually be certified. In the third scenario, the Eleventh Circuit noted that such claims would not be subject to jurisdiction under CAFA in the first place. None of these exceptions were at issue in Wright.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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