CAFA (Class Action Fairness Act of 2005) Determination of “Commencement” of Action Turns on State Law Fifth Circuit Holds
On May 3, 2006, the Fifth Circuit Court of Appeals issued its opinion in Patterson v. Dean Morris, L.L.P., ___ F.3d ___, 2006 WL 1156388 (5th Cir. 2006), where it considered whether an action that had been filed on February 17, 2005 (prior to CAFA’s February 18, 2005 effective date), but the filing fees not paid until February 22, 2005, could be removed to federal court under CAFA (Class Action Fairness Act of 2005). Slip Opn., at 6-7. The district court remanded the consolidated actions finding that CAFA did not apply, and the Fifth Circuit affirmed. _Id._, at 6. The Fifth Circuit’s analysis turned entirely upon state law, determining when Louisiana would deem the action to have been “commenced.” In so analyzing the case, the Court joined several sister circuits in relying upon state law to determine when an action has “commenced” under CAFA.
Louisiana law permits a party to fax-file a complaint, provided that the filing fee be paid within 5 days thereof, together with a $5 “transmission fee.” If a plaintiff fails to pay the required filing fee and transmission fee, then the fax filing “shall have no force or effect.” Slip Opn., at 7 (citations omitted). In Patterson, plaintiffs paid the court $3,039 on February 22. However, on May 12 plaintiffs learned that they owed the court an additional $2,145 in fees, which they did not pay until June 14. Defendants urged that the late payment took the action outside of the Louisiana statute’s five-day deadline, so the effective date of the commencement of the lawsuit was after the effective date of CAFA. Slip Opn., at 7.
Patterson summarized the legal issue as follows:
CAFA provides for original jurisdiction in federal court of certain class actions “commenced on or after the date of enactment,” which is February 18, 2005. Id. Plaintiffs allege that their actions commenced on February 17, 2005, the date they fax-filed their complaints. Defendants allege plaintiffs failed to pay required fees at the time of filing, and therefore the actions did not commence until May 6, when plaintiffs amended their complaints, or June 14, when they paid the balance of the fees. It is undisputed that, if plaintiffs’ actions commenced on or after February 18, CAFA would apply, and remand would be inappropriate. Slip Opn., at 6-7.
Patterson determined that under Louisiana caselaw an action complies with the fax-filing statute if the plaintiff timely tenders the filing fee plus the fax transmission fee, as this constitutes the “applicable filing fee.” Additional fees – such as fees for “extra plaintiffs” or “extra defendants” – need not be paid within 5 days of the fax filing of the complaint. Slip Opn., at 7-8. The Court’s opinion, revised May 23, 2006, is available for download below and is worth reading.
NOTE: The Patterson defendants also asserted “that the district court erred by assigning the burden of proof to them to show that removal was appropriate.” Slip Opn., at 6. The Court found it unnecessary to address the burden of proof issue, but noted with approval the Seventh Circuit’s opinion in Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 447-48 (7th Cir. 2005), which applied “the ‘well-established’ rule that the proponent of removal bears the burden of persuasion,” id., at 6 n.2.
Defendants also argued that even if CAFA did not apply, the district court had jurisdiction under the general bankruptcy removal statute. See 28 U.S.C. § 1452. On this issue, the district court had “equitably remanded the action,” and the Fifth Circuit held that such remand decisions are not reviewable on appeal. Slip Opn., at 8-9.
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