CAFA Class Action Defense Cases-McAtee v. Capital One: Ninth Circuit Holds That Naming Doe Defendant Does Not Commence New Action For Purposes Of Class Action Fairness Act Of 2005 (CAFA)

Mar 19, 2007 | By: Michael J. Hassen

Under California Law, Class Action is not “Commenced” under Class Action Fairness Act of 2005 (CAFA) by Amending Complaint to Name Doe Defendant Ninth Circuit Holds

In August 2004, plaintiff Ball filed a class action in California state court against various Capital One entities alleging that certain provisions of defendants’ credit card contracts constituted unlawful business practices. McAtee v. Capital One, F.S.B., ___ F.3d ___ (9th Cir. March 16, 2007) [Slip Opn., 2-3]. Three months later, California voters passed Proposition 64 which necessitated that a plaintiff must have suffered actual injury in order to have standing to bring a claim under California’s Unfair Competition Law (UCL), and this new requirement applied to cases pending at the time of its passage. Id., at 3. In May 2005, the trial court precluded Ball from pursuing her claims against the named Capital One defendants; an amended complaint was filed naming McAtee as the new party-plaintiff. Id. Defense attorneys removed the class action to federal court on the basis of the Class Action Fairness Act of 2005 (CAFA), which became effective February 18, 2005, arguing that the substitution of plaintiffs constituted the commencement of a “new action” within the meaning of CAFA, id., at 3-4. The federal court remanded the action, holding that the class action had been commenced in August 2004 when Ball filed the original class action complaint, id., at 4. Following remand, McAtee amended the complaint to add Capital One Bank as a party-defendant and dismissing the original Capital One entities as defendants; defense attorneys again removed the class action to federal court under CAFA, and the federal court again granted plaintiff’s motion for remand. Id. The Ninth Circuit granted defendant’s petition for appeal and affirmed the remand order.

As a matter of first impression in the Ninth Circuit, the Court of Appeals addressed “whether substitution of a named defendant for a Doe defendant in a California state court action commences a civil action against the new named defendant within the meaning of CAFA.” Slip Opn., at 4-5. The question of when an action is “commenced” for purposes of removal under CAFA turns on state law, id., at 7-8. In this regard, the Ninth Circuit rejected the approach taken by some other federal courts that relies, at least in part, on state-law relation back doctrine. Id., at 8-9. The appellate court explained that “[w]hen the ultimate question before the court is whether to dismiss an action for lack of timeliness, it makes sense to apply the relationship back doctrine, for in such cases the very survival of the action is at issue.” Id., at 9. But the consequences are far less severe when the issue is commencement for purposes of jurisdiction only: “The case will be allowed to go forward, in some forum, whether CAFA applies or not. If CAFA applies, the action may go forward in federal court if a defendant files a timely motion for removal. If CAFA does not apply, the action must go forward in state court unless there is some other basis for removal to federal court.” Id., at 10. For this reason, the relation back doctrine simply does not apply to a determination of whether a class action filed in state court may be removed under CAFA: the Ninth Circuit “simply look[s] to the date on which the original complaint in the action was filed.” Id., at 11.

Turning to the situation of Doe defendants added by amendment to class action complaints, the Ninth Circuit found that its prior decisions “make this case easy”: “an action filed in California state court is commenced for purposes of CAFA when a complaint is filed, irrespective of any later amendment of that complaint.” Slip Opn., at 11-12 (citations omitted) The Court of Appeals rejected a defense argument that the adding of a new defendant commences a new action, id., at 12. The Ninth Circuit set forth a bright-line rule: “[A] California state court action is commenced for the purpose of the effective date of CAFA when the original complaint is filed…. Any amendment of that complaint — whether to add new causes of action, to add or replace plaintiffs, or to add or replace defendants — does not change that commencement date.” Id., at 12-13. Accordingly, the appellate court held that the class action complaint had been filed prior to CAFA’s effective date and dismissed the appeal for lack of jurisdiction. Id., at 13.

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