District Court did not Err in Remanding Class Action to State Court because Addition of Class Action Allegations to Ninth Amended Complaint did not Commence a Civil Action under CAFA (Class Action Fairness Act) and Addition of New Plaintiffs and Claims did not Commence a Civil Action under CAFA Fifth Circuit Holds
In the early 1990s, plaintiffs, as purchasers of “life insurance policies, annuities, and corporate notes from three Louisiana companies” – Public Investors Life Insurance Co. (PILCO), Public Investors (PI) and Midwest Life Insurance (MLI) – filed a class action in Louisiana state court against the State of Louisiana and other defendants after all three companies failed; the class action complaint alleged “negligent, intentional, and criminal acts (regulatory and otherwise) that they claim contributed to these failures.” Admiral Ins. Co. v. Abshire, ___ F.3d ___, 2009 WL 1887381, *1 (5th Cir. 2009). The original lawsuits were not styled as class actions; rather, originally more than 1300 plaintiffs filed three lawsuits in two different Louisiana state courts. Id. Eventually, the three lawsuits were consolidated and a ninth amended complaint was filed that sought class action treatment. Id. Defense attorneys removed the ninth amended class action complaint to federal court pursuant to the Class Action Fairness Act of 2005 (CAFA). Id. The district court remanded the lawsuit to state court, but denied plaintiffs’ motion for fees and costs associated with securing remand, id. Both sides appealed and the Fifth Circuit affirmed both the remand order and the denial of fees and costs.
The state-court complaint was amended to seek class action treatment because plaintiffs’ counsel lost contact with about 250 of the plaintiffs and an advisory opinion from the Ethics Advisory Service Committee of the Louisiana State Bar Association “determined that [plaintiffs’] attorneys would violate the Rules of Professional Conduct if they tried or settled the claims of plaintiffs with whom they had lost contact, using only the powers of attorney that these plaintiffs had executed at the time of retainer.” Abshire, at *1. Plaintiffs’ counsel initially sought to withdraw as counsel for those clients, but subsequently pursued the class action route in order to resolve the ethical issues created by loss of contact with their clients. Id., at *1-*2. Defense attorneys removed the lawsuit to federal court immediately after the ninth amended complaint was filed, id., at *2. Plaintiffs moved to remand the class action on the ground that it had been “commenced” long before CAFA’s February 18, 2005 effective date; the district court agreed, id. Pursuant to 28 U.S.C. § 1447©, plaintiffs requested attorneys’ fees and costs incurred in winning remand, arguing that the State’s removal of the class action to federal court under CAFA was “objectively unreasonable.” Id., at *3. The district court refused to award fees “because case law in the area was unsettled at the time of removal.” Id.
Reviewing the remand order de novo, and in determining whether the ninth amended class action complaint “commenced” a new lawsuit for purposes of removal under CAFA, the Fifth Circuit explained that “the date on which a civil action is ‘commenced’ for purposes of CAFA is determined by state law.” Abshire, at *3. Under Louisiana law, “a suit is commenced only at the time the original petition is filed in a court of competent jurisdiction,” id. Accordingly, the instant lawsuit had been “commenced” in 1991, “long before CAFA’s effective date,” id. Defense attorneys urged the Circuit Court to hold that plaintiffs “commenced a new civil action when they filed the ninth amended complaint” because it represented the first time that plaintiffs sought class action relief, which “exposes Louisiana to additional liability via (1) a claim for attorneys’ fees and costs, (2) the ‘resurrection’ of claims held by deceased, substitution-less plaintiffs, and (3) the ‘resurrection’ of the dual-capacity plaintiffs’ previously dismissed claims.” Id. Each of these claims represented matters of first impression in the Fifth Circuit, id. Addressing each in turn, the Fifth Circuit held: (1) that under Louisiana law the “mere addition” of class action allegations does not “commence a new civil action for purposes of CAFA,” id., at *4-*5, and (2) that the mere addition of parties or claims does not automatically commence a new civil action under CAFA, id., at *5-*8.
Finally, reviewing for abuse of discretion the district court order denying plaintiffs’ request for attorney fees, and rejecting Louisiana’s contention that the Court lacked jurisdiction to review the order, the Fifth Circuit held that the lower court did not abuse its discretion in finding that defendant had “an objectively reasonable basis for removal.” Abshire, at *9-*10. Accordingly, the Circuit Court affirmed the order remanding the class action to state court and denying plaintiffs’ request for fees and costs. Id., at *10.
NOTE: The Circuit Court rejected use of the “relation-back” doctrine for purposes of determining whether the addition of new parties or claims commenced a new civil action under CAFA, explaining at page *6: “Relation-back and non-retroactivity might overlap, but, given their logical independence, it is far from pellucid why the relation-back test should control our analysis of CAFA’s non-retroactivity provision.”
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