Following Removal of Class Action to Federal Court under CAFA (Class Action Fairness Act), Plaintiffs Decision to Amend Complaint to Eliminate Class Action Allegations did not Destroy Federal Court Jurisdiction because Jurisdiction is Determined at Time of Removal and is not Affected by Subsequent Events Seventh Circuit Holds
Plaintiffs filed a putative class action in Wisconsin state court against Burlington Northern Santa Fe Railway Company and Burlington Northern Santa Fe Corporation alleging that defendants’ “failure to inspect and maintain a railroad trestle caused the town to flood in July 2007, damaging their property.” In re Burlington Northern Santa Fe Railway Co., 606 F.3d 379, 379-80 (7th Cir. 2010). Defense attorneys removed the class action to federal court under CAFA (Class Action Fairness Act); plaintiffs then amended the complaint to remove the class action allegations and the district court remanded the matter to state court on the ground that without the class action allegations federal court jurisdiction was lacking under CAFA. Id., at 379. Id. Defense attorneys sought leave to appeal the remand order; the Seventh Circuit granted the petition and reversed.
The Seventh Circuit noted that “the parties battled extensively over jurisdiction” in the district court. In re Burlington, at 380. Defense attorneys argued diversity jurisdiction existed because the joinder of the non-diverse individual employee defendants was fraudulent, but the district court found it to be tactical rather than fraudulent. Id. The district court agreed, however, that jurisdiction existed under CAFA, and denied plaintiffs’ first motion to remand. Id. Plaintiffs thereafter sought and obtained leave of court to amend the complaint to remove the class action allegations. Id. The federal court also considered the motion to amend to be “an implied motion to remand the case, which it granted.” Id. In the district court’s view, because the amended complaint did not contain any class action allegations, jurisdiction under CAFA no longer existed. Id.
In reversing the remand order, the Circuit Court relied on “[t]he well-established general rule…that jurisdiction is determined at the time of removal, and nothing filed after removal affects jurisdiction.” In re Burlington, at 380-81 (citations omitted). The Seventh Circuit found this rule to be dispositive. The Court held that “CAFA is, at base, an extension of diversity jurisdiction.” Id., at 381. And “[e]ven in cases filed originally in federal court, later changes that compromise diversity do not destroy jurisdiction.” Id. (citations omitted). Moreover, under Seventh Circuit authority, “CAFA jurisdiction attaches when a case is filed as a class action” and “even if the class is not certified, jurisdiction continues.” Id. (citations omitted). The “limited question” presented, then, is “whether CAFA jurisdiction also continues when the post-removal change is not the district court’s denial of class certification but is instead the plaintiffs’ decision not to pursue class certification.” Id. The Court held that there are “compelling reasons” to treat the situations in the same way. Accordingly, the Circuit Court reversed the remand order. Id.
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