CLASS ACTION DEFENSE BLOG
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Post-CAFA (Class Action Fairness Act of 2005) Amendment of Complaint to Add or Substitute Named Plaintiffs Does Not “Commence” New Action Under CAFA Seventh Circuit Holds
The Class Action Fairness Act of 2005 (CAFA) became effective on February 18, 2005. Understandably, then, federal courts still confront matters of first impression under CAFA. On January 30, 2006, the Seventh Circuit Court of Appeals addressed “whether amending a complaint to add or substitute named plaintiffs (class representatives) ‘commences’ a new suit” for purposes of CAFA. Phillips v. Ford Motor Co., 435 F.3d 785, 786 (7th Cir. 2006). The Court noted, “No appellate court has yet decided whether adding named plaintiffs to a class action suit ‘commences’ a new suit for purposes of removal under CAFA.” Id.
In Phillips, the lawsuits at issue had been filed prior to the enactment of CAFA, but new plaintiffs were added by amendment after CAFA’s effective date. The Seventh Circuit held that the amendment did not commence a new suit for purposes of CAFA. In analyzing the legal issue presented, the Court observed that state law controlled: because the question “is whether adding named plaintiffs commences a new suit in state court, the answer should depend on state procedural law.” Phillips, at 787.Read more...
A class action defendant often benefits if it is able to remove the case to federal court whenever possible. Plaintiffs, however, know this, and often artfully draft their class action complaints with an eye toward avoiding federal court jurisdiction. “[I]n general, district courts have federal-question jurisdiction only if a federal question appears on the face of a plaintiff’s complaint. [Citations.] The artful pleading doctrine creates an exception to this general rule.” T & E Pastorino Nursery, 268 F.Supp.2d at 1247.
“Artful pleading exists where a plaintiff articulates an inherently federal claim in state-law terms. [Citations.] A federal court may exercise removal jurisdiction under the ‘artful pleading’ doctrine, even if a federal question does not appear on the face of a well-pleaded complaint, in three circumstances: (1) where federal law completely preempts state law; (2) where the claim is necessarily federal in character; and (3) where the right to relief depends on the resolution of a substantial, disputed federal question.” T & E Pastorino Nursery, at 1247.
If the plaintiff’s right to relief depends on the resolution of a substantial, disputed federal question, then removal is proper regardless of the disguises the plaintiff utilizes to hide the true nature of his or her claims. Thus, if a plaintiffs’ suit is couched in terms of state law but is founded on and wholly derivative of federal law, then removal is proper. As Sparta Surgical Corp. v. National Ass’n of Sec. Dealers, Inc., 159 F.3d 1209, 1212 (9th Cir. 1998), held:
Here, although Sparta’s theories are posited as state law claims, they are founded on the defendants’ conduct in sus-pending trading and de-listing the offering, the propriety of which must be exclusively determined by federal law. The viability of any cause of action founded upon NASD’s conduct in delisting a stock or suspending trading depends on whether the association’s rules were violated.
“To bring a case within the [federal-question removal] statute, a right or immunity created by the Constitution or laws of the United States must be an element, and an essential one, of the plaintiff’s cause of action.” Gully v. First Nat’l Bank in Meridian, 299 U.S. 109, 112 (1936). “Claims brought under state law may ‘arise under’ federal law if vindication of the state right necessarily turns upon construction of a substantial question of federal law, i.e., if federal law is a necessary element of one of the well-pleaded claims.” Ultramar America Ltd. v. Dwelle, 900 F.2d 1412, 1414 (9th Cir. 1990).Read more...