The UCL Practitioner
Thursday, August 11, 2005
New CAFA decision: Pfizer, Inc. v. Lott
In Pfizer, Inc. v. Lott, ___ F.3d ___ (7th Cir. Aug. 4, 2005), the Seventh Circuit rejected another attempt to remove a case to federal court based on the Class Action "Fairness" Act. But before getting to the CAFA issues, the court (Judge Posner) neatly explained the Supreme Court's holding in Exxon Mobil Corp. v. Allapattah Service, Inc., 125 U.S. 2611 (2005) in a single sentence:
The named plaintiffs stipulated that they would not seek or even accept damages in excess of $75,000, and while the stipulation would not bind the other members of the class, the likelihood that [any class member] had damages in excess of $75,000 was sufficiently remote to cast on [the defendant] the burden of presenting some evidence or argument to establish the plausibility of an inference that at least one member of the class could cross the $75,000 threshold, which would establish jurisdiction over the entire class.
Slip op. at 2 (citations omitted). (I'm glad to find I got it right after my quick read of Exxon when it came down in late June.) (UPDATE: An anonymous commenter points out that I was too quick to endorse Judge Posner's reading of Exxon. Exxon held that if "at least one named plaintiff" (not just any class member) meets the $75,000 jurisdictional threshold, then diversity jurisdiction is present. Thanks to Mr./Ms. Anonymous for pointing this out.)

After determining that diversity jurisdiction was not present under Exxon, the court turned to CAFA. The case was filed in state court on the day before CAFA was enacted, and was removed within thirty days after that. The court rejected the argument that the word "commenced" in CAFA meant the date of removal. Slip op. at 3. It's interesting that the court employed the state-law definition of the word "commenced" in determining its meaning for purposes of CAFA. In Illinois, the filing of the complaint "commenced" the case, so CAFA did not apply. Slip op. at 3. This means that, potentially, CAFA might operate differently in some states than in others. The opinion ended with these words:
This is not to belittle Pfizer's indignation at the plaintiffs' having beat the statute by one day, but their gamesmanship actually hurts its argument. Pharmaceutical and other companies that pressed for the enactment of the Class Action Fairness Act were doubtless acutely aware, as the bill that became the statute was wending its way through Congress en route to enactment, that the prospect of its enactment would spur the class action bar to accelerate the filing of state-law class actions in state courts. Doubtless the companies made their concerns known to Congress. The fact that Congress did not respond by writing "removed" (or "removed after the date of enactment but within 30 days of the orignal filing") instead of "commenced" is telling.
Slip op. at 4. Is it "gamesmanship" to file suit based on the law in effect on the filing date? I would argue not. As the opinion observes, Congress could have made CAFA retroactive if it wished to. Nor should a defendant be "indignant" about being sued if, in fact, it violated the law. But in any event, thanks to the reader who forwarded this case to me. And for more interesting reading, check out the Becker-Posner Blog, which Judge Posner writes with Professor Gary Becker (winner of the Nobel Prize in Economics).
Sorry Kathy, I think you and Posner got this wrong.

The Exxon Court stated:

We hold that, where the other elements of jurisdiction are present and at least one named plaintiff in the action satisfies the amount-in-controversy requirement, §1367 does authorize supplemental jurisdiction over the claims of other plaintiffs in the same Article III case or controversy, even if those claims are for less than the jurisdictional amount specified in the statute setting forth the requirements for diversity jurisdiction. Id. at 5-6

Additionally, the Court stated that their opinion "accords with the views of the Courts of Appeals for … Seventh Circuit[]" citing In re Brand Name Prescription Drugs Antitrust Litig., 123 F. 3d 599 (7th 1997).

Brand Name Drugs holds that it is the Named Plaintiffs that matter.

This view is also supported by Ginsberg's dissent. Justice Ginsberg characterizes the majority's ruling as: "The Court reads §1367 to overrule Clark and Zahn, thereby allowing access to federal court by co-plaintiffs or class members who do not meet the now in excess of $75,000 amount-in-controversy requirement, so long as at least one co-plaintiff, or the named class representative, has a jurisdictionally sufficient claim." Ginsberg Dissenting at 38.

Interestingly, client alerts put out by Akin Gump; Goodwin Proctor; OMM; and others agree with this reading.
It's Kim, not Kathy. :)

Looks like you're right. I wasn't really focusing on the named plaintiff vs. unnamed class member aspect of Judge Posner's summary of the holding when I wrote this up. I think you may be right. Thanks for your comment.
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