Creative Strategies To Avoid CAFA Removal Yield Different Results
Reading some of the recent cases involving removal under the Class Action Fairness Act is an excellent reminder that venue really matters, and some lawyers really, really, really don't want to end up in federal court. At all. Ever.
Take, for example, Vanegas v. Dole Food Co., 2009 WL 213012 (C.D. Cal. Jan. 29, 2009). In Vanegas, plaintiffs counsel had filed a series of lawsuits in Los Angeles state court on behalf of banana plantation workers from Costa Rica, Honduras, Panama, and Guatemala against a host of companies, alleging that the workers' exposure to pesticides had injured them. They alleged a variety of products liability and fraud causes of action. Each of the lawsuits had less than 100 plaintiffs, and none of them purported to be a class action.
The defendants removed the cases to federal court under the Class Action Fairness Act ("CAFA"), 28 U.S.C. secs. 1332(d) and 1453. CAFA generally allows for the removal to federal court of class actions exceeding the sum of $5,000,000 and so-called "mass actions" of 100 or more individuals whose individual claims exceed $75,000.
Of course, breaking the lawsuits up into blocks of fewer than 100 plaintiffs was artful pleading designed to avoid removal to federal court. The defendants argued that the court should look beyond such artifice and retain jurisdiction of the case.
But the court declined to do so, positing: "Nothing in CAFA suggests that plaintiffs, as masters of their complaint, may not 'file multiple actions, each with fewer than 100 plaintiffs, to work within the confines of CAFA to keep their state-law claims in state court.' . . . Furthermore, 'Congress expressly rejected the use of [defendants'] strategy by excluding actions in which claims have been "joined upon motion of the defendant" from the definition of "mass action."'" Id. at *1 (citations omitted).
The court ultimately issued an order to show cause why the case should not be remanded to state court.
In reaching its result, however, the court distinguished a recent case in which the Sixth Circuit looked beyond the pleadings to prevent the plaintiffs from circumventing CAFA's removal provision. In Freeman v. Blue Ridge Paper Products, Inc., 551 F.3d 405 (6th Cir. Dec. 29, 2008), some 300 riparian landowners brought public nuisance claims against a paper mill for allegedly polluting a river. They fought valiantly to avoid CAFA removal to federal court. Their complaint had expressly disavowed individual recovery of more than $75,000 and collective recovery of more than $5 million. The defendant removed once, and was remanded to state court for failure to establish that the case met the amount in controversy requirement.
On remand, the plaintiffs sought to maximize their recovery while avoiding federal court by dividing the suit into 5 suits, each covering a successive 6-month time period and each being limited to $74,000 per individual and $4.9 million per suit.
Concluding that "CAFA was clearly designed to prevent plaintiffs from artificially structuring their suits to avoid federal jurisdiction," the court refused to credit plaintiffs' artifices:
[E]ach of the five suits must be aggregated. The complaints are identical in all respects except for the broken up time periods. Plaintiffs put forth no colorable reason for breaking up the lawsuits in this fashion, other than to avoid federal jurisdiction. In fact, plaintiffs' counsel admitted at oral argument that avoiding CAFA was the only reason for this structuring. If such pure structuring permits class plaintiffs to avoid CAFA, then Congress's obvious purpose in passing the statute -- to allow defendants to defend large interstate class actions in federal court -- can be avoided almost at will, as long as state law permits suits to be broken up on some basis.
Id. at 407.
The court limited its holding to the situation where there is no colorable basis -- other than frustrating CAFA -- for dividing up the relief into separate time periods. The court also recognized that plaintiffs generally can limit their damages to avoid federal jurisdiction, but held that "where recovery is expanded, rather than limited, by virtue of splintering lawsuits for no colorable reason, the total of such identical splintered lawsuits may be aggregated." Id. at 409.
For an additional case interpreting CAFA liberally to avoid jurisdictional gamesmanship, see State of Louisiana v. Allstate Insurance Co., 536 F.3d 418 (5th Cir. 2008) (interpreting a so-called "parens patriae" action to fall within CAFA's definitions because the "real party in interest" was not the State, but the policyholders on whose behalf the State had sued).
It remains to be seen how closely courts will scrutinize pleadings in considering CAFA removal issues. But one thing is clear from Vanegas and Freeman: the creative writing ability of lawyers who want to avoid federal courts knows no bounds!
