Federal Court Grants Stay of Discovery Pending Ruling on CAFA Abstention
Regular readers will recall a recent post in which I described two federal circuit court decisions holding that where a federal court with CAFA jurisdiction determines that a class action cannot be maintained, it is not required to remand the action to state court. The theory behind those decisions was that the propriety of jurisdiction is to be measured at the time of removal to federal court.
This morning we have a decision presenting a slightly different issue. In Morrison v. YTB International, Inc., 2010 WL 1931127 (S.D. Ill. May 13, 2010), the trial court previously had granted a motion to dismiss a putative nationwide class action brought against various Illinois travel companies alleging violations of Illinois' Consumer Fraud Act. A month ago, the district court dismissed the claims of the non-resident plaintiffs because ICFA does not allow for claims by nonresidents. That left a putative class action of Illinois residents versus Illinois defendants.
The district court ordered the parties to brief whether its rulings required it to abstain from exercising jurisdiction under CAFA:
[CAFA] mandates that a federal court abstain from entertaining in diversity jurisdiction a class action in which more than two-thirds of the members of a class or a proposed class are citizens of the state where the class action was filed and all of the primary defendants are citizens of the forum state.
Id. at *1.
The defendants moved for a stay of discovery while the court considered the briefing on the question. The court ultimately granted the motion for a stay, based on its near certainty that abstention would be required:
If, as seems likely, this case ultimately is dismissed, this Court's determinations about the scope of the proposed class in this case will be issue preclusive in any proceedings brought in state court on the same claims, and it follows that class counsel will be required to re-think the discovery plan they have employed in this case. More specifically, they will need to tailor their discover to a new, more limited class consisting solely of Illinois residents. Accordingly, the Court does not believe that a stay of discovery in this case, which has been conducted on behalf of a nationwide class that the Court has ruled cannot be maintained, will not result in a waste of judicial resources, because discovery in a state-court proceeding will necessarily be on behalf of an Illinois-only.
Id. at *2.
This case raises important considerations for defendants' strategies to address post-12(b)(6) case management.
