Ninth Circuit Endorses Gaming of Class Action Fairness Act & Creates Circuit Split

9thCirCross-posted at WLF’s Forbes.com contributor page

Congress adopted the Class Action Fairness Act (CAFA) in 2005 in response to concerns that plaintiffs’ lawyers were gaming the system to prevent removal of class action lawsuits from state to federal court, thereby ensuring that their cases would be heard by sympathetic judges.  CAFA provides state-court defendants the option of removing cases to federal court in situations where the suit is both substantial and involves numerous plaintiffs, and where minimal diversity of citizenship exists.

Since CAFA’s passage, the plaintiffs’ bar has worked to circumvent the law and keep their mass lawsuits in state courts.  A disappointing September 24 U.S. Court of Appeals for the Ninth Circuit decision reflects how those efforts have borne fruit.  But the decision has a silver lining: a dissenting judge on the three-judge panel explained that the decision directly conflicts with a decision from the U.S. Court of Appeals for the Seventh Circuit, inferring the need for Supreme Court review to resolve the conflict.  Moreover, the dissenting judge had the remarkably good sense to cite directly to the amicus brief that Washington Legal Foundation filed in the case, adopting the narrower of two rationales that WLF had urged.

At issue in the Ninth Circuit case, Romo v. Teva Pharmaceuticals USA, Inc., are the product liability claims of more than 1,500 individuals alleged to have suffered injuries after taking medications containing the active ingredient propoxyphene—a drug that was widely marketed in this country between 1957 and 2010.  The claims were all initially filed (by a single set of lawyers) in state court in California.  The plaintiffs named as defendants nearly a dozen pharmaceutical manufacturers and wholesalers, including one California-based wholesaler whose presence defeated complete diversity of citizenship.  The defendants nonetheless removed the claims to federal court under CAFA’s “mass action” provision, which permits defendants to move cases from state to federal court if there are more than 100 plaintiffs and certain other conditions are met.

In an effort to defeat the defendants’ removal, the plaintiffs’ attorneys divided their 1,500 clients among 41 separate lawsuits, thereby ensuring that no one suit exceeded CAFA’s 100-plaintiff threshold.  But then they filed a petition asking the California court to coordinate the 41 lawsuits “for all purposes.”  Seizing upon that petition, the defendants argued that removal of the 41 coordinated lawsuits to federal court was permissible under CAFA because the petition to coordinate effectively increased the number of plaintiffs above the 100-plaintiff threshold.

The key question before the Ninth Circuit was whether the plaintiffs had proposed that their claims be “tried jointly,” a requirement for removal under CAFA’s “mass action” provision. The Ninth Circuit answered that question in the negative, reasoning that perhaps the plaintiffs were merely requesting that their 41 lawsuits be coordinated for pre-trial purposes only.  But that conclusion is impossible to square with the actual language of the petition, which asked that the 41 lawsuits be coordinated “for all purposes.”  Moreover, the California statute providing for coordination of related lawsuits expressly contemplates that coordination will continue through trial before a single judge.

The result of this week’s decision is that plaintiffs filing suit in the nine States comprising the Ninth Circuit have been provided a roadmap for keeping their multi-plaintiff lawsuits out of federal court.  All they need do is divide their plaintiffs into groups of 99 plaintiffs or less and include at least one defendant that is a citizen of the forum State.  They are then free to seek coordination of their lawsuits before a favored judge, and CAFA removal will be impermissible so long as they do not utter the magic words, “joint trial.”  Such gamesmanship cannot be what Congress had in mind when it adopted CAFA and specifically provided for removal of “mass actions.”

The dissenting opinion in Romo, authored by Judge Ronald Gould, does provide defendants with a ray of hope, however.  Judge Gould explained why the Ninth Circuit’s decision directly conflicts with the Seventh Circuit’s 2012 decision in In re Abbott Labs., Inc. The Abbott decision endorsed CAFA “mass action” removal after plaintiffs moved to coordinate their lawsuits under an Illinois statute that is closely analogous to the California coordination statute.  The Seventh Circuit deemed it irrelevant that the plaintiffs never explicitly stated that they desired that all their claims be “tried jointly.”  In light of that direct conflict, there is a significant possibility that the Supreme Court will agree to review the Ninth Circuit decision.

Judge Gould also provided a useful alternative explanation regarding why cases like this one should be considered proposals for joint trials under CAFA.  The key here, he said, was that plaintiffs stated that “coordination is necessary to avoid inconsistent judgments,” which is a concern that only a joint trial can fix.  Hence, according to him, “[i]f the natural and probable consequence of coordination of separate actions has an impact indistinguishable from joint trial, then it is sensible to treat such a petition for coordination as a proposal for joint trial.”  That formulation can surely be applied to other cases to help close this CAFA loophole.

The Supreme Court has displayed little patience with efforts by the plaintiffs’ bar to evade CAFA’s removal provisions, as evidenced by its decision last term in Standard Fire Ins. Co. v. Knowles.  If that decision is any guide, the Supreme Court eventually will state forcefully that Congress, when it adopted CAFA, intended to grant defendants sweeping rights to remove virtually all multi-plaintiff claims to federal courts, and to eliminate once and for all the lingering view of some lower courts—including both the majority and dissent here—that there is a presumption against the right to remove and/or that removal statutes must be construed strictly.

One thought on “Ninth Circuit Endorses Gaming of Class Action Fairness Act & Creates Circuit Split

  1. Pingback: Eighth Circuit Ruling Deepens Circuit Split on Class Action Fairness Act Circumvention Tactic | The Legal Pulse

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