Eighth Circuit Creates New Class Action Fairness Act Requirement, Sends Case to State Court

Cruz-Alvarez_FFeatured Expert Contributor – Civil Justice/Class Actions

Frank Cruz-Alvarez, Shook, Hardy & Bacon, L.L.P. (co-authored with Talia Zucker, Shook, Hardy & Bacon, L.L.P.)

On April 4, 2014, the U.S. Court of Appeals for the Eighth Circuit breathed new life into a proposed consumer class action lawsuit that was previously—and properly—dismissed with prejudice by the U.S. District Court for the District of Minnesota.     Instead of affirming the district court’s decision, the Eighth Circuit, in an attempt to save the lawsuit, reversed and remanded Melvin Wallace v. ConAgra Foods, Inc., — F.3d —-, 2014 WL 1356860 (8th Cir. Apr. 4, 2014), to the Minnesota state court where it originated. In doing so, the court’s ruling, either by design or by accident, undermined the framework and legislative purpose of the Class Action Fairness Act (“CAFA”).

The case originated in May of 2012, when a group of consumers purporting to represent a putative class sued ConAgra Foods, alleging that some of the company’s Hebrew National beef products are not 100% kosher, as the label claims. 2014 WL 1356860 at *1.ConAgra manufactures Hebrew National meat products using beef slaughtered by AER Services, Inc. (AER). Id. The slaughtering takes place in the facilities of American Foods Group, LLC (AFG), which sells kosher meat to ConAgra and any remaining meat to third parties. Id. AER employs the religious slaughterers, and a third party kosher certification entity named Triangle K, Inc., monitors whether AER, AFG, and ConAgra comply with the kosher rules. Id.

ConAgra promotes the kosher requirements as a reason to purchase Hebrew National products, which cost more than similar non-kosher products. Id. The consumers claim, however, that manufacturing quotas—not kosher rules—is the deciding factor in whether certain meat is certified as kosher; and with a quota of 70% for kosher meat, the kosher inspection process has become defective and unreliable. Id. at *2. Consequently, the consumers maintain they have been misled into paying an “unjustified premium for Hebrew National’s ostensibly kosher beef.” Id. at *1.

ConAgra removed the case to federal court invoking CAFA and then moved to dismiss on two grounds: (1) the consumers’ claims were barred by the First Amendment, and (2) the consumers lacked Article III standing. Id. at *2.The district court dismissed the lawsuit with prejudice in January 2013. See Wallace v. ConAgra Foods, Inc., 920 F. Supp. 2d 995 (D. Minn. 2013). The district court confronted the “meat” of the issue and found that the First Amendment “‘severely circumscribes’ the role that civil courts may play in resolving disputes touching on matters of faith.” Id. at 997. As such, the district court concluded that the instant lawsuit, which questions whether Hebrew National beef products met the tenets of Kashrut, is intrinsically religious in nature. Id. at 998-1000. And therefore, no civil court anywhere should ever decide this issue. Id.

On appeal, the Eighth Circuit, rather than upholding the district court’s adjudication of the case on its merits, turned to a procedural issue—standing—to support its decision to reverse and remand. 2014 WL 1356860 at *3. In finding that the consumers lacked Article III standing, the court expounded on the consumers’ failure to allege a particularized, actual injury in fact. Id. The consumers alleged that the non-kosher status of some packages of beef tainted all Hebrew National products. Id. at *4. According to the Eighth Circuit, however, they failed to allege that all or even most of the Hebrew National products they purchased contained non-kosher beef, “which means the particular packages of processed beef they purchased may have been—and indeed more than likely were—prepared in accordance with minimum kosher standards.” Id. at *3. In so finding, the court took liberties in ruling that without Article III standing, CAFA does not extend federal jurisdiction to the case. Id. at *6.

The Eighth Circuit was correct that the litigants lacked standing. The district court was also correct that the First Amendment bars this claim from ever being viable due to its religious entanglement. That said, a dismissal without prejudice (the remedy for lack of Article III standing) would have sufficed. Instead, the Eighth Circuit felt compelled, for reasons unknown, to revive the lawsuit entirely. To do that, the court had to apply 28 U.S.C § 1447(c), which provides that “[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.” Consequently, the court read an erroneous standing requirement into CAFA that is not present in the statute or the legislative history. On this basis, the court concluded that without Article III standing, there is no CAFA claim, which necessarily means the court has no jurisdiction. This analysis is quite troubling both legally and practically. In the future, companies seeking to invoke CAFA and remove cases to federal court should be wary of the Eighth Circuit’s decision to connect Article III standing with jurisdiction under CAFA.

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