Class Actions Shrugged: Mass Actions and the Future of Aggregate Litigation

59 Pages Posted: 4 Feb 2013 Last revised: 21 Feb 2014

Date Written: January 6, 2013

Abstract

Congress enacted the Class Action Fairness Act (CAFA) in 2005 in response to the perceived manifold misuse of class action proceedings in state court. The centerpiece of this legislation was the creation of new federal diversity jurisdiction for class action cases. In addition, CAFA also created a new removal provision that enabled defendants to remove state class actions in federal courts. Since 2005, much of the CAFA litigation has centered on several issues of statutory construction relating to the retroactivity of CAFA’s provisions, amount-in-controversy requirements, notice provisions, “local controversy exceptions,” and coupon settlements.

This paper addresses the less-recognized CAFA provision for the removal of so-called “mass actions” that are not class actions, from state court into federal court. The article examines the strategic use of this CAFA mass action mechanism, the problems this provision was intended to address, and the federal courts conflicting decisions relating to the CAFA mass action provision.

As is often recited, Congress enacted the Class Action Fairness Act (“CAFA”) in 2005 in order to create a federal forum for multistate class actions of national interest and to protect defendants and class members from hostile state courts. Since then, almost all scholarly interest has focused on the fate of state class action litigation in the post-CAFA era, including research by the Federal Judicial Center. Scant attention, however, has been paid to CAFA’s lesser-known provisions relating to mass actions. Indeed, three years after CAFA’s enactment, one commentator noted that CAFA had little impact on mass action litigation, measured “most obviously by the lack of judicial decisions under this section, but it is also probably true empirically in terms of changing the filing behavior of litigants.”

This observation no longer seems true: CAFA’s mass action provisions embody a litigation Trojan horse for attorneys engaged in the resolution of large-scale aggregate litigation and demonstrate the law of unintended consequences. It is no longer true that attorneys are not remodeling state class action or mass aggregate cases to avoid removal to federal court. Instead, CAFA has inspired some of the most creative lawyering in recent decades, as plaintiffs’ attorneys seek to evade CAFA class and mass action provisions, and to retain aggregate litigation in state court forums.

This article examines how CAFA has encouraged artful pleading in state court not only to circumvent CAFA’s removal provisions for state class actions, but with an emphasis on evasion of CAFA’s mass action provisions. Thus, plaintiffs’ attorneys skillfully have developed pleading strategies in order to retain large inventories of claimants, to aggregate claims, and to evade the force of CAFA by not pursuing class action relief. Simply, since CAFA’s enactment plaintiffs’ attorneys have realized there is little to be gained and much to be lost by structuring litigation as a class action, when the same results may be achieved through large-scale claim aggregation by other procedural means (such as non-class mass actions). Thus, the simple way to avoid CAFA is not to pursue a class action.

There is some evidence that the CAFA drafters anticipated this possible class-action end run because of the inclusion of CAFA’s mass action provisions. However, it is highly unlikely that the legislators predicted the array of pleading strategies the mass action provisions have inspired, or the judicial response to these stratagems. Because many plaintiffs’ attorneys have responded to CAFA by defaulting to a mass action modality, the defense bar in response has aggressively invoked CAFA’s mass action provisions to preserve defendants’ rights to have large-scale litigation resolved in federal rather than state forums.

The CAFA mass action cases represent an emerging jurisprudence anchored in the more significant debate concerning the resolution of large-scale litigation. To the extent that the plaintiffs’ bar has been successful in employing the mass action approach to evade CAFA, then CAFA has been rendered superfluous in addressing the problems of forum shopping that motivated CAFA’s enactment in the first place. On the other hand, to the extent that the defense bar has been successful in deploying CAFA’s mass action provisions to remove artfully pleaded aggregate litigation into federal court, then CAFA has effectively operated to achieve its stated goals.

Nonetheless, ironies abound in the emerging CAFA mass action jurisprudence. Thus, in those cases where defendants have prevailed in removing mass actions to federal court, followed by a request for severance of claims, the federal forum is thereby inundated with large numbers of individual cases that undermine the utility and efficiency of federal proceedings. In addition, where mass actions successfully have been removed to federal court and counter-intuitively litigants have pursued class certification, procedural gamesmanship seems honed to new, heightened, unexplored realms. Indeed, perhaps CAFA’s ultimate irony stems from the fact that legislation intended to end procedural gamesmanship has, in effect, upped the ante.

Finally, any assessment of the CAFA litigation strategies must be appreciated against the larger background narrative relating to trends in aggregate litigation resolution. While many plaintiffs’ attorneys might prefer congenial state forums to resolve their cases, CAFA removal of mass actions might achieve equivalent or more opportune results. Hence, once removed to federal court, mass actions may ― at the plaintiffs’ election ― be sent to multi-district litigation, largely free of class action constraints. Moreover, recent history suggests that defendants likewise favor resolution of mass litigation under non-class MDL auspices. Hence, CAFA mass action removal provisions may represent an unusual convergence of sanguine procedural opportunism among all actors in the aggregate litigation universe.

Keywords: Class Action Fairness Act, mass actions, artful pleading, class actions, removal, amount in controversy, master of complaint doctrine, parens patrie actions, CAFA

Suggested Citation

Mullenix, Linda S., Class Actions Shrugged: Mass Actions and the Future of Aggregate Litigation (January 6, 2013). 32 Rev. Litig. 591 (2013); U of Texas Law, Public Law Research Paper No. 323. Available at SSRN: https://ssrn.com/abstract=2211843

Linda S. Mullenix (Contact Author)

University of Texas School of Law ( email )

727 East Dean Keeton Street
Austin, TX 78705
United States
512-232-1375 (Phone)

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