Kryptonite for CAFA?

Abstract

This essay — for the Review of Litigation’s symposium issue on the Class Action Fairness Act (CAFA) and accompanying panel at the 2013 annual meeting of the Association of American Law Schools — explores the tension between CAFA and the Erie doctrine. CAFA was designed to expand federal diversity jurisdiction over high-stakes state-law class actions and, thereby, allow federal judges to decide class certification pursuant to federal law. The Erie doctrine, by contrast, aims to discourage vertical forum shopping by requiring federal courts hearing state-law claims to follow state law. Put the two together, and the result could be that federal courts exercising CAFA jurisdiction must follow the very state class-certification standards that a party invoking CAFA jurisdiction hopes to avoid. The Supreme Court’s 2010 decision in Shady Grove v. Allstate appears to undermine this possibility, as it held that the federal court in that case must apply Federal Rule 23 rather than the state class certification rule. Shady Grove, however, is hardly the last word on the role of state class action law in federal court. This essay sets forth a number of theories by which federal courts would be required to follow state class action law, even after Shady Grove. It concludes by examining lower federal court decisions on this issue, highlighting numerous examples where courts have followed state law notwithstanding Shady Grove.

Keywords: Class Action Fairness Act, CAFA, Erie, Rules Enabling Act, REA, Shady Grove, Standard Fire, Knowles, Class Actions, Rule 23

JEL Classification: K00, K10, K40, K41