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Plaintiffs Strike Out in Bids for Remand in Class Action Fairness Act Cases (Thursday, May 17, 2012)

Cunningham Charter Corporation sued Learjet, Inc. in an Illinois state court for breach of warranty and products liability on behalf of itself and other buyers of Learjets who had received the same warranty. Learjet removed the case to federal district court under the Class Action Fairness Act ("Act"), 28 U.S.C. § 1332(d). Cunningham Charter moved to certify two classes, but the district court denied the motion and ruled that the denial of class certification eliminated subject-matter jurisdiction under the Act. The district court remanded the case to the state court. Learjet appealed the remand order.

The Act creates federal diversity jurisdiction over certain class actions in which at least one member of the class is a citizen of a different state from any defendant. 28 U.S.C. § 1332(d)(2). he Act applies to any class action within the Act's scope before or after the entry of a class certification order.

According to the appeals court, federal jurisdiction under the Act does not depend on actual certification of a class. The Court noted the general principle that jurisdiction, once properly invoked, is not lost by later developments in the suit.

This jurisdictional principle is backed by a goal to minimize expense and delay. A case should stay in the system that first acquired jurisdiction, rather than be bounced between court systems.

The appeals court also believed that the policy behind the Act would be ignored if a suit within the scope of the Act ended up being litigated as a class action in state court after a remand. The judgment of the district court was reversed and the case remanded.

Cunningham Charter Corporation v Learjet, Inc., 592 F.3d 805 (7th Cir. 2010).

Certain Wisconsin residents claiming to be representatives of a class filed a complaint in Wisconsin state court against Burlington Northern Santa Fe Railway Company, Burlington Northern Santa Fe Corporation, and some of its employees. They alleged that BNSF's failure to inspect and maintain a railroad trestle caused the town to flood, damaging their property.

BNSF removed the case to federal court, asserting that there was jurisdiction under the Act. The plaintiffs moved to remand the case to state court. The district court denied that motion. The plaintiffs then sought to amend their complaint to omit the class allegations. The district court allowed the amendment and treated the motion as an implied motion to remand the case. BNSF asked the district court to reconsider its remand order.

The district court recognized that there are exceptions to the general rule that removal jurisdiction is determined at the time of removal, but nevertheless concluded that it properly remanded the case. On appeal, the Seventh Circuit Court of Appeals repeated the general rule that jurisdiction is determined at the time of removal, and that nothing filed after removal affects jurisdiction.

The appellate court observed that in Cunningham Charter Corp. it had determined that federal jurisdiction survives even if the district court ultimately denies class certification.

This time, the question was whether jurisdiction under the Act continues when the post-removal change is the plaintiffs' decision not to pursue class certification. The appellate court believed there were compelling reasons to conclude that such a post-removal amendment did not destroy jurisdiction. In particular, the court pointed to considerations of expense and delay, and noted that allowing plaintiffs to amend away jurisdiction after removal would pose a risk of forum manipulation.

In re: Burlington Northern Santa Fe Railway Co., 606 F.3d 379 (7th Cir. 2010).

· Michael R. Lied
· Howard & Howard Attorneys PLLC
· One Technology Plaza, 211 Fulton Street, Suite 600, Peoria, IL 61602
· (309) 999-6311
· MLied@howardandhoward.com