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Consumer Class Actions: 2.4.3.1 Generally

There are three types of exceptions to CAFA jurisdiction: (1) when there are state defendants; (2) for shareholder securities and derivative suits; and (3) when the case has a close nexus to the forum state. Each of these exceptions is discussed below. Sometimes it is the defendant who urges the exception in response to a suit filed in federal court asserting CAFA jurisdiction, and sometimes it is the plaintiff who takes this position in response to removal of a suit filed in state court.

Consumer Class Actions: 2.4.3.2 State Defendants

The CAFA excludes from its terms cases in which “the primary defendants are States, State officials, or other governmental entities against whom the district court may be foreclosed from ordering relief.”140 Such a case might, for example, implicate the Eleventh Amendment, which bars suits against states for damages in federal court and suits to enforce state laws against state government agencies.

Consumer Class Actions: 2.4.3.3 Shareholder Derivative and Other Corporate Suits

The CAFA also excludes from its coverage class actions that solely involve claims concerning covered shareholder securities and certain other corporate issues.143 Remand orders pursuant to this exception to CAFA jurisdiction are relatively common.144 There may, however, be separate, non-CAFA bases for removal jurisdiction over certain securities-related cases.145

Consumer Class Actions: 2.4.3.4.2 Citizenship of class members

The threshold for the local controversy and home state exceptions is that more than two-thirds of all class members are citizens of the state in which the action was filed.150 The threshold for the discretionary exception is that between one-third and two-thirds of class members are citizens of the forum state.151 The issues raised by determination of citizenship are the same, but the remainder of this discussion will refer to the two-thirds threshold for simplicity.

Consumer Class Actions: 2.4.3.4.4 Home state exception

The home state exception to CAFA jurisdiction applies when “two-thirds or more of the members of all proposed plaintiff classes in the aggregate, and the primary defendants, are citizens of the State in which the action was originally filed.”182

Consumer Class Actions: 2.4.4.1 Any Defendant May Remove a Case

The CAFA allows any defendant to remove a class action to federal court, without regard to whether it or any other defendant is a citizen of the forum state and without the consent of the other defendants.201 The defendant seeking removal need not be a “primary” or even a “significant” defendant.

Consumer Class Actions: 2.4.4.2 Time Limits for Removal

The CAFA does not change existing law that gives the defendant only thirty days to seek removal once a pleading, motion, order, or “other paper” makes it clear that there is a basis for federal jurisdiction.207 However, it does create an exception to the usual deadline of one year from filing to seek removal based on diversity.208 Thus, if a pleading or other paper submitted years after the case is filed creates a basis for federal jurisdiction under the CAFA’s expanded diversity jurisdiction, t

Consumer Class Actions: 2.4.4.3 Removal of “Mass Actions”

The CAFA permits removal of, and perhaps original jurisdiction over, certain cases that have not been brought as class actions but are deemed such by virtue of having related characteristics.212 The CAFA’s mass action provisions have been called “clumsy,” “bewildering,”213 and “an opaque, baroque maze of interlocking cross-references that defy easy interpretation.”214 Luckily, most cases brought on behalf of large groups of consumers are brought as

Consumer Class Actions: 17.6 Trial of Individual Counterclaims Against Class Members

Despite powerful arguments against it,60 district courts sometimes allow the defendant in a class action to assert counterclaims against some or all class members under the belief that such counterclaims are compulsory under Rule 13 or, less frequently, that permissive counterclaims should be allowed for efficiency reasons. When such counterclaims are allowed, trial of those claims should be deferred until after liability is established on the classwide claims against the defendant.61

Consumer Class Actions: 7.6 Defendant’s Motion for Summary Judgment

The defendant may move for summary judgment early on in the litigation, even before the plaintiff has completed discovery and fully gathered information on the defendant’s practices. This early filing of the defendant’s motion may be an attempt to preempt the plaintiff’s own motion for summary judgment.117

Consumer Class Actions: 19.3.6.2.1 In-kind services as part of the fund

When in-kind services are accepted by class members in lieu of cash, the value of these services should be considered part of the value of the common fund for purposes of evaluating the reasonableness of the requested attorney fee award.137 Some courts may, however, discount their value for purposes of determining the fee award.138

Consumer Class Actions: 19.3.6.2.3 When coupons are part of the settlement

One issue is whether the benefit to class members is a “coupon.” CAFA does not define “coupon,” and it may extend to “vouchers” as well. There are several sources that may be considered in determining whether a coupon or voucher is being provided.

In McKnight v. Hinojosa,142 the Ninth Circuit applied the test set out in In re Online DVD-Rental Antitrust Litigation,143 to determine if a settlement includes coupons:

Fair Debt Collection: 11.13.8.5 Upward Adjustments to the Lodestar

The Supreme Court ruled in City of Burlington v. Dague1281 that the lodestar under a federal fee-shifting statute may not be adjusted upwards to compensate for the riskiness of a case or the contingent nature of litigating fee-shifting claims. And in 2010, the Supreme Court elaborated in Perdue v. Kenny A. ex rel. Winn1282 that enhancements are only permissible in “rare and exceptional circumstances.”

Consumer Class Actions: 19.2.1 Overview

Many statutory claims in consumer class actions provide for an award of “reasonable” statutory attorney fees to the consumer in a “successful action,” often referred to as the prevailing party.21 This is a second, independent basis for the award of attorney fees in a class action, distinct from an award based on a common fund theory.22 Even when claims are initiated pursuant to a statute with a fee-shifting provision, “where a class action results in a common-fund settlement for the benefit

Consumer Class Actions: 19.3.3 The Two Competing Common Fund Methods: Percentage of Fund Versus Lodestar

Over time, the courts have shifted their views on the correct approach to computing attorney fees under a common fund theory—use of a lodestar or use of a percentage of the common fund. Prior to the 1970s, the federal courts awarded fees in common fund cases based on a percentage of the benefit conferred.84 From 1973 to around 1985, the lodestar method, often with a multiplier, was temporarily in vogue in the federal courts.85

Consumer Class Actions: 19.3.7.2 The Hourly Rate

Under the lodestar method, the court first multiplies the attorney’s reasonable hourly rate by the number of hours reasonably expended to arrive at a lodestar. In common fund cases, when this lodestar is used to cross-check the reasonableness of a fee computed as a percentage of the recovery, it is often multiplied by a specific number (called a multiplier) to take into consideration the contingent nature of the case, the degree of success, and other factors.191

Consumer Class Actions: 28 U.S.C. § 1391. Venue generally

(a) Applicability of section.—Except as otherwise provided by law—

(1) this section shall govern the venue of all civil actions brought in district courts of the United States; and

(2) the proper venue for a civil action shall be determined without regard to whether the action is local or transitory in nature.

(b) Venue in general.—A civil action may be brought in—

Consumer Class Actions: 28 U.S.C. § 1404. Change of venue

(a) For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought or to any district or division to which all parties have consented.