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Consumer Class Actions: 2.3.3.7 Attorney Fees

There is general agreement that attorney fees must be authorized by a fee-shifting statute or contract provision in order to be included in the amount in controversy at all.68 However, there is a circuit split as to whether to include only the fees expended up to the point that federal jurisdiction is sought, or to include a reasonable estimate of the fees to be recovered if the plaintiffs prevail.

Consumer Class Actions: 2.3.3.8 Injunctive Relief and Disgorgement

Issues presented by requests for equitable relief, such as injunctive relief or disgorgement, include whether (1) the cost of compliance by the defendant can be counted and, (2) if that is permissible under any circumstances, the jurisdictional amount can be satisfied by a request that the defendant be ordered to disgorge or refund amounts to an entire class or to stop overcharging.

Consumer Class Actions: 2.4.1 Overview

The Class Action Fairness Act of 2005 (CAFA) amended 28 U.S.C. § 1332, the diversity jurisdiction statute.88 When the CAFA became effective on February 18, 2005, the availability of federal diversity jurisdiction—both for class actions filed by plaintiffs in federal court and for those removed by defendants from state to federal court—was greatly expanded.

Consumer Class Actions: 2.4.2.1 Class Allegations and Effect of Denial of Class Certification

The CAFA by its terms applies “to any class action before or after the entry of a class certification order by the court with respect to that action” and defines a class action as “any civil action filed under rule 23 of the Federal Rules of Civil Procedure or similar State statute or rule of judicial procedure authorizing an action to be brought by 1 or more representative persons as a class action.”89 Thus, federal jurisdiction attaches (assuming other conditions are met) when a complaint is filed that includes class allegations; plaintiffs

Consumer Class Actions: 2.4.2.2 Class Size

By its terms, the CAFA does not apply to class actions with fewer than 100 class members, aggregating all subclasses.103 For discussion of burdens of proof when elements of CAFA jurisdiction are in dispute, see § 2.5, infra.

Consumer Class Actions: 2.4.2.3 Minimal Diversity

Under the CAFA, federal diversity jurisdiction is expanded to encompass most class actions in which any class member is a citizen of a state different from any defendant, provided the other conditions of the statute are met.104 This diversity is so broadly defined that it is satisfied if all the class members reside in the same state as the defendant but at least one member of the class is a resident alien.105 Nevertheless, diversity must be properly pleaded in the complaint, o

Consumer Class Actions: 2.4.2.4 Amount in Controversy

CAFA diversity jurisdiction is limited to cases in which the matter in controversy exceeds $5 million. Unlike ordinary diversity jurisdiction, the amount in controversy under the CAFA is measured in the aggregate:

In any class action, the claims of the individual class members shall be aggregated to determine whether the matter in controversy exceeds the sum or value of $5 million, exclusive of interest and costs.120

Consumer Class Actions: 2.4.2.5 Effective Date

The CAFA grants federal jurisdiction for class actions meeting its substantive criteria that were “commenced” on or after February 18, 2005.132 The date of commencement is to be decided under the applicable state law.133 In the years after the CAFA was enacted, however, courts have had to determine whether certain activity occurring after the original filing constitutes “commencement” for purposes of removal jurisdiction under the CAFA.134

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.”