Consolidated Class Actions Treated as One for CAFA Removal: Ninth Circuit | Practical Law

Consolidated Class Actions Treated as One for CAFA Removal: Ninth Circuit | Practical Law

The US Court of Appeals for the Ninth Circuit held in Bridewell-Sledge v. Blue Cross of California that two class actions consolidated under California law should have been viewed as a single class action when evaluating the propriety of removal under the Class Action Fairness Act (CAFA).

Consolidated Class Actions Treated as One for CAFA Removal: Ninth Circuit

Practical Law Legal Update w-000-5440 (Approx. 4 pages)

Consolidated Class Actions Treated as One for CAFA Removal: Ninth Circuit

by Practical Law Litigation
Published on 25 Aug 2015 • USA (National/Federal)
The US Court of Appeals for the Ninth Circuit held in Bridewell-Sledge v. Blue Cross of California that two class actions consolidated under California law should have been viewed as a single class action when evaluating the propriety of removal under the Class Action Fairness Act (CAFA).
On August 20, 2015, the US Court of Appeals for the Ninth Circuit held in Bridewell-Sledge v. Blue Cross of California that two class actions consolidated under California law "for all purposes" should have been treated as a single action in evaluating the propriety of removal to federal court under CAFA (No. 15-56038, (9th Cir. Aug. 20, 2015)). Because the actions should have been viewed as one, the local controversy exception to CAFA removal applied and the actions should have been remanded to state court.
On October 20, 2011, two groups of plaintiffs filed putative class action complaints against the defendants alleging similar claims of employment discrimination. Both actions were transferred to Los Angeles Superior Court, and the plaintiffs moved to consolidate their actions under California Code of Civil Procedure §§ 404, 404.1 and 1048(a). The state court granted the motion for consolidation and ordered that the actions be consolidated "for all purposes." After the plaintiffs amended the complaints to add additional defendants, including one non-California citizen, the defendants removed the actions to the US District Court for the Central District of California under CAFA by filing two notices of removal, despite the consolidation. The federal district court consolidated the cases for all purposes, including trial.
The district court ordered the defendants to show cause as to why the case should not be remanded to state court for lack of subject matter jurisdiction based on CAFA's local controversy exception. After learning which complaint had been filed first, the court remanded the earlier-filed action to state court, concluding that CAFA's local controversy exception applied only to that case. The district court retained jurisdiction over the other action, finding that the local controversy exception did not apply. This appeal followed.
CAFA vests federal courts with original diversity jurisdiction over a class action if:
  • The amount in controversy exceeds $5,000,000.
  • Any class member is a citizen of a state different from any defendant.
CAFA's local controversy exception allows state courts to retain class actions with a truly local focus because state courts have a strong interest in adjudicating such disputes. The local controversy exception applies when:
  • More than two-thirds of the proposed plaintiff class are citizens of the state in which the action was filed.
  • At least one defendant from whom significant relief is sought and whose conduct forms a significant basis for the claims asserted is a citizen of the state in which the action was originally filed.
  • The principal injuries resulting from the alleged conduct were incurred in the state in which the action was originally filed.
  • No similar class action was filed against any of the same defendants in the three-year period preceding the filing of that class action.
The plaintiffs argued that because the two actions had been consolidated into a single action, no "other class action" had been filed within the three-year period before the consolidated action. The Ninth Circuit agreed. The panel noted that state court-ordered consolidation may affect jurisdiction and removability because it can destroy the identity of each suit and merge them into one. In this case, the state court consolidated the two actions "for all purposes." The Ninth Circuit rejected the defendants' argument that the actions should be treated separately because they were separate actions at the time they were filed, holding that it contravened California law regarding consolidation. Under California law, actions consolidated for all purposes are merged into a single proceeding with one case number, resulting in only one verdict and judgment, and therefore are to be treated as if they had been united originally. It was incongruous for the district court to treat them as separate actions for removal, splitting them and sending them to different courts.
The Ninth Circuit found that CAFA's policy objectives would be met if the consolidated case was remanded to state court. The local controversy exception was intended to allow truly local disputes to proceed in state court. Because most of the plaintiffs and at least one significant defendant were citizens of California and the injuries were suffered in California, the state had a strong interest in deciding the dispute. Additionally, allowing the consolidated action to proceed before one state court judge promotes judicial efficiency, one of CAFA's primary policy objectives. The Ninth Circuit ordered that the district court treat the cases as a single consolidated action and remand it in its entirety to state court.
Counsel seeking removal of consolidated cases under CAFA should consider the relevant state law on consolidation, how the cases were consolidated and for what purpose.