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October 10, 2013

Stitching the Loopholes: Exploring the Spectrum of Class Action Solutions

This guest post is authored by Victor Schwartz, partner, Shook, Hardy & Bacon L.L.P., who will present on this topic at a panel at the 14th Annual Legal Reform Summit.

When the Class Action Fairness Act (CAFA) became law in 2005, the wiser and wealthier members of class action plaintiffs’ bar met in closed quarters looking for loopholes to avoid having class actions heard in federal courts. These lawyers generally favor local state courts where the judges know them because, at least in some places, they may receive more preferential treatment. Some plaintiff’s lawyers have called such courts “magic jurisdictions.” The question for plaintiff’s lawyers after CAFA was how to continue to reach these magic jurisdictions?

The U.S. Chamber Institute for Legal Reform will explore this issue (among others) during its 14th Annual Legal Reform Summit: Healing the Lawsuit System, on October 23 in Washington, D.C.

The program will explore the ways plaintiff’s lawyers have tried to create or exploit loopholes in CAFA, what the probability is of their success, and what may be done to impede circumvention of CAFA. For example, in March 2013, the United States Supreme Court, in Standard Fire Ins. Co. v. Knowles, 133 S. Ct. 1345 (2013), held that a plaintiff’s lawyers’ pre-class certification “stipulation” not to seek damages in excess of CAFA’s $5 million minimum requirement for federal court jurisdiction could not operate to eliminate federal court jurisdiction.

In addition, while CAFA established federal court jurisdiction over so-called “mass actions,” plaintiff’s lawyers have attempted to use a case’s “mass action” status to avoid transfer to a federal Multi District Litigation (MDL) court. CAFA may pave the way for plaintiff’s lawyers to accomplish this because the Act generally bars mass actions from transfers to a federal MDL. Will plaintiff’s lawyers prevail in using CAFA to their advantage?

CAFA defines a “mass action” as “any civil action… in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that plaintiffs’ claims involve common questions of law or fact.” Accordingly, plaintiff’s lawyers have sought to bypass CAFA by filing separate cases on behalf of groups of less than 100 plaintiffs. These plaintiff’s lawyers then shrewdly ask for pretrial coordination of the suits in a favored state court, but do not ask for a joint trial. Will this work? Can plaintiff’s lawyers get the benefits of mass action litigation and remain in a magic jurisdiction?

Please attend and learn. 

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