By:Bradley C. Nahrstadt

Williams Montgomery & John Ltd.

Chicago, IL

In Cunningham Charter Corp. v. Learjet, Inc., __ F.3d __, 2010 WL 199627 (7^th Cir. Jan. 22, 2010), in a case of first impression, the Seventh Circuit Court of Appeals ruled that federal jurisdiction under the Class Action Fairness Act (CAFA) does not depend on whether a class is certified.  In so holding, the Seventh Circuit explicitly followed an intepretation of CAFA previously adopted by the First Circuit (In re TJX Companies Retail Security Breach Litigation, 564 F.3d 489 (1^st Cir. 2009) and the Eleventh Circuit Court of Appeals (Vega v. T-Mobile USA, Inc., 564 F.3d 1256 (11^th Cir. 2009) and tacitly rejected the Second Circuit Court of Appeal’s position in County of Nassau v. Hotels.com, 577 F.3d 89 (2^nd Cir. 2009).

            In Cunningham, the plaintiff filed suit against Learjet, Inc. in an Illinois state court asserting claims for breach of warranty and products liability on behalf of itself and all other buyers of Learjets who had received the same warranty from the manufacturer that Cunningham had received.  Learjet removed the case to federal court under the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d), and the plaintiff moved to certify two classes.  The district judge denied the motion to certify on the ground that neither proposed class satisfied the criteria for certification set forth in F.R.C.P. 23.  The judge then ruled that the denial of class certification eliminated subject-matter jurisdiction under the Act, and so he remanded the case to state court.  Learjet then petitioned for leave to appeal the order of remand, a petition that the Seventh Circuit Court of Appeals granted.

            According to the Seventh Circuit, CAFA 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.  CAFA defines 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.”  28 U.S.C. § 1332(d)(1)(B).  A later section of the Act says that it applies “to any class action [within the Act’s scope] before or after the entry of a class certification order.”  28 U.S.C. § 1332(d)(8).

            In reversing the judgment of the district court and remanding the case for further proceedings, the Seventh Circuit Court of Appeals said the following:

…[R]emember that jurisdiction attaches when a suit is filed as a class action, and that invariably precedes certification.  All that Section 1332(d)(1)(C) means is that a suit filed as a class action cannot be maintained as one without an order certifying the class.  That needn’t imply that unless the class is certified the court loses jurisdiction of the case.

* * *

Our conclusion [that federal jurisdiction under CAFA does not depend on whether the class is certified] vindicates the general principle that jurisdiction once properly invoked is not lost by developments after a suit is filed, such as a change in the state of which a party is a citizen that destroys diversity…The general principle is applicable to this case because no one suggests that a class action must be certified before it can be removed to federal court under the Act; section 1332(d)(8) scotches any such inference.

* * *

Behind the principle that jurisdiction once obtained normally is secure is a desire to minimize expense and delay.  If at all possible, therefore, a case should stay in the system that first acquired jurisdiction.  It should not be shunted between court systems; litigation is not ping-pong.

Cunningham, slip op. at pp. 3-5.

            It should be noted that the Seventh Circuit’s decision in Cunningham does not mean that a class action case can never be remanded to state court.  According to the court, if the plaintiff amends away jurisdiction is a subsequent pleading, the case can be dismissed.  Likewise, if the plaintiff’s class allegations are completely frivolous, the district court can remand the case on that ground.

For more info on Willaims Montgomery & John, visit the International Society of Primerus Law Firms or willmont.com.