Thursday, April 22, 2010

Ninth Circuit Rules that Denial of Class Certification Does Not Impact CAFA Jurisdiction: United Steel v. Shell Oil Co.

On April 21, 2010, the Ninth Circuit ruled that a Federal court’s CAFA jurisdiction is not contingent on certification of a class in United Steel v. Shell Oil Co., 2010 U.S. App. LEXIS 8208 (9th Cir. 2010). The Court’s opinion makes clear that “the subsequent denial of Rule 23 class certification does not divest the district court of jurisdiction” and as such, a case properly removed under CAFA “is not to be remanded to state court.” See Slip Opinion, at 6026.

The Court’s opinion cites with approval to the Eleventh Circuit’s analysis in Vega v. T-Mobile USA, Inc., 564 F.3d 1256 (11th Cir. 2009), which “reasoned that (1) § 1332(d)(5)(B)’s jurisdictional limitation applies to ‘proposed’ classes; (2) ‘jurisdictional facts are assessed at the time of removal’; and (3) ‘post-removal events [(including non- or de-certification)] do not deprive federal courts of subject matter jurisdiction.’” See id., at 6030 (quoting Vega, 564 F.3d at 1279-80).

As the Court reasoned, Congress’ failure to expressly state that denial of class certification divested a Federal court of CAFA jurisdiction reflected intent to adhere to the longstanding principle that post-filing developments do not impair Federal jurisdiction:
Had Congress intended that a properly removed class action be remanded if a class is not eventually certified, it could have said so. We think it more likely that Congress intended that the usual and long-standing principles apply -- post-filing developments do not defeat jurisdiction if jurisdiction was properly invoked as of the time of filing.
Slip Opinion, at 6031.

However, the Court was careful to note that exceptions to this rule may exist. See id., fn. 3 (“We recognize, as the Cunningham court did, exceptions to the general rule of ‘once jurisdiction, always jurisdiction’ -- such as when a case becomes moot in the course of litigation or when there was no jurisdiction to begin with because the jurisdictional allegations were frivolous from the start.”).

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