Class Actions 101: Considerations For Removing A Case To'And Keeping It In'Federal Court Under The Class Action Fairness Act (CAFA)

Published date16 June 2022
Subject MatterCorporate/Commercial Law, Litigation, Mediation & Arbitration, Class Actions, Diversity, Equity & Inclusion
Law FirmWinston & Strawn LLP
AuthorJeff Wilkerson and Patrick E. Hogan

When a putative class action complaint hits their desk, among the first things that should cross a defense attorney's mind-whether in-house or outside counsel-is venue. For state-court cases specifically, "can this case be removed to federal court?" Removal is usually beneficial to defendants-though it can sometimes be better not to remove, and that question should be carefully analyzed.

Assuming removal is desirable, the next question is whether it is possible. In class actions, the most likely route is the Class Action Fairness Act (CAFA) (though counsel should not neglect traditional diversity and federal-question principles, which sometimes permit removal even if CAFA does not). But while CAFA has made removal easier in many cases, it is a complicated statute with several exceptions, strict time limits, and difficult procedural and substantive issues that must be addressed quickly. This post will provide a quick overview of CAFA removal.


With some exceptions (discussed below), CAFA vests federal courts with jurisdiction over class actions1if (1) the amount in controversy exceeds $5 million in the aggregate, and (2) there is minimal diversity between the parties.2Such cases can be removed to the federal district court "for the district and division embracing the place where such action is pending."3 That is the correct district court even if venue was improper in the state court in which the case was originally filed.4

Removing defendants must act relatively quickly: typically, they must file a notice of removal within 30 days of service of summons and the complaint.5Although the statute is somewhat ambiguous in this regard, the Supreme Court has held that a defendant isnotrequired to remove until it isformally servedwith a summons, even if it earlier received a copy of the complaint through informal channels.6Each defendanthas 30 days to remove after service, even if a previously-served defendant failed to remove within its 30-day window.7

Sometimes it is not clear from the face of a complaint that a case is removable. In that case, a/the defendant(s) may remove within 30 days after receiving "an amended pleading, motion, order or other paper from which it may first be ascertained that the case is . removable."8Importantly, defendants are not obliged to independently investigate removability. They may wait until receiving a filing from which removability can be clearly ascertained.9


Aggregate Amount in Controversy Greater Than $5 Million

Unlike traditional diversity cases, CAFA's $5 million amount-in-controversy requirement can be met by aggregating the claims of all individual class members.10That can include:

  • Compensatory damages;11
  • Statutory damages;12
  • Punitive damages;13
  • Attorneys' fees authorized by statute or contract;14or
  • Equitable relief sought by the plaintiff.15

As the party invoking federal jurisdiction, the removing defendant(s) have/has the burden of establishing the requirements of CAFA jurisdiction, including the amount in controversy, though it need only provide a "short and plaint statement of the grounds for removal."16 Practically speaking, however, (the) defendant(s) should be ready toprovethe amount in controversy by a preponderance of the evidence because, when a plaintiff contests it or the court questions it, "both sides [must] submit proof and the court decides, by a preponderance of the evidence, whether the amount-in-controversy requirement has been satisfied."17

Sometimes the value of the relief sought is not evident from the complaint. For example:

  • Plaintiffs may seek equitable relief-such as an injunction requiring a change to a product label-that is difficult to value In that case, you must determine how the relevant circuit ascertains the value of such relief. Although some circuits still assess the value of equitable relief from the plaintiff's perspective, a growing number have adopted an "either viewpoint" approach under which the injunctive relief may be valued from either the plaintiff or defendant's perspective.18
  • Plaintiffs may also disclaim relief above the amount in controversy, such as through a stipulation not to seek damages of more than $5 million. Such stipulations, however, are not binding on absent class members and are thus often insufficient to defeat CAFA jurisdiction.19
  • Plaintiffs may not specifically plead the amount of damages sought. In such cases, defendants should consult with their counsel about whether there is a good-faith basis to allege that the damages at issue exceed $5 million given the law...

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