The Class Action Fairness Act of 2005

Article by John F. Pritchard, John M. Grenfell, Bruce A. Ericson and Andrew D. Lanphere

The Class Action Fairness Act of 2005 (the "Act"), which was signed into law today by President Bush, establishes original federal jurisdiction over large, interstate class actions. The legislation seeks to limit the ability of plaintiffs' lawyers to forum shop by filing interstate or nationwide class actions in states where the law or the judiciary is plaintiff-friendly. The Act also defines a new type of action subject to federal jurisdiction, the "mass action," which may become a means for removing certain mass tort and product liability claims to federal court. In addition, the Act places limits on attorney's fees awards in "coupon settlements." The Act is ambiguous in several key respects, however, and its scope and effect will be the subject of intensive litigation over the coming years.

The scope of federal jurisdiction over large interstate class actions under the Act

The primary focus of the Act is on jurisdiction over large, interstate class actions. With various exceptions, the Act gives the federal courts jurisdiction over class actions involving 100 or more class members, where the aggregate amount of all the class members' claims exceeds $5,000,000, and any member of the class is a citizen of a state or foreign country different from any defendant's state or country of citizenship. The Act applies prospectively to any class action filed after the date of enactment; it does not apply to pending class actions. The Act also does not apply to securities class actions and most class actions brought against states, state officials or other governmental entities.

The Act does not strip state courts of jurisdiction over these large class actions, but rather makes them removable to federal court. The removal rules established by the Act are more lenient than in other actions, however. Unlike in most other actions, under the Act any defendant can remove a qualified class action without the consent of all defendants,1 and a qualified class action may be removed even if a defendant is a citizen of the state in which the case is filed.2 In addition, as discussed further below, the Act establishes a procedure for discretionary appellate review of orders on motions to remand that does not exist for any other cases removed to federal court.

The Act potentially covers a wide range of large class actions, including any large class action with class members from three or more states, and many, but probably not all, class actions with class members from two states.3 Thus, any "nationwide" class actions may now be subject to federal jurisdiction. Federal jurisdiction is not automatic for all such class actions, however. The Act sets forth limits on its application that depend on the extent to which the plaintiffs and defendants are citizens of the state in which the action is filed.

If two-thirds or more of the class members and "the primary...