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Federal Courts Retain Jurisdiction Even After Denying Class Action Status, Seventh Circuit Holds

  • February 24, 2010

The Seventh Circuit Court of Appeals, in Chicago, has became the second federal appeals court to hold that a federal district court retains jurisdiction over lawsuits after declining to certify class actions in cases that have been removed from state court to federal court pursuant to the Class Action Fairness Act (CAFA).  Cunningham Charter Corp. v. Learjet, Inc., 2010 U.S. App. LEXIS 1452 (7th Cir. Jan. 22, 2010).  The Seventh Circuit has jurisdiction over Illinois, Indiana, and Wisconsin.    

CAFA, passed in the last Bush Administration, was designed to reduce “forum-shopping” and to make other aspects of class action law fairer by making it significantly easier for defendants to remove class action litigation from state to federal court.  Certain criteria must be met to confer jurisdiction under CAFA, including an amount in controversy in excess of $5 million and putative class members who are citizens of a state different from any defendant.  The CAFA is silent on the question of whether denial of class certification divests federal courts of subject-matter jurisdiction.  If jurisdiction is divested on denial of class certification, the federal courts must remand the case back to state court, sometimes after months of litigating class certification issues.

In a unanimous decision authored by Judge Richard Posner, the Seventh Circuit held that continued subject-matter jurisdiction under CAFA does not depend on whether a district court certifies a class.  In so doing, the Seventh Circuit joins the Eleventh Circuit — covering Alabama, Georgia and Florida — which, to date, is the only other federal appeals court to have considered the issue.

In Cunningham Charter, the plaintiff sought class certification for Learjet buyers with respect to breach of warranty and product liability claims.  The case was removed under CAFA from Illinois state court to the U.S. District Court for the Southern District of Illinois.  The district court denied class certification and remanded the matter back to state court. 

Reversing, the Seventh Circuit concluded such a remand is unsound and inefficient.  The Court also reaffirmed the long-held legal principle that once jurisdiction is properly invoked, it is not lost by developments after a suit is filed.  It also noted that its decision sought to minimize expense and delay for the litigants.  The Court explained, “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.”  The Court also was concerned that permitting remand after denial of class certification would lead to the very forum shopping CAFA, in part, was enacted to prevent.

Jackson Lewis attorneys are available to answer your questions about CAFA and defending class action lawsuits.

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