Federal Jurisdiction and Due Process in the Era of the Nationwide Class Action

University of Pennsylvania Carey Law School Penn Law: Legal Scholarship Repository Faculty Scholarship at Penn Law 2008 Federal Jurisdiction and Due Process in the Era of the Nationwide Class Action Tobias Barrington Wolff University of Pennsylvania Carey Law School Follow this and additional works at: https://scholarship.law.upenn.edu/faculty_scholarship Part of the Civil Procedure Commons, Courts Commons, Jurisdiction Commons, Jurisprudence Commons, Legislation Commons, Litigation Commons, and the Public Law and Legal Theory Commons Repository Citation Wolff, Tobias Barrington, "Federal Jurisdiction and Due Process in the Era of the Nationwide Class Action" (2008). Faculty Scholarship at Penn Law. 1623. https://scholarship.law.upenn.edu/faculty_scholarship/1623 This Article is brought to you for free and open access by Penn Law: Legal Scholarship Repository. It has been accepted for inclusion in Faculty Scholarship at Penn Law by an authorized administrator of Penn Law: Legal Scholarship Repository. For more information, please contact [email protected]. FEDERALJURISDICTION AND DUE PROCESS IN THE ERA OF THE NATIONWIDE CLASS ACTION TOBIAS BARRINGTON WOLFFt INTRO DUCTIO N .................................................................................... 2035 I. INTERDICTING STATE COURT PROCEEDINGS: TARGETED GRANTS OFJURISDICTION AND THE ANTISUIT INJUNCTION ......... 2046 A. The Anti-Injunction Act in an Era of Nationwide Complex Litigation ............................................................. 2047 B. TargetedJurisdiction and the Anti-Injunction Act ................ 2054 C. The Class Action FairnessAct and the Interdiction of Collusive Suits .................................................................... 2066 II. ENFORCING DENIALS OF CERTIFICATION: SHUsT, DUE PROCESS, AND THE ANTISUIT INJUNCTION ........................... 2073 A . Understanding Shutts ........................................................ 2076 1. Shutts and the Role of "Consent ......................... 2080 2. The Mullane Antecedent ....................................... 2094 B. Class Certification,Choice of Law, and Choice of Remedies ...2101 C. Enforcement of CertificationDenials Under the Class Action FairnessA ct ........................................................................ 2109 III. COLLATERAL ATTACKS AND ADEQUACY OF REPRESENTATION ..... 2117 C O N CLU SIO N........................................................................................ 2131 INTRODUCTION The class action has come of age in America. With increasing regularity, class litigation plays a central role in discussions about theory, doctrine, and policy in the American civil justice system. The dy- t Professor of Law, University of Pennsylvania Law School. I received excellent feedback on an early version of this Article from the participants in the April 2006 Branstetter Litigation and Dispute Resolution Program at Vanderbilt University Law School, particularly Myriam Gilles, Richard Nagareda, Erin O'Hara, Suzanna Sherry, and Catherine Struve, for which I am most grateful. I also benefited from the com- ments of members of the University of Pennsylvania Law School faculty when I pre- sented a draft in workshop, and from discussions with Beth Hillman, Judith Resnik, and Rhonda Wasserman. I am especially grateful for the generous attention that Steve Burbank, Geoffrey Hazard, Sam Issacharoff, Cathy Sharkey, David Shapiro, Linda Sil- berman, and Allan Stein provided at key junctures in this project. The attention proved invaluable in helping to focus and clarify my thinking. (2035) 2036 UNIVERSITY OFPENNSYLVANIA LAWREVIEW [Vol. 156:2035 namics of the class action lie at the heart of current debates over the nature of the litigation process and the limits of adjudication in effec- tuating social policy. Choice of law analysis has enjoyed a renaissance as its significance to the question of class certification has become ap- parent. Class litigation now frequently drives debates over tort reform and the phenomenon of regulation through litigation. In these and many other respects, we have entered a new dispensation: the era of the nationwide class action. The passage of the Class Action Fairness Act of 2005 (CAFA)l-the first occasion on which Congress has enacted a generally applicable legislative policy pertaining to aggregate representative litigation 2-aptly punctuates that arrival. The class action's ascendance to center stage, however, has not always been accompanied by the development of a sophisticated doc- trinal and analytical apparatus that is adequate to its needs. This is particularly the case in the two important areas that will be my primary focus in this Article: the analysis of the content and impact of federal jurisdictional policy when parallel class actions are filed in state and federal courts, and the due process standards that govern the various aspects of representative litigation. In the former case, much of the discussion among courts and commentators has been mired for too long in forms of analysis that are inapposite and inade- quate. In the latter, the discussion has been riddled with outright mis- takes and misunderstanding. The enactment of CAFA offers an important occasion for revisit- ing our treatment of these vital questions of federal jurisdictional policy and due process in representative litigation. This is so for several reasons. First, the Act promises to move large numbers of nationwide class actions into the federal courts.' This dramatic change in the al- l Class Action Fairness Act of 2005 (CAFA), Pub. L. No. 109-2, 119 Stat. 4 (codi- fied in scattered sections of 28 U.S.C.). 2 Congress has enacted more narrowly targeted legislation pertaining to class actions in the field of securities litigation. See Private Securities Litigation Reform Act of 1995 (PSLRA), Pub. L. No. 104-67, 109 Stat. 737 (imposing standards for securities litigation in federal court); see also Securities Litigation Uniform Standards Act of 1998, Pub. L. No. 105-353, 112 Stat. 3227 (extending the provisions of the PSLRA to state court litigation). 3 The most recent interim report of the Federal Judicial Center indicates that the rate of diversity class actions in the federal courts-including both original filings and removals-increased by approximately 100% between the last calendar year before CAFA was enacted and the twelve-month period between July 2005 and June 2006. See THOMAS E. WILLGING & EMERY G. LEE II, THE IMPACT OF THE CLASS AcTION FAIRNESS ACT OF 2005 ON THE FEDERAL COURTS: THIRD INTERIM REPORT TO THE JUDICIAL CON- 2008] FEDERALJURISDICTION AND DUE PROCESS 2037 location of class actions within the dual American court system will in- crease the stress on the flawed doctrines that are currently available for administering parallel class action proceedings and, at the same time, provide a concomitant opportunity for achieving a more uniform and comprehensive restatement of those doctrines. Second, the Act itself contains a serious flaw-ajurisdictional paradox, as I call it- that promises to intensify further the need to rationalize the methods available for administering multiforum class actions. To appreciate the legislative impetus that CAFA provides for this larger project of reexamination, it is necessary to understand the impact that the Act has on the federal jurisdictional policies that govern class litigation and the manner in which the Act operates in allocating class actions to the federal forum. CAFA operates in two basic modes. First, it dramatically expands the ability of federal courts to exercise jurisdiction over class action lawsuits by liberalizing the rules on citizenship and amount in controversy that ordinarily constrain diversity jurisdiction.4 This expansion of diversity jurisdiction, in turn, is an expression of the instinct that lies at the Act's foundation: the belief that federal courts will apply different and more restrained standards to the administration of class actions than will state courts, thus providing greater confidence that the interests of parties on both sides of the dispute will be protected from abuse. The shift to the federal forum, in other words, is ex- pected and intended to alter the outcome in class litigation based on state law. Second, the Act imposes limits on the forms of class action settle- ment that may be approved once a class action is brought to the federal forum, singling out practices believed to be particularly prone to FERENCE ADVISORY COMMrFTIEE ON CIVIL RULES 14 fig.3 (2007), available at http:// www.uscourts.gov/rnles/CAFAThird_l n terim.pdf. 4 The changes to diversityjurisdiction are twofold. The statute loosens the normal requirement of complete diversity, authorizing jurisdiction whenever any plaintiff is diverse from any defendant; it also alters the ordinary rules on aggregation, authorizing jurisdiction over small-stakes claims provided that the total amount in controversy in the proceeding exceeds $5,000,000. See CAFA § 4(a), 28 U.S.C. § 1332(d) (2) (Supp. V 2005). This change is subject to an abstention provision that limits its effects some- what, giving the district court discretion to decline jurisdiction if a sufficient propor- tion of the class and the "primary defendants" are all from the state in which the action was originally filed, and instructing the district court to dismiss if a supermajority of the class and at least one significant defendant are both from the forum state. See id. § 1332(d)(3)-(4). See generally LINDA J.

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