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The Class Action Fairness Act of 2005 in Historical Context: a Preliminary View †

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The Class Action Fairness Act of 2005 in Historical Context: a Preliminary View † University of Pennsylvania Law Review FOUNDED 1852 ________________ Formerly American Law Register ________________________ VOL. 156 JUNE 2008 NO.6 ARTICLES THE CLASS ACTION FAIRNESS ACT OF 2005 IN HISTORICAL CONTEXT: A PRELIMINARY VIEW † †† STEPHEN B. BURBANK The mechanism of law—what courts are to deal with which causes and subject to what conditions—cannot be dissociated from the ends that law subserves. So- called jurisdictional questions treated in isolation from the purposes of the legal system to which they relate become barren pedantry. After all, procedure is instru- † © Stephen B. Burbank 2008. †† David Berger Professor for the Administration of Justice, University of Pennsyl- vania Law School. I have presented various drafts of this work and received helpful comments at the Western State University College of Law Symposium on State Civil Procedure, the University of Minnesota Law School, the University of Pennsylvania Law School faculty retreat, the Duke University School of Law, and the University of Pennsylvania Law Review’s 2007–2008 Symposium. In addition, Kevin Clermont, Frank Goodman, Jim Pfander, Ed Purcell, David Shapiro, Cathie Struve, Steve Subrin, and Tobias Wolff provided extremely useful comments on various drafts. Michael O’Connor, University of Pennsylvania Law School Class of 2009, provided excellent re- search assistance. Michael Eisenkraft, Harvard Law School Class of 2004, and Polly Graham, Harvard Law School Class of 2008, both provided helpful contributions to the underlying research. (1439) 1440 UNIVERSITY OF PENNSYLVANIA LAW REVIEW [Vol. 156: 1439 mental; it is the means of effectuating policy. Particularly true is this of the fed- eral courts. 1 Felix Frankfurter & James M. Landis INTRODUCTION....................................................................................1440 I. SUBJECT MATTER JURISDICTION OVER CLASS ACTIONS IN THE DEFAULT REGIME.........................................................................1450 A. Original Jurisdiction...........................................................1450 B. Removal Jurisdiction ...........................................................1452 II. CAFA’S JURISDICTIONAL PROVISIONS..........................................1453 A. Original Jurisdiction...........................................................1453 1. Carve-Outs.............................................................1453 2. Diversity and Amount in Controversy..................1455 3. Definitions.............................................................1455 4. Exceptions.............................................................1456 B. Removal Jurisdiction .......................................................1458 III. DIVERSITY LITIGATION IN HISTORICAL CONTEXT........................1460 IV. DIVERSITY CLASS ACTIONS IN HISTORICAL CONTEXT..................1484 A. Federal Class Actions in General and the Revolution of 1966.............................................................................1484 B. The Supreme Court Leads a Counterrevolution....................1489 C. Mass Tort and Settlement Classes in Federal Court ..............1494 D. State Court Class Actions .................................................1500 E. Overlapping Class Actions ...............................................1509 V. CAFA’S SIGNIFICANCE:APRELIMINARY VIEW .............................1517 CONCLUSION........................................................................................1541 APPENDIX .............................................................................................1544 INTRODUCTION Jurisdictional legislation, like the law of procedure with which it tends to be grouped, can become disembodied from the political and social contexts in which it was enacted, the political and social con- texts in which it functions, and the historical and institutional circum- stances that affect—if not determine—its significance. Scholars who are preoccupied with doctrine, and courts that must try to make sense of jurisdictional legislation and precedent interpreting it, may be con- tent (or constrained) simply to grapple with the technical details. Those who seek to understand law’s significance, however, require 1 FELIX FRANKFURTER &JAMES M. LANDIS, THE BUSINESS OF THE SUPREME COURT: ASTUDY IN THE FEDERAL JUDICIAL SYSTEM 2 (1927). 2008] CAFA IN HISTORICAL CONTEXT 1441 perspectives in addition to the internal logic of technical reasoning. Particularly when the law in question is labeled “procedure,” they must resist the temptation to accept a doctrinal question at face value (that is, to regard doctrine as an end in itself), to view such a question apart from the litigation dynamics that it engenders, and otherwise to ignore issues of power that may be at stake in its resolution. Some of the political and social implications of the Class Action Fairness Act of 2005 (CAFA)2 are hard to miss. That statute, after all, resulted from years of intense lobbying (on both sides of the aisle by interest groups associated with both plaintiffs and defendants), parti- san wrangling, and, following two successful filibusters, fragile com- promises.3 Not only does CAFA mark a sharp break from a nearly uni- form history of congressional contraction of diversity jurisdiction.4 The scope of putative class actions that, at the end of the day, the stat- ute brings within the subject matter jurisdiction of the federal courts is very broad. Those facts—coupled with the legislation’s place in a trio of “tort reform” measures sought by the Bush administration, and with unrelenting attacks on lawyers in general and plaintiffs’ lawyers in particular—help to understand why some critics regard the com- promises as insufficient and the ultimate legislation as inimical to the interests of numerous groups of potential litigants.5 2 Pub. L. No. 109-2, 119 Stat. 4 (codified in scattered sections of 28 U.S.C.). 3 See, e.g., “Tort Reform” Bill Dies in the Senate, in 59 CQ ALMANAC PLUS 13-10 (2003); Seth Stern, Fearing Spate of Amendments, Frist Pulls Class Action Bill After Senate Cloture Vote Fails, 62 CQ WKLY. 1691 (2004) (describing the Senate’s failure to pass a previous version of CAFA in 2004); Seth Stern, Republicans Win on Class Action, 63 CQ WKLY. 460 (2005) (calling CAFA’s enactment “the capstone of a six-year slog through Congress”). 4 See Brett Curry, Institutions, Interests, and Judicial Outcomes: The Politics of Federal Diversity Jurisdiction, 60 POL.RES. Q. 454, 456-58, 464 app. A (2007). For much more modest departures from that history of contraction that may have influenced the de- liberations concerning CAFA, see the 21st Century Department of Justice Appropria- tions Authorizations Act, Pub. L. No. 107-273, § 11020(b)(1), 116 Stat. 1758, 1826-27 (2002) (codified at 28 U.S.C. § 1369 (Supp. V 2005)), which provides for federal juris- diction in cases arising from certain accidents in which at least seventy-five people have died; the Y2K Act, Pub. L. No. 106-37, § 15(c), 113 Stat. 185, 201-02 (1999) (codified at 15 U.S.C. § 6614 (2000)), which grants federal district courts jurisdiction over Y2K- related class actions; and infra text accompanying notes 293-297. 5 See Edward A. Purcell, Jr., The Class Action Fairness Act in Perspective: The Old and the New in Federal Jurisdictional Reform, 156 U. PA.L.REV. 1823; Stephen Labaton, Senate Approves Measure To Curb Big Class Actions,N.Y.TIMES, Feb. 11, 2005, at A1 (“Republi- cans say they hope the vote will provide momentum for two other major bills overhaul- ing the tort law system, one on asbestos litigation, the other on curbs on medical mal- practice lawsuits.”). 1442 UNIVERSITY OF PENNSYLVANIA LAW REVIEW [Vol. 156: 1439 How, one might wonder (particularly after reading supporters’ protestations to the contrary), could a statute that purportedly does not change the state substantive law usually applicable in federal di- versity litigation be considered “tort reform”?6 The answer is simple. Members of Congress now realize what most informed observers have long realized, to wit, that procedure is power.7 More specifically, all informed observers of the litigation process now understand that Fed- eral Rule of Civil Procedure 23 and state class action rules, although regulating the process of litigation, can still have major substantive impact.8 Even if such rules do not change the substantive law directly, they can change the practical enforcement of substantive rights, whether by enabling plaintiffs to sue who would not otherwise be able to do so, or by exerting irresistible pressure on defendants to settle cases that they regard as lacking in merit. It has also long been clear that plaintiffs’ lawyers react to changes that make litigation more difficult in one court system by moving their cases to other court systems, while defense counsel seek forum advan- tages for their clients by using the tools available to them to affect the site of litigation. Forum shopping is not necessarily, indeed not usu- ally, a ground for criticism of lawyers or their clients, as the existence and historic rationale of diversity of citizenship jurisdiction in the fed- eral courts suggest.9 Moreover, a price of federalism is that people 6 See, e.g., S. REP.NO. 109-14, at 56 (2005), reprinted in 2005 U.S.C.C.A.N. 3, 53 (“S. 5 is court reform—not tort reform.”). But see “Tort Reform” Bill Dies in the Senate, supra note 3. 7 See Stephen B. Burbank, Procedure, Politics and Power: The Role of Congress, 79 NOTRE DAME L. REV. 1677, 1703 (2004). 8 “[T]his Court’s
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