Class Action

CAFA Class Action Defense Cases–In re Katrina Canal: Fifth Circuit Affirms Denial Of Motion To Remand Class Action To State Court Holding State Sovereignty Did Not Preclude Removal Of Class Action Under CAFA Because Citizens Were Class Members

By Michael J. Hassen

Class Action by State on Behalf of Itself and Citizens Properly Removed under Class Action Fairness Act (CAFA) because State’s Sovereign Immunity not Applicable to Citizens Fifth Circuit Holds

Louisiana’s Attorney General Louisiana filed a putative class action against more than 200 insurance companies on behalf of the State and numerous Louisiana citizens based on defendants’ alleged failure to pay for covered insurance claims arising out of Hurricanes Katrina and Rita; the class action complaint alleged only state law claims, and sought compensatory, declaratory and injunctive relief. In re Katrina Canal Litig. Breaches, ___ F.3d ___, 2008 WL 1118176, *1 (5th Cir. April 11, 2008). Defense attorneys removed the class action to federal court asserting removal jurisdiction under the Class Action Fairness Act (CAFA) and the Multiparty Multiform Trial Jurisdiction Act (MMTJA). Id., at *1, *3. Louisiana moved to remand the class action to state court, “arguing that CAFA did not apply and that Louisiana enjoyed sovereign immunity from involuntary removal to federal court in that it was suing in its state court to enforce state law.” Id., at *1. The district court denied the motion; because it found that removal jurisdiction exited under CAFA, it did not reach the issue of whether jurisdiction also existed under MMTJA. Id., at *3. The Fifth Circuit granted the State’s petition under CAFA for permission to appeal the remand order under CAFA, and then affirmed.

On appeal, Louisiana argued “CAFA does not apply, and that even if it does apply by its terms, it cannot abrogate sovereign immunity from federal process, or at the least Congress did not clearly do so in CAFA.” In re Katrina, at *3. (Louisiana also raised arguments under MMTJA, but the Fifth Circuit did not address this issue so we do not discuss it here.) The only aspect of CAFA removal jurisdiction challenged on appeal was diversity; specifically, Louisiana argued that a state is not a person for purposes of diversity jurisdiction and, further, that “it has not filed a class action as defined by CAFA.” Id. The Fifth Circuit held that this was not the relevant inquiry, because “Louisiana seeks relief for both the State and the citizens as “recipients” of insurance.” and the citizens adequately satisfied the minimal diversity required by CAFA. Id. The “difficult question” addressed by the Circuit Court was whether state sovereignty barred removal. Id.

Full post as published by Class Action Defense Blog on April 23, 2008 (boomark / email).