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When You Come to a Fork in the Road, Take It. Northern District of Illinois Muddies the Post-Denial of Class Certification CAFA Jurisdictional Waters.

Muehlbauer v. General Motors Corp., Slip Copy, 2009 WL 874511 (N.D.Ill., Mar 31, 2009)(NO. 05 C 2676)

The Northern District of Illinois has reached the end of its rope. It has grown sick and tired of all the other federal district courts getting their views on CAFA jurisdiction after a class certification denial heard by Papa Westlaw. In a fit of anger and desperation, the Northern District Court of Illinois released Meuhlbauer v. General Motors Corp. in order to display its opinion on the matter. In its best whiny little sister voice, the Court dismisses the case for lack of CAFA jurisdiction since the class was denied certification.

Upon reading the opinion, Papa Westlaw declared that 'it is just like that Northern District (of Illinois) to issue an opinion just to disagree with the Central District (of Illinois). When are they going to grow up?' The Central District was quoted as saying, 'Big deal. The Seventh Circuit is gonna side with me. Everyone knows that.' The Northern District responded by saying, 'Ugh I hate the Central District and wish it would have never been drawn!'

In Muehlbauer, the plaintiffs sued General Motors alleging that the GM-designed components for braking systems of vehicles they purchased or leased were defective. The plaintiff's claim that since GM failed to disclose the defect, they have been unjustly enriched.

The plaintiff's claim of unjust enrichment is a state law claim, which varies state to state. The court took an in-depth look into the differences in unjust enrichment actions in different states and the fact that 'courts have long held that the laws of unjust enrichment…are not appropriate for nationwide class action treatment.' The court decided to continue that tradition and denied the certification of the class.

The court was then faced with the question of whether the court retains jurisdiction under CAFA after class certification has been denied. The court acknowledged that no federal circuit court of appeal has weighed in on the matter and outlined the division on the issue among the federal district courts. Numerous courts have continued to uphold jurisdiction after denial of class certification (the Central District of Illinois is one). Those opinions follow the 'basic jurisdictional principle that diversity jurisdiction is determined at the time the complaint is filed, and subsequent changes to jurisdictional facts do not destroy diversity jurisdiction.' However the opinion cited even more courts that have dismissed for lack of jurisdiction after the denial of class certification. Those opinions dismiss the action under Rule 12(h)(3)'s requirement that a district court dismiss an action 'at any time' that it determines it lacks subject matter jurisdiction.

The Muehlbauer Court agreed with the later and found that this situation is similar 'a diversity case in which the court learns a party is actually from Arizona, not California, thereby destroying diversity.' Furthermore, the court stated that dismissal 'is consistent with the language of the statutes that provide CAFA jurisdiction.' The court reasoned that since CAFA jurisdiction only applies to class actions 'before or after the entry of a class certification order by the court.' Since the court did not and will not enter a class certification order, there existed no CAFA jurisdiction.

By: Dustin Talbot

Full post as published by CAFA Law Blog - Information, cases and insights regarding the Class Action Fairness Act of 2005 on August 04, 2009 (boomark / email).