Consumer Law

New Federal Judicial Center Study on the Class Action Fairness Act: One of the Authors Speaks

By Brian Wolfman

by Tom Willging, Federal Judicial Center

[Ed. note: The following post was written by Tom Willging, a senior researcher at the Federal Judicial Center, the research arm of the federal judiciary. Tom knows as much about the inner workings of the federal judicial docket than anyone. This post on the FJC's recent study on the Class Action Fairness Act is worth reading.]

    Here are some thoughts on the Federal Judicial Center's ongoing CAFA study as we shift gears from Phase One's count of cases into Phase Two's examination of what happens in those cases.

    Phase One concentrated on identifying class actions (not as simple a task as it might seem) and measuring the impact of CAFA on the number of cases filed in and removed to the federal courts. As Brian Wolfman noted in his post on Saturday, CAFA generally has had its intended effect in the sense that more cases are being filed in or removed to the federal courts since CAFA went into effect. Yet, as Brian's post suggests, the question lingers as to how many cases are really being shifted to the federal dockets. Recall that early predictions were that all or most class actions would end up in the federal courts. The Congressional Budget Office predicted that "most" class actions would go that way. Others forecast an "epic reallocation" of class action adjudication resulting from the "wholesale removal" of cases from state to federal courts. Emery Lee and I detailed some of these predictions in our recent article, part of a CAFA symposium in the University of Pennsylvania Law Review.

    The final word is not in, but it seems unlikely that the predicted revolution happened. Here's a back of the envelope calculation to put this into perspective. We don't know how many class actions there are in the state courts. But a 2000 RAND study estimated that about 40% of all class actions filed in the United States are filed in or removed to the federal courts. In the three pre-CAFA years in our study period, the average number of federal class actions (combining diversity and federal question jurisdiction) was about 3000. Assuming that the number of state class actions was 1.5 times larger (60% of the whole), that yields a rough estimate of 4500 state class actions in each of those three years, and a total of 7500 class actions per year. If CAFA had shifted an additional one-third of the state class actions into the federal courts, then, we should have observed an increase of about 1500 new class actions in the federal courts per year. Our results suggest a much more meager impact-more like 300-400 additional diversity cases in the post-CAFA years. Even taking the estimate at the upper end of the range, that would suggest that CAFA shifted about 9% of state class actions into the federal courts. Meaningful, perhaps (see below), but hardly revolutionary.

    This rough estimate has different meaning when looked at from the federal courts' perspective. We found that there was relatively little diversity class action activity in the federal courts, pre-CAFA. Most class actions in federal court are based on federal question jurisdiction. So the observed increase of 300-400 cases per year actually represents a doubling of the number of diversity class actions in the federal courts, compared to the pre-CAFA years. 

    Moreover, it may be a mistake to posit that CAFA should have shifted <b>all</b> state class actions into federal court.  Arguably, CAFA's purpose was to move nationwide class actions or cases of national significance out of the state courts (and out of "judicial hell-holes") and into the federal courts.  It's an open question how many of the class actions in the state courts fit this description.  Maybe CAFA has succeeded in moving most of these cases into the federal courts.  We don't know.

    This discussion would be aided greatly by reliable state court data on class action activity. A soon-to-be released study by the Office of Court Research (OCR) of the California Administrative Office of Courts should provide valuable insights. The California study will almost certainly show large numbers of class actions still being filed in state court. We are also in contact with other researchers interested in (or engaged in) collecting such data in other states. We'd love to learn more from readers of this blog about their experiences in state court. Either post a reply or email me at twillgin@fjc.gov.

    Phase Two represents a completely different undertaking. Here, we are exploring litigation activity and case outcomes in samples of diversity and federal question class actions. Our recent report is limited to findings from a pre-CAFA sample of diversity cases (and further limited because about 10% of the sampled cases have yet to reach disposition in district court). These results will serve as a baseline for examining CAFA's effects on motions activity, class certification decisions, settlements, and attorney fees-data we expect will take at least another year to gather because of the number of cases that are still pending.

    Our preliminary findings suggest that, prior to CAFA, diversity class actions in the federal courts saw much lower levels of litigation activity than anticipated based on prior studies. A motion to certify a class was filed in about a quarter of the cases, with relatively few motions granted. About 10% of the cases resulted in a class settlement. The others were voluntarily dismissed, remanded to state court, or terminated on Rule 12 motion or summary judgment. Almost two-fifths of the cases-a majority (55%) of the non-remanded cases-were voluntarily dismissed by the plaintiffs or by joint motion of the parties. More than twice as many cases were disposed of by dispositive motion than by class settlement.
We are puzzled about those findings. Many, perhaps most, of the voluntary dismissals appear to be individual settlements entered into within a relatively short time after filing. Here are a few of our general questions about these cases:

X    Why did plaintiffs drop the class claims in so many cases?
X    Why did three-quarters of the cases in our sample not show any motions for class certification?
    What strategic or tactical considerations might these actions and inactions represent?
X    Is the litigation class on a path toward extinction?
X    Is the rate of termination by dispositive motion (29% of the non-remanded cases) typical of class action litigation in state courts?
X    Why is it that about half of the removed cases were remanded to state courts? Data suggest that defendants do not remove all or even most state court class actions: What if any patterns describe the removed cases?
X    How, if at all, are these patterns different from what you expect or experience in your state courts?
X    Which, if any, of the findings in this report do you think have changed in the post-CAFA era?

Maybe readers of this blog can point us in the right direction as we begin to piece together the puzzle of these apparently underwhelming federal diversity class actions. 

Let us know. Again, either post a reply or email me at twillgin@fjc.gov.any

Full post as published by CL&P Blog on November 24, 2008 (boomark / email).