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On the Class Action Fairness Act

By Steven R. Minor

Today in Dominion Energy, Inc. v. City of Warren Police and Fire Retirement System, the Fourth Circuit in a decision by Judge King, joined by Judge Thacker, and with Judge Motz dissenting, reversed the decision of the District Court in South Carolina regarding the removability under the Class Action Fairness Act of two class action cases filed in state court in South Carolina. The plaintiffs were shareholders of a company that was merged into the defendants, and brought suit claiming breach of fiduciary duty in connection with the merger.

The decision first addresses the standard for allowing an appeal from a remand order under the Act, on which the Fourth Circuit had not previously ruled.

The decision goes on to address whether the fiduciary claims fell within one of the exceptions to removability under the Act, including the exception for claims about the internal affairs of a corporation and the exception for claims about securities.

Judge Motz in her dissent agreed with granting the petition for appeal but disagreed on the application of the securities-related exception.

This opinion made a bunch of law for the Fourth Circuit, picking and choosing between the law of the other circuits, and it pertains to the proper role of the federal courts, and so it might be the kind of case that will be reheard en banc and make it all the way to the Supreme Court of the United States.

One part of the opinion was the discussion of the words, "relates to," with this interesting paragraph:

"Importantly, the Supreme Court has explained that a statutory phrase such as 'relates to' ? which is contained in the internal affairs exception ? is generally 'unhelpful' to a reviewing court because a clever person can conjure up 'infinite relations' among things. See N.Y. State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 656 (1995); see also Metro. Life Ins. Co. v. Pettit, 164 F.3d 857, 861 (4th Cir. 1998) ('Taken at its face value, the term ?relates to? has no logical boundary. In one way or another, everything relates to everything else.' (citation omitted)). Accordingly, when presented with such a phrase, the Court has directed the inferior federal courts to assess and implement the purpose and objective of a statute containing that phrase. See Maracich v. Spears, 570 U.S. 48, 59-60 (2013) ('Unless commanded by the text . . . [statutory] exceptions ought not operate to the farthest reach of their linguistic possibilities if that result would contravene the statutory design.'); N.Y. State Conference, 514 U.S. at 656 ('We simply must go beyond the unhelpful text and the frustrating difficulty of defining [?relates to?], and look instead to the objectives of the . .. statute.')."

Full post as published by Southwest Virginia Law Blog on June 28, 2019 (boomark / email).