Class Action Fairness Act (Cafa): Federal Jurisdiction and Class Action Strategy

The primary intent of CAFA is to ensure that interstate class actions are heard in federal court. 

By expanding jurisdiction, the law aims to:

• Prevent State Court Abuse: Reduce the likelihood of "judicial hellholes" where state judges might apply local bias against out-of-state corporations.
• Ensure Uniformity: Provide a more consistent application of Civil Procedure Rules (specifically Rule 23) and federal substantive law.
• Consolidate Multi-District Litigation: Facilitate the streamlining of similar cases through the federal MDL process.

CAFA applies to most civil class actions where the proposed class size and financial stakes meet specific thresholds. This includes consumer protection claims, product liability, and large-scale labor disputes involving employees across multiple state lines.

In standard litigation, "complete diversity" is required (all plaintiffs must be from different states than all defendants). Under CAFA jurisdiction, only minimal diversity is needed: if any member of a proposed class of plaintiffs is a citizen of a state different from any defendant, the requirement is met.

The aggregate amount in controversy for all class members must exceed $5,000,000, exclusive of interest and costs. This total is calculated by summing the claims of all individual class members, including potential punitive damages and statutory attorney’s fees.

The proposed class must consist of at least 100 members. If the class is smaller, the case must remain in state court unless it meets traditional diversity or federal question requirements.

A defendant typically has 30 days from the receipt of the initial pleading (or a later document making it clear the case is removable) to file a federal removal of class actions. CAFA simplifies this by allowing a single defendant to remove the case without the consent of co-defendants, a major advantage in complex litigation.

The removing party bears the burden of proving that CAFA requirements are met by a preponderance of the evidence. This often requires a sophisticated economic analysis to show the court that the $5 million threshold is "plausibly" met based on the plaintiffs' allegations.

• Home State Exception: The federal court must decline jurisdiction if two-thirds or more of the proposed class and the primary defendants are citizens of the state where the action was originally filed.
• Local Controversy Exception: This applies when more than two-thirds of the class are citizens of the filing state, at least one "significant" defendant is a citizen of that state, and the principal injuries occurred there.

If more than one-third but less than two-thirds of the class members (and the primary defendants) are citizens of the state where the action was filed, the federal judge has the discretion to decline jurisdiction based on the "interests of justice" and the "totality of the circumstances."

Federal courts are generally perceived as more rigorous in their application of class certification standards. Federal judges are often more accustomed to managing complex class action litigation frameworks and are less likely to certify "overbroad" or "unmanageable" classes than some state court counterparts.

The primary risk of a CAFA-based removal is remand. If the plaintiff successfully argues that an exception applies or the $5 million threshold isn't met, the case is sent back to state court. This can result in significant delays, wasted legal fees, and a "loss of face" before the state court judge who regains the case.

The first 30 days are decisive. An authoritative legal team will immediately evaluate the "Minimal Diversity" and "Amount in Controversy" to determine if removal is viable. We analyze the plaintiff’s complaint not just for what it says, but for what it hides - identifying hidden "federal hooks" that allow for removal even when the plaintiff tries to plead around CAFA.

CAFA is a procedural maze. Navigating the "Local Controversy" exceptions requires a forensic deep dive into the defendant’s corporate citizenship and the class’s geographic distribution. Furthermore, CAFA provides a unique right to seek an immediate appeal of a remand order under 28 U.S.C. § 1453(c)—a tactical tool that requires an appellate mindset from day one.

• Strategic Note: Federal court isn't just a different building; it's a different set of rules. Removing a case under CAFA is the most effective way to force the plaintiff onto a level playing field where certification is harder to achieve and merits are easier to argue.