Earlier this year, the Seventh Circuit in Cunningham Charter Corp. v. Learjet, Inc. held that denial of class certification does not eliminate subject matter jurisdiction in a case removed from state court under the Class Action Fairness Act (“CAFA”). You may remember that CAFA creates federal diversity jurisdiction over certain class actions in which at least one member of the class is a citizen of a different state from any defendant. The Seventh Circuit noted that jurisdiction attaches when a suit is filed as a class action, and that “invariably precedes certification.” This follows the general principle that jurisdiction once properly invoked is not lost by developments after a suit is filed, such as a change in the state of which a party is a citizen that destroys diversity. The Seventh Circuit held that remanding the case to state court would be contrary to the policy behind CAFA of relaxing the diversity requirements to allow parties to resolve interstate class action issues in federal courts.

Recently, the Ninth Circuit adopted this same approach in United Steel, Paper & Forestry, Rubber, Manufacturing, Energy, Allied Industrial & Service Workers International Union, AFL-CIO, CLV v. Shell Oil Company. As in Cunningham, the district court concluded it no longer had jurisdiction after denying class certification, and remanded the case, which had been removed under CAFA, to state court. The Ninth Circuit reversed, holding that “[h]ad Congress intended that a properly removed class action be remanded if a class is not eventually certified, it could have said so.” The Ninth Circuit continued that it is more likely that Congress intended that the usual and long-standing principles apply – post-filing developments do not defeat jurisdiction if jurisdiction was properly invoked as of the time of filing.

The Eleventh Circuit in Vega v. T-Mobile USA, Inc. is the only other Circuit to have considered the issue.

This does not mean, however, that a class action can never be remanded to state court. According to the Seventh Circuit in Cunningham, if the plaintiff amends away jurisdiction in a subsequent pleading, the case can be dismissed. Similarly, if the plaintiff’s class allegations are completely frivolous, the district court can remand the case to state court.

These decisions allow corporate defendants to vigorously oppose class certification in interstate class actions without the fear that, if successful, the case may end up being resolved back in state court.

CAFA Update: Denial of Class Certification does not Divest Federal Court of Jurisdiction Over Case Removed Under CAFA