Litigation Alert: Seventh Circuit Holds that Federal Jurisdiction under CAFA is Determined Exclusively At the Time of Removal

Date: Jun 28, 2010

The Seventh Circuit Court of Appeals recently held in In Re: Burlington Northern Santa Fe Ry. Co., No. 09-8023 (7th Cir. May 19, 2010), that federal jurisdiction under the Class Action Fairness Act ("CAFA") is determined exclusively at the time of removal and that post-removal changes to the complaint by plaintiff are irrelevant.

Residents of Bagley, Wisconsin, filed a putative class action in state court against Burlington Northern Santa Fe Railway Company ("BNSF"). Plaintiffs alleged that BNSF failed to inspect and maintain a railroad trestle, which caused flooding and property damage.

BNSF removed the case to federal court under CAFA, which provides federal jurisdiction over certain types of class actions. Once in federal court, plaintiffs filed a motion to amend their complaint to omit the class allegations.

The district court interpreted the motion to amend as an implied motion to remand the case to state court and held that federal jurisdiction was no longer proper once plaintiffs dropped the class allegations. The trial court held that the jurisdictional analysis should be based on the operative complaint, which did not contain class allegations.

On appeal the Seventh Circuit reversed, stating that federal jurisdiction for CAFA purposes is determined at the time of removal, and that nothing filed after a notice of removal affects jurisdiction.

The court cited its decision in Cunningham Charter Corp. v. Learjet, Inc., 592 F.3d 805 (7th Cir. 2010), in which it previously held that CAFA jurisdiction survives if the district court denies class certification. According to the court, the same result obtains here because keeping the case minimizes the expense and delay involved in transferring cases between courts. The ruling also furthers CAFA's purpose of permitting putative class actions to be brought in federal court.

Burlington Northern provides predictability to class action defendants. If removal to federal court under CAFA is available and tactically the right decision, this decision provides assurance that plaintiffs cannot defeat federal jurisdiction through post-removal amendments or filings.

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