Sunday, July 14, 2019

FYI: 2nd Cir Holds Post-Filing Amendment Can Divest Court of CAFA Jurisdiction

The U.S. Court of Appeals for the Second Circuit affirmed the dismissal of case for lack of jurisdiction because when the plaintiffs withdrew their class action allegations in an amended complaint it divested the court of jurisdiction under the federal Class Action Fairness Act ("CAFA"), 28 U.S.C. § 1332(d).


A copy of the decision is available at:  Link to Opinion


Plaintiff, an attorney on behalf of himself and a putative class sued several title insurance company defendants alleging that they had tortiously interfered with business opportunities and violated Connecticut law because under Conn. Gen. Stat. § 38a402(13) only attorneys licensed to practice in the state may act as title agents. 


The trial court exercised jurisdiction over the matter predicated solely on the CAFA.


After almost twelve years, Plaintiff filed a Fourth Amended Complaint ("FAC"). In the FAC Plaintiff voluntarily withdrew all class action allegations.  The FAC did not allege any other statutory basis to establish the trial court's jurisdiction.  The defendants then moved to dismiss arguing that the absence of any class action allegations deprived the federal court of jurisdiction under the CAFA.


The trial court granted the motion and dismissed the case for lack of jurisdiction. Plaintiff appealed.


As you may recall, the CAFA confers original jurisdiction over class actions where minimal diversity exists between the parties and the amount in controversy exceeds $5,000,000.  28 U.S.C. 8 § 1332(d).  Here, CAFA jurisdiction existed when plaintiff filed the case, and until plaintiff filed the FAC.


The Second Circuit observed that the only question before it was "whether the filing of the FAC, which omitted all class action allegations, divested the District Court of CAFA jurisdiction and required dismissal."

Plaintiff argued that the "time-of-filing" rule should establish jurisdiction even after he filed the FAC. 


As you may recall, the time of filing rule states that the federal trial court's jurisdiction "depends upon the state of things" when the plaintiff brings the action.  Plaintiff contended that the trial court continued to have CAFA jurisdiction after the FAC because jurisdiction existed when Plaintiff filed the case.  The Second Circuit rejected this argument.


The Second Circuit found the Supreme Court of the United States's ruling in Rockwell Int'l Corp. v. United States, 549 U.S. 457, 473–74 (2007) controlling.


There, the SCOTUS held that "the state of things" and "the alleged state of things" must both confer jurisdiction.  When a plaintiff voluntarily amends their complaint, the trial court must "look to the amended complaint to determine jurisdiction." 


Withdrawal of the allegations that conferred jurisdiction will defeat jurisdiction unless other allegations that establish jurisdiction replace them. The Second Circuit held that the trial court in this case properly determined that it lacked jurisdiction because the FAC removed the original basis for the court's jurisdiction and did not introduce "new jurisdiction-granting allegations."


Thus, the Second Circuit affirmed the trial court dismissal for lack of jurisdiction.




Ralph T. Wutscher
Maurice Wutscher LLP
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