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Tmesys v. Eufaula-Class Action Defense Cases: Circuit Court Has Jurisdiction To Review District Court Order Remanding Class Action To State Court Based On Finding That CAFA (Class Action Fairness Act) Does Not Apply Eleventh Circuit Holds

As a Matter of First Impression, Eleventh Circuit Holds that Jurisdiction Exists to Review District Court Order Based on Finding that Class Action Fairness Act of 2005 (CAFA) does not Apply and Agrees with District Court Decision to Remand Class Action to State Court

Plaintiff filed a putative class action in Alabama state court against health insurer alleging breach of contract. Defense attorneys removed the action to federal court based on the Class Action Fairness Act of 2005 (CAFA). Plaintiffs moved to remand the class action to state court on the grounds that Class Action Fairness Act did not apply because the lawsuit had been filed prior to CAFA’s effective date. Tmesys, Inc. v. Eufaula Drugs, Inc., 462 F.3d 1317, 1318 (11th Cir. 2006). The district court agreed and remanded the matter to state court; defense attorneys appealed. The Eleventh Circuit held, as a matter of first impression, that the Court of Appeals “do[es] have jurisdiction to review a district court’s order to remand [a class action to state court] when that order is based on a determination that CAFA does not apply, at least to the extent of reexamining that jurisdictional issue.” Id., at 1319 (citations omitted).

The facts underlying the removal/remand issue are as follows. Plaintiff filed its class action on February 14, 2005 – four days before CAFA’s effective date of February 18, 2005 – but the summons was not issued until February 28, 2005. Defense attorneys removed the case under CAFA on the ground that the action was “commenced” on the date the summons issued, which was after CAFA’s effective date. Plaintiff argued, and the district court found, that plaintiff intended the complaint be served on the date it filed its complaint and thus, under Alabama law, the class action had been commenced prior to CAFA’s effective date. Tmesys, at 1318. The Circuit Court held (1) as noted above, the federal Courts of Appeals have jurisdiction to review on appeal the foundational jurisdictional issue of whether CAFA applies, and (2) that “the consensus among circuits is that state law determines when an action is commenced for purposes of CAFA.” Id., at 1319. The Eleventh Circuit summarized its holdings at page 1319 as follows:

Accordingly, because the district court’s application of Alabama law established that the action was commenced prior to the effective date of the act and it is clear that the district court properly applied Alabama law to the undisputed underlying facts, both the district court and our court are without jurisdiction under CAFA. Thus, we DENY the petition for permission to appeal.

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