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CAFA Class Action Defense Cases–Lloyd v. General Motors: Maryland Federal Court Denies Motion To Remand Class Action Holding That Under Maryland Law Amendment Adding New Plaintiffs Commenced New Action Under Class Action Fairness Act

Products Liability Class Action Complaint Originally Filed in 1999 Removable under CAFA (Class Action Fairness Act) because Maryland Law Holds Amendments that Add New Party Plaintiffs do not Relate Back so 2007 Amendment to Add New Named Plaintiffs Commenced New Class Action under CAFA Maryland Federal Court Holds

In 1999, plaintiffs filed a putative class action in Maryland state court against four automobile manufacturers seeking “damages arising from the cost of replacing allegedly defective seating systems”; Eight years later, defense attorneys removed the class action to federal court on the ground that removal jurisdiction existed under the Class Action Fairness Act of 2005 (CAFA). Lloyd v. General Motors Corp., 560 F.Supp.2d 420, 421 (D.Md. 2008). Plaintiffs did not dispute that their class action involved more than 100 plaintiffs, or that the amount in controversy was more than $5,000,000, or that the minimal diversity test under CAFA had been met. Id., at 423 n.3. Instead, plaintiffs moved to remand the class action to state court on the ground that the Class Action Fairness Act applies only to class actions “commenced” on or after February 18, 2005 – long after they had filed their class action complaint in this case. Id., at 421. Defense attorneys countered that plaintiffs’ fourth amended class action complaint materially changed the lawsuit so as to “commence” a new action within the meaning of CAFA. Id. The district court agreed and denied the motion to remand the class action state court.

The initial class action complaint alleged that the seating systems in defendants’ cars were “unreasonably dangerous” because they were “susceptible to rearward collapse in the event of a rear-end collision.” Lloyd, at 421. Over the following six months, plaintiffs amended the class action complaint three times “adding several new named plaintiffs and significantly expanding the class of relevant automobiles.” Id. In March 2000, the Maryland state court granted defendants’ motion to dismiss the third amended class action complaint “ruling that the Plaintiffs had failed to plead actual injury and that their claims were barred by the economic loss doctrine.” Id., at 422. The case was tied up in the appellate courts until February 2008, when the Maryland Court of Appeals reinstated the class action complaint. Id. (citing Lloyd v. General Motors Corp., 916 A.2d 257 (Md. 2007). On August 19, 2007, plaintiffs filed a fourth amended class action complaint that, in the district court’s words, “alter[ed] their claims in three significant respects: first, by adding five new named plaintiffs, three of whom were never a part of the putative class; second, by including in the putative class lessees of class vehicles for model years 1988-2005; and third, by including in the putative class owners of class vehicles for model years 1988-89 and 2000-2005. “ Id. It was based on these amendments that defense attorneys removed the class action to federal court, arguing that under CAFA a new action had been “commenced” after February 18, 2005. Id.

Preliminarily, the federal court addressed whether the “relation back” doctrine applied to its analysis. Plaintiffs argued that it should not apply, so that the effective date of the filing of the class action was June 15, 1999, “notwithstanding the nature or timing of subsequent amendments.” Lloyd, at 423. Defense attorneys countered that it did apply, id. The district court agreed with the defense, explaining at page 423 that “application of relation back principles in this context is entirely consistent with the removal statute, which expressly contemplates that amended pleadings may render a case removable.” Plaintiffs next argued that the district court’s relation back analysis must be conducted based on federal law; however, defense attorneys argued that Maryland law applies. Id. Again, the federal court agreed with defense attorneys, finding “the weight of authority is on the Defendants’ side” and noting that at oral argument plaintiffs’ lawyer conceded that “the cases thus far have assumed that state relation back principles control.” Id., at 423-24 (citations and footnote omitted). Put simply, “When a pleading is amended prior to removal, the relation back inquiry is governed by state law.” Id., at 424 (citations omitted).

The final step of the federal court’s analysis was simple because “[t]he outcome of this case under Maryland law is clear.” Lloyd, at 424. Under Maryland law, “amendments adding new party-plaintiffs do not relate back to a plaintiff’s original complaint.” Id. (citation omitted). Here, the fourth amended class action complaint added five new named plaintiffs, three of whom were never part of the putative class: “Under Maryland law, this is the end of the analysis” and the fourth amended class action complaint “must…be treated as new litigation for purposes of the CAFA.” Id. (footnote omitted). Accordingly, the district court held that “Plaintiffs’ Fourth Amended Complaint ‘commenced’ a new action under applicable Maryland law, rendering the instant proceedings removable in accordance with the CAFA.” Id., at 425. It therefore denied the motion to remand the class action to state court. Id.

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