The Fifth Circuit Court of Appeals has held that claims severed from a Class Action Fairness Act (CAFA) case retain federal jurisdiction if the class-action lawsuit had original, rather than supplemental, jurisdiction when removed to federal court. Louisiana v. Am. Nat’l Prop. & Cas. Co., No. 14-30071 (5th Cir., decided March 26, 2014). The court refused to apply the Honeywell exception to the general rule that “jurisdictional facts are determined at the time of removal, not by subsequent events.” That exception would have required each severed action to have an independent jurisdictional basis to remain in federal court.
The decision was part of the ongoing “Road Home Litigation” involving a Louisiana program that required Hurricane Katrina victims to assign their insurance policies to the state in exchange for immediate funds to rebuild damaged homes. Louisiana then filed a class action to recover from the insurance companies, which petitioned to remove the case to federal court with subject matter jurisdiction supplied by CAFA. After certifying a question to the Louisiana Supreme Court, the district court severed the individual claims from the class action and directed the state to file amended complaints for each claim. The district court, and later the Fifth Circuit, then addressed whether the individual claims should remain in federal court.
Generally, post-removal events do not affect properly established jurisdiction. Under an exception established in Honeywell Int’l, Inc. v. Phillips Petroleum Co., 415 F.2d 429 (5th Cir. 2005), however, “an action severed from the original case must have an independent jurisdictional basis, which in turn calls for jurisdictional facts to be determined post-removal, at the time of severance.” Granting the insurance companies’ request for the litigation to remain in federal court, the Fifth Circuit pointed to Honeywell’s facts, its subsequent citations and CAFA’s text and legislative history to determine that Honeywell applies only to “claims that were never infused with original jurisdiction, but state claims that were tagging along in the tail wind of the original federal claims.”
Accordingly, supplemental jurisdiction as the basis for removal to federal court may later be grounds for a new jurisdiction determination after severance, but cases granted original jurisdiction then later severed may not be remanded to state court under the Honeywell exception.