The Seventh Circuit recently addressed, as a matter of first impression, the issue of whether a case properly removed under the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d), loses federal jurisdiction if the district judge subsequently denies class certification. In Cunningham Charter Corp. v. Learjet, Inc., Case No. 09-8042 (7th Cir. Jan. 22, 2010), the Seventh Circuit held that a court maintains jurisdiction under CAFA even after denial of class certification. This decision is important for defendants in class action lawsuits who are considering removal under CAFA.

WHAT HAPPENED:

In Cunningham, the plaintiff filed a putative class action against Learjet in Illinois state court for breach of warranty and products liability. The plaintiff purported to represent himself and all other buyers of Learjets who had received the same warranty from the manufacturer. The defendant removed under CAFA. Removal is proper under CAFA when: 1) there is minimal diversity, 2) there are at least 100 class members, and 3) the amount in controversy exceeds $5 million. In Cunningham, these requirements were met at the time of removal. However, the district court subsequently denied plaintiff ’s motion for class certification and then remanded the case to state court, ruling that the denial of class certification eliminated subject-matter jurisdiction under CAFA.

The Seventh Circuit reversed this decision, holding that CAFA jurisdiction does not require that a class be certified, only that there is “an expectation that a class will or at least may be certified eventually.” Jurisdiction attaches when a suit is filed as a class action, and CAFA is therefore applicable unless “it would have been certain from the outset of the litigation that no class could be certified.” The court held that this is consistent with the general principle that “jurisdiction once properly invoked is not lost by developments after a suit is filed.”

WHAT IT MEANS:

The Seventh Circuit’s decision will be beneficial to any class action defendants who are contemplating removal. Cunningham resolves what had been an open issue in the Seventh Circuit and definitively states that CAFA jurisdiction continues even when a class is not certified. This means that class action defendants who believe they may be able to defeat the plaintiff ’s motion for class certification can still take advantage of the benefits of CAFA and other federal laws, so long as the plaintiff ’s class allegations are not clearly frivolous.

If you are facing a state court class action with minimal diversity, more than 100 class members, and an amount in controversy greater than $5 million, the Cunningham decision should bolster any arguments you might have for removal and maintaining federal court jurisdiction after denial of class certification.