An 11th Circuit Court of Appeals decision that significantly narrowed the scope of the Class Action Fairness Act (CAFA) and created substantial confusion among class action practitioners has been vacated by that Court, which admitted that its earlier statutory interpretation was “incorrect.” Cappuccitti v. DirecTV, Inc., No. 09-14107 (11th Cir. Oct. 15, 2010).

As we reported in an earlier legal alert, the panel’s original decision in Cappuccitti held that federal courts did not have either original jurisdiction or removal jurisdiction over class actions pursuant to CAFA, unless at least one plaintiff satisfied the $75,000 amount-in-controversy requirement of 28 U.S.C. § 1332(a). The unprecedented ruling created a firestorm in the class action bar, and led to the highly unusual filing of rehearing petitions by both the plaintiff and the defendant in Cappuccitti.

On October 15, 2010, the 11th Circuit granted rehearing, vacated its prior decision, and acknowledged that "[s]ubsequent reflection has led us to conclude that our interpretation was incorrect." The Court went on to agree with the uniform prior precedents holding that "[t]here is no requirement in a class action brought originally or on removal under CAFA that any individual plaintiff’s claim exceed $75,000."

Another important aspect of the new Cappuccitti decision is the Court’s reversal of the trial judge’s denial of DirecTV’s motion to compel individual arbitration. The trial court had agreed with the plaintiff that requiring him to arbitrate his claim for recovery of the contested $420 early cancellation fee on an individual, non-class basis would be unconscionable because his attorney’s fees would exceed his maximum damage recovery.

The trial court relied on the fact that the plaintiff had elected to maintain only common law claims (for unjust enrichment and money had and received), which do not allow a prevailing party to recover attorney’s fees. However, the 11th Circuit emphasized that the plaintiff could have also sued under the Georgia Fair Business Practices Act, which allows recovery of attorney’s fees; therefore, compelling individual arbitration was not unconscionable. The Court held that in determining unconscionability, the trial judge "needed to consider all of the remedies available to Cappuccitti under Georgia law at the moment he contracted with DirecTV," not just the remedies he ultimately chose to pursue.

This is not the first time that the 11th Circuit upheld the validity of a class action waiver in a case involving the Federal Arbitration Act and Georgia law. In Jenkins v. First American Cash Advance of Georgia, LLC, et al, 400 F.3d 868 (11th Cir. 2005), reh and reh en banc denied, 143 Fed. Appx 311 (2005), cert denied, 126 S. Ct. 1457 (2006), the 11th Circuit reversed the District Court's order denying a motion to compel arbitration, rejected a challenge to the validity of the class action waiver, and compelled individual arbitration in a case where Ballard Spahr represented the defendants.