Third Circuit Issues CAFA Decision

Yesterday, the Third Circuit issued a decision concerning the Class Action Fairness Act in Frederico v. Home Depot, No. 06-2266, __ F.3d __, 2007 WL 3310553 (Nov. 9, 2007). In Frederico, the plaintiff argued that certain fees imposed by Home Depot for the alleged late return of its rental trucks violated New Jersey law. The CAFA questions were whether the putative plaintiff class sought more than $5 million - - the amount necessary under 28 U.S.C. 1332(d)(2) to establish federal jurisdiction - - and what the standard is for proving the jurisdictional amount when, as in Frederico, the complaint does not explicitly limit the amount being sought to $5 million or less.

On the latter question, to make a long story short, here's what the court held: "[W]here the plaintiff has not specifically averred in the complaint that the amount in controversy is less than the jurisdictional minimum[,] the case must be remanded [only] if it appears to a legal certainty that the plaintiff cannot recover the jurisdictional amount." Slip op. 18. The court distinguished its ruling from its prior decision in Morgan v. Gay, 471 F.3d 469 (3d Cir. 2006), where the complaint had expressly limited the value of the claim to $5 million. There, "the proponent of the federal subject matter jurisdiction [generally, in CAFA cases, the removing defendant] is held to a higher burden; that is, the proponent of jurisdiction must show, to a legal certainty, that the amount in controversy exceeds the statutory threshold." Slip op. 15. [We have previously blogged about that ruling in Morgan v. Gayhere, and another ruling in Morgan v. Gay, concerning CAFA's appeal filing deadline, here.]

For what it's worth, the court then found that there was way more than $5 million in controversy, id. at 18-24, and affirmed dismissal on the merits, holding that the plaintiff had not stated a claim under New Jersey law. Id. 25-38. It appears that the class was never certified and that therefore only the named plaintiff and not the (putative) class is bound by the court's ruling on the merits.