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Class Action Fairness Act Boosted Federal Cases

April 17, 2007 — Federal courts are handling more class action cases since the Class Action Fairness Act of 2005 (CAFA) was enacted, a study shows.

"In the 16 months since CAFA went into effect on February 18, 2005, . . . we find a substantial increase in class action activity based on diversity of citizenship jurisdiction," said the third in a series of interim reports from the Federal Judicial Center.

"Given that one of the legislation's primary purposes was to expand the diversity jurisdiction of the federal courts, it is likely that much of this observed increase in diversity removals and, of particular interest, original proceedings in federal courts is attributable to CAFA," the report said.

The Federal Judicial Center is conducting a long-term study of CAFA's impact, tracking the number of cases filed in, or removed to, federal courts.

The law, aimed at removing class action lawsuits from state to federal courts, gives federal courts jurisdiction over cases in which individual claims number more than 100 and total more than $5 million in value, and in which any individual plaintiff is a resident of a state different from any defendant.

The most recent interim report presents preliminary data from July 1, 2001, through June 30, 2006, in 88 of the 94 district courts nationwide. That data showed, among other things, the following:

- Average monthly numbers of diversity class actions increased from a pre-CAFA level of 27 cases per month to a post-CAFA level of 53.4 cases per month.

- In the last 12 months of the study period, original proceedings based on diversity jurisdiction outnumbered removals based on diversity jurisdiction. That's a reversal of the general pre-CAFA pattern.

- The increase in diversity cases in the CAFA period is largely concentrated in cases raising state-law contract and fraud claims. The average number of monthly filings and removals in contract class actions has more than doubled after CAFA. The average number of monthly filings and removals in fraud class actions has tripled.