3 Things Every Consumer Should Know About the Class Action Fairness Act (“CAFA”)

The Class Action Fairness Act, 28 U.S.C. Sections 1332(d), 1453, and 1711–1715, often referred to collectively, as “CAFA”, is one of the most prolific, important, and most recent pieces of legislation to substantively influence and impact class action lawsuits in the United States.

Enacted in 2005, CAFA essentially redefines class action lawsuits in three specific ways. First, it significantly alters the U.S. Federal Court’s jurisdiction over class actions, specifically expanding the ability of plaintiffs and making it substantially easier for them to bring class action lawsuits. For instance, although increasing the amount in controversy requirement from $75,000 to $5 million, CAFA greatly relaxes the threshold requirement for bringing such suits, allowing class action plaintiffs to aggregate the sum of each individual plaintiff’s claims. See 28 U.S.C. § 1332(d)(2) & (6).   This essentially allows individuals to pool their alleged claims and damages, for purposes of filing a class action lawsuit. Additionally, the Courts in aggregating such claims and damages, will generally apply a very flexible analysis, and will allow prospective plaintiffs to include compensatory damages, statutory damages, and punitive damages. See e.g. Cappuccitti v. DirecTV, Inc., 623 F.3d 1118, 1122 (11th Cir. 2010); and Blockbuster, Inc. v. Galeno, 472 F.3d 53, 59 (2d Cir. 2006).

Second, similar to relaxing the amount in controversy requirements, CAFA also implements flexible jurisdictional rules pertaining to plaintiff’s geographic locations. Prior to the implementation of CAFA, federal courts would only allow class actions to proceed if complete jurisdictional diversity existed between the plaintiff parties and the defendant – i.e., all class members had to be from a different state than the defendant party. Such requirement has essentially become null and void since the implementation of CAFA, where “minimal diversity” is met under CAFA if “any member of a class of plaintiffs is: (a) a citizen of a state different from any defendant; (b) a foreign state or a citizen or subject of a foreign state and any defendant is a citizen of a state; or (c) a citizen of a state and any defendant is a foreign state or a citizen or subject of a foreign state. See U.S.C. § 1332(d)(2)(A)-(C).   As such, courts now evaluate the citizenship of the entire putative class, and only require that a single member of the class to reside in a different state than the defendant, for purposes of establishing diversity jurisdiction.

Third, in terms of settlements, CAFA now requires significant disclosures, which greatly benefits prospective class action members in obtaining all relevant and necessary information to assist them in making informed and competent choices about the settlement. For instance, CAFA now requires that defendants provide formal settlement disclosures and notices to U.S. Attorney General and relevant state officials of each state where a class member may reside. See 28 U.S.C. § 1715(a)(1). Such notice and disclosure provisions, including enforcement by federal and state officials, are for the benefit of the class members, and insures that class members obtain the requisite notice, disclosures, and other important information regarding any class action settlements.