Third Circuit Finds Proposed Dual Service as Class Counsel and Class Representative Does Not Preclude CAFA Removal

The Third Circuit recently considered whether the District Court properly denied a motion for remand brought by a pro se plaintiff, an attorney also seeking to serve as class counsel, who argued that since his “dual service” precluded class certification in federal court, the defendant could not aggregate the proposed class’s claims to satisfy the $5 million amount in controversy under the Class Action Fairness Act (“CAFA”). In affirming the denial of the plaintiff’s remand motion, the Third Circuit built upon recent Supreme Court precedent confirming that a plaintiff cannot stipulate to less than $5 million in damages to avoid the federal court’s subject matter jurisdiction under CAFA. You can read about that decision, Standard Fire v. Knowles, here.

In Nutraceutical Corp., plaintiff Harold Hoffman, Esq., “an attorney who has made a habit of filing class actions in which he serves as both the sole class representative and sole class counsel,” challenged removal of the action to the District of New Jersey. Mr. Hoffman argued that CAFA jurisdiction was not satisfied to a “legal certainty” because Third Circuit law does not permit class certification if the proposed class representative is also proposed class counsel, therefore, without any class claims to aggregate, the amount in controversy is only the value of his individual claim, or about $200. The District Court concluded that the plaintiff had “failed to show that the class was not certifiable and that the class claims could not be aggregated,” explaining that class certification was “indeed possible,” as demonstrated by Mr. Hoffman’s very decision to pursue the matter as a class action.

The Third Circuit affirmed without argument, holding that Mr. Hoffman’s contention was “contravened by the plain language of CAFA, which mandates that federal courts calculate the amount in controversy of a putative class action before determining whether the class may be certified[.]” The Circuit Court explained that CAFA requires a federal court to determine the amount in controversy in a “class action” by aggregating class claims, and that CAFA defines a “class action” as “any civil action filed under rule 23 . . . or similar State statute[,]” and “class members” as persons in the proposed or certified class action.” Therefore, the Court concluded that CAFA’s amount-in- controversy requirement was satisfied when an action was filed under Rule 23 or similar state statute, and the aggregated claims of the proposed class members amounted to over $5 million. As aptly put by the Third Circuit: “[a] putative class action’s prospects for certification are irrelevant to whether federal courts have subject matter jurisdiction over that action in the first instance.” Notably, the Third Circuit relied upon Knowles, in which a unanimous Supreme Court concluded that a plaintiff’s stipulation limiting damages cannot unilaterally bind absent class members to avoid CAFA jurisdiction, and further explained that “simplicity is a virtue” in jurisdictional matters.

Overall, Nutraceutical reaffirms not only that the District Court shall follow the plain language of CAFA because “simplicity is a virtue” in jurisdictional matters, but also that a plaintiff cannot single-handedly circumvent subject matter jurisdiction to avoid removal to federal court under CAFA.

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