Analysis of the Impact of the Class Action Fairness Act of 2005
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The Class Action Fairness Act (CAFA) took effect on February 18, 2005. One of the most significant aspects of CAFA was the expansion of federal diversity jurisdiction for class actions. In general, CAFA provides federal jurisdiction when any class member and any defendant are citizens of different states. Under the law prior to CAFA, the complete diversity requirement of 28 U.S.C. 1332 meant that all named class representatives and all defendants had to be citizens of different states in order to have federal diversity jurisdiction. CAFA also relaxed the federal court requirement that each class member have a claim in excess of $75,000, changing the sufficient classwide claim value to $5,000,000. Prior to the passage of the Act, commentators predicted that these changes would have sweeping effects on the class action caseload in state court as cases moved to the federal jurisdiction.36 At the time of these predictions, there were essentially no state class action data available for any time period, and the hypotheses surrounding the implications of CAFA in state court have, until now, largely gone untested. This study of California class action litigation provides data that now allow for the first empirical assessment of the impact of the Class Action Fairness Act on a state judiciary. Data collected over the six-year study period allow for comparison of class action behavior in the years leading up to the Class Action Fairness Act and any subsequent change in behavior in 2005, the year CAFA went into effect. California class action filings did decline by 9.8% in 2005, the only decline seen in the six-year study period (see Fig. 1, above). This overall decrease in 2005 could be attributed to CAFA; however, as stated earlier, it may also be normalization from the 2004 filings number which showed an increase of 29.5% over the previous year. It will be necessary to update the filing data for the years 2006 and 2007 to determine whether the decline in 2005 was due to this realignment or if it is a continuing trend that may be related to the Class Action Fairness Act.
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Though the case-file review included cases filed in 2006, the CAFA analysis includes cases filed 2000 through 2005, only. Study cases filed in 2006 were excluded from this analysis because the filing data for that year are incomplete. 36 Congressional Budget Office, Cost Estimate, Senate Report 109-14 (February 28, 2005) at 76–78, quoted in Thomas E. Willging and Emery G. Lee III, ―The Impact of the Class Action Fairness Act on the Federal Courts: An Empirical Analysis of Filings and Removals,‖156 U. Pa. L. Rev. (2008), p. 1740: ― ‗most classaction lawsuits would be heard in a federal district court rather than a state court.‘ ‖
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