Fifth Circuit Remands Putative Class Action under CAFAs Home State Abstention after RICO Claims are Dismissed

In What's New in Class Action Law?, What's New in the Courts by gravierhouseLeave a Comment

A putative class action was filed by a Louisiana citizen in Texas State Court challenging the use of red light cameras within Texas. After removal, Watson amended his complaint to delete the RICO claim, and, eleven days later, moved to remand the case to State Court, arguing that CAFA’s exceptions precluded the district court from exercising diversity jurisdiction over the action and arguing that, given the deletion of his RICO claim, the exercise of supplemental jurisdiction over the state law claims was improper.  The district court ultimately dismissed the claims against all but three of the defendants, and denied Watson’s motion to remand, finding that it was untimely as it pertained to CAFA and that the exercise of supplemental jurisdiction was warranted.  The U.S. Fifth Circuit reversed.

“The district court addressed the propriety of retaining supplemental jurisdiction before addressing CAFA jurisdiction. CAFA, however, provides for original jurisdiction.  If CAFA applies, the district court has original jurisdiction over the entire action and there is no ‘supplemental’ jurisdiction at all. Indeed, the test to determine whether exercise of supplemental jurisdiction was proper includes a query into whether ‘the district court has dismissed all claims over which it has original jurisdiction.’ 28 U.S.C. §1367(c)(3). That question cannot be answered until we have determined whether the district court properly exercised jurisdiction over the action pursuant to CAFA….

“The 30–day deadline applied by the district court is found in 28 U.S.C. §1447(c)…. Does invocation of the local controversy and home state exceptions implicate a ‘defect’ subject to this 30–day deadline? Joining all other circuits that have considered the issue, we hold that Section 1447(c) does not apply to remand motions based on CAFA’s mandatory abstention provisions…. We have already recognized that the ‘local controversy’ and ‘home state’ exceptions require abstention from the exercise of jurisdiction and are not truly jurisdictional in nature.  This follows from Section 1332’s text, which directs district courts to ‘decline to exercise’ CAFA jurisdiction where specific conditions exist.  Thus, Section 1332(d)(4) ‘does not deprive federal courts of subject matter jurisdiction, but rather, acts as a limitation upon the exercise of jurisdiction granted’ by CAFA.  ‘An “abstention-based remand order does not fall into either category of remand order described in §1447(c), as it is not based on lack of subject matter jurisdiction or defects in removal procedure.”‘”

With respect to the district court’s exercise of supplemental jurisdiction over the non-RICO State Law Claims: “The general rule is that a court should decline to exercise jurisdiction over remaining state-law claims when all federal-law claims are eliminated before trial….  As in Enochs, ‘the mistake which led the district court to abuse its discretion was in failing to reconsider its jurisdiction over the Texas state law claims as of the moment it granted the motion to file an amended complaint deleting all federal claims from the case.’  The district court’s primary reason for retaining jurisdiction was the level of work put into determining the defendants’ many motions to dismiss. Watson, however, deleted his lone federal claim and sought remand before those motions were decided. Further, though the question of state law standing has been extensively litigated, ‘little new legal research would be necessary’ to put these arguments before a Texas state court. State claims substantially predominate….  Additionally, Watson’s lawsuit challenging Chapter 707 ‘concerns a novel Texas state law issue with no Texas Supreme Court guidance.’”
Watson v. City of Allen, Texas, No.15–10732, 2016 WL 2610169 (5th Cir. May 5, 2016).

 

 

Leave a Comment