Wednesday, December 19, 2012

At Risk Claims Sufficient To Support Federal CAFA Jurisdiction

Back when Bexis was still at Dechert, we put up a cautionary post called “CAFA Not With Standing.”  In that post we cautioned against using constitutional standing as a defense to class actions with questionable and attenuated damages claims.  Remember CAFA, we pointed out.  The damages sought in state-court class actions need to support federal Article III standing, or else defendants won’t be able to keep the actions in federal court.

Well, yesterday the court in Bouldry v. C.R. Bard, Inc., No. 12-80951-CIV, slip op. (S.D. Fla. Dec. 18, 2012), addressed precisely the situation discussed in that post.  Fortunately, our side won, and the class action stayed in federal court, where there are plenty of other arguments against its validity.

First, we have to point out that ReedSmith was involved in the Bouldry case, so we can’t say as much as we’d like.  We’ll have to stick to the legal propositions.  As for the facts, all we can say is that the Bouldry opinion should be applicable to other attenuated injury class actions, regardless of the product or conduct involved.

Bouldry involved a state class action in Florida alleging that a medical device had a higher risk of failure than it should.  The class consisted of people who had not suffered any failure.  There are good arguments that this sort of at-risk damages are not recoverable under most states’ laws − see our no injury scorecard, and in particular the Shiley heart valve cases from the late 1980s and early 1990s, which addressed similar allegations.  Hint:  the defendant won almost all of them.

Defendant removed Bouldry under CAFA.  Plaintiffs sought remand by alleging that at risk claims didn’t constitute “injury in fact” under Article III of the U.S. Constitution, and thus there was no standing to support the exercise of federal jurisdiction under CAFA.  Bouldry, slip op. at 2.  In so doing, plaintiffs in Bouldry advanced precisely the argument we worried about in our earlier CAFA post.

The court concluded that claims for risk of future injury satisfied the constitutional “injury in fact” requirement, regardless of whether such damages were recoverable under state law.  Id. at 4-5 (citing Pisciotta v. Old Nationall Bancorp, 499 F.3d 629, 634 (7th Cir. 2007); Central Delta Water Agency v. United States, 306 F.3d 938, 947-48 (9th Cir. 2002); and Friends of the Earth, Inc. v. Gaston Copper Recycling Corp., 204 F.3d 149, 160 (4th Cir. 2000) (en banc)).  The court also cited medical monitoring cases that reached the same conclusion about alleged risk of future harm.  Bouldry, slip op. at 5 (citing Sutton v. St. Jude Medical S.C., Inc., 419 F.3d 568, 574-75 (6th Cir. 2005); In re Paoli Railroad Yard PCB Litigation, 916 F.2d 829, 861 (3d Cir. 1990); In re Welding Fume Products Liability Litigation, 245 F.R.D. 279, 287 n.37 (N.D. Ohio 2007); and Carlough v. Amchem Products, Inc., 834 F. Supp. 1437, 1452 (E.D. Pa. 1993)).

Essentially, even if the claim may fail as a matter of substantive law for lack of cognizable injury, constitutional standing to adjudicate damages-related (and all other) arguments will exist as long as the plaintiff “has “a sufficient stake in a justiciable controversy.”  Bouldry, slip op. at 6 (citing Florida cases).

Finally, to the extent that plaintiffs alleged in their complaint that they did not have standing under Article III, those allegations were conclusions of law that could be ignored under TwIqbal.  Bouldry, slip op. at 7-8.

For all of these reasons, the court held that, under CAFA, the damages allegations were sufficient to support removal to federal court.  We believe this to be the first time this standing issue has been resolved in the specific CAFA context, so anyone facing similar no-injury or at-risk class actions may want to take a look.


Anonymous said...

Context is different, but there was a recent case which remanded after class certification was denied for lack of standing to pursue a claim or injunctive relief under 23(b)(2). Robinson v. Hornell BRewing 2012 US Dist LEXIS 176699 (D.N.J. Dec. 13, 2012). Interesting issue.

Fender said...

Anybody facing such type of problems can surely take help of this..