Ninth Circuit Clarifies CAFA Issues

In Visendi v. Bank of America, NA (http://www.metnews.com/sos.cgi?1013//13-16747), a panel of the Ninth Circuit Court of Appeals clarified the application of the Class Action Fairness Act ("CAFA") in the context of a proposed "mass action."  In Visendi, well over 100 aggrieved borrowers sued more than a dozen different lenders alleging bad acts in connection with mortgage lending.  The defendant lenders sought to remove the mass action under CAFA which permits mass actions of over 100 plaintiffs to be removed to federal court provided certain requirements are met.  Upon arrival in federal court, the defendants immediately argued that the claims at issue where not sufficiently similar to be tried together -- in short, that most of the plaintiffs be dismissed for misjoinder under Rule 20.  The district court remanded, concluding that defendants had conceded that there was no mass action by arguing for misjoinder.  Accordingly, the district court reasoned, CAFA's mass action provisions could not apply to allow for federal court jurisdiction. Defendant lenders appealed.  The Ninth Circuit held that so long as plaintiffs proposed to hold a joint trial of all of the claims, CAFA's mass action rules did apply.  Defendants do not waive CAFA jurisdiction by simultaneously arguing misjoinder.  Accordingly, the Ninth Circuit reversed the remand.  Then, the Ninth Circuit held that the so-called "local controversy" exception to CAFA was not jurisdictional.  Accordingly, plaintiffs' failure to argue the exception below waived the issue.  This is a significant holding which requires plaintiffs to raise the local controversy argument early on or risk waiver.  Next, the Ninth Circuit agreed with defendants that the case did not present a proper mass action and that most plaintiffs were in fact misjoined.  Thus, most of plaintiffs were ordered dismissed from the action.

The case is significant because it allows defendants to attack a class action or mass action on a dual front -- first, bringing it to federal court under CAFA and then arguing that it is not a proper class or mass action -- while still maintaining CFA jurisdiction in federal court.