Thursday, February 02, 2006

Seventh Circuit Holds That Substituting Named Plaintiff Does Not Commence a New Action for Purposes of CAFA (under Illinois Law)

Per the Seventh Circuit in Phillips v. Ford Motor Co., --- F.3d ----, 2006 WL 217942 (7th Cir. Jan. 30, 2006) (Posner, J.):

Before us are petitions for leave to appeal under the Class Action Fairness Act of 2005, Pub.L. 109-2, 119 Stat. 4, from orders remanding two class action suits to Illinois state courts. The question the petitions present is whether amending a complaint to add or substitute named plaintiffs (class representatives) "commences" a new suit. Id., ยง 9. The suits were filed before the effective date of the Class Action Fairness Act but the amendments came after. So if the amendments are deemed to commence new suits, these suits are removable to federal district court; otherwise not. Knudsen v. Liberty Mutual Ins. Co., 411 F.3d 805, 806 (7th Cir.2005); Pritchett v. Office Depot, Inc., 404 F.3d 1232 (10th Cir.2005). No appellate court has yet decided whether adding named plaintiffs to a class action suit "commences" a new suit for purposes of removal under CAFA.

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Since the question for decision . . . is whether adding named plaintiffs commences a new suit in state court, the answer should depend on state procedural law. The clearest case in which an amended complaint does not kick off a new suit is where the amendment "relates back" to the original complaint. For then the fact that the statute of limitations has run (as it may have against the named plaintiffs in Boxdorfer ) is not a bar, as it would be if the amended complaint did not relate back--that is, if it stated a new claim and thus kicked off a new suit. [citations omitted]. Under Illinois law as under federal law, an amendment relates back when it arises out of "the same transaction or occurrence set up in the original pleading." [citations omitted]. That well describes these cases--obviously Boxdorfer but only a little less clearly Phillips, for remember that the original complaint in that case included the 1996 model year.

Relation back to add named plaintiffs in a class action suit is of particular importance because of the interests of the unnamed members of the class. Suppose Mr. X files a class action and after the statute of limitations has run the defendant settles with X. If a named plaintiff cannot be substituted for X with relation back to the date of the filing of the original complaint, the class will be barred from relief. That is the fate looming in Boxdorfer if relation back is denied, and for all we know in Phillips as well for class members who own 1996 Ford models. Since, for this reason, Illinois in effect allows named plaintiffs to be substituted with relation back ("in effect" because the formal rule is that the filing of a class action tolls the statute of limitations for class members, so that they can if necessary be substituted for the named plaintiffs, without being barred by reason of the passage of time since the suit was filed), [citations omitted], the addition of such plaintiffs in the two cases before us did not commence new suits. Remand was therefore required, as the district judges ruled.


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