Friday, May 04, 2007

9thCircuit Affirms that An Action "Commences" for CAFA Purposes When the Initial Complaint Is Filed, Not on the Date of Amendment

Per McAtee v. Capital One, F.S.B., --- F.3d ---, 2007 WL 840370 (9th Cir. Mar. 16, 2007):

[The original plaintiff, Ball, filed a complaint in state court in August 2004 against subsidiaries of Capital One Financial Corporation and twenty John Doe defendants alleging that credit card contract provisions constituted unlawful business practices under California law. In May 2005 the Superior Court for Orange County held that Ball could not be the representative plaintiff because she had not suffered an injury in fact, and McAtee was substituted as lead plaintiff in a second amendment complaint filed June 1, 2005. The defendants removed, allegedly pursuant to the recently-enacted Class Action Fairness Act, which applies to "any civil action commenced on or after February 18, 2005."]

McAtee moved to remand. The federal district court granted the motion, holding that the action had “commenced” within the meaning of CAFA on August 13, 2004, when Ball's original complaint was filed. The defendants filed a petition to appeal under CAFA, Pub.L. No. 109-2, § 5, 119 Stat. 4, 12 (codified at 28 U.S.C. § 1453(c)), which we denied.

After remand, McAtee learned that her credit card contract was with a different subsidiary of Capital One Financial. Her contract was with Capital One Bank rather than Capital One, F.S.B. or Capital One Services. On June 22, 2006, McAtee filed an amended complaint substituting Capital One Bank in place of one of the Doe defendants. McAtee dismissed her claims against the other two named defendants.

Capital One Bank, like the two previous named defendants, removed to federal district court based on the supposed authority of CAFA. McAtee moved to remand. The district court again held that Ball's initial complaint filed on August 13, 2004, commenced McAtee's action, and remanded to state court. We granted Capital One Bank's petition for appeal to this court. We must decide whether substitution of a named defendant for a Doe defendant in a California state court action commences a civil action against the new named defendant within the meaning of CAFA. Looking to California law for the definition of commence, we conclude that it does not. We therefore affirm.


Our decision is controlled by our recent decision in Progressive West v. Preciado, --- F.3d ---- (9th Cir.2007), 2007 WL 725717, at *1. . . . Assuming arguendo that a defendant's counterclaim could serve as a basis for a CAFA-based removal by the plaintiff, we held in Preciado that an amendment to a cross-complaint in California state court (a counterclaim in federal court) does not commence an action under CAFA as of the date of the amendment. 2007 WL 725717, at *3. (We also held, contrary to our arguendo assumption, that CAFA does not depart from the normal rule under 28 U.S.C. § 1446 that a counterclaim does not provide a basis for removal. Id. at *3-4.) . . .

We looked to California state law in Preciado. We noted that California courts have employed the relation back doctrine for only two purposes-for the purpose of applying the statute of limitations, and for the purpose of applying timeliness rules for serving process. Preciado, 2007 WL 725717, at *2-3. So far as we were able to determine, the relation back doctrine has never been used in California for the purpose of determining a statute's effective date. We therefore held that for the purpose of determining CAFA's effective date, an action is commenced under California law when the original complaint in the action is filed, irrespective of any relation back analysis. Id. at *2 (citing Cal.Civ.Proc.Code § 350 (West 2006) (“An action is commenced, within the meaning of this Title, when the complaint is filed.”)). . . . [T]he considerations that have gone into the formulation of the relation back doctrine have relatively little bearing on whether CAFA should apply to a class action filed in state court. In a CAFA case, we need be less concerned about avoiding unfair surprise of a defendant, and more concerned about having a clear and easy-to-follow rule.


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