3rd Circuit Rules on Class Action Removal

Under the Class Action Fairness Act, the "significant basis" provision doesn't require that every class member assert a claim against the local defendant, the 3rd Circuit has ruled.

The plaintiffs filed a putative class action in New Jersey state court against their automobile insurance providers, alleging breach of contract for failing to pay the insureds' diminished value claims. Only one of the three defendants was a New Jersey citizen.

Relying on the Act, the insurers removed the case to federal court.

When the plaintiffs sought to remand the case back to state court, the insurers objected. They argued that [section]1332(d)(4), the "significant basis" provision of the Act, required every member of the proposed class to assert a claim against the local defendant.

Because two of the three defendants were not local and therefore many plaintiffs would file claims against out-of-state defendants, the insurers argued that the case should remain in federal court.

But the court rejected that reasoning.

The significant basis provision "requires that 'at least 1 [local] defendant is a defendant ... whose alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class.' The plain text of this provision relates the alleged conduct of the local defendant, on one hand, to all the claims asserted in the action, on the other. The provision does not require that the local defendant's alleged conduct form a basis of each claim asserted; it requires the alleged conduct to form a significant basis of all the claims asserted," the court said.

U.S. Court of Appeals, 3rd Circuit. Kaufman v. Allstate New Jersey Ins. Co., No. 08-4911. March 26, 2009. Lawyers USA No. 993- 599.

Originally published by Lawyers USA Staff.