CAFA’s Local-Controversy Provision Can’t Trump Federal-Question Jurisdiction

The Eleventh Circuit reinstated a federal RICO case but approved the denial of a motion to remand it to state court under the Class Action Fairness Act (CAFA) in Blevins v. Aksut, No. 16-11585, 2017 WL 782288 (11th Cir. Mar. 1, 2017). The court’s opinion confirms that CAFA’s local-controversy provision, 28 U.S.C. § 1332(d)(4), does not strip federal courts of jurisdiction over supposedly local class actions that include claims under federal law.

Blevins involved allegations that the defendants had violated the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961–1968, by performing and billing patients for unnecessary heart surgeries in Alabama. The defendants removed the case from state court because of the federal RICO claims, and the district court denied the plaintiffs’ motion to remand before dismissing the case on the ground that RICO excludes claims for personal (i.e., medical) injuries.

Among other things, CAFA confers federal subject-matter jurisdiction over all class actions with minimally diverse parties and more than $5 million in controversy. 28 U.S.C. § 1332(d)(2). But the local-controversy provision creates an exception to that rule by directing federal district courts to “‘decline to exercise [CAFA] jurisdiction’” over “class actions that involve local parties and controversies.” Blevins, 2017 WL 782288, at *2 (quoting 28 U.S.C. § 1332(d)(4)).

The Blevins plaintiffs argued on appeal that the local-controversy provision required the district court to remand the case to state court. Despite their federal RICO claims, the plaintiffs maintained that CAFA required the district court to decline jurisdiction over their “local” class action.

The Eleventh Circuit disagreed. Because the local-controversy provision is an exception to CAFA’s extension of federal diversity jurisdiction under 28 U.S.C. § 1332, “when the requirements of federal-question jurisdiction are met [under § 1331], district courts may exercise jurisdiction over class actions, even if they involve only local parties.” Blevins, 2017 WL 782288, at *3 (emphasis added).

The court was more forgiving with respect to the potential merits of the underlying RICO claims. The district court had dismissed those claims (and declined to exercise supplemental jurisdiction over the rest of the case) because private civil RICO claims are limited to injuries to “business or property.” 18 U.S.C. § 1964(c). But the Eleventh Circuit vacated the dismissal order on the ground that “[i]n the context of unnecessary medical treatment, payment for the treatment may constitute an injury to property.” Blevins, 2017 WL 782288, at *4.

Posted by Lee Peifer

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