What is the Class Action Fairness Act?

Congress enacted 28 U.S.C. § 1711 – 1715 – known as the Class Action Fairness Act (CAFA) — in response to perceived class action abuses by the plaintiffs’ bar. Legislators feared attorney fees were disproportionate to the relief obtained by the class. Congress felt local courts were too closely tied to the plaintiffs’ tort bar to objectively preside over the class actions. The end result was that CAFA greatly expanded the jurisdiction of federal courts over class action lawsuits.

Which class actions meet the standard for CAFA?

In order to be classified under the Class Action Fairness Act, a class action must:

  • Exceed $5 million, exclusive of interest and costs.
  • Have a minimum of 100 class members.
  • Include at least one diverse plaintiff (a citizen of a different or foreign state than the defendant).

What does CAFA require for defendants?

According to the Class Action Fairness Act:

  • Within 10 days of filing for preliminary approval, all defendants of class action settlements in federal court are required to notify state and federal regulators where any class member may reside.
  • If defendants are unable to determine the location of any class members, they should give notice to regulators in all fifty states and U.S. territories.
  • Regulators are granted at least 90 days to review the proposed settlement before final approval is granted.

What should be included in a CAFA notice?

The contents of the CAFA notice must include:

  • A copy of the complaint and all exhibits
  • A list of any scheduled hearings
  • A copy of the proposed notice to class members
  • The proposed or final settlement agreement
  • Any additional agreements between plaintiffs’ counsel and the defendant
  • The proposed dismissal
  • The names of class members who reside in each state
  • The share or estimated share of claims members can expect
  • Any written opinion relative to the settlement

Immediately after a settlement is reached, defendants must begin gathering documents and compiling a class list to remain in compliance with the law. Part of the job of a class action claims administrator is to assist counsel in preparing the notification on-time and in full compliance with the Class Action Fairness Act.

What could happen if the conditions of CAFA are not met?

Defendants in federal court who are unable to meet the 10-day requirement for notification face strict consequences. If a class member can prove that regulators were not notified of the settlement, any class member can then opt out of the confines of the settlement terms, causing the whole case to come undone. Additionally, a court cannot enter an order to grant final approval until 90 days after the CAFA notice is provided; while defense counsel can begin preparing this notice as settlement negotiations are ongoing, significant delays will be inevitable.

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