Mark Moller (DePaul University - College of Law) has posted A New Look at the Original Meaning of the Diversity Clause on SSRN. Here is the abstract:
The 2005 Class Action Fairness Act, which allows federal courts to exercise diversity jurisdiction if members of a proposed class and the defendant reside in different states, raises a jurisdictional puzzle.
The puzzle was first identified by Brian Wolfman, Public Citizen's litigation director, in congressional testimony on CAFA. "When a proposed class action is filed," he argued, "the class does not yet exist and a constitutional 'controversy' exists only between the named plaintiffs and the defendant. Because there is no controversy between the absent class members... and the defendant... it is difficult to imagine how diversity jurisdiction can be constitutionally maintained [based on class members' citizenship] prior to certification of the class."
CAFA, in other words, forces us to ask whom an Article III "controversy" is "between" for purposes of establishing diversity jurisdiction.
In this article, I solve this puzzle. An Article III "controversy" subsists only "between" those subject to the court's "power to bind." Diversity jurisdiction is therefore limited to suits in which persons brought within that power are citizens of different states. Put another way, the constitutional reach of diversity jurisdiction and the due process limits on federal preclusion are, contrary to received wisdom, linked. I end by exploring the implications of this discovery for the constitutionality of CAFA.
And from the text:
According to the conventional understanding of Phillips Petroleum v. Shutts,204 absent class members in a Rule 23(b)(3) class are, as matter of due process, beyond the preclusive reach of courts prior to the issuance of notice to the class and the expiration of the Rule 23 “opt out” period, which occurs after the trial court has assessed whether the class satisfies Rule 23’s commonality, typicality, adequacy and predominance requirements.
If that’s correct, CAFA’s jurisdictional provisions violate Article III. Absentees do not qualify as jurisdictional parties prior to certification and their citizenship cannot ground federal jurisdiction under a minimum diversity theory. The upshot is that, while the Diversity Clause doesn’t prevent removal of large aggregations of claims out of state courts for pre- trial discovery and trial, it does, in cases where the named plaintiffs and defendants are not diverse, delay that removal until the certification process is completed by the state court (making the state’s certification decision, in turn, the “law of the case”).
That doesn’t doom CAFA by any stretch of the imagination. Defendants could still remove large multi-state class actions into federal court where the named plaintiffs and defendants are minimally diverse. But it robs CAFA of its greatest promise: to create a seamless web of jurisdiction over nationwide class actions.205 While that result does not ruin federal efforts to comprehensively address abusive state-level class actions, it would force Congress to cast in new directions for a comprehensive fix.206
However, an alternative revisionist view claims that notice and opt out are not prerequisites to federal courts’ power to bind absent Rule 23(b)(3) class members. [Editor's note: I have omitted the substantive discussion of Shutts here.]
* * *
If Shutts revisionists are correct, CAFA’s treatment of absent class members as jurisdictional parties could survive, at least in most applications. Class members qualify as jurisdictional parties once adequacy of representation is assessed—they are capable of being bound “in a sense,” because they are subject to issue preclusion if the certification request is denied. Federal courts, in turn, have “jurisdiction to determine their jurisdiction,”214 and nothing in the federal rules of procedure prevents a federal court from undertaking an early assessment of adequacy as part of the removal jurisdiction inquiry.215
Thus, if we accept that Shutts is inapplicable at the federal level, Article III is susceptible to constructions that could save CAFA’s treatment of Rule 23(b)(3) absentees’ citizenship from at least a facial challenge, and would also likely save its treatment of absentees’ citizenship in many applications of the statute.
Very interesting & highly recommended.