Class Action Fairness Act of 2005 (“CAFA”)

The Class Action Fairness Act (“CAFA”), was enacted to make federal courts the primary venue for class action litigation. It did so by modifying the usual jurisdictional requirements of the diversity jurisdiction statute. Under CAFA, federal courts may exercise removal jurisdiction over state law class actions originally filed in state court so long as there is “minimal” rather than “complete” diversity, and the amount in controversy is greater than $5 million.

Congress passed the Class Action Fairness Act of 2005 (“CAFA”) with the hope of preventing abuse in class action lawsuits. CAFA assigns jurisdiction to federal courts over class actions where: (i) the aggregate amount in controversy exceeds five million dollars ($5,000,000); (ii) the class comprises at least 100 plaintiffs; and (iii) there is at least “minimal diversity” between the parties (i.e., at least one plaintiff class member is diverse from at least one defendant). In addition, CAFA mandates that courts apply greater scrutiny to class action settlements and, in particular, those involving coupons (i.e., vouchers or other non-cash disbursements which can be redeemed for (typically discounted) products or services).[1]