Class Actions and CAFA

A class action can reach federal court on diversity grounds by two routes, and each route has its own rules for citizenship and for money. Section 1332(a) governs every ordinary diversity case, an ordinary class action included. Subsection (d), enacted as part of the Class Action Fairness Act of 2005 (CAFA), is a separate grant that covers class actions alone.¹ A class action lets one person or a small group of co-parties represent a larger group that shares a common interest.² Under subsection (d), a district court may hear a qualifying class action on minimal diversity, which asks only whether some member of the plaintiff class differs in citizenship from some defendant, and on an amount in controversy above $5 million measured in the aggregate for the class as a whole.³

Each feature relaxes a requirement that has organized this chapter. Minimal diversity replaces the complete-diversity comparison across the caption, and aggregation replaces a $75,000 floor that the claims of separate plaintiffs could not be added together to reach. Congress could make both choices because, as the earlier discussion of minimal diversity and Article III explained, the Constitution requires less than § 1332(a) demands.

A class action problem therefore begins with one question: which statute did the plaintiffs invoke? A class action under § 1332(a) must still fit a listed alignment and exceed $75,000.⁴ The first subsection below shows what those requirements mean when most plaintiffs never appear in the caption. The rules it collects still decide every class action that does not qualify under subsection (d), and they set the baseline against which CAFA's changes are easiest to see.

A separate grant exists because a class distorts both ordinary tests. A class can include members in every State, and its combined stakes can be enormous when each member's claim is small. Requiring every member to be diverse from every defendant would let one co-citizen defeat the federal forum for the entire class, and counting only individual claims toward a dollar floor would leave a dispute with huge total exposure in state court. Subsection (d) answers by measuring diversity and dollars at the level of the class action itself. Congress then limited its own grant with provisions that send some local controversies back to state court and with a list of class actions the grant does not reach.⁵ The subsections below take these in order: ordinary class actions, CAFA's grant, home-state declination, and the exclusions.

Ordinary Diversity Class Actions

A class action filed under 28 U.S.C. § 1332(a) must satisfy the same two-part statute as any other diversity case: the parties must fall within a listed alignment, and the matter in controversy must exceed $75,000, exclusive of interest and costs.⁶ Suing for a group suspends neither requirement, but the statute does not say how its words apply when most plaintiffs never appear in the caption. Decisions that predate CAFA supply the answers, and they still control every class action that proceeds under § 1332(a), including one that falls short of what the newer grant demands.⁷ The class shrinks to its named representatives for citizenship and to a single qualifying claim for the amount, so the two halves are taught separately.

In a class action under § 1332(a), the court compares the citizenship of the named representatives with the citizenship of the defendants and ignores absent class members, even those who share a State with a defendant.⁸ Supreme Tribe of Ben Hur v. Cauble stands for that rule, and the rule continues to apply under the modern class action rule.⁹ The reason is administrative. A class can include thousands of people in every State, many of them unknown when the suit begins, so a requirement that every member be diverse from every defendant could not be verified, and a nationwide class would almost never meet it.¹⁰ Confining the comparison to the named representatives gives the court a short, knowable list, and the court runs that list through the ordinary complete-diversity test: no representative may share a State with any defendant.¹¹

Because only the named representatives count, counsel who face a large class in which some members would defeat diversity can file the action with only representatives of the right citizenship.¹² An exam stem about a nationwide class therefore asks first who is named, and the States of everyone else in the class drop out of the analysis.

The same focus on the named parties shapes disputes over defendants. Plaintiffs who want to stay in state court sometimes join an in-state defendant, and the out-of-state defendant answers that the in-state defendant was fraudulently joined and should be disregarded. The doctrine ordinarily applies in two settings: when no possibility exists that the plaintiff can establish a cause of action against the nondiverse defendant, and when the pleading of jurisdictional facts is outright false.¹³ In Triggs v. John Crump Toyota, Inc., the defendants argued that 98 percent of the class members had no conceivable claim against the nondiverse defendant. The Eleventh Circuit rejected the argument. When the named plaintiff has a potential claim against that defendant, a court cannot disregard the defendant as fraudulently joined merely because most unnamed class members have no claim against it.¹⁴ The named plaintiff's claim measures the lineup.

The amount requirement has a more troubled history, and it divides into the rule that Zahn announced and the rule that Allapattah put in its place. In Zahn v. International Paper Co. (1973), the Supreme Court held that each class member in a diversity class action must claim individual damages above the jurisdictional amount, so the claims of class members could not be combined to reach it.¹⁵ Together with Snyder v. Harris, Zahn in effect made class actions unavailable in diversity cases that require more than $75,000 in controversy.¹⁶ Consider a class of 8,000 members who each claim $10. Their combined $80,000 would clear the $75,000 line, yet the combined figure counted for nothing, because no single member's claim came close. The one exception covered plaintiffs enforcing a common and undivided interest, typically a single piece of property or a single insurance policy. There the rights of one plaintiff cannot be fixed without affecting the others, so the court may value the whole fund, but the exception was rare.¹⁷

Allapattah changed the result for any class that contains at least one qualifying claim. In Exxon Mobil Corp. v. Allapattah Services, Inc., about 10,000 Exxon dealers sued as a class alleging that Exxon had overcharged them for fuel. The question was whether a federal court in a diversity action may exercise supplemental jurisdiction, meaning power to hear additional claims related to one already within its original jurisdiction, over additional plaintiffs whose claims fall below the minimum amount.¹⁸ The Court held that when the other elements of jurisdiction are present and at least one named plaintiff satisfies the amount-in-controversy requirement, 28 U.S.C. § 1367 authorizes supplemental jurisdiction over the claims of other plaintiffs in the same Article III case or controversy, even if those claims fall below the jurisdictional amount.¹⁹ The decision overruled Zahn, at least when one claimant seeks more than the jurisdictional minimum.²⁰

Think of supplemental jurisdiction as attachment. A named representative's claim above $75,000 sits within the court's original jurisdiction, and the other members' claims arise from the same case or controversy, so they attach to it as related claims ordinarily attach to an anchor.²¹ Section 1367(a) is broad, and § 1367(b) says nothing that withholds supplemental jurisdiction over the claims of Rule 23 class members, so those claims fall within it.²²

The anchor must be a named representative's claim, and there the old rule still applies. At least one named class member must independently meet the jurisdictional amount, and named members who each fall short cannot combine their claims to reach it.²³ A large claim held by an unnamed member cannot serve as the anchor, because Allapattah speaks of at least one named plaintiff who satisfies the amount.²⁴ A named representative may add up all of her own claims against a single defendant, and when that total exceeds $75,000 the other plaintiffs need not meet the amount.²⁵ With no qualifying claim, the court has no original jurisdiction to which the others can attach, and the case fails.

Class counsel has more room to satisfy the amount than small headline figures suggest, because every item that counts toward the amount counts here. Take a class of 1,000 train passengers mildly injured in a derailment. The requirement can be met for the whole class if some legal possibility exists that a named passenger has suffered more than $75,000 in emotional distress and pain and suffering.²⁶ The usual exam error in a consumer class is to multiply the class by the claim and announce a large number.

Aggregate value matters only under the separate class-action grant in § 1332(d), which allows jurisdiction when more than $5,000,000 is claimed and diversity exists between any plaintiff class member and any defendant. The next subsection takes up that grant.²⁷

Exam Analysis Steps

Because the citizenship half looks only at the named representatives and the amount half needs one qualifying named claim, an ordinary diversity class action is best run as a short sequence that reduces the class to its named members before anything is compared. The steps are these:

Confirm that the plaintiffs invoke § 1332(a) and not § 1332(d), since the minimal-diversity and $5,000,000 rules of the newer grant do not apply to a class action filed under the older one.
Identify the named representatives and the State of citizenship of each, setting aside the unnamed class members.
Compare those States with the State of every defendant, and find no jurisdiction if any named representative shares a State with any defendant.
Total each named representative's claims against a single defendant, and ask whether at least one named representative's total exceeds $75,000, exclusive of interest and costs.
If one does, treat that claim as the anchor and let the other members' smaller claims attach by supplemental jurisdiction; if none does, find no jurisdiction under § 1332(a), because named representatives cannot combine their claims.

The third and fourth steps carry the analysis. Counsel selects the representatives, so the third step lies largely within the plaintiffs' control. The fourth is where an ordinary class action most often fails, since a class of small claims has no representative with a large one and the value of the class as a whole cannot be borrowed.

CAFA Original Jurisdiction

Section 1332(d)(2) gives the district courts original jurisdiction over any civil action in which the matter in controversy exceeds $5,000,000, exclusive of interest and costs, and which is a class action fitting one of three diversity alignments.²⁹ Congress enacted that grant in CAFA as a separate path into federal court, with its own dollar figure and its own method of comparing citizenship, so the § 1332(a) tests do not control a class action that qualifies under it.³⁰ The last subsection ended with washing-machine buyers who had no route into federal court under § 1332(a), because each claim was a few hundred dollars and no representative could anchor supplemental jurisdiction. Subsection (d) closes that gap. The same buyers, whose claims together exceed $100 million, can reach federal court if the lineup also fits one of the listed alignments, and no buyer needs a claim anywhere near $75,000.

Congress adopted the grant in response to a pattern. Some state courts had certified large class actions of questionable merit, and under the older diversity rules those suits could not be removed to federal court.³¹ Corporate defendants, politicians, and others also feared that state courts treated class action defendants unfairly and that strict jurisdictional rules left major class actions stranded there.³² Each feature of the statute removes a barrier that kept a large multistate class in state court. The definitions come first, because they fix what the grant reaches. The alignments and the dollar rule follow.

Congress defined the key vocabulary in § 1332(d)(1), and the definitions decide whose citizenship and whose claims count. There are four:

A class action is any civil action filed under Rule 23 of the Federal Rules of Civil Procedure or a similar State statute or rule authorizing an action to be brought by one or more representative persons as a class action.³³
The class is all of the class members in a class action.³⁴
Class members are the persons, named or unnamed, who fall within the definition of the proposed or certified class.³⁵
A class certification order is an order issued by a court approving the treatment of some or all aspects of a civil action as a class action.³⁶

Two features of those definitions do most of the work. The reference to a similar State statute or rule means that a class suit filed in state court is a class action for purposes of the grant. That is why such a suit may be removed under § 1453 by any defendant, whether or not the defendant is a citizen of the State in which the action arose.³⁷ The phrases named or unnamed and proposed or certified do the second job. The people whose citizenship and claims count include absent members, and they count even though no judge has yet approved the class. The definition of a certification order matters mainly for paragraph (8), taken up below.

The citizenship half of the test lists three alignments, and a class action needs only one of them:

Under (d)(2)(A), any member of the plaintiff class is a citizen of a State different from any defendant.³⁸
Under (d)(2)(B), any member of the plaintiff class is a foreign state or a citizen or subject of a foreign state, and any defendant is a citizen of a State.³⁹
Under (d)(2)(C), any member of the plaintiff class is a citizen of a State, and any defendant is a foreign state or a citizen or subject of a foreign state.⁴⁰

Each alignment compares one class member with one defendant. That is minimal diversity, the standard Article III itself requires. As the earlier discussion of Tashire showed, complete diversity governs the reading of § 1332(a) but does not stop Congress from using minimal diversity in other statutes, and Congress has done so for sizable interstate class actions.⁴¹ The choice fits the setting. A defendant that does business nationally almost always has customers in its own State, so a rule requiring every class member to be diverse from every defendant would push nearly every nationwide class out of federal court on the strength of a single local member. Under (d)(2), one diverse member is enough.

The statute also looks to any member, so absent members count, while in a § 1332(a) class action only the named representatives' citizenship is compared with the defendants'.⁴² A class whose named representatives share a State with the defendant therefore fails § 1332(a) yet can satisfy (d)(2)(A) if any absent member is a citizen of another State. Choosing representatives no longer settles the jurisdictional question. Neither (B) nor (C) reaches a class of foreign citizens suing only foreign defendants, because each requires a state citizen on one side of the caption, which parallels the requirement in § 1332(a)(2).⁴³

The money half of the test replaces the $75,000 floor with a class-wide figure. Paragraph (6) directs that, in any class action, the claims of the individual class members be aggregated to determine whether the matter in controversy exceeds $5,000,000, exclusive of interest and costs.⁴⁴ The change responds to what the older rule did to consumer cases. Under § 1332(a) each class member's claim had to stand on its own, so a class made of many small claims, as in much consumer and environmental litigation, could not use diversity jurisdiction however large the combined exposure.⁴⁵ Aggregation measures the dispute at the level of the whole class, which is where the defendant's exposure actually sits. Under it no individual member needs a claim above $75,000, and class counsel no longer has to find a named representative with a large claim to anchor supplemental jurisdiction under Allapattah.⁴⁶ Congress thus dropped the $75,000 figure for these actions and set the threshold at the aggregate value of all class claims.⁴⁷

Hypothetical Illustration

Buyers of a recalled space heater sue its manufacturer, a corporation incorporated in Delaware with its headquarters in Illinois, as a nationwide class of 30,000 people, each claiming about $200 in refunds and replacement costs. One class member is a citizen of Oregon. The aggregate claim is $6 million, and an Oregon citizen is diverse from a company that is a citizen of Delaware and Illinois, so the grant in § 1332(d)(2)(A) applies even though no buyer's claim comes near $75,000.

Buyers of a cheaper model, 15,000 of them, bring a class action against the same manufacturer with the same lineup, and their claims total $3 million. The lineup still satisfies minimal diversity, but the aggregate falls below $5,000,000, so the CAFA grant does not apply. The class falls back to § 1332(a), where no named representative holds a claim above $75,000, and the case belongs in state court.

The statutory verb is exceeds, so a class whose aggregate is exactly $5,000,000 falls short, and the figure excludes interest and costs just as the $75,000 figure does.⁴⁸ The measure also resists a drafting shortcut. In Standard Fire Insurance Co. v. Knowles, the Supreme Court held that a class representative cannot avoid removal under these provisions by stipulating not to seek more than $5,000,000, because the representative cannot bind the absent class members before the class is certified.⁴⁹ A stipulation binds only the person who signs it, so the aggregate across the proposed class stays wherever the absent members' claims put it.

Timing follows the time-of-filing principle taught earlier, with a statutory adjustment. Under Grupo Dataflux, diversity is measured when the suit is instituted, and later changes in citizenship leave attached jurisdiction undisturbed.⁵⁰ Paragraph (7) applies that idea to a class. It fixes the citizenship of the members of the proposed plaintiff classes, for paragraphs (2) through (6), as of the filing of the complaint or an amended complaint. If the case stated by the initial pleading is not subject to federal jurisdiction, it fixes citizenship as of the date plaintiffs serve an amended pleading, motion, or other paper indicating that federal jurisdiction exists.⁵¹ The adjustment makes sense because a class complaint describes a group, and the description decides who enters the comparison. If the pleading describes a group that cannot support jurisdiction, nothing yet exists to test, and the clock starts when plaintiffs themselves first put a federal-jurisdiction fact on the record.

Paragraph (8) answers a different timing question: does jurisdiction wait for class certification? It provides that the subsection applies to any class action before or after the entry of a class certification order.⁵² A certification decision comes only after the case is under way, and a court must settle its power over a case at the outset. If jurisdiction waited for certification, the question of which court should hear the case would stay open while the question of which class exists was still being litigated. The statute instead tells the court to examine the proposed class as the complaint defines it. The definition of class members as persons within the proposed or certified class makes that workable, since an absent member of a proposed class counts in the diversity comparison and in the dollar total from the start.⁵³

Entity citizenship follows a special rule for unincorporated associations. In an ordinary diversity case a partnership takes the citizenship of each of its partners, so one partner who shares a State with an opposing party defeats jurisdiction.⁵⁴ Paragraph (10) displaces that rule for this subsection and for the removal provision, deeming an unincorporated association a citizen of the State where it has its principal place of business and the State under whose laws it is organized.⁵⁵ The effect is to treat the association much as a corporation is treated, by its place of organization and its headquarters, and to spare the court a member-by-member search through its ownership. Courts classify an LLC as an unincorporated association for diversity purposes, so paragraph (10) reaches it as well. The paragraph speaks only of unincorporated associations, so a corporate defendant keeps its ordinary citizenship in every State of incorporation and in the State of its principal place of business.⁵⁶

Paragraph (2) does not state every requirement of the grant. A class action must also have at least 100 putative members across the proposed plaintiff classes,⁵⁷ and CAFA's broad grant is subject to several exceptions.⁵⁸ The later subsection on excluded class actions takes up the list, and the subsection just before it teaches the provisions that let or require a court to decline jurisdiction over a local controversy. The two statutory paths also stay separate. A court applies one path's requirements in full and cannot borrow the other path's easier terms. In Yocupicio v. PAE Group, LLC, the Ninth Circuit rejected jurisdiction where the class claims missed CAFA's dollar figure and the non-class claims lacked complete diversity.⁵⁹ The usual exam error is to carry § 1332(a) habits into subsection (d), asking whether each member claims $75,000 or whether the named representatives are diverse, when subsection (d) asks about the aggregate and about any member. Paragraph (6) aggregates claims in a class action, so by its terms it does not reach a group of individual suits that is not a class action.⁶⁰

Exam Analysis Steps

Because subsection (d) changes both halves of the ordinary test, a class action problem is best run by first choosing the statutory path and then applying that path's own questions. The steps are these:

Confirm that the case is a class action, meaning a civil action filed under Rule 23 or a similar State statute or rule that authorizes representative persons to sue for a class.
Identify whether the plaintiffs rely on § 1332(d), and if they do, set aside the complete-diversity comparison and the $75,000 requirement of § 1332(a).
Aggregate the claims of all class members, named and unnamed, exclusive of interest and costs, and ask whether the total exceeds $5,000,000.
Fix each class member's citizenship as of the filing of the complaint or amended complaint, or as of the later paper that first shows federal jurisdiction, and find each defendant's citizenship, treating any unincorporated association as a citizen of its principal-place-of-business State and its State of organization.
Ask whether any one class member and any one defendant fit an alignment in (d)(2)(A), (B), or (C), and treat the absence of certification as irrelevant to that question.
Confirm the remaining limits that sit outside paragraph (2): the 100-member minimum, the excluded class actions, and the provisions on declining jurisdiction.

The third and fifth steps carry the analysis. A single diverse absent member and a large enough aggregate together satisfy the grant, and the later steps can only narrow it.

Home-State Declination

A class action that fits § 1332(d)(2) is within the district court's original jurisdiction, yet Congress gave the court two ways to send a mostly local class action home. The first is discretionary: under § 1332(d)(3), a district court may, in the interests of justice and looking at the totality of the circumstances, decline jurisdiction over a class action in which greater than one-third but less than two-thirds of the members of all proposed plaintiff classes in the aggregate, and the primary defendants, are citizens of the State in which the action was originally filed.⁶² The second is mandatory: § 1332(d)(4) directs that the court shall decline when a larger share of the class is local, or when the facts describe the local controversy set out in subparagraph (A).⁶³ Between them, the provisions both allow and command remand where state interests seem to predominate.⁶⁴

Congress built exits into so broad a grant because it wanted to reach large multistate class actions while leaving class actions that are primarily small and local in state court.⁶⁵ The worries that justified the grant presuppose a dispute that spills across state lines. When most of the class and the primary defendants are citizens of the State where the suit was filed, the dispute is largely that State's own. Federalism points the same way, because every expansion of federal jurisdiction diminishes the power of the States, and efficiency cannot be the sole or controlling consideration.⁶⁶ The federal interest weakens as the controversy becomes more local, and the statute measures localness by two facts: the local share of the class and the citizenship of the primary defendants.

The provisions are graduated by how local the class is. In the middle band, where more than a third but fewer than two-thirds of the class and the primary defendants are local, the class still contains many outsiders, so the interstate concerns behind the grant remain in play to a degree that varies from case to case. The statute leaves that judgment to the district court, which may decline what it sees as an essentially local case.⁶⁷ When the local share reaches two-thirds, the outsider fraction is small enough that the statute settles the question in advance and removes the court's discretion.⁶⁸ The bands meet at their edges without overlapping. A class exactly two-thirds local falls outside § 1332(d)(3), which requires fewer than two-thirds, and inside § 1332(d)(4)(B), which requires two-thirds or more. A class exactly one-third local falls outside both provisions, so these provisions leave it in federal court.⁶⁹

In the middle band the court weighs six statutory factors. They ask whether the claims involve matters of national or interstate interest; whether the claims will be governed by the law of the filing State or of other States; whether the class action has been pleaded in a manner that seeks to avoid federal jurisdiction; whether the forum has a distinct nexus with the class members, the alleged harm, or the defendants; whether the filing State's citizens in the proposed classes substantially outnumber the citizens of any other State, with the remaining members dispersed among a substantial number of States; and whether one or more class actions asserting the same or similar claims were filed during the preceding three years.⁷⁰ Some of these factors pull toward keeping the case in federal court, such as national interest and the governing law of other States. Others pull toward sending it back, such as a distinct forum nexus and an in-state class that dwarfs every other State's share. Because the statute directs a judgment on the totality of the circumstances, no single factor decides the question.⁷¹ The pleading factor ties to a theme from earlier in this chapter, that plaintiffs sometimes shape a complaint to choose the forum, and it lets the court count that effort against a request to send the case home.

In the mandatory band the factors drop out. Section 1332(d)(4)(B) provides that the court shall decline when two-thirds or more of the members of all proposed plaintiff classes in the aggregate, and the primary defendants, are citizens of the State in which the action was originally filed.⁷² The word shall replaces the weighing of circumstances with two questions of fact: what fraction of the proposed class is local, and whether the primary defendants are local citizens as well. A court in this band cannot keep the case because the claims carry national interest or because another State's law governs, since the statute lists those considerations only for the discretionary band.

The mandatory exit in § 1332(d)(4)(A) catches classes that are overwhelmingly local even when some primary defendant is from elsewhere, and it pays for that breadth by demanding more than a head count.⁷³ All four of its conditions must be met:

Greater than two-thirds of the members of all proposed plaintiff classes in the aggregate are citizens of the State in which the action was originally filed.⁷⁴
At least one defendant is a citizen of the filing State, is a defendant from whom the class seeks significant relief, and has alleged conduct that forms a significant basis for the class's claims.⁷⁵
The principal injuries resulting from the alleged conduct, or any related conduct, of each defendant were incurred in the filing State.⁷⁶
During the three years before the filing, no other class action asserting the same or similar factual allegations against any of the defendants was filed on behalf of the same or other persons.⁷⁷

Subparagraph (A) differs from subparagraph (B) in ways that matter on an exam. The first condition demands greater than two-thirds, while (B) accepts exactly two-thirds. And (A) asks for a single significant local defendant, while (B) looks to the primary defendants as a group. The price of that flexibility is the pair of conditions about the controversy itself. Requiring the principal injuries to occur in the filing State makes local a description of where the harm happened. Requiring no similar class action in the prior three years screens out suits that look like one piece of a wider campaign, where the interstate concerns behind the grant carry more force.

Hypothetical Illustration

An explosion at a chemical plant injures residents of the surrounding county, and about 90 percent of them, State X citizens, file a class action in a State X court. The plant's operator, a State X company, is the defendant from whom the class seeks most of its relief and whose conduct is the heart of the claims. The out-of-state maker of a failed valve is a second primary defendant. The defendants are not all local, so the provision for fully local cases does not fit, but the local-controversy provision does. More than two-thirds of the class is local, the operator is a significant local defendant, the principal injuries occurred in State X, and no similar class action has been filed in the last three years. The court must decline.

A second explosion produces the same class and the same defendants, but a class action alleging the same failures by the operator was filed in State Y two years before. That earlier suit defeats the fourth condition, so the local-controversy provision is unavailable, and as far as these provisions are concerned the federal court keeps the case.

Exam Analysis Steps

Because the three provisions turn on the same two facts, the local share of the class and the citizenship of the defendants, they are best run in order of how much discretion each leaves the court. The steps are these:

Confirm that the class action already satisfies the grant in § 1332(d)(2), since declination presupposes jurisdiction that the court otherwise has.
Identify the State in which the action was originally filed, then determine what fraction of the members of all proposed plaintiff classes in the aggregate are citizens of that State and whether the primary defendants are citizens of it too.
If the fraction is two-thirds or more and the primary defendants are citizens of the filing State, find that the court must decline under § 1332(d)(4)(B).
If the fraction is greater than two-thirds, test the four conditions of § 1332(d)(4)(A), and find that the court must decline if every one is met, even when some primary defendant is a citizen of another State.
If the fraction is greater than one-third but less than two-thirds and the primary defendants are citizens of the filing State, weigh the six factors under § 1332(d)(3) and treat the decision as one for the court's discretion.
If none of these provisions applies, including when the class is one-third local or less, find that the grant stands as far as declination is concerned.

The second step carries the analysis, because the fraction decides which provision governs and therefore whether the court has any discretion at all. The usual error is to start with the six factors and treat them as the whole test, when they matter only in the middle band and a court in either mandatory band has no room to weigh them. A second error is to merge the two mandatory provisions, overlooking that (B) depends on the primary defendants as a group, while (A) depends on one significant local defendant plus local injuries and the absence of similar suits. The next subsection takes up the class actions to which CAFA's grant does not apply at all, which is a different question from declining a grant that does apply.

Excluded Class Actions

CAFA's grant has limits, and the first appears in paragraph (5) of subsection (d): paragraphs (2) through (4) “shall not apply to any class action in which” one of two listed conditions is met.⁷⁹ Paragraph (2) is the grant of original jurisdiction, and paragraphs (3) and (4) are the discretionary and mandatory declination provisions taught in the last subsection. A class action inside paragraph (5) therefore leaves the entire subsection (d) structure. That differs from declination, which operates on a court that already has jurisdiction under paragraph (2) and either permits or commands it to send a mostly local case home. An excluded class action never receives the grant, so the questions about the local share of the class and the citizenship of the primary defendants never arise. Paragraph (9) adds a second set of exclusions with a narrower effect. The discussion below follows the order of the statute.

The first condition in paragraph (5) is that the primary defendants are States, State officials, or other governmental entities against whom the district court may be foreclosed from ordering relief.⁸⁰ The condition turns on who the primary defendants are, so the size of the aggregate claim, the diversity of the members, and the number of members play no part in it. An answer should identify whom the class chiefly sues before it counts any dollars, and it should test both the clause naming governmental defendants and the clause about foreclosed relief against the facts.

The second condition is a headcount. Paragraph (5)(B) removes any class action in which the number of members of all proposed plaintiff classes in the aggregate is less than 100.⁸¹ Three features of the wording decide how to apply it. The count runs across every proposed plaintiff class added together, so no single class is measured alone. It counts members of proposed classes, so a court does not wait for certification before counting. And the statute says less than 100, so a class with exactly 100 members falls outside the exclusion. The test asks nothing about the value of the claims or the citizenship of the members, which is why a class that satisfies paragraph (2) on every other point can still fail here.

Paragraph (9) has a narrower target and a narrower effect. It provides that paragraph (2) shall not apply to any class action that solely involves a claim of a listed kind, and this chapter takes up two of them.⁸² Because only paragraph (2) is named, the exclusion removes the grant itself, and the declination provisions then have no jurisdiction to act on. The first kind is a claim concerning a covered security, a term the statute borrows from the Securities Act of 1933 and the Securities Exchange Act of 1934, so a court reads the definition in those statutes.⁸³ The second kind is a claim that relates to the internal affairs or governance of a corporation or other form of business enterprise and that arises under or by virtue of the laws of the State in which that corporation or enterprise is incorporated or organized.⁸⁴ The second kind has two parts, and a claim must meet both: the subject must be the enterprise's internal affairs or governance, and the governing law must be that of its State of incorporation or organization.

The word solely controls a mixed pleading. If the same class action also contains a claim of another kind, such as an allegation of deceptive sales practices under a consumer statute, the class action no longer solely involves a governance claim, and paragraph (9)(B) does not remove it from the grant. Each exclusion also closes only CAFA's path into federal court and says nothing about any other. A class action removed from the grant, such as the 60-member class above, can still proceed under § 1332(a) if it independently meets that statute, which, as the earlier treatment of ordinary diversity class actions showed, tests the named representatives and requires a qualifying claim above $75,000.⁸⁵ The exclusions therefore change which statute governs the class action and do not by themselves send a case to state court.

Exam Analysis Steps

Because each exclusion is a separate textual test that defeats the grant, the exclusions are best checked after the grant's own requirements are met and before the declination provisions are applied. The steps are these:

Identify the primary defendants, and ask whether they are States, State officials, or other governmental entities against whom the district court may be foreclosed from ordering relief.
Count the members of all proposed plaintiff classes in the aggregate, and treat a total of fewer than 100 as removing the class action from paragraphs (2) through (4).
Read the class action's claims, and ask whether the class action solely involves a covered-security claim or a claim about the internal affairs of a business enterprise that arises under the law of its State of incorporation or organization.
If any exclusion applies, find that CAFA's grant is unavailable, and test whether the class action independently satisfies § 1332(a) before concluding that the case belongs in state court.

The third step decides the mixed pleadings, because a single claim of another kind defeats the paragraph (9) exclusion. The first two steps depend only on who the primary defendants are and how many members the proposed classes contain.