Faulk v. JELD-WEN, Inc.

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 Before GRABER, OWENS, and NELSON, Circuit Judges. 

The Bottom Line

The court held that when plaintiffs amend a complaint after removal to eliminate the federal jurisdictional basis under CAFA, federal courts lose subject-matter jurisdiction and must remand the case. 

Class Action Takeaway 

Plaintiffs can now defeat CAFA jurisdiction in the Ninth Circuit by amending their complaint after removal to eliminate class allegations, forcing remand to state court. After Royal Canin, defendants can no longer rely on the “once properly removed, always federal” rule under CAFA, and forum-manipulation arguments will not save federal jurisdiction once the class claims are gone. 

Background

David and Bonnie Faulk brought a class action lawsuit in Alaska state court against two companies, Spenard and JELD-WEN. The plaintiffs alleged that windows purchased for their custom home were defective, constituting a breach of warranty. The Faulks are Alaska residents; Spenard is incorporated in Alaska, and JELD-WEN is incorporated in Delaware. The defendants removed the case to federal court under the Class Action Fairness Act (CAFA), which grants federal jurisdiction. Seeking to remand the case back to state court, the plaintiffs filed a Second Amended Complaint (SAC) that removed all class action allegations. They argued that eliminating the class claims divested the federal court of jurisdiction. The district court dismissed the SAC with prejudice, reasoning that it had already determined remand was inappropriate under the original complaint and that the plaintiffs’ “procedural move reeked of forum manipulation.” The plaintiffs timely appealed.

Opinion

The case turns on whether jurisdiction should be evaluated based on the complaint at the time of removal or on the post-removal amended complaint. In Royal Canin, the Supreme Court held that the plaintiff is the master of the complaint and that when “any federal anchor supporting jurisdiction is gone, jurisdiction of the residual state claims disappears as well.” Under prior Ninth Circuit precedent, district courts retained jurisdiction based on the original complaint, even when all federal jurisdictional anchors were removed in a subsequent amended complaint. The court concluded that this precedent, as applied under CAFA, no longer remains good law and is irreconcilable with the Supreme Court’s decision in Royal Canin. Under the new rule, minimal diversity under CAFA can no longer be relied upon. Because the plaintiffs also sued an Alaska corporation, complete diversity is lacking. The court further held that concerns about forum manipulation do not override this analysis, as plaintiffs ultimately control which claims to bring and in which forum to litigate them. Accordingly, the district court’s ruling was vacated, and the case was remanded with instructions to further remand the matter to state court.