In a first-of-its-kind opinion that could open the class action flood gates, the Eleventh Circuit has held that state consumer fraud class actions may proceed in federal court even if the state consumer fraud statute expressly forbids class actions. If other courts follow suit, plaintiffs in at least eight other states that currently prohibit consumer fraud class actions (Georgia, Iowa, Louisiana, Mississippi, Montana, South Carolina, Tennessee, and Virginia) can circumvent these prohibitions simply by filing in federal court.
In Lisk v. Lumber One Wood Preserving LLC, No. 14-11714, — F.3d —, 2015 WL 4139740 (11th Cir. July 10, 2015), the plaintiff, Robert Lisk, installed a wooden fence at his home in Alabama. The wood for the fence originated with defendant Lumber One Wood Preserving LLC (“Lumber One”) and passed through several intermediaries before being purchased by Mr. Lisk. On its website and in its product literature and labeling, Lumber One warranted that the wood was treated to prevent rot, fungal decay, and termites for at least 15 years. According to Mr. Lisk, these representations were false and the wood had not been treated at all. As a result, his fence experienced significant rot after just three years. After he began to experience problems, Mr. Lisk learned that other customers had had similar experiences.
Mr. Lisk filed a putative nationwide class action against Lumber One in the District Court for the Northern District of Alabama. The basis for federal jurisdiction was the Class Action Fairness Act (“CAFA”). Lumber One moved to dismiss the class allegations under the ADTPA, arguing that the Alabama statute expressly forbids private class actions. Specifically, Lumber One pointed to Ala. Code § 8-19-10(f), which states “a consumer or other person bringing an action under [the ADTPA] may not bring an action on behalf of a class.” The district court agreed that the ADTPA bars class actions by private consumers and dismissed the class allegations. After dismissing other claims, the district court concluded that it lacked subject matter jurisdiction under CAFA for Mr. Lisk’s individual ADTPA claim and dismissed that claim as well.
The Eleventh Circuit reversed. It concluded that Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co., 559 U.S. 393 (2010) was directly on point. In that case, the plaintiff brought a New York state-law claim for a statutory penalty in federal court. A New York statute, which applied...
