Class Action Fairness Act (CAFA)
The Class Action Fairness Act of 2005 expanded federal court jurisdiction over large, multistate class actions — making it easier to move these cases from state courts (where plaintiffs' lawyers often filed them) to federal courts. CAFA applies to class actions with 100 or more class members, more than $5 million in aggregate claims, and minimal diversity (any class member is a citizen of a different state from any defendant). The law also imposed protections against abusive settlements, including restrictions on coupon settlements and requirements to notify state attorneys general.
Current Law (2026)
| Parameter | Value |
|---|---|
| Governing statute | Class Action Fairness Act of 2005 (28 U.S.C. §§ 1332(d), 1453, 1711-1715) |
| Minimum class size | 100 members |
| Amount in controversy | $5 million aggregate (not per plaintiff) |
| Diversity requirement | Minimal diversity — any class member from different state than any defendant |
| Removal | Any defendant may remove to federal court; no 1-year deadline; no need for all defendants to consent |
| Coupon settlement protection | Attorney fees must be based on value of coupons actually redeemed, not face value |
| Net loss protection | Court cannot approve settlement that results in net loss to class members |
| Geographic discrimination | Court cannot approve settlement paying more based solely on geography |
| State AG notification | Defendants must notify appropriate federal and state officials of proposed settlements |
Legal Authority
- 28 U.S.C. § 1332(d) — Class action jurisdiction (federal courts have original jurisdiction over class actions with 100+ members, $5M+ aggregate amount, and minimal diversity of citizenship)
- 28 U.S.C. § 1453 — Removal of class actions (any defendant may remove a class action to federal court without the consent of all defendants and without the normal 1-year time limit for removal)
- 28 U.S.C. § 1712 — Coupon settlements (if a settlement provides coupons, attorney fees attributable to coupons must be based on value actually redeemed by class members, not face value; court may require some fees be contingent on redemption rate)
- 28 U.S.C. § 1713 — Net loss protection (court may not approve a settlement where class members are obligated to pay class counsel sums resulting in a net loss, unless nonmonetary benefits justify it)
- 28 U.S.C. § 1714 — Geographic discrimination prohibition (court may not approve a settlement paying some class members more than others solely based on geographic proximity to the court)
- 28 U.S.C. § 1715 — Notifications (defendants must send notice of proposed settlements to the U.S. Attorney General and appropriate state officials; settlement cannot be finalized within 90 days of notification, giving officials time to object)
How It Works
Before CAFA, plaintiffs' attorneys could file large multistate class actions in state courts — often choosing jurisdictions known for favorable rulings and generous settlements. Defendants had limited ability to remove these cases to federal court because traditional diversity jurisdiction required complete diversity (every plaintiff from a different state than every defendant) and a $75,000 per-plaintiff minimum.
CAFA changed the game by establishing minimal diversity (see Federal Court Jurisdiction & Venue for the underlying diversity rules) — federal jurisdiction exists if any class member is a citizen of a different state than any defendant. Combined with the $5 million aggregate threshold (adding up all claims), this gives federal courts jurisdiction over virtually any large multistate class action.
The removal provisions are equally significant. Under CAFA, any single defendant may remove the case to federal court — no need for unanimous consent from all defendants. There's no 1-year deadline for removal (unlike normal diversity cases). And CAFA removal is available even if the named plaintiff and defendant are from the same state, as long as minimal diversity exists among the class.
CAFA includes exceptions preserving state court jurisdiction in certain situations. The "home state" exception keeps cases in state court when two-thirds or more of class members and the primary defendants are citizens of the state where the case was filed. The "local controversy" exception applies when a significant defendant's conduct was centered in the state. A discretionary exception applies when one-third to two-thirds of class members are citizens of the forum state.
The settlement protection provisions target practices that enriched plaintiffs' lawyers while providing little real value to class members. The coupon settlement rule (§ 1712) was a direct response to settlements where class members received discount coupons of dubious value while attorneys collected millions in fees calculated on the coupons' face value. Under CAFA, fees must be based on the value of coupons actually redeemed. The net loss prohibition (§ 1713) prevents settlements where class members pay more in costs than they receive in benefits. The AG notification requirement (§ 1715) brings public scrutiny to proposed settlements by requiring notice to state and federal law enforcement officials.
How It Affects You
If you receive a class action settlement notice in the mail: The notice is real — you're a member of a class that sued a company and won (or settled). Most class action settlement checks are small (a few dollars to a few hundred dollars), but they're legitimate payments for actual legal rights. The critical action: check the deadline. Class action settlements require you to submit a claim form by a specific date to receive any payment — if you miss it, you lose your share. Some claims can be filed online in minutes. Read the notice carefully before discarding it; CAFA's § 1715 requires notice to state attorneys general, which provides a layer of governmental oversight on settlement terms. If you receive a check without filing a claim form, cash it — it won't affect your rights to future litigation. If a class action settlement requires you to give up rights worth more than the payment (for example, a $50 coupon in exchange for releasing personal injury claims), you have the right to opt out of the settlement and pursue your own claim.
If you're a defendant company facing a large consumer, employment, or product liability class action: CAFA is your primary procedural tool for moving the case out of a state court your plaintiffs' lawyers chose specifically for its favorable local juries, judges, or procedural rules — removal operates on top of the standard federal jurisdiction and venue rules. Under CAFA, you alone (any single defendant) can remove a class action to federal court if the class has 100+ members, aggregate claims exceed $5 million, and any class member is from a different state than any defendant — which describes nearly every large multistate consumer class action. There's no 1-year removal deadline (unlike standard diversity removal). The strategic trade-off: federal courts have their own plaintiff-friendly jurisdictions (the Ninth Circuit, for instance), and federal judges may be more rigorous in applying Rule 23 class certification standards — sometimes helping defendants, sometimes not. But for truly abusive state court forum selections (the Madison County, Illinois phenomenon that CAFA was designed to stop), federal removal is a critical tool — and once in federal court, class trials proceed under the federal jury system when jury trial is preserved. Make sure your litigation counsel evaluates CAFA removal in the first two weeks of any large multistate case.
If you've hired a plaintiffs' class action attorney for a consumer claim: CAFA's coupon settlement rule (28 U.S.C. § 1712) was enacted specifically to protect people like you from settlements where the class gets coupons of marginal value while lawyers get paid millions in fees based on the coupons' face value. Under CAFA, attorney fees in coupon settlements must be based on the value of coupons actually redeemed — not the theoretical value if everyone used every coupon. This creates alignment between your lawyer's incentives and yours: if nobody redeems the coupons, the lawyers don't get paid for them. The net loss prohibition (§ 1713) prevents courts from approving settlements where class members are forced to pay more in costs than they receive in benefits — a protection against negative-value settlements. If you're in a class action and the proposed settlement seems inadequate — small payment, lots of restrictions, high attorney fees — you can object to the settlement at the fairness hearing, hire your own attorney to object, or opt out entirely.
If you're a state attorney general or consumer protection official: CAFA's § 1715 notification requirement gives your office a 90-day window after receiving notice of a proposed settlement to evaluate it and file objections. The notice must come from the defendant and must go to the U.S. Attorney General and to the appropriate state officials for every state where class members reside. During this window, you can analyze whether the settlement adequately compensates state residents, whether the release of claims is overbroad, or whether the settlement terms conflict with your state's consumer protection laws. The same federal jury system that would eventually hear the case provides the backstop for any contested fairness proceedings. Several state AGs have successfully objected to class action settlements — or used the threat of objection to negotiate improved terms for state residents. The notification requirement also provides intelligence on class actions affecting your state's residents that you might not otherwise know about: it's a free early-warning system on major consumer litigation.
State Variations
CAFA creates federal jurisdiction but doesn't preempt state class action law:
- State courts retain jurisdiction over class actions that fall below CAFA thresholds or qualify for exceptions
- State consumer protection class action procedures vary significantly
- Some states have their own coupon settlement restrictions
- State court class certification standards may differ from Federal Rule 23
- CAFA's home state and local controversy exceptions preserve state jurisdiction for truly local disputes
Implementing Regulations
CAFA (28 U.S.C. §§ 1332(d), 1453, 1711–1715) is self-executing — it establishes jurisdictional rules and procedural requirements that federal courts apply directly. No CFR implementing regulations exist.
Pending Legislation
- S 3826 — Require disclosure of third-party funders in class actions/MDLs, ban funder control, report foreign funding. Status: Introduced.
- HR 6172 — Block pre-dispute arbitration of race discrimination claims, allow class actions. Status: Introduced.
- S 2799 (Sen. Blumenthal, D-CT) — End forced arbitration and class waivers for workers, consumers, small businesses. Status: Introduced.
- HR 100 (Rep. Biggs, R-AZ) — Bar federal class actions alleging worker misclassification as independent contractors. Status: Introduced.
Recent Developments
CAFA has fundamentally reshaped class action litigation geography, moving most large consumer, securities, and product liability class actions to federal court. Litigation over CAFA's jurisdictional boundaries — particularly the home state and local controversy exceptions — continues in the circuit courts. The Supreme Court has addressed CAFA issues including the standard for determining the amount in controversy and the scope of appellate review of remand orders. Class action settlement practices have evolved in response to CAFA's coupon and notification requirements, though critics argue that settlements still often provide inadequate value to class members. The growth of mass arbitration (driven by mandatory arbitration clauses enforceable under the Federal Arbitration Act) has created a parallel debate about class action alternatives and about the practical scope of the Seventh Amendment civil jury right.