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CAFA Law Blog Information, cases and insights regarding the Class Action Fairness Act of 2005

Calculation of 100 or more does not include unnamed parties

Posted in Case Summaries

Stump v Camp, 2014 WL 582813 (E.D. La. Feb. 13, 2014).

In an action brought by employees of a company who alleged fraud due to an alteration in the plan documents which denied them additional benefits that they were entitled to, the district court remanded the action finding that the under Louisiana law, the spouses cannot be included in the class definition for the purposes of ascertaining numerosity requirement for federal subject matter jurisdiction under CAFA.

The current and former employees of Pamlab, LLC., brought an action in the Twenty-Second Judicial District Court for the Parish of St. Tammy against the defendants Samuel M. Camp, Judith M. Camp, Camline LLC f/k/a/ Pamlab, LLC. The plaintiffs alleged that while they were employed at Pamlab over the past 20 years, they earned points in an “Incentive Points Employee Compensation Plan,” which the plaintiffs characterized as stock. The plaintiffs claimed that they were told that if the company was ever sold, the worker still employed could liquidate their points into cash. According to the plaintiffs, in 2012, Pamlab terminated the points system, but they were informed that plaintiffs could either elect to receive a cash payment based on how many points they formerly held or they could receive the same number of points under the newly adopted 2012 incentive plan.

The plaintiffs contended that they chose to cash in their points because the new plan lasted only until 2017, but the company reserved the right to terminate the plan at any point in time. The plaintiffs claimed that Nestle bought over Pamlab in 2013, but the defendants were already negotiating a sale when the 2012 plan came into force. The plaintiffs felt shortchanged, and hence, filed this action. The defendants removed this case under CAFA, and the plaintiffs moved to remand.

In their motion to remand, the plaintiffs argued that that federal court did not have jurisdiction under CAFA because there were not more than 100 class members, the plaintiffs pointed out that in the defendants’ notice of removal they admitted that there were only 87 Pamlab employees who constituted members of the putative class action. The defendants countered by pointing to the plaintiffs’ complaint where the plaintiffs claimed that there were over 100 potential class members. The defendants contended that the jurisdictional facts are evaluated based on the pleadings at the time of the removal. In the alternative, the defendants argued that the plaintiffs had failed to join indispensable parties, who, when joined, would satisfy the numerosity requirement. The defendants claimed that the Federal Rules of Civil Procedure requires spouses in community property states to be joined because they have interests related to the subject matter of the action.

Here, the district court observed that the plaintiffs’ definition of the proposed class was very specific i.e., all individuals employed by Pamlab, who held points and who elected to receive cash payment for those points by signing a release agreement, and who remained employees until the company was sold. The district court remarked that the class definition did not include spouses who lived in community property, therefore, it could not consider the spouses when assessing the jurisdictional requirements under CAFA. In support of its conclusion, the district court relied on Mississippi ex rel. Hood v. AU Optronics Corp., 134 S.Ct. 736 (2014), where the United States Supreme Court rejected the theory that CAFA’s definition of a mass action included unnamed persons who were real parties in interest. (Editor’s Note: See the CAFA Law Blog analysis of Hood posted on October 8, 2014). The Supreme Court reasoned that the statute says 100 or more persons, not 100 or more named or unnamed real parties in interest. The Supreme Court continued that had Congress intended the later, it easily could have drafted language to that effect. Similarly, here, the district court concluded that if the Congress wanted to include all named and unnamed interested or required parties, it could have included that language, instead, the choose to require 100 or more named or unnamed persons who fell within the definition of the proposed class. Accordingly, the district court concluded that the CAFA definition does not infer an inclusion of the spouses in this case.

The defendants then argued that spouses should be included in assessing CAFA’s numerosity requirement based on the Louisiana’s community property regime – Louisiana Civil Law Treaties: Matrimonial Regimes § 1:1 (3d ed. 2013). The defendants pointed to Louisiana Civil Code Article 2336, which provides that each spouse owns a present undivided one-half interest in the community property. The district court noted that the present case involves a breach of contract claim made by current and former employees of the Defendants. In the complaint, the plaintiffs claimed that the defendants breached their contract by terminating the Incentive Points Employee Compensation Plan. The plaintiffs alleged that the Release Agreement that they signed should be rescinded due to the defendants’ fraud and misrepresentation. The employees who were parties to those employment-related contracts were the only parties who were in privity of contract with the defendants. The district court found no reason to alter this understanding based on the contents of the contracts. The district court concluded that according to Louisiana law, joinder of the spouses in the present case was not mandatory. In addition, the district court remarked that the defendants did not point to any reason why the failure to join the spouses would result in an injustice to those spouses. Accordingly, the district court concluded that under Louisiana law there were only 87 members of the proposed class.

Accordingly, the district court remanded the case to the state court. –JR