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

Controversies Are Not “Not Local” When The Defendants Are Vulnerable To Similar Claims in Other States

Posted in Case Summaries

Villalpando v. Exel Direct Inc., 2012 WL 5464620 (N.D. Cal. Nov. 8, 2012).

In a class action based on the alleged misclassification of drivers as independent contractors rather than employees, the Northern District Court of California held that the controversy was “not local,” and it denied remand on the basis that the defendants engaged in conduct that could have injured consumers across the country making them vulnerable to similar claims in other states.

The plaintiff filed a class action in the Superior Court of Alameda County, California asserting thirteen wage and hour claims under California state law. 

The defendants removed the action to the District Court asserting that removal was proper under CAFA. 

The plaintiff filed a motion to remand asserting that the action should be remanded to state court because CAFA did not apply. Among other reasons, the plaintiff argued that the defendants did not provide admissible evidence in the form of affidavits from company directors or officers establishing the existence of minimal diversity, and the “Home State” and “Local Controversy” exceptions to CAFA applied. 

The plaintiff alleged that he was a resident of California while the defendants evidenced that they were incorporated in Ohio and based in Florida. Therefore, CAFA’s minimal diversity requirement was met.

Further, the plaintiff contended that the “Home State” exception applied because two-thirds or more of the members of all proposed plaintiff classes in the aggregate were citizens of California, and Exel Direct, the primary defendant, was also a citizen of California.

The defendants did not dispute that two-thirds or more of the members of all proposed plaintiff classes in the aggregate were citizens of California. The defendants did not even dispute that Exel Direct was a primary defendant. Rather, the defendants asserted that, in order for the exception to apply, all of the primary defendants must be citizens of California. In the case at bar, the requirement was not met because Deutsche Poste Beteiligungen Holding GmbH and DPWN Holdings (USA), Inc. were also primary defendants, but they were not citizens of California.

The District Court declined to consider Deutsche Poste Beteiligungen Holding GmbH as a  defendant because the plaintiff had not stipulated that he intended to sue that entity, and the defendants offered no evidence or authority suggesting that the Court may consider it as a defendant where it was not named in the complaint. Therefore, the question before the Court was whether DPWN Holdings (USA) was a primary defendant.

Looking to the decisions of other jurisdictions regarding the term “primary defendant,” the District Court found that the complaint alleged no facts that suggested that any defendant other than Exel Direct was directly liable to the plaintiff. The District Court, however, noted that the plaintiff named all three defendants on every claim asserted indicating that, even if the alleged liability may be indirect, those defendants faced exposure to the vast majority of the members of the proposed classes and a “primary defendant” for the purposes of CAFA. Accordingly, the “Home State” exception did not apply.

The plaintiff, nevertheless, contended that even if the “Home State” exception did not apply, the “Local Controversy” exception applied for the following reasons: more than two-thirds of the members of the class members were California citizens; the principal injuries resulting from the defendants’ alleged misconduct occurred in California; Exel Direct was the defendant from whom significant relief was sought and whose alleged conduct formed a significant basis for the claims asserted; and during the three-year period preceding the filing of this case, no other class action had been filed asserting the same or similar factual allegations against any of the defendants.

The defendants maintained that the “Local Controversy” exception did not apply because the principal injuries arising from the alleged conduct of the defendants did not occur in California, and another class action asserting similar factual allegations was filed against one of the defendants within the three-year period preceding the filing of this action. The District Court did not find that the case was factually similar; thus, it could not be used to exclude the instant case from the “Local Controversy” exception. 

The District Court, however, opined that there was nothing unique to California about the claims asserted in the action even if the class was limited to the plaintiffs who provided delivery services in California and the claims in the action were based on California law. The District Court reasoned that the controversy was not local because the plaintiff alleged nothing wrongful that was particular to California, and there was no reason to believe that the defendants were not vulnerable to suit on similar grounds beyond California.

Accordingly, the District Court denied the plaintiff’s motion to remand.

By:  Kimberly Higginbotham