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

District Court Allows Discovery to Proceed in Part for Plaintiff to Establish CAFA Jurisdiction

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Kanowitz v. Broadridge Fin. Solutions, Inc., 2014 WL 1338370 (E.D.N.Y. March 31, 2014).

A district court in New York granted in part and denied in part a defendant’s motion to stay discovery while a motion to dismiss for lack of jurisdiction under CAFA was pending.  The District Court found that although the putative class satisfied the local controversy and the home state exceptions under CAFA, defendant should produce unredacted information on the putative class members’ to allow Plaintiffs an opportunity to verify Plaintiffs’ state citizenship, which had been withheld at the initial stage of the litigation.

Five individuals who were employees of the defendant brought a class action alleging claims of unpaid wages in violation of Article 6 of the New York Labor law, breach of contract and related claims.  The plaintiffs alleged that the defendant failed to pay them non-discretionary wages despite their satisfaction of objective criteria set forth in the defendant’s Fiscal Year 2009 Management Objectives (“MBO”) Bonus Plan Document.  The defendant filed a motion for a full stay of discovery pending the disposition of its anticipated motion to dismiss the complaint for lack of subject matter jurisdiction under CAFA.  The defendant argued that the District Court lacked jurisdiction in light of the home state and local controversy exceptions, which are triggered when two thirds of the putative plaintiff class and a defendant is a citizen of the state in which the action was filed.

The defendant produced from its human resources database the home address information for 870 individuals within the plaintiffs’ definition of the putative class; 700 current employees and 170 former employees, who were residents of the state of New York, in support of its local controversy exception argument.  The plaintiffs argued that the information supplied by the defendant did not sufficiently establish that more than two thirds of the putative class members were residents of the state of New York.  The plaintiffs took objection to the defendant’s production of information after redacting the names and street addresses of the individuals, and the defendant’s principal executive office being in New Jersey.

The District Court observed that in Richins v. Hofstra University, 908 F.Supp.2d 358 (E.D. N.Y. 2012), the court found a chart illustrating the percentage of University graduates with New York mailing addresses provided by the plaintiffs as sufficient to establish the 2/3rd requirement.  The District Court found that the date supplied by the defendant here was even more substantial than that provided by the plaintiffs in Richins.  The defendants here, had provided the hometown, state, and zip codes of the putative class members both currently and formerly employed with the defendant.

The Richins court ordered expedited discovery on the issue of whether the action should be remanded to the state court under CAFA.  In Richins, the defendants removed the action from the state court to the federal court, and in response, the plaintiffs sought a mandatory remand and the court found that additional discovery was necessary to confirm whether the 2/3rds threshold had been met.  The District Court observed that this case could be distinguished from Richins primarily because the court had permitted limited discovery allowing the parties to attach supporting evidence to the motion to stay discovery.  Second, the Richins plaintiffs did not request the names, street addresses and contact numbers of the putative class members.  Moreover, the court in Richins ultimately found the showing made by the defendants there to be far less substantial than the information presented by the defendant here to meet the 2/3rd residency threshold under CAFA.

In addition, the District Court found that the defendant had satisfactorily demonstrated that it was a citizen of the State of New York, notwithstanding that its principal executive office was listed with the New York Department of State as Jersey City, New Jersey.  The District Court remarked that it was not ignoring the fact that the defendant had listed a principal executive office in Jersey City, New Jersey in its filings with the New York State Department of State.  The mere listing of a non-New York principal executive office with a state agency was, however, not determinative of the defendant’s “principal place of business” under federal law.  The District Court noted that the New Jersey location was listed only for administrative convenience so as to ensure that any formal tax notifications from New York State would be sent directly to the tax department and timely addressed.

Given these facts, the District Court found that the defendant had likely shown that the Court lacked jurisdiction over this matter pursuant to the “home state” and “local controversy” exceptions of CAFA.  As a result, the District Court concluded that the defendant had shown that the complaint was “unmeritorious” in the sense that diversity jurisdiction cannot be sustained in these circumstances.

The District Court remarked that it appreciated the potentially complex nature of this action in light of the number of putative plaintiffs.  At the same time, the District Court pointed out that the causes of action were not particularly complex.  Some discovery, the District Court remarked, would therefore, be beneficial to resolving the threshold issue of subject matter jurisdiction, which may ultimately negate the necessity of the defendant’s dispositive motion if the plaintiffs agreed, as they represented, to foreclose the litigation upon a review of the putative plaintiff’s unredacted records.

Accordingly, the District Court granted the defendant’s motion to stay discovery in part, but also denied, in part, allowing discovery to continue to the extent set forth in its Order.