Helm v. Alderwoods Group, Inc., No. 3:08-cv-01184-SI, 2011 WL 2837411 (N.D. Cal. July 18, 2011).

As a matter of first impression, a District Court in California held that the court continues to retain CAFA jurisdiction over the claims of plaintiffs severed (not like J. Paul Getty, III) as a result of the denial of class certification.  (Editors’ Note: this case is another one of many cases we have reported on brought by funeral home employees against their employers. Who knew that working with the dead would raise so many legal issues? Good thing they sue instead of striking.  Imagine what would happen if the funeral home employees went on strike.)

Eighty-five named plaintiffs filed a class action suit alleging state law wage and hour claims against their employer, Alderwoods Group, Inc, a provider of funerary services.

Earlier, Alderwoods’ employees brought an FLSA action including state law claims in the District Court for the Western District of Pennsylvania, Prise, et al. v. Alderwoods Group, Inc., et al., No. 06-1641. After the district court in Prise declined to exercise supplemental jurisdiction over the plaintiffs’ state law claims, the plaintiffs filed this action in California state court.

The defendant removed this state law action to federal court, invoking diversity jurisdiction under CAFA. 

After the District Court denied the plaintiffs’ motion for class certification, the defendant filed a motion to sever some of the plaintiffs (the people, not their body parts), arguing that the dozens of named plaintiffs in the case were improperly joined.

Although, the Court agreed that severance was appropriate in this case, the motion presented a question of what should happen to those severed claims. The defendant argued that the Court should dismiss all claims except for those of the first named plaintiff. The defendant further argued that there was no other permissible course of action for the Court, because the severed plaintiffs’ claims constituted new civil actions, the Court and all other federal courts lacked subject matter jurisdiction over them, and they were not removed from state court and therefore could not be remanded. 

The plaintiff argued that the Court retained CAFA jurisdiction over not just the first named plaintiff’s claims, but over all of the claims, and that the Court should transfer the claims of those plaintiffs who do not reside in the Northern District of California to the federal district courts where the plaintiffs reside. 

The Court noted that only possible basis for subject matter jurisdiction after severance is CAFA. In United Steel v. Shell Oil Co., 602 F.3d 1087, 1089 (9th Cir. 2010), the Ninth Circuit held that when a district court has subject matter jurisdiction under CAFA, subsequent denial of class certification does not divest district court jurisdiction. (Editors Note: See the CAFA Law Blog analysis of Shell Oil posted on August 13, 2010). 

The question for the Court was whether the Court retained CAFA jurisdiction over the severed claims, and this was a matter of first impression. The Court found that if it retained CAFA jurisdiction over the first named plaintiff, then it would retain CAFA jurisdiction over the claims of the 85 other named plaintiffs.

The Court noted that there is a usual and long-standing principle that post-filing developments do not defeat subject matter jurisdiction if jurisdiction was properly invoked as of the time of filing. The Ninth Circuit explained in United Steel that this principle applies when a CAFA class is not certified. Here, the Court found that its CAFA jurisdiction was not merely over the first named plaintiff’s claims, but, independently, over all of the named plaintiffs’ claims. After denying class certification, the Court retained CAFA jurisdiction over the claims of each of the named plaintiffs, and the severance of those claims did not now defeat the Court’s jurisdiction.

The defendant cited Honeywell Intern., Inc. v. Phillips Petroleum Co., 415 F.3d 429 (5th Cir. 2005), to argue that the Court must treat the severed claims as though they are new lawsuits first filed at the time of severance, and assess its subject matter jurisdiction over the claims in isolation both from each other and from the case’s history. The Court, however, observed that Honeywell stands for the proposition that when subject matter jurisdiction over some of the claims pled in the original suit was dependent on the presence of other parties or claims in the suit, such as when a district court exercised supplemental jurisdiction over state law claims or counterclaims, the district court might no longer have subject matter jurisdiction over those dependent claims once they are severed. 

The Court stated that here, the Court had CAFA jurisdiction not only over the first named plaintiff’s claim, but over the claims of all of the individual named plaintiffs. Although the amount in controversy in this case was determined as of the time of the filing of the suit and on the basis of the value of the suit if certified as a class action, the fact that no class was certified and that the individual claims are worth less than $5 million did not subsequently defeat the Court’s subject matter jurisdiction over any of the individual plaintiffs’ claims. 

The Court concluded that its CAFA jurisdiction over the claims of each plaintiff was independent of its jurisdiction over the claims of each other plaintiff, and there was no need for the Court to look for a new basis for subject matter jurisdiction over the claims once severed.

Accordingly, the Court retained jurisdiction over this action, and transferred the severed claims to the federal district courts under whose jurisdiction the severed plaintiffs reside.