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

California District Court Refuses to Exercise Jurisdiction Once FLSA Claims Are Dismissed Because a Class of Twenty-One Does Not Meet CAFA’s Numerosity Criteria

Posted in Case Summaries, Wage and Hour

Locke v. American Bankers Ins. Co. of Florida, 2014 WL 2091346 (E.D. Cal. May 19, 2014).

In a wage and hour action for violations of FLSA and California state laws, a district court in California refused to exercise jurisdiction over the action after the FLSA claims were dismissed, finding that a class of twenty-one does not meet the CAFA’s numerosity criteria.

The plaintiffs brought an action seeking to recover damages, penalties, injunctive relief, and attorneys’ fees under six causes of action. The plaintiff alleged violations of the federal Fair Labor Standards Act (“FLSA”); various provisions of the California Labor Code, etc. The plaintiffs in this case were insurance adjusters.  They claimed that they performed their duties under a tightly controlled manner dictated by the defendant’s procedures and software programs, that they exercised little judgment, and have virtually no discretion. Despite all of this, according to the plaintiffs, the defendant misclassified them as exempt employees not entitled to overtime pay.  As a result, the plaintiffs were not paid overtime wages.

The defendant filed a motion for partial summary judgment as to the plaintiff’s first claim for FLSA violations. The District Court, however, granted the defendant’s motion as to the plaintiffs’ FLSA claims, and dismissed the state law claims without prejudice.

Regarding the plaintiffs’ FLSA claims, the District Court found the plaintiffs did not show a genuine dispute that the plaintiffs’ primary duty included the exercise of discretion and independent judgment with respect to matters of significance. Therefore, the District Court concluded that the plaintiffs were covered by the administrative exception to the FLSA, and granted the defendant’s motion for partial summary judgment as to the FLSA claims.

Once the District Court had dismissed the only federal claim that permitted subject matter jurisdiction on the matter, the court remarked that that it would have only supplemental jurisdiction over the remaining state law claims. This meant that the District Court had the power to exercise discretion to either retain or decline jurisdiction.

Here, the District Court remarked that no unusual circumstances were present suggesting that the Court should retain jurisdiction over the plaintiffs’ state law claims. While it appeared that the parties were diverse, the plaintiffs had not alleged a significant amount-in-controversy to establish diversity jurisdiction under 28 U.S.C. § 1332(a) to allow them to proceed individually in federal court. The plaintiffs only alleged damages in excess of $25,000, well below the jurisdictional minimum of $75,000.

Similarly, the District Court found that the plaintiffs did not meet the minimum requirements to maintain federal jurisdiction pursuant to the CAFA. CAFA provides federal jurisdiction to class action where the number of members of all proposed plaintiff classes must be 100 or greater.  CAFA defines class members to mean the persons (named or unnamed) who fall within the definition of the proposed or certified class.

The District Court observed that courts generally apply the preponderance of the evidence standard to CAFA’s 100 person numerosity requirement. Here, the defendant moved to deny certification of class action based on California state claims, asserting that there were only seventeen potential class members in the state of California. In opposition, the plaintiffs contended that the defendant understated the number of class members in California and that there were at least twenty-one class members. The District Court remarked that regardless of the estimates of the parties, neither estimate of the number of class members falls meets the 100 member minimum under § 1332(d)(5)(B), and that it was not possible for the plaintiffs to establish a basis for jurisdiction under CAFA.

Accordingly, the District Court concluded that in light of the resolution of the federal claim, and finding no alternative basis for jurisdiction, it would not exercise jurisdiction over the plaintiffs’ state law claims, pursuant to Section 1367(c)(3), and dismissed them without prejudice.