Corsino v. Perkins, 2010 WL 317418, *1+ (C.D.Cal. Jan 19, 2010) (NO.CV0909031 MMMCWX).
The District Court in California raised a doubt whether the out of state defendant was a primary defendant under CAFA’s home-state controversy exception. As a result, it ordered the defendants to show cause why this action should not be remanded to the state court for lack of subject matter jurisdiction.
The plaintiffs, Kenneth Corsino et al., filed this putative class action in a California state court asserting causes of actions for failure to pay overtime; failure to provide meal breaks; conversion; unlawful business practices; and a cause of action under the California Private Attorney General Act. The defendants Perkins & Marie Callender’s, Inc. (“Perkins”), and Marie Callender Pie Shops, Inc. (Callender) removed the action to federal court invoking the court’s jurisdiction under 28 U.S.C. §§ 1332, 1441, 1446 and 1453.
The District Court found that the putative class had approximately 360 members, satisfying the minimum class size required by § 1332(d)(5), and that the defendants calculated that the amount in controversy was approximately §8.05 million in unpaid overtime, and approximately $1.4 million in penalties for violation of California Labor Code §§ 558(a) and 2699(a). Therefore, the District Court concluded that the defendants had shown that the controversy exceeded $5 million.
The District Court next noted that all of the named plaintiffs were residents of California, however, Perkins was a Delaware Corporation headquartered in Tennessee, and its principal place of business was not in California. None of its 163 restaurants were in California. As a result, the District Court concluded that Perkins properly alleged that it was not a citizen of California, and that the minimal diversity required by CAFA was present.
The District Court noted that it could decline jurisdiction under two exceptions – local controversy and home-state controversy.
The local controversy applies only if during the 3-year period preceding the filing of the class action, no other class action had been filed asserting the similar factual allegations against any of the defendants on behalf of the same or other persons. Because Jamie Morse v. Marie Callender Pie Shop, Inc., No. 09-CV-1305 JLS (POR), a similar case, was pending in the United States District Court for the Southern District of California, against Callender, the local-controversy exception did not apply.
The home-state controversy requires the court to decline jurisdiction if two-thirds or more of the members or all proposed plaintiff classes in the aggregate, and the primary defendants are citizens of California. The District Court noted that Callender was incorporated in California, and the court’s exercise of jurisdiction would depend on whether Perkins – a non California resident – is a primary defendant.
The District Court noted that Callender was the only entity named in the action pending in the Southern District of California, and Perkins did not own any store in California. The District Court noted that, it may be that only Callender, as owner and operator of the individual stores, employed the class members and was directly responsible for statutory compliance. The plaintiffs’ state court complaint made allegations against all defendants without differentiating the conduct of Perkins from that of Callender. The facts may show, consequently, that Callender was the primary defendant in this action and Perkins was only secondarily liable.
The District Court found that this possibility was bolstered by the fact that a similar class action was pursued against Callender only. As a consequence, the District Court remarked that there seems to be a settled judicial understanding of ‘primary defendants’ as those parties having a dominant relation to the subject matter of the controversy, in contrast to other defendants who played a secondary role by merely assisting in the alleged wrongdoing, or who are only vicariously liable.
Therefore, the District Court found it necessary to examine these exceptions due to their mandatory language directing a district court “shall decline to exercise jurisdiction.” Accordingly, the District Court ordered defendants to show cause why this action should not be remanded to the state court for lack of subject matter jurisdiction.