Hart v. Rick’s NY Cabaret Intern., Inc., 2014 WL 301357 (S.D.N.Y. Jan. 28, 2014).

In an action asserting Fair Labor Standards Act (“FLSA”) and New York Labor Law (“NYLL”) claims, the District Court found that, despite the FLSA claims, it had jurisdiction over NYLL claims, because the plaintiffs had sufficiently established the requirements under CAFA.

Exotic dancers brought a collective action under FLSA and a putative class action under the NYLL against an adult entertainment club owner and two corporate parents.  The District Court advised counsel that it was weighing whether to resolve the FLSA claims first and afterwards, it would decide whether to exercise supplemental jurisdiction over the NYLL claims.  The plaintiffs took the position that the Court independently would have diversity jurisdiction over the NYLL claims under the CAFA, such that, in the event the federal claims were resolved ahead of the NYLL, the Court could still retain jurisdiction over the action.  For the purposes of future case management, the Court addressed the CAFA jurisdiction, although it was not required to do so at the initial stage.

The District Court concluded that it had jurisdiction under CAFA to try the NYLL claims.  The defendants did not dispute that the plaintiffs satisfied the 100 members requirement or the minimal diversity requirement.  The defendants, however, took exception to the plaintiffs’ contention that they satisfied the amount-in-controversy requirement.  The District Court noted that in determining the amount-in-controversy, the plaintiffs must show that it appeared to a “reasonable probability” that the aggregate claims of the plaintiff class were in excess of $5 million.

 The complaint alleged that the amount-in-controversy exceeded in $5 million, thereby creating a presumption that the CAFA requirement was satisfied.  To rebut this, the District Court noted that the defendants offered conclusory statements that plaintiffs’ allegations were pled inadequately and their estimation of damages was entirely speculative and insufficient to support CAFA jurisdiction.  In any event, the District Court determined that the evidence promulgated by the plaintiffs made it a reasonable probability that the damages aggregated across the class would exceed $5 million. 

 Next, the District Court determined that the defendants failed to establish any of the exceptions to CAFA jurisdiction, i.e., the “local controversy” exception, the “home state” exception, and the “interest of justice” exception.

 As to the local controversy exception, the plaintiffs argued that the defendants failed to establish two out of the four elements, contending that the defendants failed to establish that more than two-thirds of the class members were New York citizens and no other similar class actions were filed in the previous three-year period. 

 As to the citizenship of the class members, the District Court noted that, of the 3000 members, roughly about 70% of them had New York addresses.  The plaintiffs did not dispute the authenticity of the accuracy of the records.  However, they contended that the dancers’ last known addresses, standing alone, were insufficient to establish the two-thirds requirement.  The District Court found that the defendants’ records were not directed squarely to the issue of citizenship; instead, they captured the last known address given by a dancer.  Such an entry provided only limited insight into whether the dancer intended to make New York a dancer’s permanent home.  Because this was not sufficient to show that a dancer’s true fixed home and principal establishment was New York, the District Court ruled that the defendants failed to show that the dancers were New York citizens.

 Another requirement for the local controversy exception was that no other class action was filed within a three-year period preceding the filing.  The District Court found that as the defendants failed to prove two-thirds of the class were New York citizens, it need not definitively resolve whether there existed another class action. 

 The District Court next found that the defendants failed to establish that the alternative home state exception applied.  Under that exception, a district court must decline to exercise jurisdiction where two-thirds or more of the members of all the proposed plaintiff classes in the aggregate, and the primary defendants were citizens of the state in which the action was originally filed.  The District Court noted that for this exception to apply, then at least two-thirds of the class members must have been citizens of New York and the primary defendants must have been citizens of New York.  Because the first element was not established by the defendants, the District Court ruled that the home state exception did not apply.

 Finally, the District Court remarked that it would not decline jurisdiction in the interest of justice, rather it would wait for the records to develop to ascertain as a matter of fact if the defendant Rick’s NY Cabaret International, Inc. was indeed the primary defendant.

 Accordingly, the District Court exercised jurisdiction over the NYLL claims.