In this putative class action, the Ninth Circuit held that a California state court’s pre-removal consolidation of two separately filed class actions resulted in a single consolidated action for purposes of applying the local controversy exception to removal jurisdiction under the Class Action Fairness Act.
The plaintiff filed a class action against the defendants for failing to pay African American and female employees at a wage rate equal to white or male employees working in the same establishment and performing equal work. A few minutes later, on the same day, another plaintiff filed an action against the defendants alleging similar claims of employment discrimination. Plaintiffs moved to consolidate their actions under California Code of Civil Procedure §§ 404, 404.1 and 1048(a). The state court granted the motion for consolidation and ordered that the actions be consolidated “for all purposes”. After the plaintiffs amended the complaint to add a non-California citizen, the defendants removed the action to the District Court under CAFA by filing two notices of removal.
The plaintiffs sought remand under CAFA’s local-controversy exception. In response, the defendants argued that the exception did not apply to the second-filed case because a similar class action—the first case—had been filed against the defendants in the preceding three years. The District Court agreed with the defendants and remanded the first-filed case under the local-controversy exception but retained jurisdiction over the second-filed case. The District Court’s ruling thus resulted in one part of the consolidated case proceeding in state court and the other in federal court.
An appeal followed. The plaintiffs argued that because the two actions had been consolidated into a single action, no “other class action” had been filed within the three-year period before the consolidated action. The Ninth Circuit agreed and reversed the holding of the District Court.
The Ninth Circuit found that the consolidation rendered the two actions one. The Ninth Circuit noted that the state court-ordered consolidation affects jurisdiction and removability because it destroys the identity of each suit and merges them into one. Here, the state court consolidated the two actions “for all purposes” before removal. The Ninth Circuit held that, under California law, when two actions are consolidated “for all purposes”, “the two actions are merged into a single proceeding under one case number and result in only one verdict or set of findings and one judgment”, and therefore are to be treated as if they had been united originally. Not persuaded by the defendants’ reliance on CAFA’s legislative history, the Ninth Circuit noted that the purpose of the fourth prong of the local controversy exception and an overall purpose of CAFA is to ensure that similar, overlapping class actions do not proceed before different state courts in an uncoordinated, redundant fashion resulting in inefficiencies, and thus allowing the consolidated class action to proceed in state court would be consistent with CAFA’s judicial efficiency and other goals. The Ninth Circuit therefore ordered the District Court to treat the actions as a single consolidated action and remand it in its entirety to state court.