Larry L. Turner, Has the Class Action Fairness Act Met Expectations for Wage and Hour Employment Litigation, 26 ABA J. Lab. & Emp. L. 439 (Spring 2011).
In this article, Larry L. Turner addresses how CAFA-related removal disputes unfold in wage and hour employment cases, and explores whether CAFA has fulfilled the purpose for which it was intended, particularly in wage and hour employment law cases. (Editors’ Note: See the CAFA Law Blog list of every CAFA related journal and law review article by clicking on the links to the right of this article).
The author begins by quoting from the Report from the Senate Committee on the Judiciary that opined that there were numerous problems with “our current class action system” and one key reason for “these problems is that most class actions are currently adjudicated in state courts, where the governing rules are applied inconsistently.” The Senate report described several outrageous examples, including a Tennessee state court that granted certification of a nationwide class of 23 million members on the same day that the plaintiffs filed their complaint and before the defendant was even notified about the lawsuit; a Kentucky state court that ordered injunctive relief in favor of the class before the defendant was notified of the lawsuit; and an Alabama state court that certified a nationwide class even though a federal district court presented with the same case later decided to reject certification of a class.
The author notes that for the class actions based on the state wage and hour laws, usually filed in state court, CAFA has become a strategic tool utilized by the parties to try and secure their preferred venue. The parties often become entangled in protracted battles over whether the case meets CAFA’s requirements for removal jurisdiction.
Under CAFA, putative class actions may be removed to federal court and the district courts will have original jurisdiction if: (i) there are at least 100 putative class members; (ii) the amount in controversy exceeds $5 million, exclusive of interest and costs; and (iii) any putative class member is a citizen of a state different from any defendant.
The author notes in very rare cases that a class action will have fewer than 100 members, therefore, the first factor does not seem to have affected many wage and hour class actions.
The amount in controversy requirement, however, can be very tricky in those cases where the plaintiffs have pled a specific amount in damages less than $5 million. The ultimate inquiry to determine the amount in controversy is what amount is put ‘in controversy’ by the plaintiff’s complaint, not what a defendant will actually owe. To actually calculate the amount in controversy, the claims of the individual members in a class action are aggregated and claims for general damages, special damages, punitive damages (if recoverable as a matter of law), and attorneys’ fees (if recoverable by statute or contract) are considered, but accruing or accrued interest and the costs of the suit are not included.
In the context of wage and hour cases, the author notes that courts resolving these disputes were equally split on whether they permit removal based on the amount in controversy. Courts primarily considered whether defendants’ attempts to prove this jurisdictional element were based on assumptions and speculations as opposed to facts and evidence. For example, courts examined whether defendants unreasonably assumed that each class member worked more than one overtime hour per week, was not paid minimum wage one or more times per week, and missed one or more meal or rest periods per week; and whether defendants presented evidence of how many days of penalty wages each class member would actually be entitled to receive.
The other issue that has surfaced is whether a defendant has established minimal diversity (i.e., any member of a class of plaintiffs is a citizen of a state different from any defendant). CAFA although, contains several exceptions – some are mandatory – to CAFA’s jurisdictional reach. The first exception is the local controversy exception, wherein a federal court must decline jurisdiction when the plaintiff meets all of the following: (1) more than two thirds of the class members are citizens of the state in which the action was originally filed; (2) at least one defendant against whom a significant relief is claimed is a citizen of that state; (3) the principal injuries were incurred in that state; and (4) during the preceding three year period, no other class action has been filed asserting the same or similar allegations.
Under the home state exception, a federal court must decline jurisdiction if at least two-thirds of the putative class and all of the primary defendants are citizens of the forum state. The author also mentions the discretion held by the courts to remand the case to the state court. The author observes that courts are generally split in the interpretation of CAFA, and concludes that only time will answer the question as to whether CAFA accomplishes the congressional goal of directing large class actions to federal court, or if the application of the CAFA’s removal requirements will thwart that intent.