July 19, 2019

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Ninth Circuit Holds that Last-Known Addresses of Putative Class Members Are Insufficient To Satisfy CAFA Exceptions

The Class Action Fairness Act (“CAFA”) permits removal of many class actions from state to federal court, but includes a “local controversy” exception that forbids removal where two-thirds or more of the proposed class resides in the state where the action is brought. In disputes over efforts to use CAFA to remove class actions, the residence of the class members often is difficult to assess. Earlier this month, in King v. Great American Chicken Corp., Inc., d/b/a Kentucky Fried Chicken, No. 18-55911, the Ninth Circuit reversed the district court’s order remanding a California wage-and-hour putative class action to state court, holding that the district court improperly relied on the last-known addresses of current and former employees to find that most of them were likely citizens of California and the United States. The Ninth Circuit’s holding may prove very helpful to defendants removing class actions to federal court.

The Ninth Circuit’s Decision

Plaintiff-Appellee Celena King filed a putative class action in California state court on behalf of approximately 6,000 current and former non-exempt employees of Defendant-Appellant Great American Chicken Corp., Inc. d/b/a Kentucky Fried Chicken (“GAC”) who were employed in California. King alleged that GAC violated various provisions of California’s wage-and-hour law.   GAC removed the case to the United States District Court for the Central District of California pursuant to CAFA, which requires that the amount in controversy be greater than $5 million; that the putative class size be greater than 100 members; and that any member of the class of plaintiffs be a citizen of a state different from any defendant. There are several exceptions to CAFA that deprive a federal court of jurisdiction, including the local controversy exception, which requires that the party opposing removal prove, by a preponderance of the evidence, that more than two-thirds of the putative class are citizens of the state in which the action was originally filed and the home state exception, which requires that the party opposing removal prove that at least two-thirds of the putative class (and the primary defendants) are citizens of that state.

To avoid conducting jurisdictional discovery, the parties agreed to stipulate that at least 67% of the last known addresses of the putative class members were in California. The Ninth Circuit was skeptical of the stipulation because a figure of “at least 67%” would only produce a figure “greater than two-thirds” by an extremely narrow margin. In light of GAC’s evidence that former employees had moved to other states, and because the last-known addresses were several years old, the Court determined that it was likely that other employees had done the same. The Ninth Circuit also held that it was “very likely that some putative class members were not United States citizens” and therefore were not citizens of California. The Court explained that it could not be assumed that all residents of California were citizens of the United States. Accordingly, the Court indicated that it would have to consider the proportion of California residents who are not U.S. citizens and extrapolate that to the putative class in determining whether the CAFA exceptions has been satisfied. The Court then ordered that King be permitted to conduct jurisdictional discovery if she wished to renew her motion to remand.

Implications

While federal courts have consistently placed the burden of establishing the CAFA exceptions on the party seeking to remand, the Ninth Circuit has taken this burden a step further. Now, if a party wants to successfully oppose a motion to remand based on the local controversy or home state exceptions, it will need to prove not only that more than or at least two-thirds of the putative class members are citizens of the state in question but also that they are citizens of the United States. A party’s ability to satisfy this burden will likely depend on the class of workers involved, as well as on the state in question. In short, the Ninth Circuit’s decision signals that plaintiffs who attempt to bring class actions on behalf of classes comprised of non-U.S. citizens and/or in states with a higher proportion of residents who are not U.S. citizens may have a more difficult time availing themselves of CAFA’s local controversy and home state exceptions and may be required to proceed in federal court.

© 2019 Proskauer Rose LLP.

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About this Author

Mark W Batten, Labor & Employment Attorney, Proskauer Law Firm
Partner

Mark Batten is a Partner in the Labor & Employment Law Department and co-head of the Class/Collective Action Group, resident in the Boston office.

Mark represents employers nationwide at all stages of complex employment litigation, including class and collective actions on wage and hour matters and discrimination claims. Ranked by Chambers USA, Mark is hailed as “a fabulous lawyer, handling interesting and complex cases.” Clients “highly recommend him to anyone seeking litigation counsel in the Boston area,” as well as note “he is...

617-526-9850
Elise Bloom, Labor Employment Attorney, Wage, Hour, Class Action, Proskauer
Partner

Elise M. Bloom is a member of Proskauer’s Executive Committee, co-head of the Class/Collective Actions Group and former co-chair of the Labor & Employment Law Department. During her tenure as co-chair, the department was named one of the top three U.S. labor and employment practices by The American Lawyer, ranked by Chambers Global2014 as Band 1 in the U.S. and by Chambers USA 2014 as Band 1 Nationwide, and recipient of the Chambers USA 2012 Award for Excellence.

Elise is recognized as one of the leading employment lawyers and was named “Best in Labor & Employment” at Euromoney’s 2014 Americas Women in Business Law Awards. Elise is also widely considered to be one of the most creative and effective Wage & Hour Collective Action defense lawyers in the U.S., as demonstrated by the fact that she was recently named as one of the top five Class Action “Most Valuable” lawyers by Employment Law360. Elise defends employers against individual and class actions brought under federal and state anti-discrimination laws as well as against collective and class action claims alleging wage and hour violations under federal and state law.  

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Noa M Baddish, Labor and Employment Attorney, Proskauer Law Firm
Associate

Noa M. Baddish is an Associate in the Labor & Employment Department, resident in the New York office. She is a member of the Employment Litigation & Arbitration, Class and Collective, Employment Law Counseling & Training, and Whistleblower & Retaliation Groups.

212-969-3630