Timing Is Everything: Second Circuit Court Approves CAFA Removal Two Years After Case Filing
In a somewhat unusual ruling, a Second Circuit court denied an unpaid intern’s attempt to remand a putative wage-hour class action against Oscar de la Renta to state court even though the case was removed to federal court under the Class Action Fairness Act (“CAFA”) approximately two years after the case was filed.
Under CAFA, federal courts have jurisdiction over class actions if the defendant establishes “a reasonable probability” that the class has more than 100 members, the parties are minimally diverse, and the amount in controversy exceeds $5 million. Specific, enumerated exceptions to CAFA include the “local controversy” and the “home state” exceptions. Generally, under both exceptions, the federal court cannot assert jurisdiction over class actions that involve “local” parties and controversies (i.e., involving parties and controversies from the forum state).
Removal After Two Years Considered Timely
Principle to the Court’s finding was a rejection of Plaintiff’s argument concerning timeliness. Plaintiff argued that notice of removal was untimely since it was filed more than 30 days after the employer could have determined that the amount in controversy exceeded $5 million “with a reasonable amount of intelligence” by reviewing its own records.
When Oscar de la Renta ultimately conducted its own internal investigation, including a review of it s documents to determine the number of individuals who interned during the statutory period, it learned the proposed class contained approximately 600 individuals and the $5 million amount in controversy threshold was satisfied. As a result, it sought removal.
Plaintiff argued the employer needed to review its own records to determine that the CAFA requirements were met, and that failing to do so for two years was unreasonable.
The Court disagreed. The Complaint stated the potential class exceeded 40 individuals, and the Court found this alleged number of proposed class members would not yield an amount in controversy approaching $5 million. Instead, with just 40 alleged class members, the amount in controversy would be less than $500,000. The Court held that CAFA does not require a defendant to look beyond the pleadings and related documents to determine if the requirements are met, and failure to conduct an investigation earlier provided no basis for concluding that removal was untimely. The Court also found that the CAFA exceptions did not apply as the Plaintiff failed to prove their application absent anecdotal arguments.
While we would not go so far as to say that “it’s never too late” to apply CAFA, this ruling shows that, even years after filing, the CAFA requirements can be met for the first time, and removal to federal court may be an option. As a result, defendants should always take a fresh look at each stage of the litigation to see if the requirements have been met in the first instance. But once the CAFA requirements are satisfied, remove quickly. Failure to do so may result in the removal application being denied. After all, “time makes fools of us all.”