Seyfarth Synopsis: The Ninth Circuit, addressing how to prove exceptions under CAFA, reminds us that removal under CAFA might be an invitation for extensive preliminary discovery battles, and prolonged motion practice. The following post highlights some procedural realities of finding an appropriate venue for litigating class actions in California.  

United States District Courts in California oversee some of the largest caseloads in the country.[1] Understandably reluctant to see their dockets expand, these courts often look for grounds to remand cases to state court. Even seemingly airtight removals under the Class Action Fairness Act, which Congress enacted to facilitate access to federal court, have resulted in remands based on certain statutory exceptions. In King v. Great American Chicken, the Ninth Circuit Court of Appeals this month addressed the evidentiary requirements for proving two primary exceptions under CAFA. This decision presented an employer-friendly interpretation of plaintiff’s burden to remand a case under CAFA, but also provided the plaintiffs with an opportunity to engage in burdensome jurisdictional discovery and multiple rounds of remand briefing.

CAFA permits defendants to remove certain class actions from state court to federal court. Congress intended CAFA to be “interpreted expansively.”[2] Under CAFA, federal courts have original jurisdiction over class actions where the aggregate amount in controversy exceeds $5,000,000, if the putative class size exceeds 100 persons and if there is “minimal diversity” between the state citizenship of a member of the plaintiff and state citizenship of a defendant.[3]

Federal courts must decline jurisdiction, however, under the “local controversy” exception (one of the two exceptions mentioned above), which applies if the plaintiff can prove, among other things, that more than two-thirds of putative class members were California citizens when the case was removed to federal court.[4] When the plaintiff in King demanded discovery of class members’ addresses, the defendant resisted but sought to finesse the demand by stipulating that at least 67% of the last known addresses were in California. Hon. George Wu of the Central District of California resolved the discovery dispute by seizing upon the offered stipulation and remanded the wage and hour putative class action to the Superior Court of Los Angeles.

On the CAFA appeal, the Ninth Circuit reversed, holding that a plaintiff must show that more than two-thirds of the putative class members were California citizens, not simply residents, and observing that the stipulation “left very little cushion, if any” to account for former workers who, for example, might have moved out of the state by the time the case was removed.[5] The Ninth Circuit provided a math lesson, moreover: “two-thirds actually translates into 66 & 2/3 percent, not 67 percent.”[6]

In addition, the Ninth Circuit reasoned that there was little margin to cover employees who may have had last-known California addresses but who did not qualify as California citizens.[7] “There was no evidentiary basis for the district court to find that subtracting those groups would not reduce the fraction of class members that were California citizens at the time of removal to a level less than the required ‘greater than two-thirds.’”[8] Finally, the Ninth Circuit noted that a person’s “residential address in California does not guarantee that the person’s legal domicile was in California.”[9] In sum, “there was no evidence to support a factual finding that the proportion of California citizens was greater than two-thirds.”[10]

While up to this point the Ninth Circuit handed a victory to the defendant, the Ninth Circuit went on to direct the district court to permit plaintiff to engage in jurisdictional discovery and renew her motion to remand.[11] The defendant’s victory thus came with the price of an order directing it to engage in burdensome, invasive, and procedurally complicated discovery.

King reinforces the plaintiff’s evidentiary burden to remand a putative class action to state court, but also allows plaintiffs to engage in jurisdictional discovery to establish an exception to CAFA jurisdiction. Defeating a motion to remand might be small consolation in light of the resources needed to expend on class-wide discovery. Class action defendants should thus be aware of the probability that removal under CAFA sometimes can be an invitation to extensive preliminary discovery battles, and prolonged motion practice.

[1] See United States District Courts — National Judicial Caseload Profile, June 2018,  In terms of average civil cases per judge, the Northern, Eastern, Central, and Southern District Courts rank 11th, 4th, 11th, and 76th nationally.
[2] Ibarra v. Manheim Invs., Inc., 775 F.3d 1193, 1197 (9th Cir. 2015).
[3] 28 U.S.C. §1332(d)(2)(A), (d)(5)(B); See Serrano v. 180 Connect, Inc., 478 F. 3d 1018, 1024 (9th Cir. 2007).
[4] The local controversy exception is set forth in 28 U.S.C. § 1332(d)(4)(A); Mondragon v. Capital One Auto Finance, 736 F.3d 880, 884 (9th Cir. 2013) (denying motion to remand where plaintiff submitted no evidence regarding putative class members citizenship beyond class definition in complaint).
[5] King v. Great Am. Chicken Corp, Inc., No. 18-55911, 2018 WL 4231847.
[6] Id. at *3.
[7] Id. at *4.
[8] Id.
[9] Id.
[10]  Id.
[11] Id . at *5.