18th Annual Workplace Class Action Report - 2022 Edition

VIII. Rulings On The Class Action Fairness Act Annual Workplace Class Action Litigation Report: 2022 Edition 439 President Bush signed the Class Action Fairness Act (“CAFA”) into law on February 18, 2005. The law facilitates removal of class actions from state court to federal court. In addition, it regulates the selection of class counsel, tightens control of attorneys’ fees awarded to class counsel, toughens pleading standards, reduces the ability of class counsel to dictate the choice of forum, facilitates interlocutory appeals of class certification rulings, and regulates settlements of class actions. In large part, the CAFA has significantly altered forum-selection and claim-selection strategies of plaintiffs’ lawyers in litigating class actions. The CAFA continues to play a large role in many class actions filed against employers. The CAFA responded to the abuses of state court judges in certifying class action lawsuits involving plaintiffs who filed their claims in states with a reputation for a lack of fairness toward out-of-state defendants. The CAFA modifies the rules for federal court jurisdiction over class actions based on the diversity of citizenship test. Before the CAFA, all named plaintiffs in a class action had to be citizens of states differing from those of all defendants, a situation that typically would not be met in class actions seeking nationwide classes. In addition, there was a minimum monetary threshold of $75,000 to be met by every plaintiff in the case. With the advent of the CAFA, the rules for diversity jurisdiction have eased, though for class actions only, so that diversity of the parties can be achieved if any class member is a citizen of a different state from any defendant and if the aggregated, not individual, amount-in-controversy for all class members is at least $5 million, and the class involves more than 100 people. As a result, the CAFA relaxes the historic strict standard for diversity jurisdiction to allow defendants to remove what were formerly “non-diverse” state law-based class actions. The CAFA also has prompted plaintiffs’ class action lawyers to file “single-state” class actions in state court to avoid removal under the CAFA. For example, it is increasingly more common for plaintiffs to sue on behalf of “all employees in California” in an effort to plead around the CAFA’s provisions triggering federal jurisdiction. Likewise, plaintiffs’ class action lawyers are also filing multiple single-state class actions in a staggered fashion to avoid the CAFA. The CAFA’s impact in 2021 was significant. More class actions are being filed in federal courts, and more intrastate class actions are being heard in federal courts through the removal mechanisms under the CAFA. Because the law’s provisions are designed to prevent plaintiffs’ counsel from keeping class actions in state court that are more appropriately litigated in federal court, the CAFA forecloses the pleading tactic of requesting damages of less than $75,000 per class member (the jurisdictional limit for a federal court to hear a claim involving plaintiffs and defendants of different states) to stymie a defendant from removing the lawsuit to federal court. Over the last year, employers repeatedly invoked the statute to remove class actions filed in state court to federal court. In turn, federal courts addressed several novel issues arising under the CAFA. The CAFA has had profound effects on considerations underlying case strategy and the structuring of class actions. In this context, the CAFA’s impact on workplace class actions is both varied and evolving. Class actions and collective actions under Title VII, the ADEA, the FLSA, and ERISA typically are brought in federal court. The CAFA may have limited impact on strategic decisions in those cases relative to choice of venue in a federal court or state court. Class actions in state law-based wage & hour litigation are another matter. The plaintiffs’ bar and defense bar alike continue to confront novel CAFA issues in these types of cases, for the fight over venue is often a key driver of exposure and risk. On the one hand, employers sued in state law wage & hour class actions are increasingly confronted by plaintiffs’ lawyers seeking to avoid removal to federal court by various stratagems, including prayers for relief of less than $5 million, the filing of multiple “baby” class claims on behalf of less than 100 plaintiffs, and limiting the scope of the class to residents of one state. On the other hand, defense counsel seeking (often successfully) to dismiss state law claims pursued by plaintiffs with FLSA claims in “hybrid” wage & hour class actions in federal court also argue that judges should not exercise supplemental jurisdiction over the state law claims; in turn, federal courts are increasingly confronted with questions of whether original jurisdiction exists under the CAFA over such hybrid state law claims, and employers also may face a two-front litigation war – one in federal court and the other in state court – depending on resolution of those CAFA issues. These litigation issues are likely to shape class action practice and defense strategy for the foreseeable future.