Authored by Alex Passantino

‘Twas the week before Christmas, 2-0-1-5
When the poetry elves on the blog came alive.
Crafting their rhymes with a purpose so clear:
Presenting the wage-hour gems of the year.

In January, for new regs in this year our breath bated.
Then for six painful months, we speculated and waited.
And just as we geared up to celebrate Independence,
Out came a proposal that will create more defendants.

With a salary level that for 10 years has been flat,
They looked at New York’s and said “higher than that.”
More than double the old; and then they got clever …
The proposed sal’ry level will increase for forever.

Anticipated changes to duties caused quite a fuss
When DOL said “If you’ve got some ideas, just tell us.”
Of the Department’s proposal, employers were understandably wary,
So we wrote down some ideas on how to make it less scary.

Nearly 300 thousand comments they have to review,
It will be late into next year before they are through.

Next up on the list of your wage-hour joy,
Are the efforts to change what it means to employ:
ContractorsJoint employment. Fissured industry.
Interns. The “third way” and gig economy.

Economic realityRight to control.
They’re integral to your business? Now you’re in a deep hole.
So many angles, it can drive you berserk.
As agencies and courts figure out what is “work.”

And if divergent decisions bring you a sense of elation,
Then please focus attention on class certification.
Approvals, denials, and some decerts, too.
No matter the side, there’s a case for you.

But as summer approached, there arose quite a stir,
A case that’d explain what the class cert rules were.
A Supreme explanation, o my-o, o me-o
We’d learn about class via Bouaphakeo.

They’ve argued, but there’s no decision, not yet,
And a limited ruling on records might be all that we get.
But the cases keep coming. Their numbers broke the charts.
Whether giant class actions or cases broken in parts.

And the response to those filings? The employers’ retort?
A wide range of ways to get them out of court.

Some cases get mooted. Some cases do not.
At Genesis’s open question, SCOTUS might take a shot.
Does an offer of judgment that’s not been accepted
Mean the plaintiff cannot proceed with his class as expected?

Increasingly used as a litigation life saver
Arbitration agreements with a class action waiver;
And when asked if state laws could class waivers prevent, yo,
The Supremes laid the smack-down to dear Sacramento.

With all of these options, it comes as a surprise then,
That one resolution keeps on getting the Heisman.
For reasons that many cannot understand,
To settle wage claims courts think they must hold your hand.

That’s our year in review, we whipped you right through it.
Next year? The new regs and a mad dash to review it.
But before 2015 joins the past’s ranks,
You keep on reading our blog, and for that we give thanks!

THANKS TO ALL OF OUR READERS. BEST WISHES FOR A HAPPY, HEALTHY, AND PROSPEROUS NEW YEAR!

Authored by Andrew Scroggins

As expected, the Fifth Circuit once again has rejected the NLRB’s highly controversial position that the National Labor Relations Act (“NLRA”) prohibits employers from requiring mandatory arbitration agreements that preclude employees from filing class or collective claims in any forum.

The Fifth Circuit first took up the issue nearly two years ago, when it set aside the NLRB’s D.R. Horton, Inc. decision.  In the Fifth Circuit’s view, the strong congressional policy contained in the Federal Arbitration Act (“FAA”), which requires the enforcement of arbitration agreements “as written,” was not overcome by the NLRA’s general provisions protecting the rights to organize and to engage in various forms of protected concerted activity.  Most courts (including the Second Circuit and Ninth Circuit) to address the issue since then have followed suit.

Despite the courts’ dim view, the NLRB has been undeterred and continues to press its D.R. Horton rationale.  One such decision is Murphy Oil USA, Inc., 361 NLRB No. 72 (Oct. 28, 2014).  The facts are these:  Murphy Oil’s new hires signed binding arbitration agreements that included a waiver of the right to commence or participate in a group, collective or class action.  Despite having signed the agreement, several employees filed an FLSA collective action in federal court.  Murphy Oil filed a motion to dismiss and compel arbitration on an individual basis, which the court granted.

The plaintiffs did not appeal the district court’s dismissal order. Instead, they pursued unfair labor practice charges with the NLRB, contending that the arbitration agreement interfered with their rights under Section 7 of the NLRA to engage in protected concerted activity.

In a 3-2 decision, the Board majority invalidated Murphy Oil’s arbitration agreement, concluding that the “reasoning and result” of the D.R. Horton decision were correct, notwithstanding that it had been “rejected by the U.S. Court of Appeals for the Fifth Circuit and viewed as unpersuasive by decisions of the Second and Eighth Circuits.”

Murphy Oil petitioned the Fifth Circuit to review the decision. The court declined the NLRB’s request to hear the case en banc, and at oral argument the panel pointedly reminded the agency it would follow circuit precedent.  Unsurprisingly, then, the Board’s order was set aside by the court of appeals to the extent it conflicted with the earlier D.R. Horton decision.

Unfortunately for employers, the Fifth Circuit did not add to its earlier decision, offering only a matter of fact statement: “Our [D.R. Horton] decision was issued not quite two years ago; we will not repeat its analysis here.  Murphy Oil committed no unfair labor practice by requiring employees to relinquish their right to pursue class or collective claims in all forums by signing the arbitration agreements at issue here.”

The Fifth Circuit did uphold the Board’s order with respect to its conclusion that the arbitration agreement suggested that employees were prohibited from filing unfair labor practice charges with the Board. The court declined to hold that agreements must include an express statement of employees’ right to do so, but also opined that such a statement would be helpful in the event that “incompatible or confusing language appears” elsewhere in the agreement.

Perhaps the only surprising aspect of the decision is the court’s mild tone toward an agency that continues to flout the court’s authority. For example, Murphy Oil had pressed for a contempt order or sanction to address what it had characterized as the Board’s “defiance” of the D.R. Horton decision.  The court declined to do so (“We do not celebrate the Board’s failure to follow our D.R. Horton reasoning, but neither do we condemn its nonacquiescence.”), but its reasoning is perplexing.  As the court pointed out, employers typically can chose among several circuits when challenging a decision by the Board, so the “Board may well not know which circuit’s law will be applied on a petition for review.”  However, to date no circuit has taken a contradictory view – a point the court had earlier noted, when it explained that “several of our sister circuits have either indicated or expressly stated that they would agree with our holding in D.R. Horton if faced with the same question.”

Similarly, in its decision, the Board had award attorneys’ fees and expenses that the charging party had incurred to oppose Murphy Oil’s successful district court motion to compel arbitration – an action the Board concluded had been taken “with an illegal objective.” The Fifth Circuit also refused to enforce that portion of the order, but again the language is soft: “Though the Board might not need to acquiesce in our decisions, it is a bit bold for it to hold that an employer who followed the reasoning of our D.R. Horton decision had no basis in fact or law or an ‘illegal objective’ in doing so.  The Board might want to strike a more respectful balance between its views and those of circuit courts reviewing its orders.”

In the end, the Fifth Circuit’s Murphy Oil decision is unlikely to change the status quo.  While the precedent in this circuit has been bolstered, the decision seems unlikely to deter the Board from charting its own course, both within and without this circuit, and continuing to invalidate arbitration agreements that contain class and collective action waivers.

 

 

Authored by Julie G. Yap

On Monday morning, the Supreme Court yet again rejected a would-be class action plaintiff’s attempts to avoid federal court.  The Court’s order again affirmed that defendants need not overcome significant barriers to plead their cases in federal court—a position contrary to that often advanced by plaintiffs and their counsel in opposing the removal of putative class actions alleging violations of state wage and hour laws.  Instead of imposing an evidentiary burden on a removing defendant, the Supreme Court clarified that a petition for removal from state court to a federal district court “need include only a plausible allegation that the amount in controversy exceeds the jurisdictional threshold.”  As such, removing defendants need only satisfy the same liberal pleading standards applicable to a plaintiff’s complaint.

In Dart Cherokee Basin Operating Co. v. Owens, the named plaintiff attacked the defendant’s petition to remove the case from state court to a federal district court under the Class Action Fairness Act (“CAFA”), arguing that the notice of removal was “deficient as a matter of law” because it included “no evidence” proving that the amount in controversy exceeded the required $5 million threshold for federal jurisdiction under CAFA .  In response, the defendant submitted a declaration, including a detailed damages calculation indicating that the amount in controversy well exceeded the  jurisdictional minimum by more than $6 million.  The district court, however, refused to consider the declaration, holding that the notice of removal must contain evidence of the amount in controversy.  When the defendant appealed the district court’s remand order, the Tenth Circuit denied review.

The Supreme Court overturned the trial court’s holding and concluded that a removing defendant need only set forth “a short and plain statement of the grounds for removal” and need not submit supporting evidence.  The Court noted that, “by design,” the removal statute tracks the general pleading requirements for plaintiffs, citing legislative history that corroborated Congress’ intent to “simplify the ‘pleading’ requirements for removal.”  As such, like a complaint, “when a defendant seeks federal-court adjudication, the defendant’s amount in controversy allegation should be accepted when not contested by the plaintiff or questioned by the court.”  Moreover, the Court emphasized that there is no presumption against removal in cases removed under CAFA, noting that CAFA was enacted to facilitate the removal of certain types of cases to federal court.

While the Court’s decision addressed a decision invoking removal under CAFA, the Court’s holding interpreted a section of the removal statute, 28 U.S.C. § 1446(a), which applies not only to removals under CAFA, but also to removals under the court’s traditional bases for jurisdiction, including diversity of citizenship.

This ruling has significant implications for wage and hour litigation because both CAFA jurisdiction as well as traditional diversity jurisdiction are often at issue when plaintiffs bring claims under state wage laws to avoid the federal courts or to seek enhanced damages.  The Supreme Court’s ruling demonstrates that a removing defendant cannot be held to a higher burden in pleading the right to litigate its claims in federal court.

Co-authored by Sheryl Skibbe and Simon L. Yang

Private Attorney General Actions (PAGA) brought by individuals as representative actions on behalf of the State of California and other aggrieved employees are not sufficiently similar to federal Rule 23 class actions to support federal jurisdiction under the Class Action Fairness Act (CAFA).  But is there still a way into federal court?

Last year in Urbino v. Orkin Services of California, Inc., the Ninth Circuit held that potential PAGA penalties could not be aggregated to meet the minimum jurisdictional amount required for traditional diversity removal.  The panel rejected aggregation of penalties for jurisdictional purposes because the Court found that the plaintiffs primarily asserted “the state’s collective interest in enforcing its labor laws through PAGA,” rather than their own individual interests.  Urbino did not address removal under CAFA.

Baumann v. Chase Investment Services does, and the Ninth Circuit again ruled there was no jurisdiction under CAFA.  PAGA representative actions lack the statutory class action requirements for numerosity, commonality, typicality, or adequacy of representation.  They do not require notice to absent class members or an opt out procedure, and class action judgments, unlike PAGA judgments, are preclusive as to all claims the class could have brought.  Consistent with Urbino, the Court found, “[t]he employee’s recovery is thus an incentive to perform a service to the state, not restitution for wrongs done to members of the class.”

These cases now hinder removal of PAGA representative actions to federal court.  But whether a federal court may allow a PAGA action otherwise within its original jurisdiction to proceed under Rule 23 as a class action remains an open question.

Complaints that allege PAGA claims as class actions meet the statutory requirements under CAFA for class actions, but whether aggregation of the potential penalties to meet the $5 million mark is now in doubt.  One recent district court decision, Sanchez v. Rez-Care, Inc., interpreted Urbino to permit aggregation of only the 25% recoverable by putative class members.  And what if the complaint alleges a PAGA representative action with an FLSA claim?  Courts may choose to exercise supplemental jurisdiction over the PAGA claims, but how procedurally is the PAGA action tried?

Co-authored by Richard L. Alfred and Patrick J. Bannon

Employers that want to use traditional bilateral arbitration to resolve employment disputes won an important victory yesterday:  the Fifth Circuit overturned the National Labor Relations Board’s controversial D.R. Horton decision.  Nothing in federal labor law, the Fifth Circuit ruled, forbids employers and employees from agreeing to resolve disputes through individual rather than class or collective arbitration.

Yesterday’s ruling follows a string of pro-arbitration Supreme Court decisions, including Stolt-Nielsen, Concepcion and, this past June, American Express v. Italian Colors Restaurant.  Together with these cases, D.R. Horton further clears the way for employers to use individual arbitration to resolve wage and hour disputes under federal and state laws without subjecting themselves to Rule 23 class or Fair Labor Standards Act collective arbitration claims.

The D.R. Horton case arose from an overtime dispute between D.R. Horton and one of its former superintendents.  Like all D.R. Horton employees, the superintendent had agreed to arbitrate any disputes with the company on an individual basis only, without any class or collective arbitration.  Despite his agreement, the former superintendent notified the company that he intended to pursue arbitration on behalf of a nationwide class of similarly situated employees whom, he claimed, had been misclassified as exempt from overtime in violation of the FLSA.

D.R. Horton, of course, refused to participate in class or collective arbitration, citing the employee’s agreement.  In response, the former employee, filed a charge with the National Labor Relations Board, claiming that the agreement to forego class or collective arbitration violated his rights under the National Labor Relations Act.

Last year, the Board issued a surprising ruling in favor of the employee.  The Board explained that all employees — union and non-union, alike — have a federal right to join together to try to improve their working conditions, including a right to pursue litigation together on a class or collective basis.  Agreements requiring employees to resolve all disputes through individual arbitration only, the Board ruled, interfered with those employee rights.

All three of the federal circuit courts that had previously considered the Board’s D.R. Horton decision (the Second, Eighth and Ninth Circuits) found it unpersuasive.  Numerous lower courts have also rejected it.  But employees resisting individual arbitration continued to cite it in their efforts to arbitrate wage and hour claims on a class or collective basis.  Yesterday, the Fifth Circuit reversed the Board’s ruling and, in doing so, removed whatever shadow that ruling had cast over the enforceability of individual-only arbitration agreements.

The Board’s reasoning was flawed, the Fifth Circuit stated, because the Board paid insufficient attention to the Federal Arbitration Act.  In that statute, Congress provided that arbitration agreements must be enforced according to their terms, except in very limited circumstances.  Nothing in the text or the legislative history of the National Labor Relations Act, the appellate court ruled, warranted refusing to enforce as written an employer’s agreement with an employee to participate in arbitration only on an individual basis.

The Fifth Circuit relied on AT&T Mobility v. Concepcion, in which the Supreme Court explained the fundamental differences between individual and class arbitration and found the latter inconsistent with the FAA.  Accordingly, the Court of Appeals concluded, requiring an employer to allow class or collective arbitration would effectively deny the employer the benefits of arbitration — a result that would violate the FAA.

While the NLRB may not, as a matter of policy, choose to acquiesce in the Fifth Circuit’s opinion, yesterday’s decision is a compelling repudiation of the Board’s reading of the NLRA.  Unless the Fifth Circuit’s decision is overturned by the Supreme Court or an act of Congress (neither of which seems likely) employees are less likely to be successful in relying on federal labor law to resist enforcement of agreements to participate in individual arbitration.  Earlier this year, in American Express v. Italian Colors Restaurant, the Supreme Court held that agreements to participate in individual arbitration and forego class arbitration are enforceable even as to claims that are not economically feasible to pursue except on a class basis.  Thus, employees seeking to avoid enforcement of agreements limiting arbitration to individual claims have lost their two most widely used arguments.

While today’s decision is certainly a victory for employers, it includes one cautionary note.  The Fifth Circuit found that D.R. Horton’s arbitration agreement was not clear enough that employees retained the right to file unfair labor practice charges with the Board.  The court allowed to stand the portion of the Board’s decision requiring D.R. Horton to clarify its agreement on that point.  This portion of the decision warrants further study, especially for employers with operations within the Fifth Circuit’s jurisdiction.  This and related aspects of the Fifth Circuit’s decision are discussed in further detail in Seyfarth Shaw’s Management Alert, “Fifth Circuit Sets Aside NLRB Rule Prohibiting Class Action Waivers (12/03/13) at http://www.seyfarth.com/publications/MA120313LE.

Authored by Loren Gesinsky

Last week, on August 21, 2013, the Ninth Circuit joined the chorus of courts declining to follow the National Labor Relations Board’s controversial D.R. Horton decision. 

Richards v. Ernst & Young LLP [here] held that wage-and-hour claims already litigated for years against Ernst & Young and certified as a class action by the district court must be arbitrated individually in accordance with a pre-dispute arbitration agreement, thus undercutting the D.R. Horton viewpoint that employees have a non-waivable right to pursue statutory wage-and-hour claims on a class or collective basis.  Richards also continues the recent string of decisions we summarized [here] enforcing Ernst & Young’s individual-arbitration program, including the Second Circuit’s August 9, 2013 decision in Sutherland v. Ernst & Young LLP.

Although the Ninth Circuit stated it was applying a general rule against entertaining the D.R. Horton argument because plaintiff-appellee Richards had not raised it before the district court, the Ninth Circuit also noted with approval “that the only court of appeals, and the overwhelming majority of the district courts, to have considered the issue have determined that they should not defer to the NLRB’s decision in D.R. Horton because it conflicts with the explicit pronouncements of the Supreme Court concerning the policies undergirding the Federal Arbitration Act.”  (The “only court of appeals” to which the Ninth Circuit refers is the Eighth Circuit, presumably because the Richards decision was drafted without awareness of the Second Circuit’s Sutherland decision).  Moreover, the Ninth Circuit interpreted the Supreme Court’s recent American Express v. Italian Colors Restaurant decision as supporting rigorous enforcement of the Ernst & Young arbitration agreement according to its terms.

 Ernst & Young’s victory seems all the sweeter because: 

  • Ernst & Young did not move to compel arbitration until many years after the putative class claims of Richards and others had been filed.
  • Richards’ claim for injunctive relief had been dismissed by the district court.
  • Richards’ claim for unpaid meal and rest breaks under California law had also been dismissed, albeit without prejudice.
  • Multi-year discovery caused Richards to incur expenses.

Richards argued to both the district court and Ninth Circuit that Ernst & Young waived the right to compel arbitration because of these factors.  The district court agreed with Richards and added insult to injury by certifying a class for which Richards became the representative plaintiff.  The Ninth Circuit disagreed entirely and reversed because Richards was not prejudiced enough by these factors to warrant waiver of the contractual right to arbitration, a waiver that doctrinally “is  not favored.”  More specifically, the Ninth Circuit held that Richards was not prejudiced by the:  (i) dismissal of two claims because neither dismissal was a determination on the merits; and (ii) discovery expenses because these were a “self-inflicted” byproduct of her “deliberate choice of an improper forum” and information might also be gained in arbitration.  These findings made it unnecessary for the Ninth Circuit to even address Ernst & Young’s argument that enforcement of the arbitration agreement became possible only after the Supreme Court’s April 2011 AT&T Mobility v. Concepcion decision, and thus were timely asserted.

We recently described Sutherland as signaling that the end of uncertainty regarding the enforceability of class-action waivers in arbitration agreements is nigh.  Richards magnifies this signal and provides additional support for employers interested in enforcing or implementing such waivers.

Co-authored by Robert S. Whitman and Howard M. Wexler

It has been a very busy summer for Judges on the Second Circuit, who on Wednesday issued their third decision in the past two months (most recently reported on here), and their fourth since March, addressing the adequacy of pleading in wage-hour cases.

In Gordon v. Kaleida Health [here], one of many large class/collective actions brought against New York-area hospitals and healthcare institutions alleging unlawful pay practices, the plaintiffs asked the Second Circuit to review a District Court decision dismissing their complaints.  They argued that once the lower court decided to dismiss their federal claims, it should have declined to exercise jurisdiction over their remaining state law claims and simply sent the case to State court. 

The Second Circuit disagreed.  It first upheld the dismissal of the plaintiffs’ RICO claim — which was based on allegations that the employers used a scheme to cheat them out of their lawful earnings.  Confirming its rulings from earlier this year in Lundy v. Catholic Health Sys. of Long Island [here] and Nakahata v. N.Y. Presbyterian Healthcare Sys., Inc. [here], the court held that, under RICO, “the mailing of pay stubs cannot further the fraudulent scheme because the pay stubs would have revealed (not concealed) that plaintiffs were not being paid for all of their alleged compensable overtime.”

The Second Circuit also rejected the plaintiffs’ contention that the lower court should have remanded the case rather than dismiss it outright.  The Second Circuit said it was a “wise exercise of judicial economy” for the District Judge to dismiss the state law breach of contract claim (and related claims alleging breach of an implied covenant of good faith and fair dealing, unjust enrichment and quantum meruit) as they all lacked merit.

Kaleida is yet another solid win for health care employers, which have been the target of several class/collective actions in New York courts over the past few years.  But this summer’s flurry of decisions (snow in August?) should benefit all employers are faced with cookie-cutter complaints challenging their pay practices without any factual (or legal) support.

Ninth Circuit.jpgAuthored by Catherine Dacre

In a case of first impression, the 9th Circuit held last week in Roth v. CHA Hollywood Medical Center (here) that removal of a state court case to federal court may be triggered by defendant’s own investigation of the facts supporting removal.  Previously, the window for removal has been narrowly construed, with federal court removal allowed only within 30 days of:  1) the filing of the complaint indicating federal jurisdiction or, 2) the receipt from plaintiff of a document supporting removal. 

Rejecting the interpretation of numerous district courts, the 9th Circuit has now ruled that a defendant can remove within 30 days of its own discovery that federal jurisdiction exists, and need not rely on plaintiff presenting that information in a document. 

This ruling is significant for defendants who have long encountered plaintiffs hiding the ball to avoid removal.  For example, removal under the Class Action Fairness Act is dependent on making a threshold showing that the amount in controversy exceeds $5,000,000.  Plaintiffs have avoided federal jurisdiction by pleading that the amount in controversy is less than $5,000,000, and carefully refraining from putting anything to the contrary on paper.  This new ruling allows defendants to use their own resources to determine whether federal jurisdiction exists without having to rely on plaintiffs to make some kind of admission on paper.  As noted by the Court, “neither should a plaintiff be able to prevent or delay removal by failing to reveal information showing removability and then objecting to removal when the defendant has discovered that information on its own.” 

Addressing anticipated concerns about gamesmanship on the part of defendants who might delay removing for strategic reasons, the court concluded that plaintiffs can always avoid such tactics by being transparent about removability from the outset.  

This 9th Circuit decision comes several months after the Supreme Court, in Standard Fire Insurance Company v. Knowles (see our post on that opinion here), invalidated another scheme that plaintiffs’ counsel sometimes use to try to stymie defendants from removing their state court lawsuits to federal court.  In that case, the named class plaintiff’s stipulated at the outset of the lawsuit to maximum damages of less than $5,000,000, which they argued prevented defendants from meeting the CAFA amount in controversy requirement.  The Court unanimously rejected this ploy because the named plaintiff lacked authority to bind putative class members.

How does or should this change the way defense counsel practice, at least in the 9th Circuit?  Defendants wishing to be in federal court should diligently investigate whether facts exist supporting federal jurisdiction from the outset of the case, irrespective of whether they believe the complaint contains enough information to support removal on its face.  If and when those facts are uncovered, (e.g., through data on hours/weeks/shifts worked, rates of pay, amounts of overtime worked, numbers of employees meeting the class description, frequency of pay periods, numbers of terminated employees in the class, etc.), the state court case should immediately be removed to federal court with the facts obtained by defendants that support removal.

supreme court.jpgAuthored by Barry Miller

The Supreme Court held that a would-be class action plaintiff cannot avoid federal court by “stipulating” that he will seek damages that are less than the amount necessary to give rise to jurisdiction under the Class Action Fairness Act.  In Standard Fire Insurance Co. v. Knowles, the named plaintiff claimed that his homeowners insurer had shorted him and “hundreds [or] possibly thousands” of other policyholders in the putative class that he sought to represent by failing to include certain benefits when paying out claims.  Greg Knowles filed the case in Arkansas state court and attempted to avoid removal to federal court by including in his complaint and an accompanying affidavit from his counsel a statement that he would not seek more than $5,000,000 in damages on behalf of the class.   

The defendant removed the case to federal court, invoking CAFA notwithstanding Knowles’ statements about the damages he would seek.  Under CAFA, federal District Courts have jurisdiction over a putative class action case if at least one class member is a citizen of a different state than at least one defendant, the proposed class includes at least 100 members, and the total amount in controversy exceeds $5,000,000.  In analyzing whether the federal court had jurisdiction, the District Court concluded that the total potential damages posed by the plaintiff’s class action claim exceeded the threshold amount.  However, the court concluded that the plaintiff’s statements that he would not seek more than $5,000,000 on behalf of the class served to limit the amount in controversy to less than the jurisdictional minimum, and as a result, CAFA did not apply. 

The Supreme Court overturned the trial court’s holding and found that the plaintiff’s supposed “stipulation” did not limit the amount in controversy in the case.  Writing for a unanimous Court, Justice Breyer noted that while the plaintiff could agree to limit his own request for damages, he could not do so on behalf of absent members of an uncertified class that no court had yet empowered him to represent.  This left open several possibilities by which the class might seek damages in a greater amount than described Knowles’ stipulation, if for example, Knowles was replaced as the named plaintiff or another class member sought to intervene in the case.  Because Knowles’ stipulation was not effective, the District Court’s original finding that the total potential damages in the case exceeded $5,000,000 was controlling and the requirements for CAFA jurisdiction were met.

This ruling has significant implications for wage and hour litigation because CAFA jurisdiction is often at issue when plaintiffs bring claims under state wage laws to avoid the federal courts or to seek enhanced damages.  The Supreme Court’s ruling makes clear that class action plaintiffs and their attorneys cannot avoid federal court through an artificial (and possibly temporary) limitation on the damages sought in their complaints.  There may be a broader and more subtle message in the Supreme Court’s ruling, as well.  Since CAFA was enacted in 2005, plaintiffs and their attorneys have sought to circumvent the statute and avoid the federal courts by attempting to exploit numerous supposed loopholes in the statute.  For example, plaintiffs have been known to remain mum about the damages they seek and attempt to put the defendant to the burden of providing evidence about the value of a vaguely defined case at an early stage of the proceedings.  Some Courts of Appeal have indulged this gambit, and others have rejected it.  The Supreme Court has not yet addressed all of the means by which plaintiffs might seek to avoid CAFA, but the Justices’ unanimous opinion in Knowles might suggest that they have limited tolerance for such maneuvers.