The plaintiff filed a putative class action in Pennsylvania state court against two Pennsylvania defendants and one Virginia defendant, claiming that the defendants preyed on non-English speakers, illegally coercing them to enter into franchise agreements that circumvented the obligations of what were properly classified as employment relationships. The defendants removed under CAFA, and the plaintiff sought remand pursuant to CAFA’s home-state and local-controversy exceptions. The Eastern District of Pennsylvania denied the plaintiff’s motion for remand, holding that neither exception applied.
First, the court explained that “[t]he home-state exception applies only if all the primary defendants are citizens of the state in which the action was originally filed.” The parties litigated the question whether the Virginia defendant was a “primary defendant.” Among other arguments, the plaintiff asserted that the Virginia defendant was not a primary defendant because it had previously attempted to avoid liability by asserting that it was not a party to the franchise agreements at issue. In rejecting the plaintiffs’ argument, the court held that the Virginia defendant’s denials of liability were irrelevant to the determination of whether it was a primary defendant–instead, the identity of the primary defendants is determined by the allegations of the complaint. The court held that home-state exception did not apply because the complaint sought to hold the Virginia defendant directly liable, it was named in every count of the complaint, and it stood to sustain the greatest loss as the alleged mastermind of the scheme, rendering it a “primary defendant.”
The court further reasoned that the local controversy exception only applied where there was “no other class action asserting the same or similar allegations against any of the defendants”that had been “filed in the preceding three years.” Weeks before the plaintiff filed his case, however, a hybrid class action and Fair Labor Standards collective action had been filed in Illinois federal court against one of the Pennsylvania defendants, in which similar facts and claims were asserted. Though the court determined that the local controversy exception did not apply due to the existence of the Illinois hybrid action alone, it noted that a similar action was also filed in California federal court eight days after the plaintiff filed his case, and that, while it could not be considered an “other class action” because it was filed after the plaintiff’s case, it provided a “‘strong signal’” that controversy was not local in nature.
Torres v. CleanNet, U.S.A., Inc., No. 14-2818 (E.D. Pa. Nov. 4, 2014).
