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Thursday, October 1, 2015

Bridewell-Sledge v. Blue Cross: District Court Erred in Treating Consolidated Class Actions as Separate for Purposes of Determining Federal Jurisdiction under the Class Action Fairness Act's "Local Controversy" Exception

Bridewell-Sledge v. Blue Cross of California (8/20/15) --- Cal.App.4th --- presents a novel legal issue regarding federal diversity jurisdiction under the Class Action Fairness Act and its "local controversy" exception. If you're not familiar with it, the local controversy exception provides roughly as follows: 

The district court shall decline jurisdiction over class actions when: more than two thirds of the class members are citizens of the State where the action was filed; at least one "significant" defendant is a citizen of that State; the principal injuries alleged were incurred in that State; and no similar class action has been filed against any of the defendants in the prior three years.

Plaintiff Bridewell-Sledge filed a putative class action against the defendants for failing to pay African American and female employees at a wage rate equal to white or male employees working in the same establishment and performing equal work. 14 minutes later, plaintiff Crowder filed a putative class action against the same defendants for failing to promote African-American and female employees because of their race and gender. The superior court consolidated the actions for all purposes.

Defendants removed the consolidated actions, and the district court again consolidated them for all purposes. After an OSC re. jurisdiction, district court retained jurisdiction over Bridewell-Sledge, finding that the local controversy exception applied, but remanded Crowder, finding that the local controversy exception did not apply because Bridewell-Sledge was a similar action and was filed in the three years prior to Crowder.

The Ninth Circuit reversed, holding that the district court should not have treated Bridewell-Sledge and Crowder as separate actions for CAFA purposes. By consolidating the two actions, the state court "destroy[ed] the identity of each suit and merge[d] them into one."
Under California law, when two actions are consolidated “for all purposes,” “the two actions are merged into a single proceeding under one case number and result in only one verdict or set of findings and one judgment.”
CAFA's legislative history supports this result. The purpose of the local controversy exception was “to ensure that state courts can continue to adjudicate truly local controversies in which some of the defendants are out-of-state corporations.” Remanding the consolidated cases to state court would accomplish this purpose.

The opinion is available here

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