Second Circuit Dismisses Improper Deductions Class Action Suit Under CAFA And Holds That Liquidated Damages Under New York Labor Law Do Not Apply Retroactively

by Ogletree, Deakins, Nash, Smoak & Stewart, P.C.
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Gold v. New York Life Insurance Co., No. 12-CV-2344 (2d Cir. Sept. 18, 2013) (Parker, J.): The plaintiff brought suit on behalf of himself and others alleging that he was improperly classified as exempt from the New York Labor Law (NYLL) and that his employer made improper deductions from his wages. Due to the dates of his employment and the NYLL’s longer statute of limitations, the plaintiff sued under the NYLL but not the Fair Labor Standards Act, and he therefore predicated federal jurisdiction under the Class Action Fairness Act (CAFA). Following discovery on the plaintiff’s individual claims, the district court dismissed his overtime claim, leaving only the improper wage deduction claim to go forward to class discovery. At that point, nearly three years after the case was commenced, the employer moved to dismiss because it discovered that more than two-thirds of the putative class members were New York citizens in violation of CAFA’s home state exception. The district court agreed and dismissed the remaining wage deduction claim. On appeal, the Second Circuit held that, under an abuse of discretion standard, dismissal was proper because the district court was in a better position to judge whether the delay was excusable. In doing so, the court cautioned that “there are numerous instances where the home state exception was raised much more promptly than it was in this case, and without full blown class discovery.”

In addition, the Second Circuit appeared to resolve an open question—whether the 2011 amendment to the NYLL, which raised liquidated damages from 25 percent to 100 percent, applies retroactively. Following the majority of federal district courts that have considered this question, the Second Circuit held that the amendment did not contain any “clear expression of retroactivity” and therefore 100 percent liquidated damages do not apply retroactively pre-2011. Given isolated case law to the contrary, Gold provides needed clarity on this important damages issue. The decision also stands as a reminder that employers faced with federal cases predicated upon CAFA should act promptly to determine whether the putative class meets the home state exception is a basis for dismissal.

Note: This article was published in the September 2013 issue of the New York eAuthority.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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