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Avraham Gold v. New York Life Insurance Co.

United States Court of Appeals, Second Circuit

September 18, 2013

Avraham Gold, Individually, on behalf of all others similarly situated, Plaintiff-Appellant,
v.
New York Life Insurance Company; New York Life Insurance and Annuity Corporation; New York Life Insurance Company of Arizona; John Does 1 through 50, said names being fictitious individuals; ABC Corporations 1 through 50, said names being fictitious companies, partnerships, joint ventures and/or corporations; and New York Life Securities, LLC f/k/a New York Life Securities, Inc., Defendants-Appellees

Argued: April 3, 2013

Appeal from a judgment of the United States District Court for the Southern District of New York (Pauley, J.) dismissing a complaint based on the "home state exception" to jurisdiction under the Class Action Fairness Act. See 28 U.S.C. § 1332(d)(4)(B). Plaintiff argues that the defendant waived the exception by failing to timely raise it. We hold, inter alia, that the home state exception is not jurisdictional, that it must be raised within a reasonable time, and that the defendant did so.

John Halebian, Lovell Stewart Halebian Jacobson LLP, New York, NY (Adam C. Mayes, on the briefs), for Plaintiffs-Appellants

Richard G. Rosenblatt, Morgan Lewis & Bockius LLP, Princeton, N.J. (Sean P. Lynch, Morgan Lewis & Bockius LLP, Princeton, NJ; Michael L. Banks, Morgan Lewis & Bockius LLP, Philadelphia, PA, on the brief), for Defendants-Appellees.

Before: B.D. Parker, Lohier, and Carney, Circuit Judges.

Barrington D. Parker, Circuit Judge

Plaintiff-Appellant Avraham Gold appeals from a judgment of the United States District Court for the Southern District of New York (Pauley, J.) dismissing his complaint based on the so-called "home state exception" to federal jurisdiction under the Class Action Fairness Act ("CAFA"), 28 U.S.C. §§ 1332(d), 1453, 1711-15. The home state exception requires district courts to "decline to exercise" jurisdiction over class actions in which two-thirds or more of the class, and the primary defendants, are citizens of the state in which the action was filed. 28 U.S.C. § 1332(d)(4)(B).

In 2009, Gold sued his former employer, New York Life Insurance Company ("New York Life"), both individually and on behalf of a putative class of insurance agents, alleging state law claims seeking unpaid overtime wages and recovery of improper wage deductions. See N.Y. Lab. Law §§ 663, 193, and 198(1-a). He also sought statutory liquidated damages under New York Labor Law. The case was litigated for a number of years during which the district court granted summary judgment to New York Life on Gold's overtime claim, denied Gold summary judgment on his wage deduction claim, and ruled that a 2011 amendment to New York Labor Law that increased the amount of recoverable liquidated damages did not apply retroactively. In 2012, New York Life moved to dismiss the complaint based on CAFA's home state exception. Concluding that the exception applied, the district court dismissed the complaint.

Gold appeals, contending that New York Life waived the home state exception by failing to raise it within a reasonable time. For the reasons that follow, we hold that CAFA's home state exception is not jurisdictional and must be–and in this case was–raised within a reasonable time. We also hold that the 2011 amendment to New York Labor Law is not retroactive and that the district court's grant of partial summary judgment with respect to Gold's overtime claim was correct.

BACKGROUND

New York Life is a mutual insurance company that sells life insurance and other financial products. Joint Appx. 861. Gold was employed as an insurance agent at the company's New York office from December 2001 to August 2004. Joint Appx. 30. It is not disputed that throughout Gold's employment, New York Life classified him as an outside salesman whose main responsibility was to sell insurance. Under New York Labor Law, outside salesmen are not entitled to overtime pay. See 12 NYCRR § 142-2.2 (by reference to 29 U.S.C. § 213(a)(1) which exempts outside salesmen (as defined in 29 C.F.R. § 541.500) from Fair Labor Standards Act ("FLSA") overtime provisions).

When Gold started with New York Life, he was licensed to sell life insurance as well as annuities. Later, he obtained licenses which allowed him to also sell products with investment components and permitted him to use the title "registered representative." Joint Appx. 868-69. To make sales, Gold was trained by New York Life to follow a six-step process that included researching a client's needs, recommending products to meet those needs, and ultimately selling the client those products. Joint Appx. 169-70. As a registered representative, Gold was obligated to also comply with Financial Industry Regulatory Authority ("FINRA") regulations ensuring that he only recommended products that were suitable for his clients. See FINRA Manual, Rule 2111 (Suitability Rule).

While at New York Life, Gold's wage consisted solely of commissions on sales. He was not paid a salary or an hourly wage. New York Life used a so-called "ledger-based" payment system under which an agent, including registered representative, would receive credits for commissions he earned and debits for expenses he incurred such as for use of New York Life's telephone services and office space. Joint Appx. 307, 311-12, 591. At the end of each bi-weekly pay period, New York Life would issue the agent a paycheck that netted the credits on his ledger against the debits. Joint Appx. 14, ¶¶ 12-24. In 2009, Gold sued New York Life in a putative class action, predicating jurisdiction on CAFA, and asserting that because he was responsible for making investment recommendations to clients, he should not have been classified as an outside salesman and denied overtime pay. See N.Y. Lab. Law § 663. He also alleged that because New York Life's payment system involved subtracting costs incurred from commissions earned, it violated New York Labor Law § 193, which prohibits employers from making deductions from, and charges against, wages.

In May 2011, the district court granted New York Life summary judgment on Gold's overtime claim, holding that there was no genuine dispute of material fact as to whether Gold's primary duty was sales and therefore whether he was properly classified as an outside salesman and excluded from overtime pay. Gold v. New York Life Ins. Co., No. 09-Civ-3210, 2011 WL 2421281, at *6 (S.D.N.Y. May 19, 2011). In August 2011, proceeding on the wage deduction claim alone, Gold moved to add a claim for liquidated damages under New York Labor Law.[1]See N.Y. Lab. Law § 198(1-a). The liquidated damages statute had been amended earlier in 2011 to increase the amount recoverable from 25% to 100% of any underpayment. S.B. 8380, 233rd Legis., Reg. Sess. (N.Y. 2010). The district court permitted Gold to add the liquidated damages claim but ruled that he could not benefit from the amendment because it was not retroactive. Chenensky v. New York Life Ins. Co., No. 07-Civ-11504, 2012 WL 234374, *2-3 (S.D.N.Y. Jan. 10, 2012). The district ...


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