In a September 18, 2013 opinion, Gold v. New York Life Insurance Company, the US Court of Appeals for the Second Circuit held that the home state exception to subject matter jurisdiction under the Class Action Fairness Act of 2005 (CAFA) may be waived if a party does not raise it within a reasonable time.

Plaintiff Gold brought a class action in federal court alleging various state labor law violations against his former employer and its affiliates (collectively New York Life). During several years of litigation the district court:

Later, nearly three years after Gold originally filed suit, New York Life filed a motion to dismiss based on CAFA's home state exception. The exception provides that a district court "shall decline to exercise jurisdiction" over a class action in which at least two-thirds of the members of the proposed plaintiff class, as well as the primary defendants, are citizens of the state in which the action is originally filed.

The district court granted the motion and dismissed the complaint. It concluded that the home state exception was not jurisdictional and therefore could be waived. However, it rejected Gold's argument that New York Life's delay in raising the home state exception constituted a waiver. The court found that New York Life's delay was justified on the facts. Gold appealed. The Second Circuit affirmed.

The Second Circuit agreed with the district court that the home state exception is not jurisdictional, and therefore may be waived. Relying on an Eighth Circuit opinion, Graphic Communications Union v. CVS Caremark Corporation, the district court had concluded that the "decline to exercise" language in the exception demonstrated that district courts have subject matter jurisdiction, but must actively decline to exercise it if the exception's requirements are met. The Second Circuit adopted this reasoning.

Because the exception is not jurisdictional, a party must raise it within a reasonable time. The Second Circuit acknowledged that reasonableness is a fact specific inquiry. However, it noted that motions should "be made at the earliest practicable time." Here, the Second Circuit expressed skepticism that three years constituted a "reasonable time," especially where the relevant information should have been in New York Life's possession. However, the court of appeals found that the district court had not abused its discretion by finding on the facts that New York Life had not waived the exception.

Despite having affirmed dismissal of the complaint for lack of jurisdiction, the Second Circuit then addressed the merits. First, the court agreed with the district court's conclusion that a 2011 amendment to New York Labor Law, increasing potential liquidated damages in unpaid wage cases from 25% to 100% of underpayment, should not apply retroactively. The court noted that New York law disfavors retroactive application of statutes. Nothing in the text or legislative history of the 2011 amendment undermined the presumption against retroactivity. The plaintiffs, therefore, could not enjoy retroactive application of the amendment.

The Second Circuit next affirmed the district court's grant of summary judgment on Gold's overtime claim. The district court had concluded that Gold was an "outside salesman" under New York Labor Law, and therefore exempt from overtime requirements. The Second Circuit noted that it was required to examine the entire factual picture in determining whether or not an employee is a salesman who principally conducts his duties away from the employer's place of business. Ultimately, the court concluded that the plaintiff's primary duty was to sell insurance, and that he did so remotely. Therefore, under New York Labor Law, the plaintiff was properly considered an outside salesman.

The Second Circuit declined to review the district court's denial of summary judgment on Gold's wage deduction claim. An appeal from a final judgment generally brings up for review interlocutory orders. However, even on appeal from a final judgment the court does not review a denial of summary judgment based on the existence of genuine issues of material fact.

Going forward, counsel thinking about asserting the home state exception to federal jurisdiction under CAFA must do so promptly or they will waive it. Counsel should also note that, due to New York's presumption against retroactive application of statutes, future amendments impacting damages or wage payments in labor law cases should be presumed to apply prospectively unless evidence in the text or legislative history of such amendments clearly suggests otherwise.