(Newswire.net — October 24, 2013) Los Angeles, California —
Capstone Law APC: The Ninth Circuit recently issued its first decision relating to federal diversity jurisdiction and PAGA (California’s Private Attorneys General Act of 2004 (“PAGA”). In Urbino v. Orkin Services of Calif., No. 11-56944, 11-57002 (9th Cir. Aug. 13th, 2013), a three-judge panel held that PAGA enforcement actions are not subject to federal diversity jurisdiction, and also stayed its decision in Baumann v. Chase Investment Services, No. 12-55644, a case where the named plaintiff is represented by Capstone Law APC. Baumann involves a closely-related issue: whether PAGA actions are removable under CAFA (the Class Action Fairness Act).
The Urbino opinion contains two key holdings. First, it dictates that district courts are prohibited from aggregating PAGA civil penalties in order to establish the amount in controversy for diversity jurisdiction, reasoning that, because each employee suffers a unique injury, a defendant’s obligation to its employees should be as “individuals severally” rather than as a group. Second, Urbino holds that because the benefits of PAGA inure primarily to the state, the state is the real party in interest, and is not a citizen for diversity purposes. The main result of Urbino is that pure PAGA actions are not removable based on diversity jurisdiction, since “federal courts lack subject matter over . . . quintessentially California dispute[s].”
Baumann is expected to settle a question left open by Urbino: whether PAGA actions are subject to removal under CAFA. Although Baumann has been stayed pending the U.S. Supreme Court’s decision in Mississippi ex rel. Hood v. AU Optronics Corp., it is unlikely that Hood will affect the analysis. Hood addresses a provision of CAFA which excludes from the definition of “mass action” any action where all of the claims arise from a single event or occurrence in the state where the action was filed. Because a PAGA action is limited to labor law violations occurring within California, it cannot be defined as a “mass action” for CAFA purposes.
Ryan Wu, Senior Counsel at Capstone Law APC, predicts that “The Ninth Circuit in Baumann will likely hold that federal courts may not exercise jurisdiction under the Class Action Fairness Act over California’s unique enforcement action under PAGA. Nothing in CAFA’s statutory language allows for federal courts to exercise jurisdiction over state-only enforcement actions. So I expect that, after Baumann, PAGA plaintiffs can be assured that their enforcement actions will remain in state court.”
In the meantime, PAGA plaintiffs should continue to rely on Washington v. Chimei Innolux Corp., 659 F.3d 842 (9th Cir. 2011), when faced with a removal under CAFA. In Washington, the Ninth Circuit makes clear that only class actions (and not actions “resembling” class actions, such as PAGA actions) are removable under CAFA. Baumann is unlikely to upend the reasoning of Chimei.
If you wish to discuss this or any other matter with us, please contact the following attorney:
Stephen Gamber, Senior Counsel, Capstone Law APC: 1840 Century Park East, Suite 450, Los Angeles, California 90067.
Phone number: 310 556 4810; or Email: Stephen.Gamber@CapstoneLawyers.com.
Visit the Capstone Law website (www.CapstoneLawyers.com) for more information about the firm. You can also visit our blog at http://capstonelawapc.wordpress.com/.
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SOURCE: Capstone Law APC