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Media Alerts - Baumann v. Chase Investment Services Corp - Ninth Circuit
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April 1, 2014
  Baumann v. Chase Investment Services Corp - Ninth Circuit
Headline: Ninth Circuit reverses the district court's denial of plaintiff's motion to remand civil action brought in California Superior court under the California Labor Code Private Attorneys General Act of 2004 (PAGA) and holds the district court lacks subject matter jurisdiction.

Area of Law: Fourteenth Amendment; Federal Civil Procedure

Issue Presented: Whether the district court could exercise subject matter jurisdiction over the removed PAGA action under the Class Action Fairness Act of 2005 (CAFA).

Brief Summary: On behalf of himself and other employees, plaintiff-employee filed a civil action against defendant-employer in California state court under PAGA. After defendant removed to the United States District Court invoking diversity jurisdiction under §1332(a) and CAFA, plaintiff filed a motion to remand. In denying plaintiff's motion to remand the district court held that subject matter jurisdiction existed based on §1332(a) diversity of citizenship because the potential claims against defendant could be aggregated to meet the amount in controversy. The district court declined to address CAFA jurisdiction which allows aggregation of claims where the amount in controversy exceeds $5 million. Plaintiff appealed.

The Ninth Circuit panel reversed the district court's denial of plaintiff's motion and held that PAGA actions are not sufficiently similar to Rule 23 class actions to confer CAFA jurisdiction because (1) PAGA suits lack essential "hallmarks of Rule 23 actions" and (2) the nature of a PAGA action is to enforce California labor laws rather than to provide restitution for wrongs done to class members.

Extended Summary: Plaintiff, an employee of defendant-Chase Investment Services ("Chase"), sued Chase under PAGA in California superior court alleging that Chase failed to provide him and other employees with overtime pay, meal breaks, rest periods and timely expense reimbursements. Chase filed a notice of removal invoking diversity jurisdiction and federal question jurisdiction under CAFA. Plaintiff filed a motion to remand but the district court denied the motion holding that subject matter jurisdiction existed based on diversity of citizenship because the penalties sought by plaintiff and other employees could be aggregated to meet the minimum amount in controversy under CAFA.

Applying Urbino v. Orkin Services of California, Inc., the Ninth Court panel determined that PAGA penalties against an employer may not be aggregated to meet the minimum amount in controversy requirement of 28 U.S.C. § 1332(a). To determine whether the cause of action could still be heard in federal court the panel considered whether the PAGA suit (which authorizes aggrieved employees to act as "private attorneys general" and to "recover civil penalties from their employers for violations of the Labor Code") constitutes a class action under CAFA (which defines a "class action" as "any civil action filed under rule 23 of the Federal Rules of Civil Procedure or similar State statute or rule of judicial procedure").

In applying the rule that a state rule is similar to Rule 23 "if it closely resembles Rule 23 or is like [it] in substance or in essentials," the panel held that PAGA actions are fundamentally different from Rule 23 actions because (1) the nature of the suits are essentially law enforcement actions since aggrieved employees only receive 25% of penalties collected and (2) the suits lack essential "hallmarks of Rule 23" such as a notice requirement for unnamed employees, ability to opt out of the action, and inquiry by the court of the adequacy of representation.

Panel: Judges Hawkins, Thomas, and Hurwitz

Date of Issued Opinion: March 13, 2014

Docket Number: 2:11-cv-06667-GHK-FMO

Decided: Reversed and remanded

Case Alert Author: Monique Midose

Author of Opinion: Judge Hurwitz

Case Alert Circuit Supervisor: Professor Glenn Koppel

    Posted By: Glenn Koppel @ 04/01/2014 06:32 PM     9th Circuit  

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