PAGA Claims Remain In State Court Where They Belong

Workers in California have a powerful tool for combating wage and hour violations:  the Private Attorneys General Act, or PAGA, California Labor Code section 2698, et seq.  PAGA allows workers to bring civil cases seeking penalties that otherwise would be available only to the Labor and Workforce Development Agency.

PAGA cases are almost always filed in state court.  Employers seeking to defeat PAGA actions have increasingly been attempting to remove them to federal court.  This is because federal judges are generally viewed as more pro-employer on the issues that arise in PAGA cases than state court judges.  In other words, employers believe that they are more likely to win in PAGA actions if they are in federal court.

However, in another win for plaintiffs who seek to bring PAGA actions, the Ninth Circuit recently held that PAGA claims are not class actions.  Thus, they are not subject to the Class Action Fairness Act, or CAFA.  CAFA allows certain class actions that otherwise would be heard in state court to be removed to federal court.

In Baumann v. Chase Investment Services Corp. (9th Cir.2014) No. 12-55644, the plaintiff brought a PAGA suit against Chase, his employer, in state court.  He claimed that Chase had unlawfully denied meal and rest breaks and overtime to him and his co-workers.  Chase then removed the case to federal court, presumably to gain some sort of tactical advantage.

Chase claimed that there were two reasons that the case should be in federal court.  First, Chase argued that under traditional principles of diversity, the case could be removed because the amount in controversy was more than $75,000 .  (Generally speaking, when the parties in a lawsuit are from different states, and the amount claimed is more than $75,000 in the aggregate, the lawsuit can be removed to federal court.)  Second, Chase argued that the total amount in controversy was more than five million dollars ($5,000,000). (Generally speaking, under CAFA, class actions can be removed to federal court when the total damages sought exceed five million dollars.)

When the plaintiff in Baumann sought to return the case to state court, the federal district court found that the case had been properly removed under traditional principles of diversity jurisdiction.  The district court did not address the CAFA issue.

While Baumann was pending, the Ninth Circuit issued its opinion in Urbino v. Orkin (9th Cir.2013) 726 F.3d 1118.  In Urbino, the court held that PAGA claims could not be combined for the purpose of determining whether there was enough money in controversy to meet the requirements of diversity jurisdiction.  This is because the claimants in PAGA claims did not have sufficient “common and undivided” interests.  The court also noted that the State of California is the real party in interest in PAGA actions, and that the State is not a party for the purpose of determining diversity.

Baumann, then, was left to resolve the issue of whether PAGA cases could be removed under CAFA.  The court held that PAGA cases are not similar enough to class actions for CAFA to apply, for the following reasons:

• PAGA does not contain a requirement that other workers be notified of the pending claims
• Other workers do not have the option of opting out of PAGA cases
• In PAGA cases, there is no determination that the class representatives and class counsel are able to fairly and adequately represent the employees
• In PAGA cases, a claimant does not need to show typicality, commonality, or numerosity
• Nonparty employees are not bound by the holding of a PAGA action with respect to remedies other than the PAGA penalties

Ultimately, according to the Ninth Circuit, a PAGA case is “at heart a civil enforcement action filed on behalf of and for the benefit of the state.”  It is not a class action.  Baumann, then, in conjunction with Urbino, means that PAGA actions will remain in state court where they belong.

The attorneys at Hunter Pyle Law have successfully handled numerous PAGA actions.  They also give presentations to other attorneys regarding updates in PAGA law.  If you have a question about your rights in the workplace, please contact us for a free consultation at 510.444.4400 or inquire@hunterpylelaw.com.