Private Attorney General Act of 2004 (‘PAGA’) Does Not Qualify as Class Action Under Class Action Fairness Act for Purposed of Federal Diversity Jurisdiction

Federal District Courts May Not Exercise Jurisdiction Over PAGA Actions Under the Class Action Fairness Act

Defendants in PAGA actions will not be able to remove their cases to the federal courts using CAFA after a recent decision. In the case of Baumann v. Chase Inv. Servs. Corp., 747 F.3d 1117 (9^th Cir. 2014), the Ninth Circuit held that the California Labor Code Private Attorneys General Act of 2004 (“PAGA”), Cal. Lab. Code §§ 2698-2699.5. is not a “class action” as defined by the Class Action Fairness Act for purposes of diversity jurisdiction. The Court analyzed PAGA and ultimately found that it is not similar enough to the federal class action rule, to allow the district courts to use CAFA to exercise jurisdiction over PAGA.

Factual Basis of the Case

This case arose when Joseph Baumann sued his employer, Chase Investment Services Corporation (“Chase”) under PAGA. Baumann alleged that Chase had failed to pay him and others for overtime, failed to provide breaks and rest periods, and failed to reimburse expenses. Baumann had filed his claim in state court. In response, Chase filed a note of removal to federal court on the basis of diversity jurisdiction and the amount in controversy. In the notice of removal, Chase also invoked the Class Action Fairness Act of 2005 (“CAFA”). Chase argued that CAFA required removal to the federal district court because at least one plaintiff was from a different state than the defendants and the amount in controversy exceeded five million dollars. The district court allowed removal on the basis of Chase’s first argument, diversity, and did not address CAFA. Baumann appealed, arguing that the district court did not have subject matter jurisdiction over the action.

The Appeal

The sole question on appeal was whether or not CAFA confers jurisdiction over this suit. CAFA confers original jurisdiction in the district courts for any suits, seeking damages in excess of five-million dollars, so long as any member of the class of plaintiffs is a citizen of a different state than the defendant. Neither party disputed that this action involved more than 100 employees and exceeded five million dollars, so the sole question on appeal was whether or not a PAGA claim constitutes a “class action” as defined by CAFA.

According to CAFA, a class action is any claim filed under Federal Rule of Civil Procedure Rule 23 (“FRCP 23”) or any similar state rule. Since Baumann filed his claim under PAGA, the Court of Appeal had to determine whether or not PAGA was sufficiently similar to FRCP 23. In analyzing the claim, the California Supreme Court first distinguished PAGA from laws authorizing class action suits. Unlike class action laws, PAGA essentially empowers private citizens to act as private attorney generals. The Ninth Circuit Agreed that PAGA is not similar enough to FRCP 23 to trigger CAFA jurisdiction. PAGA has none of the markings of traditional Rule 23 class actions; PAGA, for instance, does not require numerosity, commonality, and typicality. Furthermore, unlike class actions, PAGA does not preclude impacted non-parties from bringing subsequent suits in their own name. In sum, the court found that PAGA and Rule 23 are fundamentally different. “A PAGA action is at heart a civil enforcement action filed on behalf of and for the benefit of the state, not a claim for class relief.” For this reason, the district court could not use CAFA to exercise jurisdiction over this PAGA claim. The court therefore reversed the district court with instructions to grant Baumann’s motion for remand.

Baumann’s Impact

Baumann is critically important for employees who might seek to hold their employers accountable for violations of the Labor Code. PAGA is essentially a law enforcement statute, because it incentivizes private citizens to seek redress for violations of the California Labor Code. Had the court decided that PAGA was a “class action” as defined by CAFA, then employees might be forced to litigate in the federal courts. CAFA arguably makes it much harder for wronged employees to bring and maintain a class action. But after Baumann, employees have at least one further basis to keep their lawsuits in the courts in which they chose to bring their claims. If you have any employment-related dispute and are considering suing your employer under PAGA, contact the employment attorneys at Nassiri Law Group, practicing in Orange County, Riverside, and Los Angeles. Call (949) 375-4734.