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Wednesday, May 28, 2014

Baumann v. Chase Inv. Services Corp.: CAFA Provides No Basis for Federal Jurisdiction Over PAGA Action

Baumann v. Chase Inv. Services Corp., ___ F.3d ___, (9th Cir. Mar. 14, 2014) presents a single issue, stated as follows by the Ninth Circuit:
In Urbino v. Orkin Services, 726 F.3d 1118 (9th Cir. 2013) [discussed here] we held that potential PAGA penalties against an employer may not be aggregated to meet the minimum amount in controversy requirement of 28 U.S.C. § 1332(a). The remaining issue in this appeal is whether a district court may instead exercise original jurisdiction over a PAGA action under the Class Action Fairness Act of 2005 ("CAFA"), 28 U.S.C. §§ 1332(d), 1453, 1711-15. We hold that CAFA provides no basis for federal jurisdiction.
The Court began by explaining CAFA original jurisdiction as follows:
CAFA confers original jurisdiction to the district courts "of any civil action in which the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs, and is a class action in which any member of the class of plaintiffs is a citizen of a State different from any defendant." 28 U.S.C. § 1332(d)(2)-(A). The claims of class members may be aggregated to determine whether the amount in controversy requirement has been satisfied. Id. § 1332(d)(6). The class also must have at least 100 members. Id. § 1332(d)(5)(B).
The Court the held that a PAGA action does not satisfy the "class action" requirement of section 1332(d)(2)-(A). It reasoned that PAGA actions are not class actions under state law, nor do they arise under a state law that "closely resembles Rule 23 or is like Rule 23 in substance or in essentials." Among other differences between PAGA actions and class actions:
PAGA does not require notice to unnamed aggrieved employees; 
Aggrieved employees may not opt out of a PAGA action; 
A PAGA plaintiff need not prove numerosity, commonality, typicality, or adequacy of representation; and 
If an employer defeats a PAGA action, unnamed aggrieved employees are not bound by the judgment, except as to PAGA remedies. 
"In the end, Rule 23 and PAGA are more dissimilar than alike. 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."

Baumann is available here.

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