Mondragon v. Capital One Auto Finance: Ninth Circuit Clarifies CAFA "Local Controversy" Rule

Mondragon v. Capital One Auto Finance, ___ F.3d ___ (9th Cir. 11/27/13) concerns the "local controversy" exception to the general rules of federal jurisdiction set forth in the Class Action Fairness Act of 2005 (CAFA). 

The Court gives a good overview of CAFA and the local controversy exception: 

Through CAFA, Congress broadened federal diversity jurisdiction over class actions by, among other things, replacing the typical requirement of complete diversity with one of only minimal diversity, see id. § 1332(d)(2), and allowing aggregation of class members’ claims to satisfy a minimum amount in controversy of $5 million, see id. § 1332(d)(6). However, Congress also provided exceptions allowing certain class actions that would otherwise satisfy CAFA’s jurisdictional requirements to be remanded to state court. Among these is the exception commonly referred to as the local controversy exception, set forth in 28 U.S.C. § 1332(d)(4)(A). One of the requirements of the local controversy exception is that “greater than two-thirds of the members of all proposed plaintiff classes in the aggregate are citizens of the State in which the action was originally filed.” Id. § 1332(d)(4)(A)(i)(I). 

Slip op. at 3-4. 

The Court held that the plaintiff failed to show that a class of people who "purchased a vehicle in California for personal use to be registered in the State of California" would necessarily be California citizens, and the district court erred in relying on an inference that more than two-thirds of such class members would be California citizens. The Court remanded with instructions that the district court allow the plaintiff an opportunity to renew his motion to remand and to take jurisdictional discovery tailored to proving that more than two-thirds of the putative class are citizens of California. 

The opinion is available here.

Urbino v. Orkin: PAGA Penalties Not Aggregated to Satisfy Amount In Controversy Requirement for Federal Diversity Jurisdiction

Urbino v. Orkin Services of California, Inc., ___ F.3d ___ (9th Cir. 8/13/13) addresses federal jurisdiction over claims under California's Labor Code Private Attorneys General Act (PAGA).

Urbino filed a PAGA representative action against Orkin for alleged meal period, overtime, and vacation pay violations. Orkin removed, and the district court denied Urbino's motion to remand, holding that the potential penalties could be aggregated to satisfy the $75,000 amount in controversy requirement of diversity jurisdiction. The Ninth Circuit reversed, holding that the penalties cannot be aggregated. 

The claims of class members can be aggregated to meet the jurisdictional amount requirement only when they “unite to enforce a single title or right in which they have a common and undivided interest.” Slip op. at 7. Employees' rights under the Labor Code are held individually, and their claims cannot be aggregated: "Each employee suffers a unique injury—an injury that can be redressed without the involvement of other employees." Slip op. at 8. 

The Court rejected Orkin's argument that Urbino asserted not his individual interest, but rather the state’s "collective interest" in enforcing its labor laws through PAGA.

To the extent Plaintiff can—and does—assert anything but his individual interest, however, we are unpersuaded that such a suit, the primary benefit of which will inure to the state, satisfies the requirements of federal diversity jurisdiction. The state, as the real party in interest, is not a “citizen” for diversity purposes. 

Slip op. at 9. 

The opinion is available here.