Joseph Baumann v. Chase Investment Services Corp
747 F.3d 1117
9th Cir.2014Background
- Plaintiff Joseph Baumann sued Chase in California state court under the California Labor Code Private Attorneys General Act (PAGA), alleging wage-and-hour violations and seeking statutory civil penalties on behalf of the State and other aggrieved employees.
- Baumann asserted his share of any recovery (including fees) would be less than $75,000. The complaint did not invoke California’s class-action statute (Cal. Civ. Proc. Code § 382).
- Chase removed to federal court asserting (1) diversity jurisdiction under 28 U.S.C. § 1332(a) by aggregating potential PAGA penalties and attorneys’ fees, and (2) CAFA jurisdiction under 28 U.S.C. § 1332(d) (alleging minimal diversity, >100 members, and >$5,000,000 in controversy).
- The district court denied remand, relying on aggregation under § 1332(a); this panel reviews whether CAFA independently supplies federal jurisdiction (i.e., whether a PAGA suit is a “class action” under CAFA).
- The Ninth Circuit concludes PAGA suits are not “class actions” under CAFA because PAGA lacks core Rule 23 attributes (numerosity/commonality/typicality/adequacy, notice/opt-out, certification procedures) and functions as a state enforcement action primarily for the public interest.
- Because aggregation for § 1332(a) was foreclosed by Urbino, and CAFA does not apply, the Ninth Circuit reverses and directs remand to state court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CAFA confers original federal jurisdiction over a PAGA suit by treating it as a "class action" under 28 U.S.C. § 1332(d)(1)(B) | Baumann: PAGA is not a federal class action; remand required. | Chase: PAGA is sufficiently similar to Rule 23 (or would be displaced by Rule 23 under Shady Grove), so CAFA applies and federal jurisdiction exists. | PAGA is not a CAFA "class action"; CAFA jurisdiction does not apply. |
| Whether PAGA’s procedural and substantive features are similar to Rule 23 | Baumann: PAGA lacks numerosity/commonality/typicality/adequacy, no notice/opt-out, no certification procedures. | Chase: PAGA’s representative enforcement resembles class actions and can be aggregated under CAFA. | Court: PAGA substantially differs from Rule 23 (and from state statutes "similar" to Rule 23); lacks the hallmarks required by CAFA. |
| Whether PAGA judgments have the same preclusive and opt-out effects as Rule 23 class judgments | Baumann: PAGA does not bind nonparty employees in the same way; employees retain independent remedies. | Chase: Characterizes PAGA recovery as functionally similar to class recovery for amount-in-controversy purposes. | Court: PAGA judgments are not equivalent to Rule 23 judgments; finality and preclusive effects differ materially. |
| Whether Shady Grove compels treating PAGA as a Rule 23-like procedure in federal court | Chase: Shady Grove shows federal Rule 23 can displace contrary state procedural law; PAGA would be displaced and thus is "filed under" a Rule-23-like law. | Baumann: The present inquiry is statutory — whether PAGA is similar to Rule 23 for CAFA purposes — and Shady Grove does not alter that statutory construction. | Court: Shady Grove is inapposite; this is a statutory-definition question and PAGA is not "similar" to Rule 23 for CAFA. |
Key Cases Cited
- Arias v. Superior Court, 46 Cal.4th 969 (Cal. 2009) (establishes PAGA as a private attorney-general enforcement mechanism)
- Urbino v. Orkin Servs., 726 F.3d 1118 (9th Cir. 2013) (PAGA penalties may not be aggregated to meet § 1332(a) amount-in-controversy)
- Washington v. Chimei Innolux Corp., 659 F.3d 842 (9th Cir. 2011) (parens patriae suits are not CAFA "class actions")
- Purdue Pharma L.P. v. Kentucky, 704 F.3d 208 (2d Cir. 2013) (analysis of whether state representative suits are "similar" to Rule 23)
- Shady Grove Orthopedic Assocs. v. Allstate Ins. Co., 559 U.S. 393 (2010) (addresses displacement of state procedural rules by FRCP 23; distinguished here)