Urbino v. Orkin Servs. of California, Inc., 726 F.3d 1118

Background

Plaintiff John Urbino, a California citizen and former hourly employee, brought a representative action under California's Private Attorneys General Act of 2004 (PAGA) alleging wage-and-hour violations on behalf of himself and other aggrieved employees.
Defendants are out-of-state corporate citizens who removed the action to federal court asserting diversity jurisdiction, arguing aggregate PAGA penalties exceed $75,000.
Defendants presented evidence of hundreds of affected employees and thousands of paychecks, estimating total statutory penalties well above the jurisdictional threshold; Urbino moved to remand.
The district court denied remand, concluding PAGA claims are common and undivided and therefore aggregable to meet the amount-in-controversy requirement.
The Ninth Circuit, on interlocutory appeal, reviewed de novo whether the aggregated PAGA penalties could be used to establish diversity jurisdiction.
The majority held PAGA recoveries are individual rights held severally by employees (the State is the real party in interest for enforcement), so multiple employees’ penalties cannot be aggregated for diversity; the case must be remanded to state court.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether statutory PAGA penalties attributable to multiple aggrieved employees may be aggregated to satisfy the $75,000 amount-in-controversy for diversity jurisdiction	Urbino: claims are individual and his recovery alone is below $75,000 (remand urged)	Defendants: PAGA is a representative action vindicating a single, collective state interest; penalties across aggrieved employees can be aggregated	Held for remand: PAGA claims derive from individual rights; claims are separate and cannot be aggregated for diversity
Whether a PAGA suit is effectively the State's action such that the State's interest can supply diversity citizenship or enable aggregation	Urbino contends the State is real party in interest but is not a citizen for diversity purposes, so aggregation for federal jurisdiction is improper	Defendants argue the plaintiff acts as the State’s proxy and seeks collective penalties, akin to a single plaintiff aggregating multiple claims	Held for remand: state is not a citizen for diversity; actions primarily benefiting the state cannot be used to create federal diversity jurisdiction
Applicability of the common-and-undivided-interest test (Snyder/Troy Bank) to representative PAGA claims	Urbino: the interest is individual; PAGA plaintiffs do not have a common undivided interest across employees	Defendants: PAGA plaintiffs enforce a unitary statutory interest, so Snyder aggregation applies	Held for remand: plaintiffs’ claims are several, not a common undivided group interest; anti-aggregation rule controls
Whether the district court properly denied remand given precedent distinguishing individual vs. group rights	Urbino: relying on Troy Bank, Snyder, Eagle, Gibson to argue against aggregation	Defendants: reliance on California decisions describing PAGA as a law-enforcement action to justify aggregation	Held for remand: federal courts lack subject-matter jurisdiction under §1332; remand ordered

Key Cases Cited

Troy Bank v. G.A. Whitehead & Co., 222 U.S. 39 (U.S. 1911) (multiple plaintiffs with separate claims cannot aggregate to meet amount-in-controversy)
Snyder v. Harris, 394 U.S. 332 (U.S. 1969) (representative/class-member claims aggregate only when they assert a common and undivided interest)
Arias v. Superior Court, 46 Cal.4th 969 (Cal. 2009) (PAGA deputizes employees to enforce state labor laws; the action primarily vindicates the State's interest)
Eagle v. American Tel. & Tel. Co., 769 F.2d 541 (9th Cir. 1985) (look to the source of plaintiffs’ claims to determine aggregability)
Navarro Savings Ass’n v. Lee, 446 U.S. 458 (U.S. 1980) (courts must examine citizenship of the real parties in interest; disregard nominal parties)
Moor v. County of Alameda, 411 U.S. 693 (U.S. 1973) (a State is not a citizen for diversity jurisdiction)
Potrero Hill Cmty. Action Comm. v. Housing Auth., 410 F.2d 974 (9th Cir. 1969) (common factual or legal questions do not establish a common and undivided interest for aggregation)
Gibson v. Chrysler Corp., 261 F.3d 927 (9th Cir. 2001) (defendant’s obligation to a group must be joint, not several, for aggregation to apply)
Taylor v. Sturgell, 553 U.S. 880 (U.S. 2008) (preclusion and representation principles relevant to proxy/representative suits)