Lead Opinion
OPINION
This is a civil action filed in California state court under the California Labor Code Private Attorneys General Act of 2004 (“PAGA”), Cal. Lab.Code §§ 2698-2699.5, and then removed to the United States District Court for the Central District of California. PAGA authorizes aggrieved employees, acting as private attorneys general, to recover сivil penalties from their employers for violations of the Labor Code. See Arias v. Super. Ct.,
In Urbino v. Orkin Services,
I.
Factual and Procedural Background
Joseph Baumann sued his employer, Chase Investment Servicеs Corporation (“Chase”), under PAGA in California superior court, alleging that Chase had failed to pay him and other “Aggrieved Parties” (Chase financial advisors) for overtime, provide for meal breaks, allow rest periods, and timely reimburse expenses. The complaint sought PAGA statutory civil penalties for eaсh alleged violation, and asserted that Baumann’s potential share of
Chase filed a notice of removal, invoking diversity jurisdiction under § 1332(a) and alleging that the amount in controversy exceeded $75,000 if all potential statutory penalties and attorneys fee awards were aggregated. The notice of removal also invoked CAFA jurisdiction under § 1332(d)(2), alleging minimal diversity, a class of more than 100 members, and an amount in controversy exceeding $5,000,000. The district court denied Bau-mann’s motion to remand, aggregating the potential claims against Chase and finding subjeсt matter jurisdiction under § 1332(a). The court accordingly declined to address CAFA jurisdiction.
The district court certified its order denying Baumann’s motion to remand, and we permitted an appeal to be taken from that order. See 28 U.S.C. § 1292(b). Section 1292(b) authorizes appeals from orders, not questions, so “our review of the present controversy is not automatically limited solely to the question deemed controlling by the district court.” In re Cinematronics, Inc.,
II.
CAFA Jurisdiction
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 сlaims 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). There is no question that this PAGA action involves statutory violations allegedly suffered by more than 100 Chase employees, that the citizenship of onе of those employees is different than Chase’s, or that the aggregated statutory penalties sought exceed $5,000,000. Therefore, the only issue for decision is whether this is a “class action.”
A “class action” is defined by CAFA as “any civil action filed under rule 23 of the Federal Rules of Civil Procedure or similar State statute or rule of judicial procedure authorizing an action to be brought by 1 or more representative persons as a class action.” Id. § 1332(d)(1)(B). Because this action was commenced in California state court, it clearly was not filed pursuant to Federal Rule of Civil Procedure 23. The question before us thus boils down tо “whether the suit was ‘filed under’ a state statute or rule of judicial procedure ‘similar’ to Rule 23 that authorizes a class action.” Purdue Pharma L.P. v. Kentucky,
1. PAGA
The California legislature enacted PAGA because of inadequate financing and staffing to enforce state labor laws. 2003
2. PAGA and Class Actions
Section 382 of the California Code of Civil Procedure authorizes a class action if “the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court.” In addition, before a class may be certified
a party must establish the existence of both an ascertainable class and a well-defined community of interest among the class members. The community of interest requirement involves three faсtors: (1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class.
Linder v. Thrifty Oil Co.,
The complaint in this case did not invoke the California class action statute. The state Labor Code is silent as to whether a PAGA action is a “class action,” but the California Supreme Court has authoritatively addressed that issue, holding that PAGA actions are not class actions under state law. Arias,
The state high court’s decision, however, does not end our inquiry. CAFA does not require that a suit be filed under a state class action statute or rule, but only that the action be brought under a “similar State statute or rule of judicial procedure authorizing an action to be brought by 1 or more representative persons as a class action.” 28 U.S.C. § 1332(d)(1)(B). “A state statute or rule is ‘similar’ to Federal Rule of Civil Procedure 23 if it closely resembles Rule 23 or is like Rule 23 in substance or in essentials.” West Virginia ex rel. McGraw v. CVS Pharmacy, Inc.,
The substance and essentials of Rule 23 are familiar. Rule 23 allows for class actions “only if’:
(1) the class is so numerous that joinder of all members is impracticable;
(2) there are questions of law or fact common to the class;
*1122 (8) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and
(4) the representative parties will fairly and adequately protect the interests of thе class.
Fed.R.Civ.P. 28(a). In addition, a class action cannot be maintained unless one of the three requirements of Rule 23(b) is also met. A class certification order is subject to the detailed requirements of Rule 23(c) both as to form and notice.
In determining whether PAGA is sufficiently “similar” to Rule 23 to qualify under CAFA as a statute “authorizing a[] [class] action,” we do not write on a blank analytical slate. In Chimei, we held that “parens patriae suits filed by state Attorneys General may not be removed to federal court because the suits are not ‘class actions’ within the plain meaning of CAFA.”
Applying the Chimei rubric, we conclude that PAGA actions are also not sufficiently similar to Rule 23 class actions to trigger CAFA jurisdiction. Unlike Rule 23(c)(2), PAGA has no notice requirements for unnamed aggrieved employees, nor may such employees opt out of a PAGA action. In a PAGA action, the court does not inquire into the named plaintiffs and class counsel’s ability to fairly and adequately rеpresent unnamed employees— critical requirements in federal class actions under Rules 23(a)(4) and (g). See, e.g., Phillips Petroleum Co. v. Shutts,
In addition, the finality of PAGA judgments differs distinctly from that of class action judgments. The Federal Rules ensure that mеmbers of the class receiving notice and declining to opt out are bound by a judgment. Fed.R.Civ.P. 23(c)(3). Class action judgments are also preclusive as to all claims the class could have brought. Cooper v. Fed. Reserve Bank of Richmond,
In contrast, PAGA expressly provides that employees retain all rights “to pursue or recover other remedies avаilable under state or federal law, either separately or concurrently with an action taken under this part.” Cal. Lab.Code § 2699(g)(1). “[I]if the employer defeats a PAGA claim, the nonparty employees, because they were not given notice of the action or afforded an opportunity to be heard, are not bound by the judgment as to remedies other than civil penalties.” Ochoa-Hernandez v. Cjaders Foods, Inc., No. C 08-2073 MHP,
In short, “a PAGA suit is fundamentally different than a class action.” McKenzie v. Fed. Express Corp.,
The nature of PAGA penalties is also markedly different than damages sought in Rule 23 class actions. In class actions, damаges are typically restitution for wrongs done to class members. But PAGA actions instead primarily seek to vindicate the public interest in enforcement of California’s labor law. See Sample v. Big Lots Stores, Inc., No. C 10-03276 SBA,
Despite these fundamental differences, Chase argues that PAGA actions arе “class actions” under CAFA because PAGA is a state procedural law that would be displaced by Rule 23 in federal court under the rationale of Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co.,
In contrast, the issue before us is simply one of statutory construction — whether the action sought to be removed was “filed under ” a state statute “similar” to Rule 23. We do not today decide whether a federal court may allow a PAGA action otherwise within its original jurisdiction to proceed under Rule 23 as a class action. We hold only that PAGA is not sufficiently similar to Rule 23 to establish the original jurisdiction of a federal court under CAFA.
III.
Conclusion
For the reasons above, we hold thаt the district court could not exercise jurisdiction over this removed PAGA action under CAFA. And because, in light of Urbino, there was also no federal subject matter jurisdiction under § 1332(a), see supra n. 1, Baumann’s motion to remand should have been granted. We reverse with instructions to grant that motion.
REVERSED AND REMANDED WITH INSTRUCTIONS.
Notes
. Because it is undisputed that Baumann’s portion of any recovery (including fees) would be less than $75,000, we hold for the reasons explained in Urbino that the district court erred in finding the amount in controversy requirement in § 1332(a) satisfied.
. (1) Certification Order.
(A) Time to Issue. At an early practicable time after a person sues or is sued as a class representative, the court must determine by order whether to certify the action as a class action.
(B) Defining the Class; Appointing Class Counsel. An order that certifies a class action must define the class and the class claims, issues, or defenses, and must appoint class counsel under Rule 23(g).
(C) Altering or Amending the Order. An order that grants or denies class certification may be altered or amended before final judgment.
(2) Notice.
(A) For (b)(1) or (b)(2) Classes. For any class cеrtified under Rule 23(b)(1) or (b)(2), the court may direct appropriate notice to the class.
For (b)(3) Classes. For any class certified under Rule 23(b)(3), the court must direct to class members the best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort. The notice must clearly and concisely state in plain, easily understood language:
(i) the nature of the action;
(ii) the definition of the class certified;
(iii) the class claims, issues, or defenses;
(iv) that a class member may enter an appearance through an attorney if the member so desires;
(v) that the court will exclude from the class any member who requests exclusion;
(vi) the time and manner for requesting exclusion; and
(vii) the binding effect of a class judgment on members under Rule 23(c)(3).
Fed.R.Civ.P. 23(c).
Concurrence Opinion
concurring:
I concur in the majority opinion. I write separately only to note my prior disagreement on the question of whether claims under the Labor Code Private Attorney General Act of 2004, Cal. Lab.Code § 2698 et seq, can be aggregated in determining whether diversity jurisdiction exists. Urbino v. Orkin Services of California, Inc.,