RODERICK MAGADIA, individuаlly and on behalf of all those similarly situated, Plaintiff-Appellee, v. WAL-MART ASSOCIATES, INC., a Delaware corporation; WALMART INC., a Delaware corporation, Defendants-Appellants.
No. 19-16184
UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
Filed May 28, 2021
Consuelo M. Callahan, Patrick J. Bumatay, Gregory A. Presnell
D.C. No. 5:17-cv-00062-LHK. Argued and Submitted November 19, 2020. Pasadena, California. Opinion by Judge Bumatay. *The Honorable Gregory A. Presnell, United States District Judge for the Middle District of Florida, sitting by designation.
OPINION
SUMMARY**
Article III Standing / California Labor Law
In a class action suit brought by Roderick Magadia, a former Walmart employee, alleging violations of California Labor Code’s meal-break and wage-statement requirements, the panel: (1) vacated the district court’s judgment and award of damages on a
The panel held that Magadia lacked Article III standing to bring a California Private Attorney General Act (“PAGA”) claim for Walmart’s meal-break violations since he himself did not suffer injury. Specifically, the panel noted that qui tam actions are a well-established exception to the traditional Article III analysis, but held that PAGA’s features diverged from Vermont Agency of Nat. Res. v. U.S. ex rel. Stevens, 529 U.S. 765 (2000)’s assignment theory of qui tam injury. The panel also held that PAGA’s features departed from the traditional criteria of qui tam statutes.
The panel next considered whether Magadia had standing to bring his two wage-statement claims under
Finally, the panel considered the merits of Magadia’s two claims under
COUNSEL
Theane Evangelis (argued), Julian W. Poon, Bradley J. Hamburger, and Joseph Tartakovsky, Gibson Dunn & Crutcher LLP, Los Angeles, California, for Defendants-Appellants.
Jonathan E. Taylor (argued), Deepak Gupta, Gregory A. Beck, and Daniel Wilf-Townsend, Gupta Wessler PLLC, Washington, D.C.; Larry W. Lee, Kwanporn Tulyathan, and Max Gavron, Diversity Law Group PC, Los Angeles, California; Dennis S. Hyun, Hyun Legal APC, Los Angeles, California; for Plaintiff-Appellee.
Thomas R. Kaufman, Sheppard Mullin Richter & Hampton LLP, Los Angеles, California, for Amici Curiae Employers Group and California Employment Law Council.
Matthew B. Gunter, Assistant General Counsel, RCN Capital LLC, South Windsor, Connecticut, for Amicus Curiae RCN Capital LLC.
Deanna M. Rice, O’Melveny & Myers LLP, Washington, D.C.; Anton Metlitsky, O’Melveny & Myers LLP, New York, New York; Steven P. Lehotsky and Jonathan D. Urick, U.S. Chamber Litigation Center, Washington, D.C.; Stephanie Martz, National Retail Federation, Washington, D.C.; Deborah R. White, Retail Litigation Center Inc., Arlington, Virginia; for Amici Curiae Chamber of Commerce of the United States of America, National Retail Federation, and Retail Litigation Center Inc.
Henry Hewitt and Sairah Budhwani, Legal Aid at Work, San Francisco, California, for Amicus Curiae Legal Aid at Work.
BUMATAY, Circuit Judge:
Roderick Magadia worked sales for Walmart for eight years. After the company let him go, Magadia filed a class аction suit against Wal-Mart Associates, Inc., and Walmart, Inc., (collectively, “Walmart”), alleging three violations of California Labor Code’s wage-statement and meal-break
The district court at first certified classes corresponding to each of Magadia’s three claims. After summary judgment and a bench trial, the district court found that Magadia in fact suffered no meal-break violation and decertified that class. Even so, the district court allowed Magadia to still seek PAGA penalties on that claim based on violations incurred by other Walmart employees. The district court then ruled against Walmart on the three claims and awarded Magadia and the two remaining classes over $100 million in damages and penalties.
On appeal, we hold that Magadia lacked standing to bring the meal-break claim because he did not suffer injury himself. As for the twо wage-statement claims, we hold that Magadia had standing but conclude that Walmart did not breach California law.
I.
Walmart pays its employees and issues wage statements every two weeks. Walmart also voluntarily offers quarterly “MyShare” bonuses to high-performing employees. Walmart reports these quarterly bonuses on qualifying employees’ wage statements as “MYSHARE INCT.”
Besides the bonus itself, California law requires Walmart to adjust the rate of overtime pay it awards employees to account for these bonuses. See
California law separately provides that when “an employer discharges an employee,” the employee’s wages are due “immediately.”
California law also requires employers to provide employees “a meal period of not less than 30 minutes” every five hours.
Magadia worked as a sales associate at Walmart from 2008 to 2016. In late 2016, Walmart fired Magadia and provided him with his final paycheck and a Statement of Final Pay. At the end of his last pay period with the company, Walmart also provided Magadia with his final wage statement. Magadia then filed a putative class action against Walmart in state court, alleging three California Labоr Code violations: (1) that Walmart’s wage statements violated
After removal, the district court certified a class for each of Magadia’s three claims. The district court later granted Magadia partial summary judgment on his two wage-statement claims and held a three-day bench trial on all three claims. The district cоurt ultimately ruled for Magadia on his two wage-statement claims, holding that Walmart violated both
The district court then awarded Magadia $101,947,700 for the three claims: $96 million award for the adjusted overtime-rate claim ($48 million in statutory damages and another $48 million in PAGA penalties); $5.8 million in PAGA penalties for the final-wage-statement claim; and $70,000 in PAGA penalties for the meal-break claim.
On appeal, we review findings of fact for clear error and conclusions of law de novo. OneBeacon Ins. Co. v. Haas Indus., Inc., 634 F.3d 1092, 1096 (9th Cir. 2011).
II.
Before we turn to the merits of his claims, we must ensure that Magadia has Article III standing. To meet the “irreducible constitutional minimum” of standing, a plaintiff must have (1) suffered an “injury in fact,” (2) that is “fairly traceable”
A.
1.
We start by considering whether Magadia has standing to bring a PAGA claim for the meal-break violations. Although the district court found that he did not suffer a meal-break injury himself, Magadia insists he has standing to pursue this claim because PAGA is a qui tam statute. Of course, with no individualized harm, Magadia cannot establish traditional Article III standing. See Lujan, 504 U.S. at 560 & n.1.
But qui tam actions are a “well-established exception” to the traditional Article III analysis. Spokeo, 136 S. Ct. at 1552 n.* (Thomas, J., concurring) (simplified); see Vt. Agency of Nat. Res. v. U.S. ex rel. Stevens, 529 U.S. 765, 769 n.1, 774–76 (2000) (discussing qui tam’s historical pedigree and concluding that the False Claims Act (“FCA”) was a qui tam statute). Qui tam is short for “qui tam pro domino rege quam pro se ipso in hac parte sequitur,” meаning he “who pursues this action on our Lord the King’s behalf as well as his own.” Vermont Agency, 529 U.S. at 768 n.1. A qui tam statute permits private plaintiffs, known as relators, “to sue in the government’s name for the violation of a public right.” Spokeo, 136 S. Ct. at 1552 n.* (Thomas, J., concurring).
Qui tam standing for uninjured plaintiffs flows from an assignment theory. Vermont Agency, 529 U.S. at 773–74. The Court has recognized that an “adequate basis for the relator’s suit for his bounty is to be found in the doctrine that the assignee of a claim has standing to assert the injury in fact suffered by the assignor.” Id. at 773. In a qui tam action, the government partially assigns its claims to the relator, “who then may sue based upon [the government’s] injury.” U.S. ex rel. Kelly v. Boeing Co., 9 F.3d 743, 748 (9th Cir. 1993). In other words, a “qui tam action is for a redress” of the government’s injury, and “it is the government’s injury that confers standing upon the private person.” Stalley v. Methodist Healthcare, 517 F.3d 911, 917 (6th Cir. 2008). Thus, the Court has concluded that a non-injured relator has standing when the statute “effect[еd] a partial assignment of the Government’s damages claim.” Vermont Agency, 529 U.S. at 773.
Outside the narrow “exception” of qui tam actions, however, the Supreme Court has expressed skepticism that “mere authorization to represent a third party’s interests is sufficient to confer Article III standing on private parties with no injury of their own.” Hollingsworth, 570 U.S. at 710. After all, States “have no power directly to enlarge or contract federal jurisdiction.” Fiedler v. Clark, 714 F.2d 77, 80 (9th Cir. 1983) (per curiam) (simplified). Ultimately, “standing in federal court is a question of federal law, not
Though the California Supreme Court has categorized PAGA as “a type of qui tam action,” Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348, 360 (2014), we must look beyond the mere label attached to the statute and scrutinize the nature of the claim itself. Historically, common-law courts have required an individualized showing of injury before permitting a private plaintiff to vindicate “public rights”—rights involving duties owed “to the whole community, considered as a community, in its social aggregate capacity.” Spokeo, 136 S. Ct. at 1553 (Thomas, J., concurring) (quoting 4 William Blackstone, Commentaries *5). And in the modern era, the Court has rejected several attempts by States to bypass the individualized-injury requirement of Article III by authorizing private plaintiffs to represent the States’ interests. See, e.g., Hollingsworth, 570 U.S. at 707–13.
With that in mind, we examine “historical practice” to determine whether a harm “has traditionally been regarded as a basis for a lawsuit.” Spokeo, 136 S. Ct. at 1549. A purported qui tam statute must hew closely to the traditional scope of a qui tam action for an uninjured plaintiff to maintain suit under Article III. Cf. Vermont Agency, 529 U.S. at 774 (“[T]he Constitution established that judicial power could come into play only in matters that were the traditional concern of the cоurts at Westminster[.]” (simplified)). So long as PAGA claims satisfy the traditional criteria for a qui tam action, Magadia may pursue his meal-break claim.
2.
On close inspection, PAGA has several features consistent with traditional qui tam actions—yet many that are not. Foremost among the similarities, PAGA operates as an assignment from California to a relator-type plaintiff. A PAGA plaintiff serves as a “proxy or agent of the state’s labor law enforcements agencies” and represents the “same legal right and interest as state labor law enforcement agencies.” Iskanian, 59 Cal. 4th at 380 (simplified). As part of that assignment, PAGA authorizes an aggrieved employee to recover a “civil penalty” that could have otherwise been “assessed and collected by” California’s Labor & Workforce Development Agency (“LWDA”).
Also consistent with traditional qui tam actions, PAGA requires privаte-party plaintiffs to “share a monetary judgment with the government[,] . . . with the government receiving the lion’s share.” Methodist Healthcare, 517 F.3d at 918. The FCA, for example, designates 25% of the judgment to the relator, with the rest remitted to the Federal government.
And just like qui tam statutes, PAGA permits the government to dictate whether a private plaintiff may bring a claim in the first place. For example, FCA relators must first present the government with their proposed complaint and related materials before they can start an action against a defendant; at that point the government may consider whether to “intervene and proсeed with the action” in the relator’s place.
Despite these similarities, however, PAGA differs in significant respects from traditional qui tam statutes. First, PAGA explicitly involves the interests of others besides California and the plaintiff employee—it also implicates the interests of nonparty aggrieved employees. By its text, PAGA authorizes an “aggrieved employee” to bring a civil action “on behalf of himself or herself and other current or former employees.”
This feature is atypical (if not wholly unique) for qui tam statutes.5 It conflicts with qui tam’s underlying assignment theory—that the real interest is the government’s, which the government assigns to a privatе citizen to prosecute on its behalf. Cf. Stalley v. Catholic Health Initiatives, 509 F.3d 517, 522 (8th Cir. 2007) (“A ‘private’ right is different from
a public right and qui tam cases exist to vindicate public rights.” (simplified)). And it conflicts with Article III’s core principle that each plaintiff “must assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights or
Second, a traditional qui tam action acts only as “a partial assignment” of the Government’s claim. Vermont Agency, 529 U.S. at 773 (emphasis added). The government remains the real party in interest throughout the litigation and “may take complete control of the case if it wishes.” U.S. ex rel. Taxpayers Against Fraud v. Gen. Elec. Co., 41 F.3d 1032, 1041 (6th Cir. 1994). Under the FCA, for instance, the federal government can intervene in a suit, can settle over the objections of the relator, and must give its consent before a relator can have the case dismissed.
In contrast, PAGA represents a permanent, full assignment of California’s interest to the aggrieved employee. True enough, PAGA gives California the right of first refusal in a PAGA action. An aggrieved employee can only sue if California declines to investigate or penalize an alleged violation; and California’s issuance of a citation precludes any employees from bringing a PAGA action for the same violation.
Consistent with a full assignment, an aggrieved employee’s PAGA judgment precludes California from citing the employer for the same violation. See Iskanian, 59 Cal. 4th at 381. In that way, PAGA prevents California from intervening in a suit brought by the aggrieved employee, yet still binds the State to whatever judgment results. A complete assignment to this degree—an anomaly among modern qui tam statutes—undermines the notion that the aggrieved employee is solely stepping into the shoes of the State rather than also vindicating the interests of other aggrieved employees.
3.
Our precedent also shows the lack of standing here. We have ruled that an uninjured party has no Article III standing to
Several circuit сourts have likewise concluded that comparable statutes are not qui tam for purposes of Article III, based on the same features we identify in PAGA. See, e.g., Orlando Reg’l Healthcare, 524 F.3d at 1233–34 (holding that the Medicare Secondary Payer Act “differs
materially” from a qui tam action partly because it “provides to the government none of the procedural safeguards to manage or direct an action” traditionally afforded); Methodist Healthcare, 517 F.3d at 918 (same); United Seniors Ass’n, Inc. v. Philip Morris USA, 500 F.3d 19, 24 (1st Cir. 2007) (same); Woods, 574 F.3d at 97–98 (same); Brintley v. Aeroquip Credit Union, 936 F.3d 489, 494–95 (6th Cir. 2019) (holding that a “private attorneys general” suit is not necessarily “entitled to special solicitude in an Article III standing analysis”).
***
Altogether, PAGA’s features diverge from Vermont Agency’s assignment theory of qui tam injury, and they depart from the traditional criteria of qui tam statutes. As a result, we hold that Magadia lacks standing to bring a PAGA claim for Walmart’s meal-break violations since he himself did not suffer injury.7 We remand Magadia’s meal-break claim to the district court with instructions to return it to state court. See Lee, 260 F.3d at 1008.
B.
Next, we consider whether Magadia has stаnding to bring his two wage-statement claims under
The hallmark of an Article III injury is that it is concrete and particularized. Although we often think of “tangible” injuries as the basis of this jurisdictional requirement, the Supreme Court has confirmed that “intangible injuries can nevertheless be concrete.” Spokeo, 136 S. Ct. at 1549. The omission of statutorily required information can constitute a distinct, concrete injury.8 At the same time, not “every minor inaccuracy reported in violation of [a statute] will ‘cause real harm or present any material risk of real harm.’” Robins v. Spokeo, Inc., 867 F.3d 1108, 1116 (9th Cir. 2017) (“Spokeo II”) (quoting Spokeo, 136 S. Ct. at 1550) (simplified).
To determine whether the violation of a statute constitutes a concrete harm, we engage in a two-part inquiry. We first consider “whether the statutory provisions at issue were established to protect . . . concrete interests (as opposed to purely procedural rights).” Id. at 1113. If so, we then assess “whether the specific procedural violations alleged in this case actually harm, or present a material risk of harm to, such interests.” Id.
First, we believe
required by
Second, Magadia sufficiently alleges that Walmart’s
While Walmart claims that Magadia was not harmed because it did not underpay him, the lack of the required information runs the risk of leaving him and other employees unable to determine whether that is true. As Walmart’s own witnesses confirmed, without the mandated information, employees could not tell from their
We therefore hold that Magadia has standing to bring his two claims under
III.
We turn, finally, to the merits of Magadia’s two claims under California’s wage statement statute.
statute.” Price v. Starbucks Corp., 192 Cal. App. 4th 1136, 1142 (2011) (citing
A.
First, we conclude that the wage statement law did not require Walmart to list the “rate” of the MyShare overtime adjustment on employees’ wage statements. The law requires an itemized statement with “all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee.”
Walmart did not violate the wage statement law because there was no “hourly rate[] in effect during the pay period” for the MyShare overtime adjustment. Walmart paid its employees every two weeks and provided a paystub at the end of each semimonthly pay period. At the end of a quarter (encompassing six pay periods), Walmart awarded a MyShare bonus to its employees based on performance, sales, profits, and store standards from the entire quarter. California law considers that bonus part of the employees’ base rate of pay, which in turn requires Walmart to make an after-the-fact adjustment to overtime pay. See
Under these facts, the MyShare overtime adjustment is no ordinary overtime pay with a corresponding hourly rate. It is a non-discretionary, after-the-fact adjustment to compensation based on the overtime hours worked and the average of overtime rates10 over a quarter (or six pay periods). As a recent California court recognized with a similar bonus scheme, the supposed “hourly rate” for the adjusted overtime pay “is a fictional hourly rate calculated after the pay period closes in order to comply with the Labor Code section on overtime”—“[i]t appears as part of the calculation for an overtime bonus and then disappears, perhaps never to be seen again.” Morales v. Bridgestone Retail Operations, LLC, No. G057043, 2020 WL 1164120, at *1 (Cal. Ct. App. Mar. 11, 2020) (unpublished); see also Canales v. Wells Fargo Bank, N.A., 23 Cal. App. 5th 1262 (2018) (unpublished)11 (Because “[t]he OverTimePay Override was an adjustment to the overtime payment due to an employee, based on bonuses earned by the employee for work performed during prior pay period . . . there were no
applicable hourly rates in effect during the pay period which defendant was required to include in the wage statement.”).12
As a result, we do not consider the calculation to be an “hourly rate in effect during the pay period.”
This reading is confirmed by
in the employee’s paystub. At the end of the quarter, if the employee receives a MyShare bonus and its required overtime adjustment, then Walmart must also calculate the overtime adjustment rate. But at no time during the preceding two-week pay period did the employee work under that overtime rate because it’s calculated after the close of the pay period based on the preceding six pay periods of work. For example, Magadia’s overtime adjustment “rate” was apparently about $.20 per hour. Yet there was no pay period in which Magadia ever worked overtime at an hourly rate of $.20. As this illustrates, Magadia’s reading of the statute would lead to the anomalous result of having a wage statement listing an “hourly rate” but with zero “number of hours worked” at that rate.
In sum, because Walmart must retroactively calculate the MyShare overtime adjustment based on work from six prior periods, we do not consider it an hourly rate “in effect” during the pay period for purposes of
B.
Next, we hold that Walmart’s Statements of Final Pay do not violate the wage statement statute. The law requires employers to furnish employees “semimonthly or at the time of each payment of wages” with “an accurate itemized statement in writing showing . . . the inclusive dates of the period for which the employee is paid.”
Magadia insists that Walmart violated the law by not including the “dates of the period for which the employee is paid” on his Statement of Final Pay, which he received along with his final paycheck when he was terminated in the middle of a pay period. But Walmart furnished the required pay-period dates to Magadia and other terminated employees in their final wage statements at the end of the next semimonthly pay period. By the plain meaning of the statute, Walmart had the option of furnishing the required wage statement in this way and thus Walmart complied with the law.15
IV.
For these reasons, we VACATE the district court’s judgment and award of damages on the