Ninth Circuit finds employee statutory claims cannot be removed under CAFA

The Ninth Circuit ruled that a would-be class action for alleged violations of the California Private Attorneys General Act (PAGA) by an employer cannot be removed from state court to federal court under the Class Action Fairness Act (CAFA) because it does not fit the CAFA definition of a “class action.” Baumann v. Chase Inv. Servs. Corp., 2014 BL 70242, 9th Cir., No. 12-55644 (March 13, 2014). Continuing a developing line of jurisprudence making it more difficult for employers to remove multi-employee claims to federal court, the Ninth Circuit found that PAGA and Rule 23 are too dissimilar for CAFA to apply. 

The case had been filed by the plaintiff on behalf of himself and other alleged “aggrieved parties” in state court alleging violations of PAGA. The complaint stated that each plaintiff’s share of alleged penalties and fees would be less than $75,000. The case was removed to federal court by the defendants based on diversity jurisdiction and CAFA. In Urbino v. Orkin Servs., 726 F.3d 1118 (9th Cir. 2013), the court had previously found that PAGA penalties may not be aggregated to meet the amount in controversy requirement for federal jurisdiction. 

In Baumann, the Ninth Circuit confronted the remaining question of whether CAFA could be used as a basis for original subject matter jurisdiction in the federal courts. Reversing the district court’s decision denying remand, the Ninth Circuit found the answer is not based on the CAFA definition of a “class action.” That definition states a class action is “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.” 

Although not brought under Federal Civil Rule 23, the defendants argued that PAGA was similar enough to Rule 23 to meet the CAFA definition of a “class action.” In finding otherwise, the court focused on the fact that the case was not commenced under the state equivalent of Rule 23 and the California Supreme Court had already found PAGA actions were not class actions under state law. Further, PAGA suits lack the defining characteristics of true class actions, making them more akin to law enforcement or parens patriae suits by state attorneys general than class actions.

Civil Rule 23 Requirements, Class Action Fairness Act