Baumann v. Chase Inv. Servs. Corp.

• Decision Date: 13 March 2014
• Docket Number: No. 12–55644.,12–55644.
• Citation: 747 F.3d 1117
• Parties: Joseph BAUMANN, individually, and on behalf of other members of the general public similarly situated, Plaintiff–Appellant, v. CHASE INVESTMENT SERVICES CORP., a Delaware corporation; JPMorgan Chase Bank NA; JPMorgan Chase & Co., a Delaware corporation, Defendants–Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

747 F.3d 1117

Joseph BAUMANN, individually, and on behalf of other members of the general public similarly situated, Plaintiff–Appellant,

v.CHASE INVESTMENT SERVICES CORP., a Delaware corporation; JPMorgan Chase Bank NA; JPMorgan Chase & Co., a Delaware corporation, Defendants–Appellees.

No. 12–55644.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 5, 2013.

Submission Vacated Aug. 13, 2013.

Resubmitted March 6, 2014.

Filed March 13, 2014.

Glenn A. Danas (argued), and Ryan H. Wu, Capstone Law APC, Los Angeles, CA, Marc Primo, Initiative Legal Group APC, Los Angeles, CA, for Plaintiff–Appellant.

Carrie A. Gonell (argued) and John A. Hayashi, Morgan, Lewis & Bockius LLP, Irvine, CA; Samuel S. Shaulson, New York, NY; and Alison B. Willard, San Francisco, CA, for Defendants–Appellees.

Allen Graves (argued) and Elizabeth Sullivan, The Graves Firm, Pasadena, CA, for Amicus Curiae Stacy Thompson.

George W. Abele and Melinda A. Gordon, Paul Hastings LLP, Los Angeles, CA; Robin S. Conrad, Kate Comerford Todd, and Shane B. Kawka, National Chamber Litigation Center, Washington, D.C., for Amicus Curiae California Employment Law Council and Chamber of Commerce of the United States of America.

Appeal from the United States District Court for the Central District of California, George H. King, Chief District Judge, Presiding. D.C. No. 2:11–cv–06667–GHK–FMO.

Before: MICHAEL DALY HAWKINS, SIDNEY R. THOMAS, and ANDREW D. HURWITZ, Circuit Judges.

OPINION

HURWITZ, Circuit Judge:

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 civil penalties from their employers for violations of the Labor Code. See Arias v. Super. Ct., 46 Cal.4th 969, 95 Cal.Rptr.3d 588, 209 P.3d 923, 929–30 (2009). The sole question presented on appeal is whether the district court had subject matter jurisdiction over this removed action.

In Urbino v. Orkin Services, 726 F.3d 1118 (9th Cir.2013), we held that potential PAGA penalties against an employer may not be aggregated to meet the minimum amount in controversy requirement of 28 U.S.C. § 1332(a). The remaining issue in this appeal is whether a district court may instead exercise original jurisdiction over a PAGA action under the Class Action Fairness Act of 2005 (“CAFA”), 28 U.S.C. §§ 1332(d), 1453, 1711–15. We hold that CAFA provides no basis for federal jurisdiction.

I.Factual and Procedural Background

Joseph Baumann sued his employer, Chase Investment Services 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 each alleged violation, and asserted that Baumann's potential share of any penalties recovered and attorneys' fees would be less than $75,000.

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 Baumann's motion to remand, aggregating the potential claims against Chase and finding subject 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. See28 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., 916 F.2d 1444, 1449 (9th Cir.1990). And, because the sole question remaining in this appeal—whether a PAGA suit is a “class action” as defined in CAFA, 28 U.S.C. § 1332(d)(1)(B)—is a purely legal issue, which we review de novo, Washington v. Chimei Innolux Corp., 659 F.3d 842, 846–47 (9th Cir.2011), we choose as a matter of judicial economy to address it in the first instance.¹

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 claims 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 one 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 to “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, 704 F.3d 208, 214 (2d Cir.2013). We therefore begin with an overview of PAGA, the state statute under which this suit was filed.

1. PAGA

The California legislature enacted PAGA because of inadequate financing and staffing to enforce state labor laws. 2003 Cal. Stat. Ch. 906, §§ 1–2. The legislature declared it “in the public interest to allow aggrieved employees, acting as private attorneys general, to recover civil penalties for Labor Code violations, with the understanding that labor law enforcement agencies were to retain primacy over private enforcement efforts.” Arias, 95 Cal.Rptr.3d 588, 209 P.3d at 929–30. If the California Labor and Workforce Development Agency (“LWDA”) declines to investigate an alleged labor law violation or issue a citation, an aggrieved employee may commence a PAGA action against an employer “personally and on behalf of other current or former employees to recover civil penalties for Labor Code violations.” Id., 95 Cal.Rptr.3d 588, 209 P.3d at 930. “[T]he civil penalty is one hundred dollars ($100) for each aggrieved employee per pay period for the initial violation and two hundred dollars ($200) for each aggrieved employee per pay period for each subsequent violation.” Cal. Lab.Code § 2699(f)(2). An aggrieved employee is “any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed.” Id. § 2699(c). The LWDA receives seventy-five percent of the penalties collected in a PAGA action, and the aggrieved employees the remaining twenty-five percent. Id. § 2699(i).

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 factors: (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., 23 Cal.4th 429, 97 Cal.Rptr.2d 179, 2 P.3d 27, 31 (2000) (internal quotation marks and citations omitted).

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, 95 Cal.Rptr.3d 588, 209 P.3d at 926. The court found PAGA actions fundamentally different from class actions, chiefly because the statutory suits are essentially law enforcement actions. Id., 95 Cal.Rptr.3d 588, 209 P.3d at 933–34.

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., 646 F.3d 169, 174 (4th Cir.2011).

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;

(3) the claims or defenses of the representative parties are typical of...