It’s Always Nice When the Ninth Circuit Proves You Right

Posted in Appeals, News on April 14, 2014

Yesterday, the Ninth Circuit published its opinion in Baumann v. Chase Investment Services Corporation, in which it held that the Class Action Fairness Act (the “CAFA”) does not provide a basis for federal jurisdiction over claims brought under the Labor Code Private Attorneys General Act (the “PAGA”). In my most recent blog post, I discussed the significance of the Baumann case (and accurately predicted the Ninth Circuit’s ruling!).

Here is an excerpt of the Baumann opinion that sums up the Ninth Circuit panel’s reasoning:

“In short, ‘a PAGA suit is fundamentally different than a class action.’ McKenzie v. Fed. Express Corp., 765 F.Supp. 2d 1222, 1233 (C.D. Cal. 2011). These differences stem from the central nature of PAGA. PAGA plaintiffs are private attorneys general who, stepping into the shoes of the LWDA, bring claims on behalf of the state agency. See Arias, 209 P.3d at 929-30. Because an identical suit brought by the state agency itself would plainly not qualify as a CAFA class action, no different result should obtain when a private attorney general is the nominal plaintiff.”

So there you go–PAGA is not “sufficiently similar” to Rule 23 to support original jurisdiction under the CAFA.

The court also noted that because it was undisputed that the plaintiff’s “portion of any recovery (including fees) would be less than $75,000,” under Urbino, there was no diversity jurisdiction.

Taken together, the Ninth Circuit’s decisions in Baumann and Urbino are likely to raise significant barriers to the removal of PAGA actions to federal court.