I

n an important new decision,

the 9th U.S. Circuit Court of
Appeals has determined that
actions seeking recovery under
the California Labor Code Pri-
vate Attorneys General Act of
2004 (PAGA) are not removable
to the federal district court under
the federal Class Action Fairness
Act of 2005 (CAFA), found at 28
U.S.C. Section 1332(d). The case,
Bauman vs. Chase Investment
Services Corp., No. 12-55644,
was decided March 13 by a three-
judge panel and it represents an
important clarication in con-
nection with the handling of em-
ployment matters raising PAGA
claims.
Before delving into that hold-
ing, there are two very important
facts that, to a large extent, are
critical to a full understanding
of the scope (or possibly limited
scope) of this new holding.
First, in connection with his
PAGA claim, the plaintiff alleged
that his personal recovery un-
der the PAGA provisions which
designate how any recovery is
divided between the state of Cal-
ifornia and the injured employee
would be less than $75,000, thus
excluding the claim from removal
jurisdiction under the basic feder-
al diversity statute. Little explana-
tion for this important factual de-
termination is offered, other than
the statement in footnote 1 of the
decision that it is undisputed that
Baumanns portion of any recov-
ery (including fees) would be less
than $75,000.
Second, the case, originally
led in state court, did not contain
any class action allegations. The
the court found that, unlike a true
Rule 23 class action, a PAGA ac-
tion lacks the following charac-
teristics: (1) PAGA has no notice
requirements for unnamed em-
ployees; (2) there is no mechanism
for unnamed employees to opt out
of a PAGA action; (3) the court
does not inquire into the ability
of the plaintiff and his/her coun-
sel to fairly and adequately repre-
sent the unnamed employees; (4)
the class action requirements of
a sufcient number of aggrieved
individuals (numerosity), the ex-
istence of common issues of law
and/or fact (commonality), and
that the plaintiffs claims be typ-
ical of the claims of the absent
individuals (typicality) are inap-
plicable to a PAGA claim; and
(5) the nature of PAGA penalties
are fundamentally different from
damages sought in class actions.
Because the central nature of a
PAGA claim is to vindicate the
public interest in enforcement of
Californias labor laws, and that
plaintiffs are acting as private at-
torneys general, stepping into the
shoes of the applicable California
Labor and Workforce Develop-
ment Agency, PAGA is not a class
action statute and removal based
upon CAFA is inappropriate. As
clearly stated in this new opinion,
In the end, Rule 23 and PAGA
are more dissimilar than alike.
That result does leave open
the question of whether a PAGA
claim coupled with an accom-
panying class action subject to
CAFA jurisdiction, and led in
state court, would be removable.
In that case, it appears that 28
U.S.C. Section 1441(c) would be
applicable. In that situation, while
the entire case would be remov-
complaint limited itself to recov-
ery under PAGA. Because of this,
the 9th Circuit was able to craft
a decision dealing strictly with
whether or not a case based upon
PAGA, unaccompanied by any
related class action claims, would
be removable under CAFA. The
impact of combining a class ac-
tion that would be subject to
CAFA with a PAGA claim was
not addressed.
The state Supreme Court had
previously determined that a
PAGA action is not a class ac-
tion under California law. Arias
vs. Superior Court, 209 P.3d 923,
926 (2009). However, the 9th
Circuit determined that an anal-
ysis of PAGA must go further.
The courts analysis focused on
whether PAGA, regardless of its
title and the determination by
the state Supreme Court that it is
not a class action, is sufciently
similar to Rule 23 for the Fed-
eral Rules of Civil Procedure as
to qualify it as, in effect, a class
action for purposes of CAFA ju-
risdiction. To a certain extent ig-
noring the Supreme Court deter-
mination of the non-class nature
of PAGA, the 9th Circuit engaged
in an analysis of whether a PAGA
claim has the characteristics of a
class action, and came to its own
conclusion that a PAGA claim
does not bear a substantial simi-
larity to a class action, and is thus
not removeable under CAFA.
In reaching this determination,
By Louis Marlin and Hanna Raanan
FRIDAY, MARCH 18, 2014
www.dailyjournal.com
LOS ANGELES
Questions for both sides in wake of PAGA opinion
PERSPECTIVE
able, the district court would be
required to sever the PAGA claim
from the class action and then re-
mand the PAGA claim to the state
court. (1441(c)(B)(2).
The decision raises import-
ant questions for both plaintiffs
counsel and defense counsel who
litigate wage and hour matters.
For the plaintiff, limiting a case to
just a PAGA claim in order to keep
the case in what some believe are
more favorable state courts may
mean abandoning meaningful and
large claims that the class might
recover. If an action is led with
both a PAGA claim and a class
claim, both sides would face a
decision as to whether or not it
would be most efcient and bene-
cial for their clients to leave the
case in state court as one action,
or remove to federal court where
the PAGA claim would be severed
and returned to the state court, re-
sulting in two matters proceeding
on what would most likely be
similar (if not identical) discovery
tracks.
Louis M. Marlin is an attorney
with Marlin & Saltzman LLP. He
can be reached at louis.marlin@
marlinsaltzman.com.
Hanna Raanan is an attorney
with Marlin & Saltzman LLP. She
can be reached at hraanan@mar-
linsaltzman.com.
Reprinted with permission from the Daily Journal. 2014 Daily Journal Corporation. All rights reserved. Reprinted by ReprintPros 949-702-5390.
LOUIS M. MARLIN
Marlin & Saltzman
The decision raises important
questions for both plaintiffs
counsel and defense counsel
who litigate wage and hour
matters.
HANNA RAANAN
Marlin & Saltzman