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.
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
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. See 28 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.
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.
The California legislature enacted PAGA because of inadequate financing and staffing to enforce state labor laws. 2003
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
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":
Fed.R.Civ.P. 23(a). In addition, a class action cannot be maintained unless one of the three requirements of Rule 23(b) is also met. A class certification order is subject to the detailed requirements of Rule 23(c) both as to form and notice.
In determining whether PAGA is sufficiently "similar" to Rule 23 to qualify under CAFA as a statute "authorizing a [class] action," we do not write on a blank analytical slate. In Chimei, we held that "parens patriae suits filed by state Attorneys General may not be removed to federal court because the suits are not `class actions' within the plain meaning of CAFA." 659 F.3d at 847; cf. Mississippi ex rel. Hood v. AU Optronics Corp., ___ U.S. ___, 134 S.Ct. 736, 739, 187 L.Ed.2d 654 (2014) (holding that a parens patriae suit is also not a CAFA "mass action"). We noted that parens patriae suits "lack statutory requirements for numerosity, commonality, typicality, or adequacy of representation that would make them sufficiently `similar' to actions brought under Rule 23, and ... do not contain certification procedures." Chimei, 659 F.3d at 850. Accordingly, we concluded that parens patriae suits "lack the defining attributes of true class actions. As such, they only `resemble' class actions in the sense that they are representative suits." Id.; accord Purdue Pharma, 704 F.3d at 216-17.
Applying the Chimei rubric, we conclude that PAGA actions are also not sufficiently similar to Rule 23 class actions to trigger CAFA jurisdiction. Unlike Rule 23(c)(2), PAGA has no notice requirements for unnamed aggrieved employees, nor may such employees opt out of a PAGA action. In a PAGA action, the court does not inquire into the named plaintiff's and class counsel's ability to fairly and adequately represent unnamed employees — critical requirements in federal class actions under Rules 23(a)(4) and (g). See, e.g., Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 812, 105 S.Ct. 2965, 86 L.Ed.2d 628 (1985) ("[T]he Due Process Clause of
In addition, the finality of PAGA judgments differs distinctly from that of class action judgments. The Federal Rules ensure that members of the class receiving notice and declining to opt out are bound by a judgment. Fed.R.Civ.P. 23(c)(3). Class action judgments are also preclusive as to all claims the class could have brought. Cooper v. Fed. Reserve Bank of Richmond, 467 U.S. 867, 874, 104 S.Ct. 2794, 81 L.Ed.2d 718 (1984).
In contrast, PAGA expressly provides that employees retain all rights "to pursue or recover other remedies available under state or federal law, either separately or concurrently with an action taken under this part." Cal. Lab.Code § 2699(g)(1). "[I]if the employer defeats a PAGA claim, the nonparty employees, because they were not given notice of the action or afforded an opportunity to be heard, are not bound by the judgment as to remedies other than civil penalties." Ochoa-Hernandez v. Cjaders Foods, Inc., No. C 08-2073 MHP, 2010 WL 1340777, at *4 (N.D.Cal. Apr. 2, 2010); see Arias, 95 Cal.Rptr.3d 588, 209 P.3d at 934.
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, 95 Cal.Rptr.3d 588, 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.
The nature of PAGA penalties is also markedly different than damages sought in Rule 23 class actions. In class actions, damages are typically restitution for wrongs done to class members. But PAGA actions instead primarily seek to vindicate the public interest in enforcement of California's labor law. See Sample v. Big Lots Stores, Inc., No. C 10-03276 SBA, 2010 WL 4939992, at *3 (N.D.Cal. Nov. 30, 2010); Franco v. Athens Disposal Co., 171 Cal.App.4th 1277, 90 Cal.Rptr.3d 539, 556 (2009). The bulk of any recovery goes to the LWDA, not to aggrieved employees. And, the twenty-five percent portion of the penalty awarded to the aggrieved employee does not reduce any other claim that the employee may have against the employer — in this case, for example, for withheld overtime pay. See Caliber Bodyworks, Inc. v. Super. Ct., 134 Cal.App.4th 365, 36 Cal.Rptr.3d 31, 40 (2005). The employee's recovery is thus an incentive to perform a service to the state, not restitution for wrongs done to members of the class.
Despite these fundamental differences, Chase argues that PAGA actions are "class actions" under CAFA because PAGA is a state procedural law that would be displaced by Rule 23 in federal court under the rationale of Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co., 559 U.S. 393, 130 S.Ct. 1431, 176 L.Ed.2d 311 (2010). But Shady Grove is of no help to Chase. In Shady Grove, the Supreme Court considered whether a New York law, which precluded suits seeking recovery of penalties from proceeding as class actions, deprived a federal district court of jurisdiction over a diversity suit proposed as a Rule 23 class action. Id. at 397, 130 S.Ct. 1431. The issues were whether Rule 23 conflicted with the New York law, and if so, whether the Rule exceeded the authorization of the Rules Enabling Act or Congress's rulemaking power. Id. at 398, 130 S.Ct. 1431. The Supreme Court held that the New York law conflicted with Rule 23, and after applying the analysis mandated by Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965), concluded that the Federal Rule was not ultra vires. Shady Grove, 559 U.S. at 398-410, 130 S.Ct. 1431; id. at 429-36, 130 S.Ct. 1431 (Stevens, J., concurring).
In contrast, the issue before us is simply one of statutory construction — whether the action sought to be removed was "filed under" a state statute "similar" to Rule 23. We do not today decide whether a federal court may allow a PAGA action otherwise within its original jurisdiction to proceed under Rule 23 as a class action. We hold only that PAGA is not sufficiently similar to Rule 23 to establish the original jurisdiction of a federal court under CAFA.
For the reasons above, we hold that the district court could not exercise jurisdiction over this removed PAGA action under CAFA. And because, in light of Urbino, there was also no federal subject matter jurisdiction under § 1332(a), see supra n. 1, Baumann's motion to remand should have been granted. We reverse with instructions to grant that motion.
THOMAS, Circuit Judge, concurring:
I concur in the majority opinion. I write separately only to note my prior disagreement on the question of whether claims under the Labor Code Private Attorney General Act of 2004, Cal. Lab.Code § 2698 et seq, can be aggregated in determining whether diversity jurisdiction exists. Urbino v. Orkin Services of California, Inc., 726 F.3d 1118, 1123 (9th Cir. 2013) (Thomas, J., dissenting). Urbino is law of the circuit, of course, and binds this panel. However, if I were writing on a clean slate, I would hold otherwise as to the question of aggregation.