PAGA claims of multiple employees are not a "common and undivided interest"

In  Urbino v. Orkin Servs. of California, Inc. (9th Cir. Aug. 13, 2013), the Ninth Circuit took up the question of whether PAGA claims aggregate for purposes of CAFA's damage prerequisite.  Plaintiff, a California citizen, worked in a nonexempt, hourly paid position for defendants, each of whom is a corporate citizen of another state, in California. Alleging that defendants illegally deprived him and other nonexempt employees of meal periods, overtime and vacation wages, and accurate itemized wage statements, plaintiff filed a representative PAGA action.  Defendants removed.  Plaintiff moved to remand.  The district court was obligated to decide whether the potential penalties could be combined or aggregated to satisfy the amount in controversy requirement. If they could, federal diversity jurisdiction would lie because statutory penalties for initial violations of California’s Labor Code would total $405,500 and penalties for subsequent violations would aggregate to $9,004,050. If not, the $75,000 threshold would not be met because penalties arising from plaintiff’s claims would be limited to $11,602.40.  Acknowledging a split of opinion, the district court found PAGA claims to be common and undivided and therefore capable of aggregation.

The Court examined the "common and undivided interest" exception to the rule that multiple plaintiffs cannot aggregate claims.  Observing that common questions do not create that common and undivided interest, the Court said:

But simply because claims may have “questions of fact and law common to the group” does not mean they have a common and undivided interest.  Potrero Hill Cmty. Action Comm. v. Hous. Auth., 410 F.2d 974, 977 (9th Cir. 1969). Only where the claims can strictly “be asserted by pluralistic entities as such,” id., or, stated differently, the defendant “owes an obligation to the group of plaintiffs as a group and not to the individuals severally,” will a common and undivided interest exist, Gibson v. Chrysler Corp., 261 F.3d 927, 944 (9th Cir. 2001) (quoting Morrison v. Allstate Indem. Co., 228 F.3d 1255, 1262 (11th Cir. 2000)).

Slip op., at 8.

The defendants then argued that the interest asserted by plaintiff was not his, but was actually the state's interest.  The Court's majority did not find that argument compelling:

To the extent Plaintiff can—and does—assert anything but his individual interest, however, we are unpersuaded that such a suit, the primary benefit of which will inure to the state, satisfies the requirements of federal diversity jurisdiction. The state, as the real party in interest, is not a “citizen” for diversity purposes. See Navarro Sav. Ass’n v. Lee, 446 U.S. 458, 461 (1980) (courts “must disregard nominal or formal parties and rest jurisdiction only upon the citizenship of real parties to the controversy.”); Mo., Kan. & Tex. Ry. Co. v. Hickman, 183 U.S. 53, 59 (1901); see also Moor v. Cnty. of Alameda, 411 U.S. 693, 717 (1973) (explaining that “a State is not a ‘citizen’ for purposes of the diversity jurisdiction”).

Slip op., at 9.   By the way, this cleverly avoids deciding an unnecessary issue that is of some consequence in the world of arbitration.  It does, however, suggest a point upon which the California Supreme Court will likely have to express an opinion when it decides whether PAGA claims are excused from arbitration clause enforcement or, alternatively, from arbitration clauses that preclude “class” claims.

The dissent, like the majority opinion, is also relatively short, but it is also well argued.

Thanks to the tipster for directing me to the decision (since I don't know whether you want to be identified, you remain anonymous).

NOTE:  This is an updated version of an earlier post on this case.  The older post has been removed.