please be seated good morning everyone and happy new year we have a number before we submit the cases i want to welcome judge hellmann judge wallace and i are very pleased to be sitting with judge hellmann and to welcome him from the district  good morning karen seldon on behalf of cosco and i'd like to reserve five minutes for rebuttal this court should reverse a district court summary judgment ruling for two independent reasons st canela fails to show that she has standing to represent the interests of rd parties who are entitled to a statutory twenty five percent share of any part of penalty nd under the controlling analysis and shady grove rule twenty three has to apply and she argues essentially that these rd party interests that twenty five percent statutory share is not worthy of protection in federal court and that it somehow subordinate to the seventy five percent share that goes to the state and that it's subordinate to the state's law enforcement purpose but never before has this court endorsed such a wholesale basically disregard of statutory rights that are money in the pockets of these absent rd parties so i offer start with the standing question could you actually st start with whether this should have been removed under cafe at all absolutely your honor and the answer is yes this is clearly a calf a class action as defined in the statute the statute sets forth a mechanical test which is was a complaint filed under a state law similar to rule twenty three dollars and this court in louis the h s b c bank stated the rule even in a more straightforward fashion which is quote whether a complaint seeks class status that is the analysis and so if a complaint seeks class status it's a calf a class action so what if it what if you have a complaint where it's very clear there's a typo like it just makes no sense at all to say that something could be a class action it's like a dispute between someone and their and perhaps there's an argument there that you can look behind the pleadings but every single case that this court and the u s supreme court has considered under cafe we have consistently rejected the idea that you can pierce the pleadings and look behind them but do you have a case that talks about what to do when the pleading says it's a class action but it really makes no sense to think of it as a class action we have the reverse situation in h s b c bank where the a g t filed a complaint in state court and specifically disclaimed it was a classic action even though under state law that action had to have been asserted as a class action and this court said that the allegations of the complaint are controlling even if it were true that in state court this were a class action the fact that they haven't asserted it as such is the end of the analysis and similarly in the supreme court case and you of tronics the court again specifically said we aren't going to look behind the pleadings this hasn't completed as a mass action even though it looks and feels like one we're not going to go behind the pleading we have to look at the pleading explain what is gained by calling a paga action a class action i don't understand how any recovery would be any different or anything would really be practically different where you would have the protections of a class action the substantive recovery amounts you're right your honor would not change but you would have the protections of more rigorous settlement supervision you would have the ability of class members to opt out you would have perhaps a more defensible position that your class action settlement if there is one is fair are so if a class member ops out would they still be bound by the judgment though like i thought in a paga action once there's a judgment for one employer with the same claim that binds everyone if they opt out the scope of the claim narrow so for that particular class member and the labor code violation and their associated penalty they could then go on and pursue their own class action no but that's not what the that's not what pago that's not the relief the program gives them the their bo court and she had filed this nation this is the state wide action if absent an opt out you're absolutely right everybody who is in the greeter position in cosco would be bound by that judgement in so far as the pocket penalties go but that's if there is no ability to opt out if it is filed as a not as not a class action just as your run of the mill in state court or riots non class paga action but if it were in federal court and if the court accept rule twenty three applies aggrieved employees would be able to opt out as class members always are and in that case we're not talking for example about a twenty one warehouse action with twenty with twelve thousand people any other labor code class action if say for example you're seeking statement penalties under section two dollars to six dollars if you opt out of the claim out of the class you can do you feel free to pursue your own statement penalties in a different class action aren't isn't that treated differently than pago i thought pa had a pretty clear rule that once there's a judgement it binds everyone that is the paga rule that is what the statute says in iraq recognizes that in state court that's fine but here the difference is that in federal court cost position is the rule twenty three has to apply for state for standing purposes and understated growth and so full twenty three dollars applies then we have all of the protections that congress intended to  control representative action litigation in federal court and that includes the ability to opt out so yes you are right in the sense that a paga action in federal court would have a different result in terms of the scope of the action and the scope of the judgment that it w in state court but that's by congressional design that's because rule twenty three says that if you are representing other people and their concrete interests you have to allow them the ability you have to give them notice you have to give them the ability to opt out because that is what is considered important in rule twenty three so you're right that it would be different but that is not a reason to contort rule twenty three and not apply rule twenty three in fact it's the opposite paga is setting up a different standard than what rule twenty that it says that it is not answering the question here about what specifically said it was not answering whether a paga action may be brought as a class action in federal court bellman was instead a statutory construction question asking simply whether under is similar enough to rule twenty three to count as a removable class action and the answer was no because the paga statute itself does not contain rule twenty three like requirement such as commonality numerosity it seems like you're it's a circular argument you're making because your argument for why putting the words class action on the complaint changes it is that that triggers rule twenty three which makes it different but if it was in state court i still don't understand really how it's any different in terms of what could be recovered or the purpose of effect or anything about the difference in a pod action in a pod a class action because plaintiffs specifically invoked the state class action rule in our case she didn't just file maybe i said generally i mean what difference did that make what what was that going to do i still don't really understand  well i don't do in state court i think that calf a prick ludes us from asking is a class action allegation material is it strategically smart what does it add to the case it is a mechanical inquiry is this asserted as a class action or not and the reasons why plaintiff did it i'm not sure a rawest didn't require her to do with that way but she did and after the claim was removed to federal court she continued to sa for the next four years that she was intending to file a class certification motion so i can't tell you why they decided to do that but i can tell you that under cafe to say that we need to look behind the pleadings and really inquire as to whether it's material would actually be adding an element to the cafe statute that's not there it's just very bizarre because your argument is basically we could remove this because it's a class action but that now it's not a class action so now it can't  proceed there's a real tension i think i think the tension is created by the fact that plaintive canelo decided not to pursue class certification there would be no tension had she decided not to file it as a class action in state court and there would have been tension had she once we were here decided to pursue it instead she let the classification deadline lapse and that's why we're here the tension was created by the procedural maneuvers in this case not by anything inherently inapplicable about will twenty three in this case and in fact as  she titled it a class action complaint and so at the time of removal as far as caught the cosco was concerned and as far as the district court was concerned this was a paga class action and we know that those are allowed in state court because  been certified so yes as far as everybody was concerned she was seeking class action relief until four years into this litigation when she decided that she was not a good class action really how does playing in class action really when all the money belongs to them all of the money does not belong to the state seventy five percent goes to the state she recovers seventy five dollars goes to the state twenty five percent goes to her and the aggrieved employees and the amount that does go to the state is based on all of the labor code violations committed against these rd parties who are in this case because paga says that plaintive canal is action is a private action brought on behalf of other current and former employees not on behalf of the state do you need the state's share to get to the amount of controversy we do not because there's two points  don't see how you get to aggregate the state even if you can call it a class action well because one hundred percent what the cafe statute says is that you have to have five million in controversy and what is in controversy in this action is one hundred percent counting the state though with this way of counting what you do it doesn't actually your honor because even at the time of removal you don't just look at how mental how much had accrued in penalties up to the data from of all amount of controversy includes everything that is at stake in the litigation and that includes future penalties attorneys fees lost wages whatever it is through the entire sweep of the case and so even at the data removal we were at five million two hundred thousand dollars and that was seven and a half years ago and so even at that date cosco could make the reasonable assumption that this case would go on for three or four years let alone the six and a half that we already have so we would far far exceed the five million that was already a controversy because every pay period that goes by we are adding more and so we would easily meet it whether or not you count the one hundred dollars or the twenty five dollars and i would say your honor that if a court is that all interested in this issue we would request the ability to file supplemental briefing on this as this was in the supplemental briefing the st time that plane of canal has ever raised this issue so we did not anticipate that this is something that we would be arguing so to the extent the court would like more information we would request the ability to do so i have a question i wan determine whether the mattern controversy exceeds the value of twenty five million dollars those people you can argue vade even the smallest of the twenty five percent and can aggregate everybody's claims together to reach five million dollars and our view is that the claims of the class members have to include the entire one hundred percent of the penalty because the only way the state even gets their seventy five percent is through this action so it makes no sense to say that the only way to collect one hundred percent of the penalty is through this class action but you can only count twenty five percent as being in controversy that is pacifically what it says but  may agree that you may think the congress is wrong but no one is amended i don't see how i don't understand your your view that the claims have to be of the individual class members the state is not an individual class member the people who brought this lawsuit are now how how do we i mean is says what it says and it just seems to me is very difficult to understand your position because the again this is an aggregation provision the in meeting the amount of controversy consider attorneys fees but those don't go into the pockets of class members that is not a claim of the class member and yet we're allowed to consider that and often do consider that in the amount in controversy so this provision doesn't two we have directly on point to this specific issue the d a s case which is a district court case that's directly on point to this specific question but in terms of th circuit authority we  have the cases in re ford motor company that talk about amount of controversy being looked at from either viewpoint from the viewpoint of the defendant or the viewpoint of the plaintiff so here from costco's viewpoint more than five million dollars in controversy for how those have squared that we're talking about the individual class members because again here the claims of the individual class members are for the only way that the state gets their money is through a private action being brought on behalf of the individual class members the vehicle is paga so the state while it's not a class member the only way it gets its recovery the only way that amount is in controversy is because of the way this class claim has to be litigated and this is a function the difficulty we're having is because california has created a very unique statute and so it but that again cannot modify how we look in federal court and what honor if you look at actually what was it we don't need to count one hundred percent we can even if you were to consider only the twenty five percent given that we are now at thirty million dollars plus in penalties even if you were only to count twenty five percent but those like t the individual class members that's all of them all of the individual yes and we say that that includes up to the state's portion because there's no other way for the state to get to to obtain  it's only through the claims of the class members the state is not a party made it is a class member no the only way that the state can obtain their relief is through the claim of the class number so our view is that the claim of the class member includes the state seventy five percent sure because thank you and may it please the court michael reuben form is kind of the propriety of removal is measured as of the date of removal cosco filed its removal class action within the meaning of kaffir the amount in dispute wasn't sufficient to trigger kaffir jurisdiction but for the reasons i think the court was indicating in the questioning this case is not a class action could not be a class action and the reason why is actually the answer to all of the issues raised in this case which is the nature of a paga claim by the due process clause it makes no difference whether the case proceeds as a class action or not as a class action those class action allegations are immaterial and with a class action allegations are making both points a if this is not a class action in any sense given the nature of the rights issue and b the amount in controversy wasn't satisfied the district court rejected that argument but for the reasons we set forth in our supplemental brief and i think were indicated by some of the questions today this case should never have been in federal court and to accept the arguments that costco is making would necessarily transform the nature of the rights of aggrieved employees to make them something the california legislature never intended them to be and therefore if you give aggrieved employees the right to opt out to intervene to object to a settlement to notice and most importantly and it didn't come clear until the reply briefing that this was really nature of rights would violate the rules enabling act because it would have bridge modify or change rights which a rule can't to rule twenty three dollars has to accept the rights as they were created the legislature of california defined these rights they can be pursued in a representative action there is no such thing as a class action in the sense that the due process protections actions and this one was called the class action can you explain why the people are calling this case class actions sure heart sure i can i can't tell you about this case because i wasn't counsel below at the time or i asked cites the  case and i was counsel and m r i'll tell you exactly what happened and it's and it's in the record we filed i am or how involved the city of hayward's living wage ordinance and whether the people who work in the commercial laundry were entitled to the protections because laundry occasionally came in from the city of hayward and it was undifferentiated no one knew which products they were working on we file that as a class action before enacted under the living wage ordinance the labor code and business and professions code seven thousand two hundred pago was then an act that in we amended the complaint we added an additional cause of action we didn't think  the time every a every cause of action was a class action we added to the case the judge judge stephen brick an alum in this kind of spirit court certify the case included the paga case it went up on that basis there was never any discussion or thought about whether the due process protections would kick in because it was certified there was no dispute over that issue the court of appeal affirmed the california supreme court denied review action allegations in order to know what with this procedure look like no one had any interest or inclination to construe paga rights as due process protected rights because their rights no due process interest all of the rights and protections that cosco is asking this court to engraft on to paga rest on the notion that there are due process protections that would give defendants in these cases not just the plaintiffs greater rights in particular the race judicata right which would in effect wipe out all of the labor code claims upon the resolution of a paga case and if you take their arguments a logical conclusion every paga case whether filed as a class action or not whether pursued in state or federal court would necessarily have to comply with class action requirements because if costco is right that there is a due process claim owned by each aggrieved employee then that due process protection is a constitutional protection it would apply in state court no less than federal court so in effect cosco is acting act asking for a radical reformulation of the rights and benefits that the california legislature confer how do we deal with footnote five in our use footnote five is dictum because it simply and it simply describes what happened in the case that i just described the the court noted be and in fact they are met doesn't and then the next sentence is the issue here though is whether they must and the court reserved to the question of whether they whether if you bring a class action that means the due process requirements of protected by rule twenty three kick in and the answer to that is no even if as in the emerald case or this case there are class action allegations that doesn't make it a class action and in which the individual class members of which there are none have the right to opt out challenge a settlement get notice and have the judgment erased or to cut so to the extent the supreme court st but was just doing is noting as a matter of fact that sometimes that's what happens but there is no indication in area us that it was contemplating the type of class action with the due process for texans that cosco is referring to and of course areas expressed lee says that this is nine hundred and five and actually throughout the opinion does not give rise to due process concerns the very reason that the california supreme poured an aria said that there is no requirement cases be pursued as class actions is the very argument that i'm making it's because the nature of the rights of the degree of comply is have are not the sort of rights where you need the class protections of california court of procedure three hundred and two the state court or r twenty three in the federal court to protect because there is no due process interest and that's what the california supreme court expresses said and that's what this court in all of its later paga cases expressly said and was reiterated most recently by the california supreme court in october in the bank case so because of the nature of the rights there is no subject matter jurisdiction there isn't a sufficient amount  purposes is exclusively a question of whether the individual plaintiff suffered injury has nothing to do with whether she is or can be an adequate representative of some other individuals so there is no standing issue in the case because cosco concedes that ms can know ahead standing this is only a question of whether the rule twenty three applies to confer due process protections that this court in the california supreme court said the california legislature in an acting paga did not create to get the result you're asking for do we need actions really can't be class actions and if so are we needing to may is describing the type of cases where it was necessary secondly the this court can decide based on the mountain controversy it could indicate that there are serious questions raised cafe this is not a class action in in because those allegations are material they don't affect anyone's rights if they did affect anyone's rights than they would be a violation of the rules enabling act so there's no need to certify you could decide because this conference record in this court have have uniformly said they're a new process protection so there's nothing to ask the supreme court  very she made her persuasive argument on how that section should apply in this case i'd like to have you respond to that how do you do you see the application of that section differently and if so why i think i do see application of that section differently in a caf case the claims of the individual class members can be aggregated to determine whether at the time of removal more than five million dollars was in dispute at the time of removal here even if you treat the aggrieved employees as individual class members their interests were far less than five million dollars but our main point aggregation of the claims of class members here this court in the california supreme court have said the aggrieved employees have no claim so it's actually a three part answer to your question one is it wouldn't come up to five million dollars anyway nd is the state of california is not an individual class member so you can't count it seventy five percent that's what yo affectionally says in determining whether the calf a five million dollars threshold isn't satisfied you can only consider class claims and not by any stretch of the imagination does the state have a class claim because if it did then anytime the state broadening foresman action itself that would have to be a class action and that's never been the case when the government seeks to protect the rights of the public interest and the rights of picciola which says you don't count the pago in that case it was pago claims but you don't count non class claims and finally the california supreme court have we have a series of california supreme court and th circuit cases that answer all the questions raised in this appeal we we've chosen as a policy matter to decide some cases by on published dispositions the theory being that if it's stated again and again we don't have to say it again and again and so we don't look at those but i look at them periodically because you how would you feel now saying that this is presidential so the we have to follow it but the reason you get yourself is is pretty strong how would you how would you respond the versus time warner cable i thought maybe you had i'm not criticizing because we've told you never do so i thought but and so it's an unfair question but i thought if you happen to have in your mind i would be interested in your base anyway so if we need your assistance on this well we'll let you know thank you very much very thank you thank you thank you when we actually give you two minutes or republic of thank you but st i would again urge the plant to allow us to submit supplemental briefing on this amount controversy issue because again we have not briefed it at all and i would just make the point as well that whether you consider the twenty five percent or the one hundred percent of the penalty we still need the amount of controversy it's simply incorrect that the clock stops at the time of removal in terms of the penalties you look at the entire scope of the case and what's at stake so if you from that at it from the date of removal and you make your best reasonable assumption of what the value of the case is so that includes your best reasonable assumption of what attorney's fees would be owed at the end of the case what loss of wages you are continuing to accrue end to the end of the case what penalties are likely to accrue by the time of judgment because what you're really trying to do is value the entire case yeah and then it was is this a case that says we do this going all the way through trial or assuming the case  wages that accrue after the date of removal and determining the amount of controversy and the court said yes because the relevant inquiry is what is your best reasonable estimate of what this entire case is worth arise that court said what is litigation that's interesting i always thought that jurisdiction was at a particular time and if you don't have jurisdiction it doesn't go but what you're saying is we think that this will continue on and we can have removal papers you talk about where you're reasonable assumptions are in terms of the violation rates in terms of what the attorneys fees incurred will be so it is it's an estimate that you're making at the time of removal because again the inquiry is what is controversy what's in controversy isn't just what occurred until the data removal what's a controversy is the entire scope of the case are you saying you are lying then the actual people that are involved are going to continue to suffer this never it is so that is long as the case is going on that's adding to the amount of current controversy that's correct because paga penalties accrue per pay period and this is an open ended case where every single week additional paga penalties are added and that was true from the moment the case was filed and would that include also assume people are going to join in later that would it yes it would be but you don't know obviously at the beginning of the case you confined by what the allegations of the complaint are but we don't need to go beyond what's in the complaint because based on the complaint it's a nationwide it's a statewide class action or was a statewide class action so we had every we had and this point twelve thousand people that follows that loose understanding of the supreme court that it isn't that definite that you can take all sorts of of things into consideration ok thank you that's helpful and then  just one other point i heard counsel talk a lot about how a by applying rule twenty three were somehow going to be wiping out other claims but that's simply not true it's no more true for paga than it is for any other labor code claim that's filed in federal court the point of rule twenty three dollars is you bring together all like claims and you efficiently and manageably litigate them in one single place and employees have notice and the ability to opt out so there is no wiping out of claims once they have notice they are free to decide whether to remain in the case or not so this idea that will twenty three dollars is wiping out substantive rights is simply not the case and the rd point i would make is a lot of councils arguments seem to depend on the california courts telling this court how to interpret rule twenty three and how to interpret federal standing requirements and that's just exactly backwards you start from the proposition under shady grove that if rule twenty three and the state rule answer the same question will twenty three has to control and here they do answer the same question we know that they do because both paga and rule twenty three use the identical on behalf of language both k both statutes authorize actions on behalf of absent individuals so in federal court shady grove says rule twenty three has to control even if the california state courts don't like that result they don't get to decide and the very last point i would make is this idea that it's class action because it's somehow optional in state court that makes it less of a calf a class action and there is no authority for that proposition there is no authority to say that when somebody voluntarily invokes a class action statute that this court is free to just ignore that because we