Court Opinion

ID: 8412536
Source: CourtListenerOpinion
Date Created: 2022-11-02 19:46:20.61676+00
Date Added: 2024-06-11T16:47:57.990474
License: Public Domain

THOMAS, Circuit Judge,
dissenting:
Because I conclude that claims under the Labor Code Private Attorney General Act of 2004 (“Private Attorney General Act,” “the Act,” or “PAGA”), Cal. Lab. Code § 2698 et seq., can be aggregated in determining whether diversity jurisdiction exists, I respectfully dissent.
“Our starting point for determining the amount in controversy is to characterize the [aggrieved employees’] claims under California state law.” Eagle v. Am. Tel. & Tel. Co., 769 F.2d 541, 545 (9th Cir.1985) (citing Horton v. Liberty Mut. Ins. Co., 367 U.S. 348, 352-53, 81 S.Ct. 1570, 6 L.Ed.2d 890 (1961)). Thus, we look to “the source” of plaintiffs’ claims to determine whether they are subject to aggregation. Id. at 546.
Under California law, a representative action under the Private Attorney General Act “is fundamentally a law enforcement action designed to protect the public and not to benefit private parties.” Arias v. Superior Court, 46 Cal.4th 969, 95 Cal.Rptr.3d 588, 209 P.3d 923, 934 (2009) (internal quotation marks and citation omitted). The Act neither creates nor vindicates substantive rights of individual aggrieved employees. Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court, 46 Cal.4th 993, 95 Cal.Rptr.3d 605, 209 P.3d 937, 943 (2009). Rather, it deputizes aggrieved employees to vindicate the State’s interest in labor code enforcement. Arias, 95 Cal.Rptr.3d 588, 209 P.3d at 933-34. PAGA plaintiffs such as Urbino sue “as the proxy or agent of the state’s labor law enforcement agencies,” id., 95 Cal.Rptr.3d 588, 209 P.3d at 933, and do not enjoy “property rights or any other substantive rights” under the statute they enforce, Amalgamated Transit, 95 Cal.Rptr.3d 605, 209 P.3d at 943. A successful PAGA plaintiff is not entitled to “damages.” Rather, he receives a twenty-five percent share of the civil penalties recovered on behalf of the State as an incentive payment for bringing suit in the public interest. As such, PAGA plaintiffs do not represent “separate and distinct” claims subject to the anti-aggregation rule. Troy Bank of Troy, Ind., v. G.A. Whitehead & Co., 222 U.S. 39, 40, 32 S.Ct. 9, 56 L.Ed. 81 (1911). Instead, they “represent!] the same legal right and interest as state labor law enforcement agencies — namely, recovery of civil penalties that otherwise would have been assessed and collected *1124by the [State].” Arias, 95 Cal.Rptr.3d 588, 209 P.3d at 933 (citations omitted). Looking, as we must, to “the source” of Urbino’s claim, Eagle, 769 F.2d at 546, the amount in controversy equals the total civil penalties sought in the action.
In this regard, a PAGA plaintiff stands in a position comparable to a plaintiff in a shareholder derivative suit, who likewise lacks a direct proprietary interest in the subject of the litigation and sues as a proxy for the injured corporation. Id. at 546 — 47. Notwithstanding the individual recovery secured by successful shareholder derivative plaintiffs, we have long held their claims subject to aggregation, relying on the rationale that derivative suits vindicate corporate interests and benefit the shareholders only indirectly. Id. at 546-47 & n. 4.
That Private Attorney General Act plaintiffs do not vindicate “separate and distinct” claims is further evidenced by the fact that their claims under the Act are not assignable, Amalgamated Transit, 95 Cal.Rptr.3d 605, 209 P.3d at 943-44, and may be pursued by individual aggrieved employees only if the State elects not to take enforcement action, Cal. Lab.Code § 2699.3; Arias, 95 Cal.Rptr.3d 588, 209 P.3d at 930. More importantly, “[b]eeause an aggrieved employee’s action under the [Act] functions as a substitute for an action brought by the government itself, a judgment in that action binds all those, including nonparty aggrieved employees, who would be bound by a judgment in an action brought by the government.” Arias, 95 Cal.Rptr.3d 588, 209 P.3d at 933. If aggrieved employees possessed individual substantive rights under the Act, this broad rule of preclusion would raise serious due process concerns. Taylor v. Sturgell, 553 U.S. 880, 892-95, 128 S.Ct. 2161, 171 L.Ed.2d 155 (2008).
For these reasons, a judgment in a representative action under the Act does not preclude aggrieved employees from later pursuing individual wage and hour, discrimination, or benefits interference claims founded on the same labor code violations. The rationale for this rule is that such claims are individual in nature, deriving from the aggrieved employee’s contractual relationship with the defendant. Thus, multiple employees filing individual actions cannot aggregate their wage and hour, discrimination, or benefits claims to satisfy the statutory amount-in-controversy requirement. See Potrero Hill Cmty. Action Comm. v. Hous. Auth. of the City & Cnty. of S.F., 410 F.2d 974, 977-78 (9th Cir.1969) (holding that common questions of law and fact do not suffice to establish the common and undivided interest necessary to aggregate multiple plaintiffs’ claims).
Because Urbino pursues a common and undivided claim in his role as proxy for the State, the district court correctly calculated the amount in controversy based on the aggregate civil penalties sought in this action, and properly determined that the total exceeded $75,000. Therefore, in my view, the district court properly exercised diversity jurisdiction.