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