ISKANIAN v. CLS TRANSPORTATION OF LOS ANGELES

Appellant’s Letter Advising of New Case Authority

Cal.August 26, 2013

Capstone LAWaec 1840 Century Park East, Suite 450 Los Angeles, California 90067 310.556.4811 Main | 310.943.0396 Fax GLENN A. DANAS 310.556.6826 Direct SUPREME COURT Glenn.Danas@capstonelawyers.com - i i Gee M a Led August 23, 2013 VIA FEDERAL EXPRESS The Honorable Tani Cantil-Sakauye, ChiefJustice And Associate Justices Supreme Court of California 350 McAllister Street San Francisco, CA 94102-4797 Subject: Iskanian v. CLS Transp. OfLasAngeles, No. S204032 Dear ChiefJustice Cantil-Sakauye and Associate Justices: Pursuant to California Rule of Court 8.254, Appellant Arshavir Iskanian hereby submits Urbino v. Orkin Svcs. ofCalf. 9th Cir. Aug. 13, 2013) No. 11-56944, No. 11-57002, No. 12- 55064, a recently published opinion from the Ninth Circuit Court of Appeals. (A true and correct copy ofthe slip opinion is attached hereto as Exhibit A.) In Urbino, the Ninth Circuit held that a federal court may not exercise diversity jurisdiction over the plaintiffs representative action underthe Private Attorneys General Act of 2004 (“PAGA”). One basis for the Urbino court’s decision is that “[t]he state as the real party in interest [in a PAGAsuit], is not a ‘citizen’ for diversity purposes.” (Slip op. at p. 9.) Urbine’s finding is consistent with Appellant’s argumentsas set forth in the Opening Brief on the Merits, pp. 31-32, and the Reply Brief, pp. 13-14, regarding the state, as the real party in interest in a PAGAsuit, not being bound bya private agreement. Si Glenn A. Danas cc: See attachedservicelist FOR PUBLICATION UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT JOHN URBINO,for himself and on behalf of other current and former employees, - Plaintiff-Counter-Defendant- Appellee, Vv. ORKIN SERVICES OF CALIFORNIA,INC., a Delaware corporation, and ROLLINS, INC., a Delaware corporation, Defendants-Counter-Claimants- Appellants. JOHN URBINO,for himself and on behalf of other current and former employees, Plaintiff-Counter-Defendant- Appellant, Vv. ORKIN SERVICES OF CALIFORNIA,INC., a Delaware corporation, and ROLLINS, INC., a Delaware corporation, Defendants-Counter-Claimants- Appellees. No. 11-56944 D.C. No. 2:11-cv-06456- CJC-PIW No. 11-57002 D.C. No. 2:11-cv-06456- CJC-PJW 2 URBINO V. ORKIN SERVS. OF CALIFORNIA,INC. JOHN URBINO,for himself and on No. 12-55064 behalf of other current and former employees, D.C. No. Plaintiff-Appellant,| 2:11-cv-06456- CJC-PJW v. ORKIN SERVICES OF CALIFORNIA,INC., OPINION a Delaware corporation, and ROLLINS, INC., a Delaware corporation, Defendants-Appellees. Appeal from the United States District Court for the Central District of California Cormac J. Carey, District Judge, Presiding Argued and Submitted March 5, 2013——Pasadena, California Filed August 13, 2013 Before: Michael Daly Hawkins, Sidney R. Thomas, and Andrew D. Hurwitz, Circuit Judges. Opinion by Judge Hawkins; Dissent by Judge Thomas URBINO V. ORKIN SERVS. OF CALIFORNIA,INC. 3 SUMMARY Diversity Jurisdiction The panelheld that the federal courts lacked subject mater jurisdiction overthis California dispute, vacatedthe district court’s order denying plaintiffs motion to remand, and directed the district court to return the matter to state court for resolution. Under California’s Private Attorneys GeneralAct of2004 (“PAGA”), if the state agency declines to investigate labor code violations, an aggrieved employee may commence an action against the employer. Plaintiff filed a representative PAGAaction, and defendants removed the matter to federal court on the basis of diversity, based on evidence that the aggregated claims ofthe individual employees couldresult in liability in excess ofthe minimumjurisdictional requirements under 28 U.S.C. § 1332(a)(1). The panel held that the recoveriesat issue cannot be aggregated to meet the amount in controversy requirement, and therefore there was no federal diversity jurisdiction. Judge Thomasdissented because he would concludethat claims under PAGA can be aggregated in determining whetherdiversityjurisdiction exists, and therefore the district court properly exercised diversity jurisdiction. * This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader, 4 URBINOV. ORKIN SERVS. OF CALIFORNIA,INC. COUNSEL Theodore R. Scarborough (argued), RobertN. Hochman,and Tacy F.Flint, Sidley Austin LLP, Chicago,Illinois; John E. Lattin, Fisher & Phillips LLP,Irvine, California; Christopher C. Hoffman, Fisher & Phillips LLP, San Diego, California, for Defendants-Appellants/Cross-Appellees (No. 11-56944, 11-57002), Defendants-Appellees (12-55064). Kenneth H. Yoon (argued) and Stephanie E. Yasuda, Law Offices of Kenneth H. Yoon, Los Angeles, California; Peter M.Hart and AmberS. Healy, Law Offices of Peter M. Hart, Los Angeles, California, for Plaintiff-Appellee/Cross- Appellant (No. 11-56944, 11-57002), Plaintiff-Appellant (12- 55064). OPINION HAWKINS,Senior Circuit Judge: This interlocutory appeal deals with a unique statute concerning the claims of California residents against the owners and operators of California-based enterprises. Brought originally in state court, it has been removed to federal court on the theory that the individual claims, when aggregated, meet the minimum requirements of diversity jurisdiction. We have jurisdiction to review the district court’s refusal to remand the dispute back to state court. Because we determine that the recoveries at issue cannot be aggregated to meet the amount in controversy requirement, we vacate the district court order and remand with URBINOV. ORKIN SERVS. OF CALIFORNIA,INC. 5 instructions to return the dispute to the California courts for resolution." I. BACKGROUND With passage of the Private Attorneys General Act of 2004 (“PAGA”), the California Legislature fundamentally altered the state’s approach to collecting civil penalties for labor code violations. Though the Labor and Workforce Development Agency (““LWDA”) retained primacy over private enforcement efforts, under PAGA, if the LWDA declines to investigate or issue a citation for an alleged labor codeviolation, an aggrieved employee may commencea civil action “on behalf of himself or herself and other current or former employees” against his or her employer. Cal. Lab. Code § 2699(a); Arias v. Super. Ct., 209 P.3d 923, 930 (Cal. 2009). If the representative plaintiff prevails, the aggrieved employeesarestatutorily entitled to 25% ofthe civil penalties recovered while the LWDAis entitled to 75%. Cal. Lab. Code § 2699(i). From 2005 to 2010, Plaintiff John Urbino, 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 wagestatements, Urbinofiled a representative PAGA action. Defendants removed the matter to federal court on the basis of diversity, presenting evidence that the labor code The parties do not suggest any alternative basis for federal jurisdiction apart from diversity jurisdiction. 6 URBINO V. ORKIN SERVS. OF CALIFORNIA,INC. violations identified by Urbino would give rise to claims involving 811 other employees who were issued at least 17,182 paychecks andthat the claims couldresult in liability in excess of the minimum jurisdictional requirements under 28 U.S.C. § 1332(a)(1).” Plaintiff responded by moving the district court to remandthe case to state court. The district court thus had to decide whetherthe potential penalties could be combined or aggregated to satisfy the amount-in controversy requirement. If they could, federal diversityjurisdiction would lie becausestatutorypenalties for initial violations of California’s Labor Code would total $405,500 and penalties for subsequent violations would aggregate to $9,004,050. Ifnot, the $75,000 threshold would not be met because penalties arising from Urbino’s claims would be limited to $11,602.40. Acknowledging a divergence of opinion amongthedistrict courts on the issue and noting that this court has yet to addressit, the district court found PAGAclaims to be commonand undivided and therefore capable of aggregation. Ii. JURISDICTION AND STANDARD OF REVIEW Wehaveinterlocutory appellate jurisdiction pursuant to 28 U.S.C. § 1292(b) to review the district court’s denial of Urbino’s motion to remand.? “We review de novoa district ? At the time Defendants removed the case to federal court, they also moved to compel arbitration in accordance with the parties’ arbitration agreement. > Because this court has jurisdiction pursuant to § 1292(b), it need not address Urbino’s alternative contention that the court should exercise pendent appellate jurisdiction. URBINO V. ORKIN SERVS. OF CALIFORNIA,INC. 7 court’s denial of a motion to remandto state court for lack of federal subject matter jurisdiction.” Chapman y. Deutsche Bank Nat’l Trust Co., 651 F.3d 1039, 1043 (9th Cir. 2011). Il. DISCUSSION To invoke federal diversity jurisdiction under 28 U.S.C. § 1332(a), a matter must “exceed[] the sum or value of $75,000.” Where,as here, “it is unclear or ambiguous from the face of a state-court complaint whether the requisite amountin controversyis pled,” Guglielmino v. McKee Foods Corp., 506 F.3d 696, 699 (9th Cir. 2007), the “removing defendant bears the burden of establishing, by a preponderance of the evidence, that the amount in controversy exceeds”thejurisdictional threshold, Sanchez v. MonumentalLife Ins. Co., 102 F.3d 398, 404 (9th Cir. 1996). There is no dispute that Urbino’s individual potential recovery would not meet the $75,000 threshold. Rather, the issue is whether the penalties recoverable on behalf of all aggrieved employees may be considered in their totality to clear the jurisdictional hurdle. Thetraditional rule is that multiple plaintiffs who assert separate and distinct claims are precluded from aggregating them to satisfy the amount in controversy requirement. Troy Bank v. G.A. Whitehead & Co., 222 U.S. 39, 40 (1911). In Snyder v. Harris, the Supreme Court applied that rule to representative actions, holding that the claims of class memberscan be aggregated to meet thejurisdictional amount requirementonly whenthey “unite to enforce singletitle or right in which they have a commonand undividedinterest.” 394 U.S. 332, 335 (1969). To determinethe characterofthat interest, courts look to “the sourceofplaintiffs’ claims. Ifthe 8 URBINO V. ORKIN SERVS. OF CALIFORNIA,INC. claimsare derived from rights that they hold in groupstatus, then the claims are commonandundivided. Ifnot, the claims are separate and distinct.” Eagle v. Am. Tel. & Tel. Co., 769 F.2d 541, 546 (9th Cir. 1985). But simply because claims may have “questions of fact and law common to the group” does not mean they have a commonandundivided interest. Potrero Hill Cmty. Action Comm. v. Hous. Auth., 410 F.2d 974, 977 (9th Cir. 1969). Only wherethe claimscanstrictly “be asserted by pluralistic entities.as such,” id., or, stated differently, the defendant “owes an obligation to the group ofplaintiffs 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)). Aggrieved employees have a host of claims available to them—e.g., wage and hour, discrimination, interference with pension and health coverage—to vindicate their employers’ breaches of California’s Labor Code. Butall of these rights are held individually. Each employee suffers a unique injury—an injury that can be redressed without the involvementof other employees. Troy Bank, 222 U.S.at 41 (explaining that an interest is common and undivided when “neither [party] can enforce [the claim] in the absenceofthe other”), Defendants’ obligation to them is not “as a group,” but as “individuals severally.” Gibson, 261 F.3d at 944 (quotation omitted). Thus, diversity jurisdiction doesnotlie becausetheir claims cannot be aggregated. Defendants contend however that the interest Urbino asserts is not his individual interest but rather the state’s collective interest in enforcing its labor laws through PAGA. URBINO V. ORKIN SERVS. OF CALIFORNIA,INC. 9 See, e.g., Arias, 209 P.3d at 934; Amalgamated Transit Union, Local 1756, AFL-CIO v. Super. Ct., 209 P.3d 937, 943 (Cal. 2009). Accordingly, they argue this is effectively a “case[] in which a single plaintiff seeks to aggregate two or more of his own claimsagainst a single defendant,” Snyder, 394 U.S. at 335, and that those claims can be combined to satisfy the minimum amountin controversy requirement of the diversity statute, id. To the extent Plaintiff can—and does—assert anything but his individual interest, however, we are unpersuadedthat 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 nominalor formalparties andrestjurisdiction only upon the citizenship ofreal parties to the controversy.”); Mo., Kan. & Tex. Ry. Co. v. Hickman, 183 U.S. 53, 59 (1901); see also Moor v. Cnty. ofAlameda, 411 U.S. 693, 717 (1973) (explaining that “‘a State is not a ‘citizen’ for purposesofthe diversity jurisdiction”). Accordingly, the federal courts lack subject matter jurisdiction over this quintessential California dispute. We therefore vacate the district court order denying the Plaintiffs motion to remand and direct the district court to return the matter to state court for resolution.‘ VACATED AND REMANDED. Costs on appeal to Urbino. — - * Because wefind that the district court lacked jurisdiction, we need not address Defendants’ contention that the lower court erred in denying their motion to compelarbitration. 10 URBINO V. ORKIN SERVS. OF CALIFORNIA, INC. 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 (1961)). Thus, we look to “the source” of plaintiffs’ claims to determine whetherthey are subject to aggregation. Jd. at 546. Under California law, a representative action under the Private Attorney General Act “is fundamentally a law enforcementaction designed to protect the public and not to benefit private parties.” Arias v. Superior Court, 209 P.3d 923, 934 (Cal. 2009) (internal quotation marksand citation omitted), The Act neither creates nor vindicates substantive rights of individual aggrieved employees. Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court, 209 P.3d 937, 943 (Cal. 2009). Rather, it deputizes aggrieved employees to vindicate the State’s interest in labor code enforcement. Arias, 209 P.3d at 933-34. PAGAplaintiffs such as Urbino sue “‘as the proxy or agent of the state’s labor law enforcement agencies,” id. at 933, and do not enjoy “property rights or any other substantive rights” under the statute they enforce, Amalgamated Transit, 209 P.3d at 943. A successful PAGAplaintiff 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 URBINO V. ORKIN SERVS. OF CALIFORNIA, INC. ll payment for bringing suit in the public interest. As such, PAGAplaintiffs 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 (1911). Instead, they “represent[] the samelegal right and interest as state labor law enforcement agencies—namely, recovery of civil penalties that otherwise would have been assessed and collected by the [State].” Arias, 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 equalsthetotal civil penalties sought in the action. . In this regard, a PAGA plaintiff stands in a position comparableto a plaintiffin a shareholderderivative suit, who likewise lacks a direct proprietary interest in the subject of the litigation and suesas a proxy for the injured corporation. Id. at 546-47. Notwithstanding the individual recovery secured by successful shareholder derivative plaintiffs, we have longheldtheir claims subject to aggregation,relying on the rationale that derivative suits vindicate corporateinterests 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, 209 P.3d at 943-44, and may be pursued by individual aggrieved employees onlyif the State elects not to take enforcement action, Cal. Lab. Code § 2699.3; Arias, 209 P.3d at 930. More importantly, “Tb]ecause an aggrieved employee’s action under the [Act] functions as a substitute for an action brought by the governmentitself, a judgment in that action bindsall those, including nonparty aggrieved employees, who would be 12 _URBINOV. ORKIN SERVS.OF CALIFORNIA,INC. bound by a judgment in an action brought by the government.” Arias, 209 P.3d at 933. If aggrieved employees possessed individual substantive rights underthe Act, this broad rule of preclusion would raise serious due process concerns. Taylor v. Sturgell, 553 U.S. 880, 892-95 (2008). For these reasons, a judgmentin 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 employeesfiling 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. ofthe City & Cnty. of SF., 410 F.2d 974, 977-78 (9th Cir. 1969) (holding that commonquestions oflaw andfact do not suffice to establish the commonand undivided interest necessary to ageregate multiple plaintiffs’ claims). Because Urbino pursues a commonand undivided claim in his role as proxy for the State, the district court correctly calculated the amountin controversy based on the aggregate civil penalties soughtin this action, and properly determined that the total exceeded $75,000. Therefore, in my view,the district court properly exercised diversity jurisdiction. oO o 6 “N N D N 10 1] 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PROOF OF SERVICE STATE OF CALIFORNIA, COUNTY OF LOS ANGELES J am employedin the State of California, County of Los Angeles. I am over the age of 18 and not a party to the within suit; my business address is 1840 Century Park East, Suite 450, Los Angeles, California 90067. On August 23, 2013, I served the document(s) described as: 1) LETTER RE: NOTICE OF NEW AUTHORITY on theinterested parties in this action by sending[ ] the original [or] [V’] a true copy thereof [ ] to interested parties as follows [or] [W] as stated on the attachedservicelist: SEE ATTACHED SERVICE LIST [Vv] BY MAIL (ENCLOSEDIN A SEALED ENVELOPE):I deposited the envelope(s) for mailing in the ordinary course of business at Los Angeles, California. I am “readily familiar” with this firm’s practice of collection and processing correspondencefor mailing. Underthat practice, sealed envelopes are deposited with the U.S. Postal Service that same day in the ordinary course of business with postage thereon fully prepaid at Los Angeles, California. [ ] BY E-MAIL:[hereby certify that this document was served from Los Angeles, California, by e-mail delivery on the parties listed herein at their most recent known e- mail address or e-mail of recordin this action. [ ] BY FAX: [hereby certify that this document was served from Los Angeles, California, by facsimile delivery on the parties listed herein at their most recent fax number of record in this action. [ ] BY PERSONAL SERVICE:I delivered the document, enclosed in a sealed envelope, by handto the offices ofthe addressee(s) named herein. [ ] BY OVERNIGHT DELIVERY: [ am “readily familiar” with this firm’s practice of collection and processing correspondencefor overnight delivery. Under that practice, overnight packages are enclosed in a sealed envelope with a packing slip attached thereto fully prepaid. The packagesare picked up bythe carrier at our offices or delivered by our office to a designated collectionsite. I declare under penalty of perjury underthe lawsofthe State of California that the foregoing is true and correct. Executed this August 23, 2013, at Los Angeles, California. Matthew Krout Type or Print Name Signature Page 1 PROOFOF SERVICE a o O > S N W D W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 SERVICE LIST Yesenia Gallegos, Esq. David Faustman, Esq. FOX ROTHSCHILD LLP 1800 Century Park East, Suite 300 Los Angeles, CA 90067 Telephone: (310) 598-4159 Facsimile: (310) 556-9828 E-mail: Ygallegos@foxrothschild.com dfaustman@foxrothschild.com Attorneys for Defendant/Respondent CLS Transportation of Los Angeles Leo V. Leyva (Pro Hac Vice) Cole, Schotz, Meisel, Forman & Leonard, P.A. Court Plaza North 25 Main Street Hackensack, NJ 07601 Telephone: (646) 563-8930 Facsimile: (201) 678-6294 Attorney for Defendant/Respondent CLS Transportation of Los Angeles Scott L. Nelson (Pro Hac Vice) Public Citizen Litigation Group 1600 20"Street, NW Washington, DC 20009 Telephone: (202) 588-1000 Facsimile: (202) 588-7795 Email: SNelson@Citizen.org Attorney for Plaintiff/Appellant Arshavir Iskanian Page 2PROOF OF SERVICE