Employment lawyers know that it is commonplace for national employers to remove private, state-law employment discrimination cases from state to federal court, whenever there are diversity-of-citizenship grounds to do so. Here’s the next step – the Ninth Circuit (2-1) approves removal of a suit commenced by a state civil rights agency in state court, holding that it is the citizenship of the employee – the real party in interest – that counts for diversity purposes.
FEHA v. Lucent Technologies, No. 09-15057 (9th Cir. Apr. 26, 2011): The employee, named Carauddo, filed a charge of disability discrimination against Lucent under the California Fair Employment and Housing Act (FEHA) with the Department of Fair Employment and Housing (DFEH). The state agency filed a lawsuit in its own capacity in California state court to enforce the FEHA against Lucent. Lucent removed the action to federal court; the district court denied a remand to state court, and it granted the employer summary judgment on the merits of the claim.
The DFEH on appeal argued that because a state agency – the named plaintiff – is not a “citizen” for purposes of federal diversity-jurisdiction, there was no federal jurisdiction to serve as the basis of removal.
But the panel majority holds the relevant “citizenship” was that of the employee himself, not of the state agency. The majority holds that the state agency is not the real party in interest because it is seeking relief for the employee himself, and has no particularized interest in enforcement of the FEHA. That the DFEH itself is authorized by state statute to bring its own lawsuit on behalf of an employee, according to the panel majority, does not make it the real party in interest. The state agency at most has “general governmental interest[s]” in the enforcement of the law.
Even the fact that the DFEH seeks systemic equitable relief, separate from the employee himself, was apparently is not enough for the panel majority:
“DFEH’s claim that these equitable remedies constitute a substantial state interest is unavailing, as most of these forms of equitable relief could be obtained by the individual aggrieved. In fact, Carauddo’s prayer for relief includes a request ‘[f]or a permanent and mandatory injunction prohibiting Defendants from committing future violations of the laws and public policies’ of the FEHA. ER 646. Any remaining interests that are unique to DFEH’s lawsuit, namely the training of Lucent’s employees, are tangential to the alleged relief sought for Carauddo and, thus, cannot render DFEH a real party to the controversy under these circumstances.”
Thus, “[f]or these reasons, the statutory scheme does not support a finding that DFEH is a real party in the controversy for the purposes of diversity jurisdiction.”
Carauddo himself attempted to intervene into the action under Federal Rule of Civil Procedure 24, but the panel majority also concludes that the district court did not abuse its discretion in rejecting compulsory intervention. This it holds on the ory that his interests are adequately represented by the DFEH. It so holds despite the fact that California state law gives individual employee the right to intervene in FEHA cases filed by the DFEH.
“Although the FEHA provides that in employment discrimination cases brought by DFEH, ‘the person claiming to be aggrieved shall be the real party in interest and shall have the right to participate as a party and be represented by his or her own counsel,’ Cal. Gov’t Code § 12965(c)(2), state law cannot negate the requirement of the federal rule that Carauddo demonstrate that he is not adequately represented by California . . . . As Carauddo has failed to make such a showing, the district court’s denial of his motion to intervene as a right was not in error.”
While the district court allowed the employee permissive intervention, the panel majority holds that the judge did not abuse her discretion in barring the employee’s own lawyer from filing motions or oppositions related to the DFEH claims, serving “duplicative” discovery or even orally arguing motions.
Finally, the panel affirmed summary judgment on the merits, finding that Lucent satisfied its FEHA duty to provide the employee reasonable accommodations.
Dissenting, Judge Ikuta would have held that the district court had no diversity jurisdiction over this matter: “a party is an interested party for purposes of diversity jurisdiction when it has some control over the litigation.” The dissent observes:
“In this case, DFEH is the party of record. Moreover, DFEH is the party that brought the suit and is also in control of the litigation. Indeed, the majority does not dispute that this DFEH’s litigation; it holds that Carauddo had no right of intervention, see Maj. op. at 5366-67, and that the district court did not abuse its discretion in placing various limitations on Carauddo as an intervenor, . . . . DFEH’s complete control over the litigation is sufficient to make DFEH a real party for jurisdiction purposes. Accordingly, the majority errs in suggesting that obtaining benefits from the litigation is a sine qua non of being a real party.”
I see this case being reargued en banc in the Ninth Circuit, lest it become the norm for employers to remove such state-government cases routinely to federal court.