Removability of PAGA actions to Federal Court

This blog is the third in a series regarding recent PAGA jurisprudence.  It focuses on developments regarding the removability of PAGA claims to federal court.

Removability of PAGA Actions to Federal Court

A heavily contested issue in recent years has been whether or not defendants can rely on PAGA penalties in order to meet the $5 million amount in controversy requirement of the Class Action Fairness Act (CAFA).  Under CAFA, when certain other requirements are met, a class action that is filed in state court can be removed to federal court if the defendants can show that the damages at issue are worth more than $5 million.[1]

This issue is significant to both plaintiff and defense attorneys because federal courts have treated PAGA claims differently than state courts.

For example, in state court it is settled that PAGA claimants need not meet the requirements of class actions in order to proceed in a representative fashion.  See Arias v. Superior Court (2009) 46 Cal.4th 969 (PAGA claims need not be certified).  In federal court, this remains an open question.  See, e.g., Medlock v. Taco Bell Corp. (E.D.Cal.2014) 2014 WL 6389382 (PAGA claims must satisfy requirements of FRCP Rule 23); Amey v. Cinemark USA, Inc. (N.D.Cal.2015) 2015 WL 4148366 (PAGA claims need not satisfy Rule 23).

Likewise, some federal courts have grafted a requirement of “manageability” onto PAGA claims.  See, e.g., Litty v. Merrill Lyncy & Co., Inc. (C.D.Cal.2015) 2015 WL 4698475 (striking PAGA claim as unmanageable).  To date, state courts have not followed suit.

In Yocupicio v. PAE Grp., LLC, 795 F.3d 1057 (9th Cir. 2015), the Ninth Circuit squarely addressed the question of whether PAGA claims can be counted toward CAFA’s amount-in-controversy requirement.  The Court held that they cannot, because a PAGA representative claim “cannot be deemed to be a class claim.”  795 F.3d at 1060.

As a result, fewer cases involving both class action allegations and PAGA claims that are filed in state court will be removable to federal court.[2]  This is undoubtedly a win for employees, particularly those who wish to remain in state court where they initially filed their lawsuit.

[1] PAGA penalties can add up quickly.  In many cases, when combined with the underlying class damages, PAGA penalties can result in a relatively small class action being worth more than $5 million.

[2] With respect to cases alleging only PAGA claims, the Ninth Circuit held in Baumann v. Chase Inv. Sers. Corp. (9th Cir.2014) 747 F.3d 1117, cert. denied 135 S.Ct. 870 (December 15, 2014) that PAGA actions are insufficiently similar to class actions to be removable under CAFA.