Co-authored by Sheryl Skibbe and Simon L. Yang

Private Attorney General Actions (PAGA) brought by individuals as representative actions on behalf of the State of California and other aggrieved employees are not sufficiently similar to federal Rule 23 class actions to support federal jurisdiction under the Class Action Fairness Act (CAFA).  But is there still a way into federal court?

Last year in Urbino v. Orkin Services of California, Inc., the Ninth Circuit held that potential PAGA penalties could not be aggregated to meet the minimum jurisdictional amount required for traditional diversity removal.  The panel rejected aggregation of penalties for jurisdictional purposes because the Court found that the plaintiffs primarily asserted “the state’s collective interest in enforcing its labor laws through PAGA,” rather than their own individual interests.  Urbino did not address removal under CAFA.

Baumann v. Chase Investment Services does, and the Ninth Circuit again ruled there was no jurisdiction under CAFA.  PAGA representative actions lack the statutory class action requirements for numerosity, commonality, typicality, or adequacy of representation.  They do not require notice to absent class members or an opt out procedure, and class action judgments, unlike PAGA judgments, are preclusive as to all claims the class could have brought.  Consistent with Urbino, the Court found, “[t]he employee’s recovery is thus an incentive to perform a service to the state, not restitution for wrongs done to members of the class.”

These cases now hinder removal of PAGA representative actions to federal court.  But whether a federal court may allow a PAGA action otherwise within its original jurisdiction to proceed under Rule 23 as a class action remains an open question.

Complaints that allege PAGA claims as class actions meet the statutory requirements under CAFA for class actions, but whether aggregation of the potential penalties to meet the $5 million mark is now in doubt.  One recent district court decision, Sanchez v. Rez-Care, Inc., interpreted Urbino to permit aggregation of only the 25% recoverable by putative class members.  And what if the complaint alleges a PAGA representative action with an FLSA claim?  Courts may choose to exercise supplemental jurisdiction over the PAGA claims, but how procedurally is the PAGA action tried?