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PAGA Claims May Not Satisfy CAFA’s Amount in Controversy Requirement Nor May CAFA’s Diversity Provisions Create Federal Jurisdiction for PAGA Claims.

Yocupicio v. PAE Group, LLC, 795 F.3d 1057 (9th Cir. July 30, 2015)

Plaintiff filed a class action in state court alleging various wage and hour violations under the Labor Code, as well as a representative cause of action for civil penalties under the Labor Code Private Attorneys General Act of 2004 (PAGA, Lab. Code § 2698, et seq.). The class claims satisfied the numerosity and minimal diversity requirements of the Class Action Fairness Act of 2005 (CAFA)[i] but in the aggregate did not exceed the $5 million threshold. Although the PAGA claim was not a class claim,[ii] the district court considered the amount of the PAGA claim in deciding whether the claims met the CAFA amount in controversy threshold. The court of appeals rejected this aggregation, finding that while district courts may take supplemental jurisdiction of claims over which they normally would not have jurisdiction, shoehorning PAGA, a representative action, within Rule 23’s class action requirements would undermine CAFA’s central purpose to have large class actions heard in federal courts.

Similarly, the Ninth Circuit held that federal jurisdiction over class claims could not create federal diversity jurisdiction over PAGA claims brought by a California employee against a California employer where complete diversity was lacking.

[i] 28 U.S.C. § 1332(d)(2)(A)-(C), (d)(5)(B); see also United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int’l Union v. Shell Oil Co., 602 F.3d 1087, 1090-91 (9th Cir. 2014).

[ii] Haw. Ex rel. Louis v. HSBC Bank Nev., N.A., 761 F.3d 1027, 1040-41 (9th Cir. 2014); Baumann v. Chase Inv. Servs. Corp., 747 F.3d 1117, 1121, 1124 (9th Cir. 2014), cert. denied, __ U.S. __, 135 S. Ct. 870, 190 L. Ed. 2d 702 (2014); Arias v. Super. Ct. (2009) 46 Cal.4th 969, 981, 985.