Ninth Circuit Defines Parameters For Removal Of PAGA Actions

California's Private Attorneys General Act of 2004 (PAGA) allows an "aggrieved employee" to recover civil penalties for certain violations of the California Labor Code. The amount of recovery in a PAGA action is based on the number of pay periods in which violations of the Labor Code have taken place with respect to each aggrieved employee.1

For purposes of removal based on diversity, California courts have been divided over whether a defendant must establish the $75,000 amount-in-controversy requirement based solely on civil penalties attributable to the plaintiff's individual claims or instead, whether a defendant can establish the minimum jurisdictional amount by aggregating the civil penalties attributable to the claims of all the aggrieved employees represented by the PAGA plaintiff. In Urbino v. Orkin Services of California, Inc.,2 a divided panel of the U.S. Court of Appeals for the Ninth Circuit reversed a lower court decision and held that PAGA penalties cannot be aggregated for purposes of removal. Nevertheless, while the Ninth Circuit has resolved one disputed issue, its reasoning might well call into question other decisions interpreting the PAGA.

Removal of the Urbino Case

The plaintiff in Urbino filed a PAGA action against his former employer, alleging that it deprived him and other current and former nonexempt employees of their rightful meal periods, overtime and vacation wages, and accurate itemized wage statements, all in violation of various sections of the California Labor Code. The plaintiff sought civil penalties pursuant to the PAGA based on those purported violations.3 The defendant removed the action based on diversity jurisdiction. With respect to the jurisdictional amount, the defendant calculated that it could potentially be liable for over $9,000,000 in civil penalties, well in excess of the $75,000 jurisdictional amount.

The plaintiff moved to remand, arguing that under PAGA an individual has a separate and distinct claim that cannot be aggregated with other aggrieved employees' claims to meet the jurisdictional amount for removal. Based on the total penalties divided by the total number of aggrieved employees, the plaintiff argued that no one employee's penalties exceeded the $75,000 jurisdictional minimum as each employee would be entitled to only approximately $11,000 in penalties. The district court found that a PAGA action falls into the "common and undivided" exception to the anti-aggregation rule, citing...