965 F.3d 694
9th Cir.2020Background
- Costco employed greeters and exit checkers as “member service” employees; Canela worked as a greeter/exit checker in California.
- Canela sued in California state court under PAGA alleging Costco failed to provide suitable seating in violation of California labor law; the complaint was titled and pleaded as a “Class Action Complaint.”
- Costco removed the case to federal court invoking both traditional diversity jurisdiction and CAFA.
- After removal Canela abandoned any effort to certify a class and argued PAGA is a representative (qui tam–like) action that cannot be a class action under CAFA.
- The district court declined to remand, denied Costco’s partial summary judgment, certified §1292(b) questions, and permitted interlocutory appeal; the Ninth Circuit reviewed whether federal subject-matter jurisdiction existed at removal.
Issues
| Issue | Plaintiff's Argument (Canela) | Defendant's Argument (Costco) | Held |
|---|---|---|---|
| Whether amount-in-controversy for diversity can aggregate PAGA penalties across employees | PAGA penalties are representative; plaintiff’s pro rata share meets threshold? | Aggregate civil penalties of all aggrieved employees satisfy $75,000 at removal | Held: No aggregation — under Urbino PAGA penalties may not be aggregated; named plaintiff’s share did not meet $75,000, so no §1332(a) diversity jurisdiction |
| Whether a standalone PAGA suit filed in state court is a “class action” under CAFA (28 U.S.C. §1332(d)(1)(B)) | PAGA was pleaded as a class action and labels/allegations suffice to invoke CAFA; alternatively PAGA could be pursued as a class action under state law | PAGA suits are not similar to Rule 23; a PAGA action lacks numerosity, commonality, typicality, adequacy, notice/opt-out, and other Rule 23 hallmarks; therefore it is not a CAFA “class action” | Held: No — PAGA is not similar to Rule 23 and cannot be treated as a CAFA class action (Baumann controls); CAFA jurisdiction did not exist at removal |
| Whether the district court retained jurisdiction after plaintiff later abandoned class allegations | Dropping class status shows lack of Article III standing to represent absent employees in federal court | Jurisdiction must be assessed as of the time of filing/removal; initial labels could establish CAFA jurisdiction | Held: Jurisdiction is assessed at time of removal; but on the facts here PAGA could not have been filed as a class action at removal, so later developments do not cure lack of jurisdiction |
Key Cases Cited
- Urbino v. Orkin Servs. of Cal., Inc., 726 F.3d 1118 (9th Cir. 2013) (PAGA civil penalties may not be aggregated to meet diversity amount-in-controversy)
- Baumann v. Chase Inv. Servs. Corp., 747 F.3d 1117 (9th Cir. 2014) (PAGA actions are not sufficiently similar to Rule 23 to trigger CAFA jurisdiction)
- Washington v. Chimei Innolux Corp., 659 F.3d 842 (9th Cir. 2011) (plain meaning of CAFA requires state statute authorize suit ‘as a class action’)
- Mississippi ex rel. Hood v. AU Optronics Corp., 571 U.S. 161 (2014) (CAFA "mass action" requires 100+ named plaintiffs; distinguishes mass-action and class-action provisions)
- Kim v. Reins Int’l Cal., Inc., 459 P.3d 1123 (Cal. 2020) (California Supreme Court: PAGA is representative and not a class action)
- Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83 (1998) (threshold requirement that courts address subject-matter jurisdiction before merits)
- Freeport-McMoRan Inc. v. KN Energy, Inc., 498 U.S. 426 (1991) (jurisdiction is assessed at commencement and subsequent events generally cannot divest proper jurisdiction)
- Dart Cherokee Basin Operating Co. v. Owens, 574 U.S. 81 (2014) (CAFA relaxed diversity requirements for class actions; removal standards)