Only the Named Plaintiff’s Claim in PAGA Action Can Be Considered for Purposes of Diversity Jurisdiction
Today the Ninth Circuit issued its decision in Urbino v. Orkin Services of California, Inc., addressing how to properly analyze whether the amount in controversy element is satisfied for purposes of diversity jurisdiction in a PAGA action. As most California employers know, PAGA is a California statute that allows an employee to recover penalties (purportedly on behalf of the state) against an employer for various violations of the California Labor Code. Worse, the employee who is the named plaintiff can seek to recover penalties on behalf of all aggrieved employees. Most claims are filed in state court, but employers retain the option to remove the action to federal court if the requirements for diversity jurisdiction are met. One of those requirements is that the amount in controversy must exceed $75,000. In determining whether the amount in controversy meets this jurisdictional threshold, the question becomes whether courts should look only at the amount of the named plaintiff's claim, or whether courts should look at the aggregate amount of the claim as to all “represented” employees. California district courts have disagreed over the answer to this question. Today, the Ninth Circuit resolved the question, holding that only the claim of the named plaintiff (and not the aggregate claims of all aggrieved employees sought to be represented) may be considered in determining whether the amount in controversy requirement is satisfied. The result of this decision will be that far fewer PAGA claims will be capable of removal to federal court based on diversity jurisdiction. The full opinion of the court is here.