Not All Class Actions Are Created Equal Under CAFA, Says the Ninth Circuit

The Ninth Circuit recently delivered a setback to defendants seeking to remove cases to federal court under the Class Action Fairness Act (“CAFA”) when it interpreted the statute narrowly to exclude consideration of non-class claims in determining the jurisdictional amount in controversy in Yocupicio v. PAE Grp., LLC, No. 15-55878, 2015 WL 4568722 (9th Cir. 2015).

The Class Action Fairness Act authorizes federal jurisdiction over “any civil action in which the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs, and is a class action.”  Federal district courts typically aggregate the claims of individual class members to determine whether the $5 million jurisdictional threshold is met.  And until last week, federal courts generally included in that figure the recovery sought for non-class claims pled within a class complaint, such as other representative claims often brought under the California Private Attorney General Act (“PAGA”).

That was the case in Yocupicio, No. CV 14-8958-GW JEMX, 2014 WL 7405445, at *4 (C.D. Cal. Dec. 29, 2014).  The plaintiff in that action claims that her employer, among other things, denied her and other employees meal and rest breaks in violation of California labor laws.  After she filed the complaint in state court, her employer removed it to federal court under CAFA, estimating that the lawsuit seeks $1.7 million for the class claims and $3.2 million for the PAGA claims.  With fees and costs, those amounts tallied up to more than CAFA’s jurisdictional threshold requirement of $5 million.  The district court agreed with this approach in its order denying the plaintiff’s subsequent motion to remand.  It explained that the PAGA claims were properly considered within the amount in controversy because they contribute to a case that had been “unquestionably” filed as a class action.  To treat the PAGA claim any differently, the court elaborated, would have required the court to “ignore the statutory language” and misread prior precedent.

A Ninth Circuit panel, however, reversed the district court’s decision, stating that the district court failed to give consideration to CAFA’s legislative history, which, according to the panel, “clearly indicates that Congress meant something other than what it said” when it enacted the statute.  In the Court of Appeals’ opinion, CAFA’s references to “class actions” shows that Congress did not intend to afford jurisdiction over “all representative actions or on cases where a class claim was only a part, perhaps a small part, of a civil action.”  Based on this narrow interpretation of CAFA, the Ninth Circuit held that the statute grants federal jurisdiction only when the class claims alone meet the $5 million threshold.

The Court of Appeals’ ruling in Yocupicio departs from more recent jurisprudence that favors an expansive reading of CAFA.  In Dart Cherokee Basin Operating Co., LLC v. Owens, 135 S. Ct. 547, 552 (2014), for example, the Supreme Court held that unlike other removal statutes, CAFA does not contain an anti-removal presumption, citing in support a legislative instruction that CAFA’s “provisions should be read broadly.”

The defendant in Yocupicio is reportedly considering an appeal of the Ninth Circuit’s decision.  Until the U.S. Supreme Court reverses the opinion or issues a superseding decision, businesses should be aware that Yocupicio is the prevailing authority within the Ninth Circuit, and will likely be cited by plaintiffs in other jurisdictions who seek to avoid CAFA.