The U.S. Court of Appeals for the Ninth Circuit recently held that, in determining whether a putative class action satisfied the jurisdictional requirements of the federal Class Action Fairness Act, amounts in controversy as to non-class and class claims may not be aggregated to meet CAFA’s diversity requirements.

More specifically, the Ninth Circuit held that, “where a plaintiff files an action containing class claims as well as non-class claims, and the class claims do not meet the CAFA amount-in-controversy requirement while the non-class claims, standing alone, do not meet diversity of citizenship jurisdiction requirements, the amount involved in the non-class claims cannot be used to satisfy the CAFA jurisdictional amount, and the CAFA diversity provisions cannot be invoked to give the district court jurisdiction over the non-class claims.”

A copy of the opinion is available at: Link to Opinion.

The plaintiff sued her former employer and a related entity (the “employer defendants”) for violations of the California Labor Code.  See, e.g., Cal. Lab. Code §§ 201 (timely pay), 226.7 (meal and rest periods), 512 (meal periods), 1194 (minimum wages).  She alleged 10 causes of action, the first nine of which were brought as class claims on behalf of herself and “certain current and former employees.”  She also brought one non-class claim, a “representative claim” under the California Labor Code Private Attorney General Act of 2004 (PAGA).  Cal. Lab. Code §§ 2698-2699.5.

The employer defendants removed the case to federal court under CAFA, and the plaintiff moved to remand.  The lower court denied the plaintiff’s motion to remand.  This appeal ensued.

As you may recall, in any removal, the “overarching condition” is that “defendants may remove to the appropriate federal district court any civil action brought in a State court of which the district courts of the United States have original jurisdiction.” See, e.g., City of Chi. V. Int’l Coll. Of Surgeons, 118 S. Ct. 523, 529 (1997) (citing 28 U.S.C. § 1441(a)).

CAFA “gives federal courts jurisdiction over certain class actions defined in § 1332(d)(1), if the class has more than 100 members, the parties are minimally diverse, and the amount in controversy exceeds $5 million.”  See, e.g., Dart Cherokee Basin Operating Co., LLC v. Owens, 135 S. Ct. 547, 552 (2014).  Under CAFA, a “‘class action’” is “any civil action filed under” class action rules “as a class action.”  See 28 U.S.C. § 1332(d)(1)(B).

In this case, there was no dispute that to meet the “exceeds $5 million” requirement for original jurisdiction under CAFA the class claims and non-class claims (plus attorney’s fees) had to be aggregated.  Moreover, there was no dispute that the non-class claim standing alone could not provide a basis for “original jurisdiction” because it was a state law claim and there was no diversity of citizenship between the plaintiff employee and the employer defendants.

For the purposes of its opinion, and based upon the record, the Ninth Circuit Court assumed that the damages sought for the class claims were $1,654,874, exclusive of attorney’s fees, and that the amount sought pursuant to the representative non-class action claim was $3,247,950, exclusive of attorney’s fees.  The Ninth Circuit noted that these amounts added up to $4,902,824.

It also assumed “without deciding, that [the] addition of reasonable attorney’s fees would cause the total recovery for the class claims and the PAGA claim to reach $5,000,001 at least.”

Accordingly, to establish original jurisdiction in federal court, the employer defendants argued that the claims should be and could properly be aggregated under CAFA.

Conversely, the plaintiff employee argued that aggregating the class and non-class claims was improper because CAFA focused specifically on “class actions” and that for there to be original jurisdiction under CAFA, the class claims standing alone had to meet the CAFA damages threshold of $5 million.  Thus, she argued that because the damages for the class claims were well short of that threshold, there was no original jurisdiction under CAFA, and no other basis for federal original jurisdiction.

The Ninth Circuit agreed with the plaintiff.

Citing Dart, the Ninth Circuit held that the language of the statute shows that “in enacting CAFA, Congress was focused on class actions rather than on all representative actions or on cases where a class claim was only a part, perhaps a small part of a civil action.”  Moreover, it held, CAFA’s primary objective is to ensure “federal court considerations of interstate cases of national importance.”  See also Standard Fire Ins. v. Knowles 133 S. Ct. 1345, 1348 (2013).

Accordingly, the Ninth Circuit held the plain language of the statute “does not suggest that every case with a class claim can be brought in federal court.”  Moreover, it noted that CAFA defines “class action” as “any civil action filed under class action rules.”  See 28 U.S.C. § 1332(d)(1)(B).  It held that nothing in CAFA “suggest[s] that the mere presence of even a relatively minor class claim in an action will suffice for federal diversity jurisdiction purposes” and that “the same is true for aggregation.”

Consequently, the Ninth Circuit Court held that the provisions in CAFA “do not speak to claims that are not part of the class action itself; [and therefore] there appears to be no reason to include those large or small [non-class] claims in the damage threshold calculations.”

In sum, the Ninth Circuit held that where a plaintiff files a class action containing class claims and non-class claims, and the class claims do not meet the “CAFA amount-in-controversy requirement” and the “non-class claims, standing alone do not meet diversity of citizenship requirements,” the amounts involved in the non-class claims “cannot be used to meet the CAFA [$5 million] jurisdictional amount.”

Additionally, the Court held that in such instances, the CAFA minimal diversity provisions “cannot be invoked to give the district court jurisdiction over the non-class claims.”

Accordingly, the Ninth Circuit reversed and remanded the case to the district court with instructions to remand it back to state court.