June 22, 2016

Supreme Court should affirm federal efforts to stop class action abuse

By Anastasia P. Boden Attorney

Readers of this blog are likely no stranger to class action lawsuit abuse.  Egregious examples abound.

Congress responded to that abuse in 2005 by enacting the Class Action Fairness Act, or CAFA.  That law allows parties to remove class action lawsuits to federal courts—which Congress thought would better police the class action process.  Since CAFA was enacted, plaintiffs have tried to evade removal to federal court, because they prefer friendlier state courts.  A case in which PLF filed an amicus brief today, ABM Industries v. Castro, involves one such example.

In this case, Marley Castro sued her employer—ABM Industries—in state court, purportedly on behalf of hundreds of similarly-situated employees.  She alleged ABM failed to properly reimburse its employees for business-related expenses related to personal cell phone use, in violation of state labor code.  ABM attempted to remove the case to federal court under CAFA.

However, Ninth Circuit law allows plaintiffs to evade CAFA removal when the case is brought under California’s Private Attorney General Act (PAGA), which deputizes individuals to bring “representative” lawsuits on behalf of others to enforce the state labor code.  While PAGA actions are slightly different than class actions (some of the penalties are paid directly to the state, and PAGA actions lack due process rules for class action certification), there’s no material difference that justifies isolating these large, often coercive, lawsuits from CAFA.  Nevertheless, the Ninth Circuit has held that lawsuits—even those lawsuits involving hundreds of plaintiffs and massive fines—are not subject to CAFA because they do not go through class certification procedures akin to the federal class certification procedure for traditional class actions.

ABM filed a petition for writ of certiorari in the United States Supreme Court and today, PLF filed an amicus brief in support of the petition, arguing that the Court should agree to review the case and overrule the Ninth’s Circuit loophole.  We argue that, given the increasing number of “representative actions” under PAGA-like statutes across the country, the Ninth Circuit’s loophole may swallow the general rule that allows removal of class litigation seeking more than $5 million.

Moreover, by allowing large lawsuits that don’t have class certification measures to escape CAFA removal, the Ninth Circuit’s decision gives those states that are hostile to CAFA an incentive to authorize mass actions that lack important class certification protections.  This affects constitutional due process protection not only for defendants, but also for absent employees whose rights are finally determined without their input or consent.

The Court should take this opportunity to affirm that CAFA applies to representative PAGA actions.

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