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CAFA Law Blog Information, cases and insights regarding the Class Action Fairness Act of 2005

Only 25% of PAGA Penalties–Sufficient to Satisfy the Amount in Controversy?

Posted in Case Summaries, Jurisdictional Amount

Controulis v. Anheuser-Busch, LLC, 2013 WL 6482970 (C.D. Cal. Nov. 20, 2013).

The plaintiff, employed as a bottler by the defendant, Anheuser-Busch, LLC, brought an action alleging that the defendant violated California law by including the value of free beer in the regular rate of pay.

The terms of the plaintiff’s employment were governed by a collective bargaining agreement (“CBA”), which provided that the defendant would distribute two free cases of beer each month to each employee who met certain requirements in the previous month.  Supposedly, these free cases of beer were not to be included in the calculation of the regular rate of pay.

The defendant removed the action to the District Court alleging subject matter jurisdiction under CAFA.  The plaintiff moved for remand, and the District Court granted the motion.

Under CAFA, the courts have original jurisdiction over a class action where there is minimal diversity and the amount in controversy exceeds $5,000,000.  To determine whether the amount in controversy exceeded $5,000,000, the claims of individual class members should be aggregated.

Here, to demonstrate that the aggregated claims of individual class members exceeded $5,000,000, the defendant combined $1,696,000 in potential wage statement penalties under Labor Code § 226 and $4,536,800 in potential PAGA penalties for all potentially aggrieved employees.

The District Court, however, found that such claims could not be aggregated under CAFA because 75 percent of any PAGA penalties would be due to the state rather than to individual class members.  Therefore, the District Court stated that the $4,536,800 in potential PAGA penalties were not claims of individual class members, as required by § 1332(d)(6) because the primary benefit of such penalties inures to the state.  So, such penalties could not be aggregated to meet the $5,000,000 amount in controversy requirement.  Moreover, the penalties that would be entitled to plaintiffs only would not exceed the amount-in-controversy requirement.

Accordingly, the District Court granted the plaintiff’s motion to remand the case to the superior court.