Must a plaintiff who brings an action under California’s Private Attorney General Act (PAGA) comply with Rule 23’s requirements? Although the Ninth Circuit has not addressed the issue, one California federal district court recently weighed in, reiterating the California Supreme Court’s 2014 decision in Iskanian v. CLS Transp. Los Angeles, LLC that a PAGA action is different than a class action and more akin to a qui tam suit.

Plaintiff, a Costco employee, filed suit against Costco for allegedly failing to provide suitable seats to employees in violation of Labor Code § 1198 and pursuant to the PAGA. Costco moved for summary judgment, arguing that plaintiff could not represent unnamed third parties in federal court absent Rule 23 certification because federal procedural law governed the action. Costco primarily relied on the Supreme Court’s 2010 decision in Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., which held that a New York law prohibiting certain claims from being maintained as class actions was preempted by Rule 23. Plaintiff responded by arguing that in 2015, the Ninth Circuit, in Sakkab v. Luxottica Retail N. Am., Inc., indicated that a PAGA claim can move forward in federal court without class certification.

The court, referring back to Iskanian, noted that “civil penalties recovered on behalf of the state under PAGA are distinct from the statutory damages to which employees may be entitled in their individual capacities,” and that “[a] PAGA representative action is therefore a type of qui tam action.” Because of this, and in reconciling PAGA with the requirements of Rule 23, the court determined there was no conflict between PAGA and Rule 23. Specifically, the court reasoned that PAGA implicates only how a plaintiff may bring a PAGA action, which the court also acknowledged was a “type of qui tam action” to which Rule 23 did not apply. Moreover, the court found that PAGA is considered substantive for purposes of an Erie analysis because it gives plaintiffs a right to recover in specified circumstances. In so finding, the court determined that a decision to the contrary – i.e., that PAGA does not apply in federal court – would contravene Erie’s core policies because the result would lead to inequitable administration of the law. As such, the court denied Costco’s motion for summary judgment and found that plaintiff need not obtain Rule 23 class certification to assert her PAGA claim.

Canela v. Costco Wholesale Corp. No. 4:13-cv-03598 (N.D. Cal. May 23, 2018).