On February 11, 2022, the 9th Circuit issued its decision in Saucillo v. Peck, — F.4th —, 2022 WL 414692 (9th Cir. 2022), holding among other things that a nonparty aggrieved employee does not have standing in federal court to challenge a Private Attorneys General Act (PAGA) settlement. In doing so, it bucks a trend emerging in state court.

In recent months, three California Court of Appeal cases decided whether a nonparty aggrieved employee has standing to object to a settlement under state law. Two of the three cases—Uribe v. Crown Building Maintenance Co., 70 Cal. App. 5th 986 (2021), and Moniz v. Adecco USA, Inc., 72 Cal. App. 5th 56 (2021)—held that trial courts may permit parallel plaintiffs to intervene to challenge a settlement. (To read about the Uribe and Moniz decisions, click here and here.) Turrieta v. Lyft, Inc., 69 Cal. App. 5th 955 (2021), came out the other way, but the California Supreme Court has granted review of Turrieta, and the Labor and Workforce Development Agency (LWDA) has asked the court to adopt the emerging majority rule. (To read about the Turrieta decision and the LWDA’s amicus brief, click here and here.)

In Saucillo, the 9th Circuit held that Article III does not provide standing in federal court to challenge a PAGA settlement, because “[t]he rule that only parties to a lawsuit, or those that properly become parties, may appeal an adverse judgment, is well settled.” Saucillo, 2022 WL 414692, at *5. The court found it immaterial whether the objector was a class member in a parallel class or PAGA action. Critically, even though an objector may ultimately receive a portion of the PAGA settlement the allegedly aggrieved employees in a PAGA action are not parties to the lawsuit. Id. at *6 (“[O]bjectors to a PAGA settlement are not ‘parties’ to a PAGA suit in the same sense that absent class members are ‘parties’ to a class action.”).

The Saucillo decision states a potentially meaningful limitation in its conclusion. The court distinguished Uribe and Moniz (both of which held that objectors had standing under state law) on the grounds that the objectors in those cases had successfully moved to intervene in connection with challenging the settlement. In Saucillo, the objector did not move to intervene, and the court expressed no opinion on whether the objector “could have been permitted to intervene, raise objections to the PAGA settlement, and then pursue those objections on appeal.” Id. at *7. Thus, the court left open the possibility that a case in a procedural posture similar to Uribe and Moniz could come out the same way, even in federal court.

The effect of the Saucillo decision will most likely be felt in hybrid class/PAGA settlements, because federal courts typically lack subject matter jurisdiction over pure PAGA actions. (Saucillo itself involved a hybrid settlement.) In such hybrid settlements, the parties often assign relatively little value to the PAGA claims, thereby maximizing the recovery for the class. (Seventy-five percent of the settlement value assigned to PAGA claims must be paid to the LWDA.) The LWDA typically does not object to such allocations, but parallel PAGA plaintiffs often do. The court’s parting words in Saucillo may invite further litigation about the rights of nonparties to intervene to challenge hybrid settlements in federal court. In the meantime, some litigants may decide to allocate slightly higher amounts to the PAGA portion of such settlements as insurance against the threat of an intervenor.