Thank you for sharing!

Your article was successfully shared with the contacts you provided.
In a case of first impression, the 6th U.S. Circuit Court of Appeals on Sept. 7, 2004, waded into the Zahn class action/supplemental jurisdiction morass. See Olden v. LaFarge Corp., 2004 U.S. App. Lexis 18809; 2004 Fed. App. 0296P (6th Cir. Sept. 7, 2004). The court’s decision, authored by Judge Richard D. Cudahy (sitting by designation from the 7th Circuit), is noteworthy reading for class action attorneys. Not only is Cudahy’s opinion a witty exegesis on a mind-boggling statutory construction problem, but the opinion nicely catalogues the extant history of the Zahn morass. Cudahy succinctly frames the Zahn issue in Olden: whether each individual class member in a diversity class action must meet the $75,000 amount-in-controversy requirement, or whether the plaintiffs may aggregate damages to satisfy the requirement. Olden, 2004 U.S. App. Lexis 18809, 8. CUTTING TO THE CHASE: THE 6TH CIRCUIT JOINS MAJORITY To cut to the chase, the 6th Circuit has now joined the majority of circuits — the 4th, 5th, 7th, 9th and 11th circuits — in holding that the 1990 supplemental jurisdiction statute, 28 U.S.C. 1367(a), has overruled Zahn v. Int’l Paper Co., 414 U.S. 291 (1973). This ruling is convenient for those who need a memory aid to keep track of which circuits have overruled Zahn: it’s the sequential run from the 4th through 9th (but excluding the 8th), and rounding out with the 11th. The dissenting circuits — that the supplemental statute does not overrule Zahn — include the 3rd, 8th and 10th circuits. Moreover, Cudahy suggested a rather novel basis for the court’s de novo review of the Zahn issue: “To say that this question has been thoroughly examined is an understatement. See Allapattah Servs. Inc. v. Exxon Corp., 362 F.3d 739 (11th Cir. 2004). In fact, one of my law clerks was asked to answer this very question on a civil procedure exam in 1999. Unfortunately, however, he does not recall the answer, so we must review the issue de novo.” It is one of the enduring ironies that the Zahn supplemental jurisdiction problem was inadvertently created by its drafters: well-known civil procedure professors. The professors’ drafting oversight has resulted in conflicting court rulings and one unresolved trip to the Supreme Court (see Free v. Abbott Labs. Inc., 529 U.S. 333 (2000) (per curiam)). In addition, to the bane of law students everywhere, the drafters’ error has inspired annual law school Zahn/supplemental jurisdiction exam questions. A brief history of the Zahn problem, then: In Zahn, the Supreme Court in 1973 held that in a class action, the claims of multiple parties could not be aggregated to satisfy the jurisdictional amount required to establish diversity jurisdiction, consistent with Snyder v. Harris, 394 U.S. 332 (1969). Conversely, each class member individually had to satisfy the amount-in-controversy, or the class could not be certified. This simple Zahn principle was reigning class action jurisprudence from 1973 through 1989. In 1989, the Supreme Court reaffirmed this proposition in Finley v. United States, 490 U.S. 545 (1989). In Finley, the court rejected the concept of pendent party jurisdiction, even if all the claims derived from a common nucleus of operative facts. The very next year, in reaction to the court’s rejection of pendent party jurisdiction, Congress enacted the supplemental jurisdiction statute to codify principles relating to federal pendent party and claim jurisdiction. Judicial Improvements Act of 1990; see 28 U.S.C. 1367. It is clear that the chief motivating purpose behind the congressional enactment of the supplemental jurisdiction statute was to undo the court’s Finley decision relating to pendent party jurisdiction. The knotty Zahn problem arises from the interplay between the two statutory provisions providing for supplemental jurisdiction, with the legislative history explaining those provisions. The legislative history indicates that the statutory drafters did not intend to overrule Zahn in codifying supplemental jurisdiction principles. Thus, the legislative history to the supplemental jurisdiction statute is at odds with the statute, and federal courts have been arguing whether to give effect to the plain statutory language — or, if the statute is ambiguous, to give effect to the drafters’ intent. The supplemental jurisdiction statute sets forth two core provisions that are intertwined in this dispute. The first subsection, 28 U.S.C. 1367(a), states that federal “district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.” This language was intended to codify the principle of pendent claim jurisdiction the Supreme Court articulated in United Mine Workers of America v. Gibbs, 383 U.S. 715 (1966). Subsection (a) also states that supplemental jurisdiction shall include “the joinder or intervention of additional parties” — language that was intended to confer supplemental pendent party jurisdiction and to overrule the court’s Finley holdings to the contrary. However, federal court supplemental jurisdiction given in subsection (a) is limited by exclusions listed in subsection (b). Hence, subsection (b) directs that “the district courts shall not have supplemental jurisdiction under subsection (a) over claims by plaintiff against persons made parties under Rule 14, 19, 20, or 24 of the Federal Rules of Civil Procedure … when exercising supplemental jurisdiction over such claims would be inconsistent with the jurisdictional requirements of section 1332.” Subsection (b) was intended to codify the rule in Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365 (1978). In codifying the Owen principle, however, the statutory drafters neglected to include Fed. R. Civ. P. 23 (the class action rule). When this legislative drafting oversight became apparent at the 24th hour, the professorial legislative drafters attempted to plug the dike with explanatory legislative history. Thus, the drafters used the legislative history to explain that it was not their intent to overrule the Zahn case or the nonaggregation principle. The drafters’ last-gasp attempt to salvage the drafting has proved unavailing. Instead, the attempt to fill the subsection (b) Rule 23 gap through a legislative history has since inspired heated controversy, recourse to principles of statutory construction and an unresolved muddle in the circuit courts. Famously, the 5th Circuit was first out of the gate on the relationship of the supplemental jurisdiction statute to the possibility of aggregating claims in diversity-based class action litigation, rejecting Zahn‘s limitations on such class actions. In Abbott Labs, the 5th Circuit broadly declared that Congress, in enacting the supplemental jurisdiction statute, had overruled Zahn: “Section 1367(a) grants district courts supplemental jurisdiction over related claims generally, and � 1367(b) carves exceptions. Significantly, class actions are not among the exceptions.” In re Abbott Labs., 51 F.3d 524, 527 (5th Cir. 1995). Thus, because Rule 23 was not included on the list of rules in subsection (b), Congress had seemingly granted supplemental jurisdiction over the claims of absent class members who could not independently satisfy the statutory amount-in-controversy requirement. The 5th Circuit’s judicial overruling of Zahn, based on a plain reading of the text of the statute, was quickly followed by the 7th Circuit. See Stromberg Metal Works Inc. v. Press Mech. Inc., 77 F.3d 928 (7th Cir. 1996). The 4th, 9th and 11th circuits, considering this same problem, also have concluded that the supplemental jurisdiction statute overrules Zahn. See Allapattah Servs. Inc., supra; Rosmer v. Pfizer Inc., 263 F.3d 110, 114 (4th Cir. 2001); Gibson v. Chrysler Corp., 261 F.3d 927 (9th Cir. 2001). OTHER FEDERAL COURTS HAVE DISAGREED OVER ‘ABBOTT’ However, other federal courts have disagreed with the 5th Circuit’s Abbott Labs holding, arguing that the legislative history provides a substantial basis for concluding that the omission of Rule 23 from the 28 U.S.C. 1367(b) list of federal rules was an oversight. These courts read the legislative history to suggest that Congress intended the supplemental jurisdiction statute to overrule only the court’s Finley decision, but not Zahn. The House Judiciary Committee legislative history, moreover, states that “this section is not intended to affect the jurisdictional requirements of 28 U.S.C. 1332 in diversity-only class actions, as those requirements were interpreted prior to Finley.” H. Rep. 101-734 (1990), reprinted in 1990 U.S.C.C.A.N. 6860, 6875. A footnote cites Zahn as a pre- Finley case unaffected by the supplemental jurisdiction statute. Id. at n.17. The nub of the Zahn/supplemental jurisdiction debate, then, has hinged on whether federal courts find the statutory language to be ambiguous. Those courts that have found the statute ambiguous have looked to the legislative history and concluded that Zahn was not intended to be overruled, and is good law. See Leonhardt v. Western Sugar Co., 160 F.3d 631, 641 (10th Cir. 1998). The 3rd and 8th circuits have followed the 10th Circuit’s reasoning in Leonhardt. See Trimble v. Asarco Inc., 232 F.3d 946, 962 (8th Cir. 200); Meritcare Inc. v. St. Paul Mercury Ins. Co., 166 F.3d 214, 22 (3d Cir. 1999). However, the majority of circuits have determined that “When text and legislative history disagree, the text controls.” Stromberg Metal Works Inc., supra, 77 F.3d at 931. Finally, this split percolated to the Supreme Court in 2000, when it famously split, 4-4, and summarily affirmed the 5th Circuit’s holding in Abbott Labs, thereby failing to resolve the lower federal courts. See Free v. Abbott Labs. Inc., supra. In the absence of the Supreme Court revisiting the Zahn split, this means that diversity-based class actions that fail to meet the amount-in-controversy may proceed in some federal circuits, but not in others. Undoubtedly, class action attorneys will proceed to favorable Zahn-overruling courts. Linda S. Mullenix holds the Morris and Rita Atlas Chair in Advocacy at the University of Texas School of Law. She can be reached at [email protected]

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.