X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
The close of the Supreme Court’s term is traditionally a time for announcing decisions on some of the most controversial cases before the Court. This year, crowded out by socially explosive cases, two of the last cases received very little comment. On June 23, deciding a pair of cases in a single opinion, a 5-4 majority held that 28 U.S.C. � 1376 (supplemental jurisdiction) changed the rules regarding determination of the minimum amount in controversy for establishing diversity jurisdiction under 28 U.S.C. � 1332 announced in Zahn v. International Paper Co., 414 U.S. 291 (1973). Exxon Mobil Corp. v. Allapattah Services, Inc., No. 04-70, Ortega v. Star-Kist Foods, Inc., No. 04-79, 2005 U.S. LEXIS 5015. The relative silence concerning the Exxon decision is unfortunate. Although partly mooted by the Class Action Fairness Act of 2005, enacted earlier this year, the opinion has important jurisprudential as well as practical effects on litigation in federal court, especially in the 3rd Circuit, which had reached a different result — now overruled — in Meritcare, Inc. v. St. Paul Mercury Ins. Co., 166 F.3d 214 (3rd Cir. 1999); see also In re Life U.S.A. Holding, Inc., 242 F.3d 136, 142 n.7 (3rd Cir. 2001). In 1973, the Supreme Court in Zahn held that every plaintiff in an action must meet the minimum amount in controversy requirement of 28 U.S.C. � 1332 (currently $75,000 exclusive of interest and costs) to permit the court to exercise diversity jurisdiction as to them in the case. Thus, as in Zahn, a class action could not proceed in federal court, in diversity, unless every member of the class separately could satisfy the minimum amount; that millions of dollars overall was at stake was irrelevant, even if one (but not all) had met the jurisdictional minimum. In 1993, Congress enacted the Supplemental Jurisdiction statute, 28 U.S.C. � 1367, ostensibly to overrule the result in Finlay v. United States, 490 U.S. 545 (1989), which had held that the grant of original jurisdiction over claims involving particular parties did not itself confer supplemental jurisdiction over related claims against other defendants (so-called pendent party claims), even though part of the same “case or controversy,” as measured by prior caselaw. The circuits split as to whether the language of Section 1367 also permitted Supplemental Jurisdiction as to related claims, not necessarily in the class action context, by other plaintiffs. In the 3rd Circuit, which held related claims were not permitted, district courts determining whether Zahn had been satisfied — often in the context of a motion to remand a case removed pursuant to 28 U.S.C. � 1441, et seq. — went through excruciating analyses of whether the total amount of attorney fees or punitive damages could be divided among all plaintiffs to satisfy the jurisdictional minimum as to each. See, e.g., Samuel-Bassett v. Kia Motors Am., Inc., 357 F.3d 392 (3d Cir. 2004); Werwinski v. Ford Motor Co., 286 F.3d 661 (3rd Cir. 2002); Suber v. Chrysler Corp., 104 F.3d 578 (3d Cir. 1997). Because the minimum amount in controversy must be determined from the plaintiff’s “point of view,” see Packard v. Provident National Bank, 994 F.2d 1039, 1050 (3rd Cir.), cert. denied, 510 U.S. 964 (1993), the cost to the defendant of complying with requested injunctive relief normally would not be considered. E.g., Talalai v. Cooper Tire & Rubber Co., 2001 U.S. Dist. LEXIS 3577 (D.N.J. Jan. 5, 2001). When the Supreme Court first came to review the effect of Section 1367 on the holding in Zahn, it split 4-4, thereby making the result nonprecedential. Free v. Abbott Labs., Inc., 529 U.S. 333, 120 S. Ct. 1578 (2000) (affirming 5th Circuit’s position that Zahn had been overruled by Section 1367). With the passage of the Class Action Fairness Act of 2005, which allows certain national class actions to proceed where overall damages exceed $5 million, many of the day-to-day issues concerning the interplay of Zahn and Section 1367 no longer will be relevant; under CAFA, damages may be aggregated to meet its $5 million jurisdictional requirement. However, Exxon still will be relevant to class actions that do not come within the strictures of CAFA. As the Supreme Court has now held, the claim of one plaintiff meeting the federal subject matter jurisdictional requirements, whether under the federal question or diversity jurisdiction statute, is a “civil action of which the district courts have original jurisdiction,” 28 U.S.C. � 1367, with which other cases may be joined so long as they are part of the same case or controversy under Section 1367. Moreover, the Ortega case decided with Exxon was not a class action, and the Supreme Court’s decision in Exxon will change the result should cases such as that come into controversy. Thus, two or more plaintiffs may be able to join in a federal case against a defendant involving the same case or controversy, not as a class action, where one, but not all, can meet the jurisdictional minimum and otherwise satisfy Section 1367. One question that arises out of the Exxon decision is whether it will have any transitional effects for purposes of removal. That is, will the decision trigger the 30-day period in which a defendant may file a notice of removal, pursuant to 28 U.S.C. � 1446(b), because (for example) it is an “order or other paper” that first “permits” removal, even though the original 30-day period has passed. Defendants’ efforts to remove may have been rebuffed by the District Court, or passed up, in the 3rd Circuit because the Circuit held — and the district courts were bound to apply — a restrictive view of Zahn and Section 1367. Although a number of courts have held that the “order or other paper” language in Section 1446(b) must be in the same or “related” case to trigger a right to remove, the rule is not universal. In Doe v. American Red Cross, 14 F.3d 196 (3rd Cir. 1993), the 3rd Circuit permitted removal following the Supreme Court’s decision in American National Red Cross v. S.G., 505 U.S. 247 (1992), which specifically authorized the Red Cross to remove cases in light of the Court’s decision that the Red Cross’s charter conferred federal subject matter jurisdiction in suits against it. The 5th Circuit also has permitted removal after a change in law, without a specific Supreme Court mandate, where the defendants were the same and the facts were similar. Green v. R. J. Reynolds Tobacco Co., 274 F.3d 263, 266-67 (5th Cir. 2001). See also Hamilton v. United Healthcare of La., Inc., 2003 U.S. Dist. LEXIS 21141, at **7-8 (D. La. 2003). At least two other courts have held that a change in the law, such as the higher court’s determination of federal pre-emption of a state cause of action, also would justify removal, although without the relatedness relied upon in Doe and Green. Davis v. Time Ins. Co., 698 F. Supp. 1317 (D. Miss. 1988); Smith v. Burroughs Corp., 670 F. Supp. 740 (E.D. Mich. 1987). A second question, not transitional, is whether cases that had been found wanting under Zahn may or may not be allowed to proceed in federal court given the separate, general prohibition against aggregating damages in Snyder v. Harris, 394 U.S. 332 (1969). Exxon holds purely that the requirement that each plaintiff separately satisfy the minimum amount in controversy is no longer good law. Thus, Section 1367 now permits the case to go forward so long as one plaintiff can satisfy that burden. Exxon says nothing directly about aggregating the amount of attorney’s fees, punitive damages or valuing equitable relief to enable that single plaintiff to satisfy the minimum amount in controversy. In Snyder v. Harris, the Supreme Court recognized the principle that “aggregation has been permitted … in cases in which two or more plaintiffs unite to enforce a single title or right in which they have a common and undivided interest.” 394 U.S. at 335. After Snyder v. Harris, but before Zahn, the 3rd Circuit in New Jersey Welfare Rights Org. v. Cahill, 483 F.2d 723 (3d Cir. 1973), described three conditions in order for aggregation of claims to be allowed. First, the adversary of the class must have no interest in how the claim is to be distributed among members of the class. Second, none of the class members could bring suit without affecting the rights of the other class members. Last, the rights asserted must be common to the class rather than individually held. When profits are disgorged, that amount is fixed; therefore, the defendant arguably may not have an interest in how the profits are disbursed among the class members. The courts in this circuit that have allowed aggregation post- Zahn have relied in part on this theory, but the circuit itself has not faced the issue. Nabal v. B.J.’s Wholesale Club, 2002 U.S. Dist. LEXIS 15106 (E.D. Pa. 2002). After Exxon, courts facing the aggregation issue also may look to the reasoning of courts that had held that Section 1367 overruled Zahn. E.g., Olden v. LaFarge Corp., 383 F.3d 495 (6th Cir. 2004); In re Microsoft Corp. Antitrust Litigation, 127 F. Supp. 2d 702 (D. Md. 2001); In re Cardozem CD Antitrust Litigation, 90 F. Supp. 2d 819 (E.D. Mich. 1999); Aetna U.S. Healthcare, Inc. v. Hoechst A.G., 48 F. Supp. 2d 37 (D.D.C. 1999). Bartkus, a member of Dillon, Bitar & Luther of Morristown, concentrates his practice in commercial litigation. He is a member of the Law Journal ‘s Editorial Board and is the editor of New Jersey Federal Civil Procedure , published by New Jersey Law Journal Books in 1999. He thanks Paul F. Campano, a partner at the firm, and Marisa L. Jimenez, a summer associate, for their research assistance for this article.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

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 © 2020 ALM Media Properties, LLC. All Rights Reserved.