Title: Mutual of Omaha Ins. Co. v. Blury-Losolla

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Mutual of Omaha Ins. Co. v. Blury-Losolla1998 WY 9952 P.2d 1117Case Number: 96-304Decided: 01/22/1998Supreme Court of Wyoming
 
MUTUAL OF OMAHA INSURANCE COMPANY, a Nebraska 
Corporation;

United of Omaha Life 
Insurance Company, a Nebraska Corporation, Appellants 
(Defendants),

v.

Julie BLURY-LOSOLLA, 
Cindy Lusher, Larry Hutchinson, Fred Mau, and Donna Lamb,

Suing on Behalf of 
Themselves and All Other Individuals Similarly Situated, Appellees 
(Plaintiffs).

 

Appeal from the District 
Court, Fremont County, Nancy Guthrie, J.

Patrick R. Day 
and Donald I. Schultz of Holland & Hart, Cheyenne; and Marilyn S. Kite of 
Holland & Hart, Jackson, for Appellants 
(Defendants).

Glenn E. Smith 
of Glenn E. Smith & Associates, Cheyenne; and John R. Vincent, Riverton, 
for Appellees (Plaintiffs).

Before 
TAYLOR, C.J., and THOMAS, GOLDEN and LEHMAN, JJ., and VOIGT, District 
Judge.

VOIGT, District 
Judge.

[¶1]      Appellees are 
five former insurance agents. Appellants are affiliated insurance companies 
which were appellees' employers. Appellees brought suit on behalf of themselves 
and as a class action on behalf of approximately 10,000 other similarly situated 
former insurance agents across the country, seeking damages for the alleged 
breach of their respective employment contracts. After extensive discovery, and 
after the district court certified the class, appellants filed a motion to 
dismiss for lack of subject matter jurisdiction. The district court found "to a 
legal certainty" that none of the named appellees had a claim for $7,000.00 or 
more. The motion to dismiss was based on Wyo. Stat. § 5-5-131 (1997), which 
provides, in pertinent part:

(a) Each county 
court has exclusive original civil jurisdiction within the boundaries of the 
state for:

(i) An action 
where the prayer for recovery is an amount not exceeding seven thousand dollars 
($7,000.00), exclusive of court costs[.]

[¶2]      The district 
court certified to this court, pursuant to W.R.A.P. 11, the following questions 
of law:

1. Can the 
separate claims of separate Plaintiffs be aggregated to meet the $7,000 amount 
in controversy requirement of Wyo. Stat. § 5-5-131 when none of the individual 
Plaintiffs' claims equal or exceed $7,000 at the commencement of the 
lawsuit?

2. If the answer 
to question number 1 is no for the typical case, should aggregation of separate 
Plaintiffs' claims nevertheless be permitted to accommodate class action 
litigation of small claims[1] in district 
court?

3. Would the 
judicial aggregation of separate Plaintiffs' claims, to meet the statutory 
amount in controversy threshold established by the legislature in Wyo. Stat. § 
5-5-131, violate Article 5, Section 10 of the Wyoming Constitution, which gives 
the legislature the authority to define the boundaries of district court 
jurisdiction?

4. Based upon 
the record submitted to the district court, and considering all of the arguments 
asserted by the parties in connection with the Defendants' Motion to Dismiss for 
Lack of Subject Matter Jurisdiction, does the District Court have subject matter 
jurisdiction over this case?

I. LEGAL 
FRAMEWORK

A. THE 
COURTS

[¶3]      The jurisdiction 
of the district courts is defined in Wyo. Const. art. 5, § 10, which states, in 
pertinent part:

The district 
court shall have original jurisdiction of all causes both at law and in equity 
and in all criminal cases, of all matters of probate and insolvency and of such 
special cases and proceedings as are not otherwise provided for. The district 
court shall also have original jurisdiction in all cases and of all proceedings 
in which jurisdiction shall not have been by law vested exclusively in some 
other court * * *.

The legislation 
effectuating this constitutional directive is found in Title 5, ch. 3 (1997) of 
the Wyoming Statutes.

[¶4]      Wyoming's county 
courts were not specifically created by the state constitution, but provision 
for their creation is found in Wyo. Const. art. 5, § 1, which grants to the 
legislature the authority to establish subordinate courts. The county court 
statutes are found in Title 5, ch. 5 (1997) of the Wyoming Statutes. The 
$7,000.00 jurisdictional limit found in Wyo. Stat. § 5-5-131 is the focus of the 
present controversy. It is clear that, if that particular statute does not give 
the county court jurisdiction in this case, jurisdiction must lie in the 
district court under the language of the state constitution. Matter of Larsen, 
770 P.2d 1089, 1092 (Wyo. 1989).

B. SUBJECT 
MATTER JURISDICTION

[¶5]      The phrase 
"subject matter jurisdiction" refers to "`the power to hear and determine cases 
of the general class to which the proceedings in question belong.'" Lacey v. 
Lacey, 925 P.2d 237, 238 (Wyo. 1996) (quoting Fuller v. State, 568 P.2d 900, 903 
(Wyo. 1977)); 20 Am.Jur.2d, Courts, § 70 (1995). The issue of subject matter 
jurisdiction is so fundamental that it cannot be waived, can be raised on the 
court's own motion, and can be raised at any time, even on appeal. Pawlowski v. 
Pawlowski, 925 P.2d 240, 243 (Wyo. 1996). This court has repeatedly emphasized 
the implications of this precept:

"It is 
fundamental, if not axiomatic, that, before a court can render any decision or 
order having any effect in any case or matter, it must have subject matter 
jurisdiction. Jurisdiction is essential to the exercise of judicial power. 
Unless the court has jurisdiction, it lacks any authority to proceed, and any 
decision, judgment, or other order is, as a matter of law, utterly void and of 
no effect for any purpose. Subject matter jurisdiction, like jurisdiction over 
the person, is not a subject of judicial discretion. There is a difference, 
however, because the lack of jurisdiction over the person can be waived, but 
lack of subject matter jurisdiction cannot be. Subject matter jurisdiction 
either exists or it does not and, before proceeding to a disposition on the 
merits, a court should be satisfied that it does have the requisite 
jurisdiction."

Boyd v. Nation, 
909 P.2d 323, 325 (Wyo. 1996) (quoting United Mine Workers of America Local 1972 
v. Decker Coal Co., 774 P.2d 1274, 1283-84 (Wyo. 1989)).

[¶6]      When the question 
of subject matter jurisdiction revolves around the amount claimed, this court 
has established the following determinative rules: (1) the sum claimed, rather 
than the amount eventually recovered, controls unless the amount claimed was not 
done in good faith; (2) to find a lack of good faith, it must appear to a legal 
certainty that the claim is really for less than $7,000.00; (3) the amount is 
determined as of the time the action is commenced; and (4) a plaintiff cannot 
control jurisdiction between the county and district court by setting forth an 
improper amount in the prayer for relief. Joslyn v. Professional Realty, 622 P.2d 1369, 1373 (Wyo. 1981).

C. 
JOINDER

[¶7]      There are five 
separate plaintiffs in this case, with individual claims against the affiliated 
defendants. One lawsuit was brought, rather than five, because the Wyoming Rules 
of Civil Procedure permit such "joinder." A brief review of the joinder rules 
may help place this controversy in context.

[¶8]      W.R.C.P. 18 
allows a party to join all the claims against an opposing party in one suit. 
W.R.C.P. 19 allows the court to order joinder of all parties necessary to 
adjudicate complete relief. W.R.C.P. 20 provides for permissive joinder of 
parties in particular circumstances, such as a right to relief held jointly, or 
claims arising out of the same transaction or occurrence. W.R.C.P. 21 prescribes 
remedies for misjoinder and nonjoinder.

[¶9]      W.R.C.P. 23, 
which provides for class action lawsuits, is not so much a joinder rule as it is 
a procedural device created to allow named parties to represent the interests of 
unnamed parties. In fact, class actions are only allowed where joinder is not 
feasible. W.R.C.P. 23(a)(1). W.R.C.P. 20 and 23 are the focus of the parties' 
discussion in this case.

[¶10]   The Wyoming Rules of Civil 
Procedure generally govern procedure in the state's county courts, "to the 
extent that they are consistent with the subject-matter jurisdiction of county 
courts * * *." W.R.C.P.C.C. 1.02. However, W.R.C.P. 23 - the class action rule - 
has specifically been excepted from this general application by W.R.C.P.C.C. 
1.06:

The following 
rules of the revised Wyoming Rules of Civil Procedure shall not apply in county 
courts, unless and until county courts have statutory subject matter 
jurisdiction of cases in which such relief is requested:

Rule 23 * * * - 
Class Actions[2]

(Emphasis 
added.)

[¶11]   The key question becomes, if class 
actions are not available in county courts, whether named plaintiffs lacking the 
requisite district court jurisdictional claim amount may nevertheless come 
before the district court by aggregating their claims for the purposes of a 
class action lawsuit.

II. 
DISCUSSION

[¶12]   Wyoming adheres to the doctrine of 
separation of powers. Wyo. Const. art. 2, § 1. As part of that doctrine, both 
statutes and court rules have recognized the distinction between substantive 
law-making and procedural rule-making. State ex rel. Frederick v. District Court 
of Fifth Judicial Dist. In and For Big Horn County, 399 P.2d 583, 584-86 (Wyo. 
1965). Wyo. Stat. § 5-2-114 (1997) sets forth the court's authority to make 
rules "governing pleading, practice and procedure * * *." See White v. Fisher, 
689 P.2d 102, 106 (Wyo. 1984). Wyo. Stat. § 5-2-115(b) (1997) makes it clear 
that "[s]uch rules shall neither abridge, enlarge nor modify the substantive 
rights of any person nor the jurisdiction of any of the courts * * *." See 
McGuire v. McGuire, 608 P.2d 1278, 1290 (Wyo. 1980). W.R.C.P. 82 dictates a 
narrow construction of the rules to ensure this 
limitation.

[¶13]   Wyo. Stat. § 5-5-131(a)(i) gives 
the county court exclusive jurisdiction over "[a]n action where the prayer for 
recovery is an amount not exceeding * * * $7,000.00 * * *[.]" This is a clear 
legislative mandate that such cases may not be heard in the district court. The 
fact that W.R.C.P. 20 - a procedural rule - allows multiple plaintiffs with 
similar claims to join their separate claims in one lawsuit, cannot and does not 
change the fact that subject matter jurisdiction lies only in the county court. 
Likewise, the class action procedures adopted by this court in W.R.C.P. 23 do 
not contemplate, and could not accomplish, a modification of subject matter 
jurisdiction via aggregation of claims. Federal precedent, which we find 
persuasive, disallows aggregation under similar circumstances (amount in 
controversy under cases involving diversity of citizenship). See Zahn v. 
International Paper Co., 414 U.S. 291, 94 S. Ct. 505, 38 L. Ed. 2d 511 (1973) and 
Snyder v. Harris, 394 U.S. 332, 89 S. Ct. 1053, 22 L. Ed. 2d 319 
(1969).

[¶14]   In their brief, and in oral 
argument, appellees contend they automatically belong in district court because 
they mentioned no amount in their prayer for recovery. They remind the court 
that Wyo. Stat. § 5-5-131(a)(i) gives the county court exclusive jurisdiction 
only where "the prayer for recovery is an amount not exceeding * * * $7,000.00 * 
* *" and that everything else falls to the district court as the court of 
general jurisdiction. (Emphasis added.) Under this logic, one can come before 
the district court simply by failing to assert the jurisdictional amount for 
county court. While this specious argument deserves little attention, we note 
that it violates the precept that jurisdiction cannot be controlled by artful 
pleading tactics. Joslyn, 622 P.2d  at 1373.

[¶15]   Finally, appellees ask this court 
to decide in their favor because all class action lawsuits ought to be in 
district court. They point to several factors they believe make the district 
courts a more appropriate forum for the complications of the typical class 
action case. While this may well be a good policy argument, it is not the job of 
this court to make policy. The setting of the jurisdictional limits of the 
state's courts is a legislative task. What we cannot do by court rule, neither 
can we do by individual case opinion. The same can be said of the decision as to 
whether class actions should be made available in the county and justice courts. 
At present, W.R.C.P.C.C. 1.06 and W.R.C.P.J.C. 1(a)(3) indicate that such is not 
the case. Indeed, the language of W.R.C.P.C.C. 1.06 specifically recognizes that 
it is the role of the legislature to make that decision. We cannot say whether 
Wyoming's lawmakers would think it a good idea to make class action lawsuits 
available in the courts of limited jurisdiction.

III. 
CONCLUSION

[¶16]   The certified questions are 
answered as follows:

1. Can the 
separate claims of separate Plaintiffs be aggregated to meet the $7,000 amount 
in controversy requirement of Wyo. Stat. § 5-5-131 when none of the individual 
Plaintiffs' claims equal or exceed $7,000 at the commencement of the 
lawsuit?

ANSWER: 
No

2. If the answer 
to question number 1 is no for the typical case, should aggregation of separate 
Plaintiffs' claims nevertheless be permitted to accommodate class action 
litigation of small claims in district court?

ANSWER: 
No

3. Would the 
judicial aggregation of separate Plaintiffs' claims, to meet the statutory 
amount in controversy threshold established by the legislature in Wyo. Stat. § 
5-5-131, violate Article 5, Section 10 of the Wyoming Constitution, which gives 
the legislature the authority to define the boundaries of district court 
jurisdiction?

ANSWER: 
Yes

4. Based upon 
the record submitted to the district court, and considering all of the arguments 
asserted by the parties in connection with the Defendants' Motion to Dismiss for 
Lack of Subject Matter Jurisdiction, does the District Court have subject matter 
jurisdiction over this case?

ANSWER: 
No

[¶17]   For this court to answer otherwise 
would require us to blur the line between substantive law and procedural rule, 
to ignore the unambiguous commands of our state constitution and controlling 
statutes as to subject matter jurisdiction, and to negate the process by which 
jurisdictional amounts have heretofore been determined. We hold that in a class 
action lawsuit, the claim of each and every plaintiff, whether named or unnamed, 
must meet the minimum jurisdictional limit, and that aggregation of claims for 
that purpose is not permitted.

[¶18]   This case is remanded to the 
district court for further proceedings consistent with this 
opinion.

Footnotes

1 The term 
"small claims" is not used here as a "term of art" connoting claims filed under 
the procedures set forth in Title 1, ch. 21, art. 2 (1997) of the Wyoming 
Statutes, but simply refers to claims for less than 
$7,000.00.

2 The 
situation in Wyoming's justice courts is identical, in that W.R.C.P.J.C. 1(a)(3) 
makes W.R.C.P. 23 inapplicable in justice courts.

THOMAS, Justice, concurring 
specially.

[¶19]   My colleague's dissent in this case 
has prompted some philosophical reflections of my own. I agree completely with 
the majority opinion in this case. It is sound in its reasoning, and it is sound 
in the policy that it embraces.

[¶20]   One of my reflections is pragmatic. 
The record and briefs inform us that five of the plaintiffs are citizens of 
Wyoming, while potentially there are 9,995 who are citizens of some other state. 
Wyoming is a small state with limited judicial resources. While I might share a 
concern over disenfranchised Wyoming citizens if that eventuality should occur, 
I am not persuaded that we need to turn our limited resources to the service of 
thousands of citizens of other states who certainly have the option of pursuing 
their claims in their home state where they pay taxes and support a judicial 
system.

[¶21]   Neither am I persuaded that the 
disparity between the jurisdictional ceilings in justice of the peace courts and 
county courts leads to some draconian scenario. The word "may" in WYO. R. CIV. 
P. 23 clearly connotes discretion in the trial court with respect to whether a 
class action is to be maintained. I trust our district court bench to recognize 
that it would be inappropriate to permit a class action to go forward in a 
justice of the peace court county when it could not be maintained in a county 
court county. I am sure that in such an instance the district court would order 
that the class action could not be maintained.

LEHMAN, Justice, 
dissenting.

[¶22]   I respectfully dissent. The 
majority rephrases the key issue, calling for an answer to a question neither 
asked by the district court nor briefed by the parties - whether the county 
courts have jurisdiction to hear class action suits. The answers to the 
certified questions are not dependent on whether class actions are available in 
county court, but instead turn on whether the county court is vested with 
exclusive subject matter jurisdiction over the parties' claims. To the extent 
the majority suggests county courts are without jurisdiction to hear class 
actions, I believe that the question is, at the very least, open for debate. In 
fact, both parties in their briefs assume that the county courts do have 
jurisdiction. This is not an unreasonable assumption. Section 5-5-131(a)(i) of 
the Wyoming Statutes gives county courts exclusive original civil jurisdiction 
over cases where the "prayer for recovery is an amount not exceeding seven 
thousand dollars," and Rule 1.06 of the Wyoming Rules of Civil Procedure for 
County Courts only precludes application of the rules governing class actions 
"unless and until county courts have statutory subject matter jurisdiction of 
cases in which such relief is requested." The majority correctly asserts that 
our rules of practice and procedure shall neither abridge, enlarge nor modify 
the substantive rights of any person nor the jurisdiction of any of the courts, 
but in the same breath says it is our own Rule 1.06 which precludes class 
actions in county court. I find that reasoning inapposite. In any event, the 
determination of whether the county courts can entertain class action suits is 
beyond the scope of the certified questions, and we should wait for a properly 
briefed appeal to determine the issue. See Wilder v. Cody Country Chamber of 
Commerce, 933 P.2d 1098, 1106 n. 2 (Wyo. 1997).

[¶23]   I also part company with the 
majority insofar as its decision relies on federal precedent. I must agree that 
our current statutory scheme, as well as Wyoming's constitution and this court's 
prior precedent, do not allow aggregation of claims to meet the jurisdictional 
threshold of the district court. However, the reasons for precluding aggregation 
of claims in the federal courts to achieve diversity jurisdiction do not apply 
to class actions at the state level. The federal rule against aggregation is 
based in part on the premise that because diversity cases involve issues of 
state law, those issues are more appropriately resolved in state courts. The 
federal policy is also directed at reducing the caseload of federal district 
courts. The Wyoming legislature has not expressed an intent to limit the number 
of suits filed in state district courts or to remove district courts as a forum 
for class actions, nor is there any reason to assume such legislative intent. 
Therefore, the majority's reliance on federal authority is 
misplaced.

[¶24]   There are important benefits to be 
derived from class action suits. A class action offers an economically effective 
procedure for adjudicating numerous similar, though small, claims. This is 
particularly true in disputes involving citizens with limited resources who may 
be prevented from seeking redress unless permitted to band together in a single 
lawsuit. In addition, class actions can eliminate repetitious litigation and 
possibly inconsistent adjudications involving common questions, related events 
or requests for similar relief. Considering these benefits, I am compelled to 
point out what I perceive to be major deficiencies in the way class actions fit 
into our current jurisdictional scheme.

[¶25]   If we assume, as does the majority, 
that county courts cannot hear class action suits, then as a practical matter 
plaintiffs with individual claims of less than $7,000 have no judicial forum in 
which to seek relief as a class. Consider, for example, a business entity which 
erroneously overcharges every Wyoming resident $5 a month for a period of 
months. Certainly, no one individual will bring a suit because the cost of 
filing the action would be more than the recovery. However, the business entity 
would accumulate thousands if not millions in profit as a result of its 
wrongdoing, with virtually no risk of legal liability. In effect, any entity who 
by error or by design bilks Wyoming citizens out of sums which individually fall 
below the jurisdiction of district courts may be insulated from suit, even 
though collectively the damages may be quite large.

[¶26]   On the other hand, if we assume 
that class actions are permitted in county courts, a different set of problems 
arises. At the county level, Wyoming has either county courts or justice of the 
peace courts, each with different jurisdictional thresholds. In county court 
counties, plaintiffs with claims of less than $7,000 would be required to file 
suit in county court. Because county courts have no minimum jurisdictional 
amount, plaintiffs with even very small claims could be included in a class 
action. However, pursuant to Rule 1(a)(3) of the Wyoming Rules of Civil 
Procedure for Justice of the Peace Courts, the rules governing class actions are 
inapplicable in justice of the peace courts, without exception. This leads to 
the bizarre and inequitable result that in justice of the peace counties 
plaintiffs with claims exceeding $1,000 could bring their claims in the district 
court,1 while plaintiffs with claims of 
$1,000 or less would be precluded from joining a class action at 
all.

[¶27]   In either case, this scheme defeats 
the main benefits of class actions because it mandates multiple actions, and 
perhaps even multiple class actions. For the foregoing reasons, I urge the 
legislature to consider a statutory enactment which would vest the district 
courts with exclusive jurisdiction over all class actions regardless of the 
amount in controversy, provided claimants meet the requirements of W.R.C.P. 
23.

Footnotes

1 In fact, 
from the information contained in the record, it appears that had suit been 
filed in Buffalo (home of named-plaintiff Lusher), the district court would have 
had jurisdiction, at least over those plaintiffs with claims exceeding 
$1,000.