United States Court of Appeals

FOR THE EIGHTH CIRCUIT

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Nos. 02-3715/3774 

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Donald D. Kessler, on his own behalf *

and on behalf of all others similarly *

situated; Mary L. Kessler, on her own *

behalf and on behalf of all others *

similarly situated; William L. Martin, *

on his own behalf and on behalf of all * 

others similarly situated; Anita M. *

Martin, on her own behalf and on *

behalf of all others similarly situated; *

James W. Wallace, on his own behalf *

and on behalf of all others similarly *

situated; Doris F. Wallace, on her *

own behalf and on behalf of all * Appeals from the United States

others similarly situated; Carroll W. * District Court for the 

Brockwell, on his own behalf * Western District of Arkansas.

and on behalf of all others similarly *

situated; Cathryn Brockwell, on her *

own behalf and on behalf of all *

others similarly situated, *

*

Appellees/Cross-Appellants, *

*

v. *

*

National Enterprises, Inc.; *

Arkansas No. 1, LCC, *

*

Appellants/Cross-Appellees. *
1

D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447 (1942).

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Submitted: September 12, 2003

Filed: October 30, 2003

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Before BYE, FAGG and HANSEN, Circuit Judges.

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BYE, Circuit Judge.

This is a class action dispute over a timeshare development in Hot Springs,

Arkansas. The case originated in state court and was removed to federal district court

based on diversity jurisdiction. This is the fourth decision the Eighth Circuit has

issued in the case, all involving varied topics. The first resolved questions regarding

the application of the D'Oench1

 doctrine. Kessler v. Nat'l Enters., Inc., 165 F.3d 596

(8th Cir. 1999) (Kessler I). The second involved the timing of a challenge to the

dismissal of a third-party complaint. Kessler v. Nat'l Enters., Inc., 203 F.3d 1058 (8th

Cir. 2000) (Kessler II). The third interpreted certain provisions of the Arkansas

Time-Share Act, Ark. Code Ann. §§ 18-14-101 to 18-14-602, and addressed statute

of limitations defenses. Kessler v. Nat'l Enters., Inc., 238 F.3d 1006 (8th Cir. 2001)

(Kessler III).

In Kessler III we resolved the liability issues in favor of the plaintiff class

members and remanded to the district court for a determination of damages. 238 F.3d

at 1015-16. On remand, the district court calculated the total damages at

$1,666,626.26. Both sides appealed, raising a number of issues. With such large

aggregate damages involved, none of the parties previously questioned whether this

case satisfied the minimum amount-in-controversy prescribed by 28 U.S.C. § 1332
2

NEI was the original defendant in this case but transferred its interests in the

disputed property to Arkansas No. 1 LLC on September 18, 1995. For convenience,

we will refer to the appellants/cross-appellees as NEI.

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(which at the time this case was filed was still $50,000). In this appeal, for the first

time, National Enterprises, Inc. (NEI) and Arkansas No. 1 LLC2

 contend the federal

courts lack jurisdiction over this matter because the class members' claims cannot be

aggregated and do not individually satisfy the amount-in-controversy requirement.

Given the considerable resources and time exhausted by the federal courts and

the parties in this action, we would like to ignore NEI's belated jurisdictional

challenge. Unfortunately, we cannot. See, e.g., 4:20 Communications, Inc. v.

Paradigm Co., 336 F.3d 775, 778 (8th Cir. 2003) ("As parties may not expand the

limited jurisdiction of the federal courts by waiver or consent, subject matter

jurisdiction issues may first be raised at any time, even on appeal."); see also

Meritcare Inc. v. St. Paul Mercury Ins. Co., 166 F.3d 214, 218 (3d Cir. 1999) ("Thus,

if it develops that the requisite amount in controversy was never present, even if that

fact is not established until the case is on appeal, the judgment of the District Court

cannot stand.") (citing Am. Fire & Cas. Co. v. Finn, 341 U.S. 6, 17-19 (1951)).

Having considered the jurisdictional challenge, we reluctantly agree with NEI that

federal diversity jurisdiction is lacking.

I

The general rule is that "individual class members' distinct claims for actual

damages may not be aggregated to satisfy the . . . amount-in-controversy requirement

for diversity jurisdiction." Crawford v. F. Hoffman-La Roche Ltd., 267 F.3d 760, 765

(8th Cir. 2001). Further, even if one class member's claim exceeds the amount in

controversy, "a district court cannot exercise supplemental jurisdiction of class

members who do not, themselves, satisfy the jurisdictional requirement." Trimble v.
3

The circuits are split on whether supplemental jurisdiction can be exercised

over all claims when at least one satisfies the jurisdictional limit. In Trimble the

Eighth Circuit agreed with the Tenth Circuit, see Leonhardt v. Western Sugar Co.,

160 F.3d 631, 640-41 (10th Cir. 1998), that Congress did not overrule Zahn in 1990

by enacting 28 U.S.C. § 1367 (providing for supplemental jurisdiction "over all

claims that are so related to claims in the action within such original jurisdiction that

they form part of the same case or controversy"). Trimble, 232 F.3d at 961. The

Third Circuit is in accord with the Eighth and Tenth Circuits. Meritcare Inc., 166

F.3d at 218. The Fourth, Fifth, Seventh, Ninth and Eleventh Circuits have concluded

supplemental jurisdiction can be exercised over all claims when at least one satisfies

the jurisdictional limit. Allapattah Servs., Inc. v. Exxon Corp., 333 F.3d 1248, 1254

(11th Cir. 2003); Rosmer v. Pfizer Inc., 263 F.3d 110, 114 (4th Cir.), reh'g & reh'g en

banc denied, 272 F.3d 243 (4th Cir. 2001), cert. dismissed, 536 U.S. 979 (2002);

Gibson v. Chrysler Corp., 261 F.3d 927, 933 (9th Cir. 2001), cert. denied, 534 U.S.

1104 (2002); Stromberg Metal Works, Inc., v. Press Mech., Inc., 77 F.3d 928, 930-33

(7th Cir. 1996); In re Abbott Labs., 51 F.3d 524, 529 (5th Cir. 1995).

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Asarco, Inc., 232 F.3d 946, 960 (8th Cir. 2000) (citing Zahn v. Int'l Paper Co., 414

U.S. 291, 301 (1973)).3

The class members contend their claims fall within an exception that allows

claims to be aggregated when class members sue jointly to enforce a common title or

right to which they have a common and undivided interest. See Zahn, 414 U.S. at 294

("When two or more plaintiffs, having separate and distinct demands, unite . . . in a

single suit . . . the demand of each [must satisfy] the requisite jurisdictional amount;

but when several plaintiffs unite to enforce a single title or right, in which they have

a common and undivided interest, it is enough if their interests collectively equal the

jurisdictional amount.") (quoting Troy Bank of Troy, Ind. v. G. A. Whitehead & Co.,

222 U.S. 39, 40-41 (1911)).

The class members argue this is a "paradigm" case for allowing aggregation

because it involves a dispute over a single indivisible res, the timeshare property,

where the legal issues implicated in each claim are identical and the matter "cannot
4

For example, a couple who purchased a timeshare contract in the disputed

property brought their own separate suit in state court, and prevailed, without

affecting the rights of the class members in this suit. See Nat'l Enters. v. Rea, 947

S.W.2d 378 (Ark. 1997).

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be adjudicated without implicating the rights of everyone involved with the res."

Gilman v. BHC Sec., Inc., 104 F.3d 1418, 1423 (2nd Cir. 1997) (quoting Bishop v.

Gen. Motors Corp., 925 F.Supp. 294, 298 (D.N.J. 1996)). We respectfully disagree.

It is not enough that the dispute involve a common piece of property — the class

members must also share a common interest in the collection of a single liability. "An

identifying characteristic of a common and undivided interest is that if one plaintiff

cannot or does not collect his share, the shares of the remaining plaintiffs are

increased." Sellers v. O'Connell, 701 F.2d 575, 579 (6th Cir. 1983); accord Gilman,

104 F.3d at 1422-23; Allen v. R & H Oil & Gas Co., 63 F.3d 1326, 1331 & n.7 (5th

Cir. 1995).

In this case, each class member seeks to enforce rights obtained through an

individual contract between the class member and the original developer (or one of

its successors). If a class member recovers under her individual contract, it will have

no effect on the amount another class member may recover on his individual

contract.4

 Thus, this case varies little from the situation where individual

policyholders combine to sue an insurer raising an identical issue regarding the

meaning of a policy, but the insureds will not have to fight amongst themselves over

a common recovery fund. In such a case, aggregation is prohibited. See Burns v.

Mass. Mut. Life Ins. Co., 820 F.2d 246, 251 (8th Cir. 1987) ("The claims of the

proposed class members are distinct from each other; each policy holder asserts an

individual claim based upon that policy holder's individual contract. We therefore

conclude that the claims . . . cannot be aggregated for purposes of satisfying the

requisite jurisdictional amount.").
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 Undaunted, the class members argue jurisdiction can still be exerted over many

of their claims because "[s]tatutory attorney fees do count toward the jurisdictional

minimum for diversity jurisdiction," Crawford, 267 F.3d at 766, and the original

complaint requested statutory fees pursuant to Ark. Code Ann. §§ 16-22-308

(allowing prevailing party to recover attorney fees in breach of contract action) and

18-14-402 (permitting a party to recover attorney fees for a willful violation of the

Arkansas Time-Share Act). Many of the class members' individual claims exceed

$20,000, and they argue adding attorney fees to those claims raises the amount above

the required $50,000 jurisdictional limit.

NEI responds the class members ultimately prevailed upon a constructive fraud

theory, not breach of contract, and therefore are not entitled to fees under § 16-22-

308. Further, NEI contends there is no proof of a willful violation of the Arkansas

Time-Share Act upon which to base an attorney fee award under § 18-14-402.

Notwithstanding NEI's arguments, the district court has already indicated its

intent to award fees. Add. at 14-15. Therefore, we will assume fees can be

considered in satisfying the amount-in-controversy requirement, but note the fees

"cannot be aggregated to meet the amount-in-controversy requirement," Crawford,

267 F.3d at 767, and must be determined on a pro rata basis. When fees are added on

a pro rata basis, the class members still cannot meet the requisite amount to overcome

the jurisdictional hurdle. The named plaintiffs in this case are Carroll and Cathryn

Brockwell, Donald and Mary Kessler, William and Anita Martin, and James and

Doris Wallace. The original complaint alleged the Brockwells purchased their

timeshare unit for $5500, the Kesslers paid $4950, the Martins paid $8900, and the

Wallaces paid $5310, and that the plaintiffs were "entitled to a return of their

purchase price, interest paid on the note, their out of pocket costs, attorneys fees,

court costs, and prejudgment interest." Original Complaint at 9. On the final "Master

Damages Spreadsheet" submitted by the class members, the Brockwells' claim

(including interest) is listed at $14,358.12, the Kesslers' claim is $14,226.39, the
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Martins' is $23,295.91, and the Wallaces' is $14,616.01. At oral argument, counsel

for the class members advised he has requested attorney fees in an amount equal to

half of the total award. If we add pro rata fees of that amount to the largest of the

named plaintiffs' claims, the Martins', the total still does not satisfy the jurisdictional

requirement. Although there are a few other class members whose claims would

surpass $50,000 if pro rata attorney fees were added (for example, the largest amount

claimed in the final Master Damages Spreadsheet is $44,046.30 by Frederick and

Patricia Ludden), the claims of unnamed class members cannot serve as a basis for

satisfying the amount-in-controversy requirement. See Gibson v. Chrysler Corp., 261

F.3d at 940-41 ("Examining only the claims of named class plaintiffs for purposes of

the amount-in-controversy requirement in diversity class actions mirrors the treatment

of the complete diversity requirement. In both instances, subject matter jurisdiction

depends only on the named plaintiffs.").

II

"Federal courts are courts of limited jurisdiction. The requirement that

jurisdiction be established as a threshold matter springs from the nature and limits of

the judicial power of the United States and is inflexible and without exception."

Godfrey v. Pulitzer Pub. Co., 161 F.3d 1137, 1141 (8th Cir. 1998) (internal citations

and quotations omitted). In a case before our court based on diversity jurisdiction,

we must acknowledge our lack of jurisdiction whenever "it appears to a legal

certainty that the claim is really for less than the jurisdictional amount." Kopp v.

Kopp, 280 F.3d 883, 884 (8th Cir. 2002) (internal citations and quotations omitted).

Although the class members' claims satisfy the jurisdictional amount in the aggregate,

it appears to a legal certainty (whether considered when the original complaint was

filed or now) that none of the named class members' claims satisfies the jurisdictional

amount individually. As a result, we have no choice but to remand this case to the
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district court, with directions to remand it to the state court from which it was

removed. See 28 U.S.C. § 1447(c).

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