Zahn Revisited: Supplemental Jurisdiction over Individual Claims to Satisfy Federal Diversity Jurisdiction

This article previews the issues and arguments in two cases ― Exxon Corp. v. Allapattah Services, Inc. and Ortega v. Starkist Foods, Inc. ― on consolidated appeal to the Supreme Court during the 2004-05 Term. The consolidated Allapattah and Ortega appeals raise the question whether federal courts may assert supplemental jurisdiction over the claims of individuals joined under Fed. R. Civ. P. 20, or class members aggregated under Fed. R. 23, to satisfy the $75,000 amount-in-controversy requirement in order for a court to have jurisdiction over a diversity class action. In light of the supplemental jurisdiction statute Congress enacted in 1990, the Supreme Court is asked to reconsider the Court’s 1973 Zahn rule that prohibits aggregation of individual claims to confer federal diversity jurisdiction. The Court also is asked to determine the effect of the supplemental jurisdiction statute over parties joined under Fed. R. Civ. P. 20. In Allapattah the Supreme Court is asked whether the federal supplemental jurisdiction statute, 28 U.S.C. § 1367, authorizes federal courts to assert supplemental jurisdiction over the claims of absent class members whose individual claims do not satisfy the $75,000 federal threshold for diversity jurisdiction under 28 U.S.C. § 1332. Implicit in this supplemental jurisdiction issue is the question whether the Court’s precedent, in Zahn v. International Paper Co., 414 U.S. 291 (1973), has been overruled by Congress’s enactment of 28 U.S.C. § 1367. In Ortega, the Supreme Court is asked whether in a diversity-based federal action where one plaintiff meets the amount-in-controversy requirement, whether the supplemental jurisdiction statute, 28 U.S.C. § 1367, authorizes courts to exercise supplemental jurisdiction over additional diverse plaintiffs who are joined under Fed. R. Civ. P. 20 and who do not satisfy the amount-in-controversy requirement. For class action attorneys, the Allapattah case is freighted with great significance: the Zahn stakes are very high indeed. In the absence of the Supreme Court getting unstuck on the Circuit Zahn split, diversity-based class actions that fail to meet the amount-in-controversy may proceed in some federal circuits, but not in others. Consequently, plaintiffs’ class action attorneys will continue to proceed to favorable Zahn-overruling federal circuits, in order to bootstrap small individual claims under the supplemental jurisdiction statute. On the other hand, if the Court upholds the Zahn rule even in light of the supplemental jurisdiction statute, this will put the brakes on numerous diversity-based small claim class actions. The Ortega appeal presents the mirror-image problem presented by Allapattah, except in the non-class action context. In handling the Allapattah and Ortega cases on a consolidated docket, the Court additionally will have to address whether the form of aggregation of parties and claims makes a difference for the purpose of construction and application of the supplemental jurisdiction statute. At least some of the litigants argue that the aggregation of claims pursuant to the Rule 23 class action rule is fundamentally different than simple joinder under Rule 20. Exxon, for example, argues that Rule 23 is not a joinder device at all; that the class action is instead a representational litigation. In this view, the supplemental jurisdiction statute cannot be construed to permit aggregation of claims for representational litigation where the claims could not be joined in non-representational litigation. The Allapattah and Ortega cases are incredibly complex, but ultimately implicate longstanding rules of federal diversity jurisdiction. The combined Allapattah and Ortega appeals present the Court with two highly technical, knotty problems of statutory construction based on an admittedly messy supplemental jurisdiction statute. The Court is going to have to sort its way through the complicated interrelationship of the two subsections of the statute, and possibly the statute’s equally complicated legislative history. In addition, the Court is going to have to determine whether the Zahn and Clark rules prohibiting aggregation of claims to satisfy the jurisdictional amount, have different implications for simple joinder under Rule 20, as opposed to aggregation in a representational class action under Rule 23. Ultimately, the Allapattah and Ortega cases implicate broader policy issues concerning federal court access. A cabined interpretation of the supplemental jurisdiction statute that limits the scope of the supplemental jurisdiction will have an impact on the ability to join multiple parties in simple joinder cases, and to pursue small claims class actions. On the contrary, an expansive reading of the supplemental jurisdiction statute, as overruling Zahn and Clark, would permit everyone into the federal court pool.