Source: https://openjurist.org/469/f2d/1033
Timestamp: 2019-04-20 02:29:19+00:00

Document:
Rehearing Denied Oct. 18, 1972.
Mark L. Sperry, Middlebury, Vt. (Langrock & Sperry, Middlebury, Vt.), for plaintiffs-appellants.
Taggart Whipple, New York City (Davis, Polk & Wardwell, Richard E. Nolan, William H. Levit, Jr., and Ronald V. Bryant, New York City, of counsel), and Black & Plante, White River Junction, Vt. (Henry F. Black and George W. Ray, Jr., White River Junction, Vt., of counsel), for defendant-appellee.
Before MOORE, SMITH and TIMBERS, Circuit Judges.
We are confronted with the novel question whether a diversity case will be allowed to proceed as a class action under Fed.R.Civ.P. 23(b)(3) when the named plaintiffs meet the jurisdictional amount requirement of 28 U.S.C. Sec. 1332 (a) but the unnamed representatives of the class do not.1 That question was answered in the negative by the late Chief Judge Leddy in the United States District Court for the District of Vermont (53 F.R.D. 429). He refused to allow the case to proceed as a class action and struck all references in the complaint to persons other than the four named plaintiffs. On October 21, 1971, Judge Leddy certified the order for interlocutory appeal under 28 U.S.C. Sec. 1292(b), and this court granted permission to appeal.
The complaint, brought by the four named owners of lakefront property on Lake Champlain on behalf of themselves and some 200 other similarly situated riparian landowners and lessees, sought compensatory and punitive damages in the total amount of $40,000,000 for damage to their property rights caused by appellee's alleged pollution of the lake's waters. Purportedly the discharge of untreated or inadequately treated waste from appellee's now-closed pulp and paper making plant in the Village of Ticonderoga, passing into the lake via Ticonderoga Creek created a massive sludge blanket on the bottom of the lake; masses of sludge apparently break off periodically to wash up on appellants' property. As a consequence appellants' property is claimed to be unfit for any recreational or other reasonable use and to be permanently diminished in value.
With "great reluctance" the district court read Snyder v. Harris, 394 U.S. 332, 89 S.Ct. 1053, 22 L.Ed.2d 319 (1969) to compel the holding that "each class member in a spurious class action must independently satisfy the requirement as to jurisdictional amount." We agree and affirm the order below.
The fact that judgments under class actions formerly classified as spurious may now have the same effect as claims brought under the joinder provisions is certainly no reason to treat them differently from joined actions for purposes of aggregation.
After 1938, Clark v. Paul Gray, Inc., 306 U.S. 583, 59 S.Ct. 744, 83 L.Ed. 1001 (1939), the rule evolved in joinder cases that distinct claims could not be aggregated was applied to class actions under the new Federal Rules. Even aside from the clear language quoted above, the Court's reliance on Clark appears to offer an insurmountable obstacle to appellants, for the Clark Court had recognized that one originally named member of the proposed class might meet the jurisdictional amount requirement, just as the named plaintiffs do here; yet the action was dismissed as to all plaintiffs except that one. Clark, 306 U.S. at 589-590, 59 S.Ct. 744. It is no basis to distinguish Clark that all, rather than only one, of the named plaintiffs here meet the jurisdictional amount requirement; the point is that in a spurious class action one plaintiff may not ride in on another's coattails. Similarly the Court of Appeals for the Fifth Circuit, whose position was upheld by Snyder, dismissed a purported class action where only one member of the proposed class, albeit not a named member, could make a showing of the requisite jurisdictional amount, citing Clark v. Paul Gray, Inc., supra. Alvarez v. Pan American Life Insurance Co., 375 F.2d 992, 996-997 (5th Cir.), cert. denied, 389 U.S. 827, 88 S.Ct. 74, 19 L.Ed.2d 82 (1967).
We are entirely sympathetic to the proposition that the amended Rule 23 "should be given a liberal rather than a restrictive interpretation" in order to vindicate small federal claims. Eisen v. Carlisle & Jacquelin, 391 F.2d 555, 563 (2d Cir. 1968); but the policies underlying the amended rule are not determinative of this case.4 Rather it is clear in the light of Snyder, 394 U.S. at 336, 89 S.Ct. 1053, that the critical focus in resolving the issue before us must be on 28 U.S.C. Sec. 1332. Accepting that, one might ask how application of the aggregation doctrine to preclude this class action will sustain the congressional purpose underlying the jurisdictional amount requirement of section 1332 stressed in Snyder: to check the rising caseloads in federal courts. After all, this action may still be maintained in federal court under the banner of the named plaintiffs; but that was equally true in Clark and Alvarez. However, were this case to proceed as a class action it would in fact significantly increase the burden on the federal courts. Once appellee's liability had been established, and even assuming that appellee's defenses would not vary as to different members of appellants' class, it would be an enormously time consuming task to assess the damages suffered by each of the 200 riparian landowners, each of whose claims is regarded as separate and distinct. Indeed the Advisory Committee did not intend that Rule 23(b)(3) ordinarily be utilized in a mass tort situation. Advisory Committee Note, 39 F.R.D. 98, 103 (1966). Moreover a second policy consideration relied on in Snyder is relevant here: local controversies involving claims to be settled on the basis of state law "can often be most appropriately tried in state courts." Snyder, 394 U.S. at 341, 89 S.Ct. at 1059.
We are therefore persuaded that the district court properly applied the nonaggregation doctrine in refusing jurisdiction over the plaintiff class proposed in this case.
With deference, it seems to me that the majority reads the Supreme Court's decision in Snyder v. Harris, 394 U.S. 332 (1969), for all it might be worth, rather than for the least it has to be worth. More significantly, the majority decision here ignores the well-established principle that if a case is properly in a federal court, that court has subject matter jurisdiction over the case or controversy in its entirety and therefore can adjudicate related claims of ancillary parties who have no independent jurisdictional grounds.
The concept of "ancillary jurisdiction" has been a part of the jurisprudence of the federal courts for many years. It originally was used to allow parties otherwise without grounds for jurisdiction to assert rights in property that had come under a federal court's control. Freeman v. Howe, 65 U.S. (24 How.) 450 (1861). Similarly, the doctrine was utilized to enable federal courts to effectuate their judgments in suits that had properly been before them. Supreme Tribe of Ben-Hur v. Cauble, 255 U.S. 356 (1921). During this early period, the concept of ancillary jurisdiction was applied only to situations in which its use was necessary to the effective operation of the federal courts.
Since the Supreme Court's decision in Moore v. New York Cotton Exchange, 270 U.S. 593 (1926), however, the concept has been used primarily to promote judicial economy through the avoidance of piecemeal litigation. In Moore, a state claim not independently cognizable in a federal court was asserted by way of compulsory counterclaim to a federal claim. The Court held that the state claim could be heard in the federal court even though the federal claim was eventually dismissed on the merits. The Moore decision was one of the major inspirations for the development of a general principle that federal courts can invoke ancillary jurisdiction to resolve in a single action any disputes, regardless of jurisdictional sufficiency, arising out of the facts supporting the plaintiff's "cause of action". See, e. g., Hurn v. Oursler, 289 U.S. 238 (1933).
The enactment of the Federal Rules of Civil Procedure, with their provisions for liberal joinder of parties and claims, especially stimulated the growth of the ancillary jurisdiction doctrine. The Rules broadened the concept of a single triable case or controversy by allowing to be joined in one action all parties and claims related to the main action. Also, courts found the ancillary jurisdiction doctrine helpful in putting to use some of the new joinder devices, particularly Rules 14, 20 and 24. Lower federal courts, including ours, were quick to recognize that ancillary jurisdiction was available to solve jurisdictional problems, such as lack of diversity or amount in controversy, which were often attendant upon utilization of joinder procedures. See, e. g., Dery v. Wyer, 265 F.2d 804 (2 Cir. 1959) (impleader of third party defendant); Formulabs, Inc. v. Hartley Pen Co., 318 F.2d 485 (9 Cir. 1963) (intervention as of right); Jacobson v. Atlantic City Hosp., 392 F.2d 149 (3 Cir. 1968) (simple joinder of parties). But see Hymes v. Chai, 407 F.2d 136 (9 Cir. 1969) (simple joinder of parties).1 These developments impelled one commentator to say recently that the ancillary jurisdiction doctrine "is in a process of evolution from a rule of prevention of basic unfairness to a rule of convenience for resolving all issues involved in the subject of the matter before the court". Note, Federal Practice: Jurisdiction of Third-Party Claims, 11 Okla.L.Rev. 326, 329 (1958), quoted in 7A Wright & Miller, Federal Practice and Procedure Sec. 1917, at 590 n. 29 (1969). The majority's decision today greatly retards this "process of evolution".
An extension of the ancillary jurisdiction doctrine to permit an adjudication of the claims of the unnamed plaintiffs in this action would be unquestionably harmonious with this development.2 For example, although in the past courts have held that they could not invoke ancillary jurisdiction to hear claims for less than $10,000 asserted by parties joined under Rule 20, the majority of recent decisions are to the contrary. See, e. g., General Research, Inc. v. American Employers' Ins. Co., 289 F.Supp. 735 (W.D.Mich.1968); Lucas v. Seagrave Corp., 277 F.Supp. 338 (D.Minn.1967); Johns-Manville Sales Corp. v. Chicago Title & Trust Co., 261 F.Supp. 905 (N.D.Ill. 1966). This change in position reflects growing realization that the disposition of jurisdictionally insufficient claims along with reasonably related claims having an independent jurisdictional basis is expeditious and not unduly burdensome. There is, of course, a limit on the number and nature of claims that can be conveniently tried together, but that limit would not be exceeded by adjudicating all the class members' claims here. Indeed, the purpose of the Rule 23(b)(3) class action device was to provide an efficient and economically effective procedure for adjudicating numerous small, closely related claims. See Eisen v. Carlisle & Jacquelin, 391 F.2d 555 (2 Cir. 1968); Escott v. Barchris Construction Corp., 340 F.2d 731 (2 Cir. 1965).
". . . Under the [Federal Civil] Rules, the impulse is toward entertaining the broadest possible scope of action consistent with fairness to the parties; joinder of claims, parties and remedies is strongly encouraged. Yet because the Hurn question involves issues of jurisdiction as well as convenience, there has been some tendency to limit its application to cases in which the state and federal claims are, as in Hurn, 'little more than the equivalent of different epithets to characterize the same group of circumstances.' 289 U.S., at 246.
This limited approach is unnecessarily grudging. Pendent jurisdiction, in the sense of judicial power, exists whenever there is a claim 'arising under [the] Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their Authority . . .,' U.S.Const., Art. III, Sec. 2, and the relationship between that claim and the state claim permits the conclusion that the entire action before the court comprises but one constitutional 'case.' The federal claim must have substance sufficient to confer subject matter jurisdiction on the court. Levering & Garrigues Co. v. Morrin, 289 U.S. 103. The state and federal claims must derive from a common nucleus of operative fact. But if, considered without regard to their federal or state character, a plaintiff's claims are such that he would ordinarily be expected to try them all in one judicial proceeding, then assuming substantiality of the federal issues, there is power in federal courts to hear the whole." 383 U.S. at 724-25.
These principles as expressed by the Gibbs court apply equally to a situation where the claims of named plaintiffs in a class action are properly before the court but the similar claims of other members of the class lack subject matter jurisdiction: judicial authority over the ancillary claims exists if the relationship between the claims having independent jurisdictional grounds and the pendent claims "permits the conclusion that the entire action before the court comprises but one constitutional 'case"'; or, as applied to the jurisdictional deficiency in the instant case, "if, considered without regard to" the amount in controversy, the claims satisfying the jurisdictional amount requirement and those that do not "are such that [the parties] would ordinarily be expected to try them all in one judicial proceeding, . . . there is power in federal courts to hear the whole". 383 U.S. at 724-25. Indeed, since pendent jurisdiction concerns constitutional limitations on the jurisdiction of federal courts, while the instant suit involves only statutory limitations, the case for recognizing jurisdiction over all class members and their claims here is even stronger. See Leather's Best, Inc. v. S. S. Mormaclynx, 451 F.2d 800, 809-11 (2 Cir. 1971); cf. Ryan v. J. Walter Thompson Co., 453 F.2d 444, 446 (2 Cir. 1971), cert. denied, 406 U.S. 907 (1972).
"There is no compelling reason for this Court to overturn a settled interpretation of an important congressional statute in order to add to the burdens of an already overloaded federal court system." 394 U.S. at 341.
The rationale of the Snyder decision is inapplicable to the issue before us. There is no "settled line of precedent" that every member of a Rule 23(b)(3) class must satisfy the amount in controversy requirement. The Snyder court referred to Clark v. Paul Gray, Inc. as the first case to apply the nonaggregation rule to a class action situation. 394 U.S. at 336-37. In that case, as the majority here points out, at least one plaintiff had a claim in excess of $10,000, but the Supreme Court held that each plaintiff who had a similar claim must meet the amount in controversy requirement. That suit, however, seems not to have been a class action, although the Snyder court characterized it as such; it was merely a case of permissive joinder. It was decided prior to the 1966 amendment of Rule 23, which had the effect of making a judgment in a Rule 23(b)(3) class action binding on unnamed plaintiffs, thus greatly distinguishing it from a permissive joinder situation and old Rule 23.
Most importantly, whatever the nature of the action in Clark, the precedential value of that decision has been substantially reduced by recent decisions. Although the Court in Snyder cited Clark with approval, its approval was directed not to the holding in Clark but to some of Clark's dicta on aggregation of claims. Since Clark was decided, moreover, the ancillary jurisdiction doctrine has expanded and grown. As discussed above, within the last few years many federal courts have held that a court has discretion to adjudicate a jurisdictionally insufficient claim joined with a claim for more than $10,000 if the claims derive primarily from the same operative facts. See Hatridge v. Aetna Cas. & Sur. Co., 415 F.2d 809 (8 Cir. 1969); Stone v. Stone, 405 F.2d 94 (4 Cir. 1968); Jacobson v. Atlantic City Hospital, 392 F.2d 149 (3 Cir. 1968); Wilson v. American Chain and Cable Co., 364 F.2d 558 (3 Cir. 1966); Wright, Federal Courts 124, 316 (1970). Cf. United Mine Workers v. Gibbs, supra. But see Alvarez v. Pan American Life Ins. Co., 375 F.2d 992, 996-97 (5 Cir.), cert. denied, 389 U.S. 827 (1967), referred to by the majority.3 In the light of this distinct trend, and the Supreme Court's enthusiastic endorsement in Gibbs of the ancillary jurisdiction concept, old cases such as Clark should be wielded with discrimination.
"That power [pendent jurisdiction] need not be exercised in every case in which it is found to exist. It has consistently been recognized that pendent jurisdiction is a doctrine of discretion, not of plaintiff's right. Its justification lies in considerations of judicial economy, convenience and fairness to litigants; if these are not present a federal court should hesitate to exercise jurisdiction . . . ." 383 U.S. at 726.
The position of the majority in this action promotes duplicative litigation-a trial of the representative claims in the federal court and identical actions by the other class members in the state court. Not only does this discourage the named plaintiffs from asserting their right to a federal forum, but it restricts the use of the Rule 23(b)(3) class action to the extraordinary situation in which every member of the class has a claim in excess of $10,000 (unless a statute dispensing with the jurisdictional amount requirement can be invoked). Furthermore, there is no guarantee that a class action could be initiated in the state court. Many states discourage class actions and if the individual claims are so small that suit would have to be instituted in a state court of limited jurisdiction, most likely the class action device would be unavailable.
The majority's decision is not compelled by Snyder and Clark, as the opinion states. The result reached disregards the development of a sound doctrine for more efficient and economical judicial administration and severely impairs the efforts of those who would modernize the federal law of class actions. It undercuts this Circuit's strong policy favoring class actions. I therefore respectfully dissent.
Ordered that said petition be and it hereby is denied.
Ordered that rehearing before the court en banc is denied for want of an affirmative vote "by a majority of the circuit judges of the circuit who are in regular active service."
In view of the circumstances of this case, I fear our dissenting brothers have staked too much upon the label senior or active.
I fully concur in the views expressed in Judge Mansfield's opinion.
I concur in the views expressed by Judge Kaufman.
The time may well have come for a Congressional review of Title 28 U.S.C. Sec. 46(c) which governs en banc procedure in federal courts of appeal, because of its apparent inconsistency in declaring, on the one hand, that a senior judge who heard an appeal as a panel member may not participate in ordering it to be heard en banc but, on the other, that he may participate in an en banc reconsideration ordered by a vote of the "majority of the circuit judges of the circuit who are in regular active service." However, the dissent, by suggesting that the majority requirement can have an unfortunate or unfair impact in cases where less than the court's full complement of judges is available to vote misconceives the purpose of the statute and of Rule 35(a) enacted pursuant to it. In my view if the dissent's views were adopted, the objective of en banc procedure would be threatened.
The goal of Sec. 46(c) and of Rule 35(a) is to achieve intracircuit uniformity by assuring that where questions of exceptional importance are presented the law of the circuit will be established by the vote of a majority of the full court rather than by a three-judge panel. H.R. Rep.No.1246, 77th Cong., 1st Sess. (1941); Hearings on S. 1053; before a Subcommittee of the Senate Committee, 77th Cong., 1st Sess. 14-16 (1941). The judges voting in favor of en banc in this case mistakenly describe themselves as representing "the will of a majority of the Court". (Fn. 1). Actually they represent less than a majority. The issue here is whether four judges of a court with a nine-judge complement may force an en banc reconsideration that could result in the law of the circuit being determined by less than a majority of the court. If less than a majority could determine the law of the circuit, the purpose of en banc procedure would be eroded. Carried to its logical extreme it would mean that in a case where only five members of a nine-member court were available (either because of vacancies, disqualifications, illnesses or the like) the law of the circuit would be determined by the vote of only three. It was just to avoid such a possibility that Congress provided that a vote of a majority of the court's full complement should be required. The majority requirement serves the further salutary purpose of limiting en banc hearings to questions of exceptional importance rather than allow the court to drift into the unfortunate habit of requiring such hearings in every case where a minority of the court may desire a decision by the full court. At a time when the judicial work load of most courts of appeal is at an unprecedented high, sittings en banc should continue to remain the exception.
There is nothing unfair about the majority requirement, either generally or in this case. In cases of exceptional importance, or where there is a conflict between circuits, it may be expected that the Supreme Court will grant certiorari and settle the questions in issue. For this reason this Circuit for many years did not hear appeals en banc, see Lopinsky v. Hertz Drive-Ur-Self Systems, 194 F.2d 422, 429 (2d Cir. 1951) (concurring opinion of Judge Clark), preferring to adhere to panel decisions, at least where recent. See Schick, Learned Hand's Court, Johns Hopkins Press (1970) pp. 105, 115-120. As for the present case, as Judge Kaufman has observed, the ironic feature is that if the two senior judges who joined in the majority opinion were permitted a voice on the issue, it may reasonably be inferred that they would vote against hearing the appeal en banc.
In this environmental suit involving alleged pollution of the waters of Lake Champlain, the late Chief Judge Leddy of the District Court for the District of Vermont, reached his class action determination "with great reluctance". 53 F.R.D. 430, 433. In affirming the district court by a 2-1 vote, Judge Smith's forthright panel majority opinion acknowledged that "[w]e are confronted with the novel question whether a diversity case will be allowed to proceed as a class action under Fed.R.Civ.P. 23(b) (3) when the named plaintiffs meet the jurisdictional amount requirement of 28 U.S.C. Sec. 1332(a) but the unnamed representatives of the class do not." 469 F.2d at 1033.
I have already expressed in my panel dissent, 469 F.2d at 1036, my views on this novel issue, the resolution of which will vitally affect the viability of the Rule 23(b)(3) class action. The record in this case strikes me as a particularly good one on which to resolve this important issue. The facts are not in dispute. The legal question is starkly presented. The issue to be resolved is both important and sure to recur.
Finally, I think it is most unfortunate that en banc reconsideration of such a substantial question of unusual importance is being denied despite the 4-3 vote by the active judges of this Court in favor of en banc reconsideration. This comes about because there has been a vacancy on this nine judge Court for nearly a year and one of the eight active judges has abstained from voting in this case by reason of disqualification. Fed. R.App.P. 35(a) authorizes a rehearing en banc only when ordered by a "majority of the circuit judges who are in regular active service". With only eight active judges, when one judge by reason of disqualification is excluded from voting whether to en banc but is included in determining what constitutes a majority, then the rule appears to require five out of seven to en banc the case. Such a result seems to me to be most unfortunate in thwarting the clear intent of the rule. It is especially unfortunate here where the rule operates to permit a minority of the active judges of the Court to deny en banc reconsideration of one of the more pressing issues of our day-an issue to which the best thinking of legal scholars, lawyers and judges has been devoted.
I therefore respectfully but most emphatically dissent from the denial of reconsideration en banc.
We claim no omniscience as to how our colleagues, Senior Judges Moore and Smith, would vote on the merits in the event of a rehearing en banc in this case. That of course is not the issue to which our dissent is addressed. The issue is whether a three-judge minority-on a Court for which Congress has provided a nine-judge complement, 28 U.S.C. Sec. 44(a) (1970)-may block the reconsideration en banc which the majority wants of a substantial question of unusual importance. And as we all know, despite the guesswork of our colleagues as to how our Senior colleagues would vote if they could vote on whether to en banc, the fact is that not infrequently the author of the majority opinion of a divided panel has voted in favor of en banc reconsideration. See, e. g., Scenic Hudson II, 453 F.2d 463, 494 (2 Cir. 1971), cert. denied, 407 U.S. 926 (1972), and other en banc cases. And there are times when judges change their minds on the merits of an issue. See, e. g., Waterman, J., concurring in Local 1251, UAW v. Robertshaw Controls Co., 405 F.2d 29, 33 (2 Cir. 1968) (en banc), overruling Zdanok v. Glidden Co., 288 F.2d 99 (2 Cir. 1961).
To the extent that Judges Kaufman and Mansfield believe that "[t]he time may well have come for a Congressional review" of that part of 28 U.S.C. Sec. 46 (c) (1970) that governs en banc procedure, we agree. Such review, in addition to considering the present anomaly by which a minority can thwart the will of a majority of the Court in determining whether en banc reconsideration is to be granted, might also appropriately address itself to the question whether, in en banc matters, all Senior judges who have elected to continue their judicial service pursuant to 28 U.S.C. Sec. 294 (1970) should be fully enfranchised. Surely any Senior judge who sat on the original panel should be permitted to vote on whether to en banc the case (as he now is permitted to vote on the merits if the case is en banced).

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