Opinion ID: 774566
Heading Depth: 3
Heading Rank: 1

Heading: Supplemental Jurisdiction Based on Claims of Individual Named Plaintiffs

Text: 14 Chrysler argued twice before the district court that there was federal subject matter jurisdiction over the entire class action, including the claims of the unnamed class members, because the individual named plaintiffs each had claims worth more than $75,000. Chrysler argued that 28 U.S.C.§§ 1367 confers supplemental jurisdiction over the claims of unnamed class members when there is subject matter jurisdiction over the claims of the named plaintiffs. Although the Supreme Court held in Zahn v. International Paper Co. , 414 U.S. 291, 300 (1973), that each member of a class must satisfy the amount-in-controversy requirement, Chrysler argued that §§ 1367, enacted after Zahn, overrules that case. The district court disagreed. It recognized that other circuits had adopted Chrysler's reasoning, but aligned itself with what it described as the chorus of courts that had reaffirmed Zahn after the passage of §§ 1367. 15 Of the circuit courts that have reached the issue, the Fifth and the Seventh have agreed with Chrysler. See In re Abbott Laboratories, 51 F.3d 524, 529 (5th Cir. 1995), Stromberg Metal Works, Inc., v. Press Mechanical, Inc., 77 F.3d 928, 930-33 (7th Cir. 1996) (agreeing with Abbott Laboratories in a Rule 20 joinder case); see also In re Brand Name Prescription Drugs Antitrust Litig., 123 F.3d 599 (7th Cir. 1997) (following Stromberg Metal Works in a Rule 23 class action). The Third, Eighth, and the Tenth have agreed with the district court. See Meritcare Inc. v. St. Paul Mercury Ins. Co., 166 F.3d 214 (3d Cir. 1999); Trimble v. ASARCO, Inc. , 232 F.3d 946,962 (8th Cir. 2000); Leonhardt v. Western Sugar Co., 160 F.3d 631, 640-41 (10th Cir. 1998). The Supreme Court granted certiorari in Abbott Laboratories, but after the recusal of one Justice it affirmed without opinion by an equally divided Court. See 529 U.S. 333 (2000). For the reasons that follow, we agree with the Fifth and Seventh Circuits in Abbott Laboratories and Stromberg Metal Works, and hold that Zahn is overruled by §§ 1367. 16
17 Section 1367 was enacted as part of the Judicial Improvement Act of 1990, seventeen years after the Supreme Court's decision in Zahn. In relevant part, it provides: 18 (a) Except as provided in subsection[ ] (b) . . . , in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties. 19 (b) In any civil action of which the district courts have original jurisdiction founded solely on section 1332 of this title, the district courts shall not have supplemental jurisdiction under subsection (a) over claims by plaintiffs against persons made parties under Rule 14, 19, 20, or 24 of the Federal Rules of Civil Procedure, or over claims by persons proposed to be joined as plaintiffs under Rule 19 of such rules, or seeking to intervene as plaintiffs under Rule 24 of such rules, when exercising supplemental jurisdiction over such claims would be inconsistent with the jurisdictional requirements of section 1332. 20 The first two courts of appeals to consider the effect of §§ 1367 on Zahn--the Fifth and Seventh Circuits--had no doubt about the plain meaning of this text. The Fifth Circuit in Abbott Laboratories stated its conclusion succinctly: [T]he statute's first section vests federal courts with the power to hear supplemental claims generally, subject to limited exceptions set forth in the statute's second section. Class actions are not among the enumerated exceptions . . . [U]nder §§ 1367 a district court can exercise supplemental jurisdiction over members of a class, although they did not meet the amount-in-controversy requirement, as did the class representatives. Id. at 528-29. The Seventh Circuit agreed, writing that the result in Abbott Laboratories has strong support from the statutory text. Stromberg Metal Works, 77 F.3d at 930. Our own analysis convinces us that Abbott Laboratories properly understood the plain meaning of the text of§§ 1367, and correctly held that the claims of unnamed class members in a diversity class action need not satisfy the amount-in-controversy requirement. 21 The Tenth and Eighth Circuits have argued that the text of §§ 1367 has a plain meaning, but they reached the opposite conclusion about what that plain meaning is. In Leonhardt, the lead case, the Tenth Circuit made two textual arguments to support its conclusion. Because of the importance of the plain meaning of §§ 1367, we analyze those two arguments in detail. 22
23 Leonhardt's first argument is that §§ 1367(a) does not confer supplemental jurisdiction over unnamed class members whose claims do not satisfy the amount-in-controversy requirement because the term original jurisdiction in subsection (a) has a different meaning in diversity cases than in federal question cases. 5 Leonhardt notes that under subsection (a) there is only supplemental jurisdiction over claims that are related to claims in a civil action of which the district courts have original jurisdiction (emphasis added). Leonhardt then argues that the existence of original jurisdiction under subsection (a) in a diversity case is determined by applying the basic diversity statute, 28 U.S.C. §§ 1332, to all the claims in the complaint. If §§ 1332 confers jurisdiction over all those claims, there is original jurisdiction within the meaning of subsection (a). However, if §§ 1332 confers jurisdiction over only some (but not all) of those claims, there is nooriginal jurisdiction. If there is no original jurisdiction, there can be no supplemental jurisdiction either, for there is no jurisdiction to which supplemental jurisdiction can attach. 24 In the words of Leonhardt, 25 In our view, a literal and textually faithful reading of §§ 1367(a) leads to the opposite conclusion from that of the Fifth and Seventh Circuits. Section 1367(a) specifically addresses any civil action of which the district courts have original jurisdiction. (Emphasis added). It then provides for supplemental jurisdiction over transactionally related claims. Section 1332 is what confers original jurisdiction over diversity cases and it expressly requires that the matter in controversy exceed[ ] the sum or value of $75,000. While §§ 1332 does not expressly refer to class actions, the Supreme Court has noted that periodic congressional amendment of the diversity statute to alter only the amount in controversy evidences congressional agreement with the Court's holding that matter in controversy does not encompass[ ] the aggregration of separate and distinct claims. Snyder [v. Harris], 394 U.S. at 339[.] Thus, Congress in §§ 1367(a) expressly excepted claims brought under §§ 1332 and its well-understood definition of matter in controversy. See Pfander . . . (Section 1367(a) appears to assume that the existing rules of original jurisdiction will continue to apply and that the grant of supplemental jurisdiction will come into play only after the plaintiff has submitted claims in a well-pleaded complaint that properly invoke such original jurisdiction.). 160 F.3d at 640. See also Trimble, 232 F.3d at 962 (We agree with and adopt the reasoning of the Tenth Circuit in Leonhardt.). 26 For Leonhardt to be right, the term original jurisdiction in subsection (a) must mean something different in diversity and federal question cases. Everyone agrees that in a federal question case there need not be subject matter jurisdiction over all the claims in the complaint for there to beoriginal jurisdiction within the meaning of subsection (a). Rather, there is original jurisdiction if there is subject matter jurisdiction over one claim in the complaint. If there is subject matter jurisdiction over that one claim, there is supplemental jurisdiction over the other claims, provided that all of the claims are transactionally related. 27 An example will clarify the point. If a non-diverse plaintiff files a complaint with two transactionally related claims against a single defendant, one based on federal law and one based on state law, there is original jurisdiction under subsection (a) because there is subject matter jurisdiction over the federal-law claim. Because there is original jurisdiction, there is supplemental jurisdiction over the state-law claim. The example just described is, of course, United Mine Workers v. Gibbs, 383 U.S. 715 (1966), the paradigm case of pendent (now supplemental) jurisdiction. If Leonhardt 's definition of original jurisdiction were applied to federal question cases, §§ 1367 would overrule Gibbs. Since no one, including the Leonhardt panel, argues that §§ 1367 has that consequence, the question is whether original jurisdiction in subsection (a) has a different meaning in diversity cases from its unquestioned meaning in federal question cases. For several reasons, we believe that original jurisdiction means the same thing in both kinds of cases. 28 First, there is nothing in the text of subsection (a) to suggest, even remotely, that there is such a difference in meaning. Specifically, nothing in the text suggests that in a diversity case (but not in a federal question case) the term original jurisdiction in subsection (a) requires subject matter jurisdiction over all the claims in a complaint. 29 Second, even though subsection (b) applies only to diversity cases, original jurisdiction in that section is used in the sense concededly applicable to federal question cases in subsection (a). The meaning of original jurisdiction in subsection (b) is apparent from the fact that subsection (b) excludes from supplemental jurisdiction claims made by a plaintiff against a non-diverse defendant joined under Rule 20. A plaintiff will ordinarily join all Rule 20 defendants in the complaint rather than waiting to join them by a later or amended pleading. The exclusion of joined claims against non-diverse defendants from the supplemental jurisdiction granted by subsection (a) indicates that such claims are covered by supplemental jurisdiction, for there would otherwise be no reason for subsection (b) to except them from supplemental jurisdiction. 30 In order for such claims to have been covered by supplemental jurisdiction, original jurisdiction under subsection (a) must be determined by looking to see if there was subject matter jurisdiction over any one claim in the complaint, rather than over all of the claims in the complaint. Iforiginal jurisdiction under subsection (a) were determined by looking at all the claims in the complaint, there would have been no jurisdiction under §§ 1332 (and hence no original jurisdiction) in the first place because there was a lack of complete diversity when all the claims were considered together. See Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806). The exclusion by subsection (b) of claims by non-diverse parties joined under Rule 20 from supplemental jurisdiction would thus be superfluous. 31 Third, we are reinforced in our reading of the termoriginal jurisdiction by a precursor to §§ 1367. A proposed supplemental jurisdiction statute in a Working Paper of the Federal Court Study Committee provided as follows: 32 (a) Except as provided in subsections (b) and (c) or in another provision of this Title, in any civil action on a claim for which jurisdiction is provided, the district court shall have jurisdiction over all other claims arising out of the same transaction or occurrence, including claims that require the joinder of additional parties. 33 (b) In civil actions under §§ 1332 of this Title, jurisdiction shall not extend to claims by the plaintiff against parties joined under Rules 14 and 19 of the Federal Rules of Civil Procedure, or to claims by parties who intervene under Rule 24(b) of the Federal Rules of Civil Procedure, provided, that the court may hear such claims if necessary to prevent substantial prejudice to a party or third-party. 34 1 Federal Courts Study Committee, Working Papers and Subcommittee Reports, July 1, 1990 at 567-68 (hereinafter Working Paper). The proposed statute has the same basic analytic structure as the actual statute. Subsection (a) broadly confers supplemental jurisdiction, and subsection (b) takes away some of that jurisdiction in diversity cases. The proposed statute uses the single term jurisdiction  to include both original jurisdiction and supplemental jurisdiction, but we believe that this does not affect our analysis. The authors of the Working Paper explicitly stated what the effect of their proposed statute would be: [O]ur proposal would overrule the Supreme Court's decision in Zahn v. International Paper Co. . . . From a policy standpoint, this decision makes little sense, and we therefore recommend that Congress overrule it. Id. at 561 n.33. We recognize that the Federal Courts Study Committee disagreed with this policy recommendation, but we do not rely on the Working Paper as evidence of what the Study Committee wanted to do. Rather, we cite it because the text of the proposed statute is strikingly similar to the text of §§ 1367, and because the Study Committee explicitly stated that the text would overrule Zahn. 35 Finally, even if Leonhardt's reading oforiginal jurisdiction in subsection (a) were right, its ultimate holding would still be wrong. A class action complaint is filed only by a named plaintiff or plaintiffs. Although such an action is often referred to as a class action when it is filed, it is, at the time of filing, only a would-be class action. It does not become a class action until certified by the district court. The certification decision is not made at the time of filing, but, rather, [a]s soon as practicable after the commencement of an action. Fed. R. Civ. P. 23(c) (emphasis added). And as Rule 3 tells us, [a] civil action is commenced by filing a complaint with the court. Therefore, if there is complete diversity and a sufficient amount in controversy for the named plaintiff or plaintiffs in the complaint, there is original jurisdiction under subsection (a) over the class action, even as Leonhardt would read the term. 36
37 Leonhardt's second argument is that the last phrase of subsection (b) indicates that §§ 1367 was not intended to overrule Zahn. For the convenience of the reader, we quote §§ 1367(b) again, and italicize the phrase in question: 38 In any civil action of which the district courts have original jurisdiction founded solely on section 1332 of this title, the district courts shall not have supplemental jurisdiction under subsection (a) over claims by plaintiffs against persons made parties under Rule 14, 19, 20, or 24 of the Federal Rules of Civil Procedure, or over claims by persons proposed to be joined as plaintiffs under Rule 19 of such rules, or seeking to intervene as plaintiffs under Rule 24 of such rules, when exercising supplemental jurisdiction over such claims would be inconsistent with the jurisdictional requirements of section 1332. 39 Leonhardt does not analyze the precise meaning of the phrase on which it relies. The entirety of Leonhardt 's discussion consists of the following: 40 That very language evidences a concern for preserving the historical and well-established rules of diversity. The fact that §§ 1367(b) prohibits the addition of claims and parties which would destroy diversity supports our interpretation of §§ 1367(a) as also fully respecting the rules of diversity in cases invoking the original jurisdiction of the federal courts. 41 160 F.3d at 640 (emphasis in original). We agree with Leonhardt's general statement that the phrase evidences a concern for preserving the historical and well-established rules of diversity, but we disagree with Leonhardt as to the specific meaning of the phrase. 42 The text of §§ 1367 has the following analytic structure: first, subsection (a) broadly confers supplemental jurisdiction, subject to certain exceptions; second, the first part of subsection (b) sets out exceptions to subsection (a); and third, the last phrase of subsection (b) limits the reach of those exceptions. We believe that the last phrase of subsection (b) means that there is supplemental jurisdiction over a claim otherwise excepted from supplemental jurisdiction by subsection (b) if §§ 1332, as understood before the passage of§§ 1367, would have authorized jurisdiction over that claim. 43 Such claims do exist. For example, subsection (b) excepts from supplemental jurisdiction a claim by a plaintiff against a third-party defendant who has been impleaded under Rule 14. To that extent, it codifies the result of Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365 (1978). But without its last phrase, subsection (b) would also except from supplemental jurisdiction a claim asserted by the plaintiff against the third-party defendant when that claim is a compulsory counterclaim to a claim by the third-party defendant against the plaintiff. The claim by the third-party defendant against the plaintiff is clearly within the supplemental jurisdiction conferred by subsection (a), and it would be both unfair and inefficient to forbid the plaintiff's compulsory counterclaim to that claim. The question does not arise often, but there was circuit law before the passage of §§ 1367 holding that such a compulsory counterclaim was permitted under §§ 1332 pursuant to what was then known as ancillary jurisdiction. See Revere Copper and Brass Inc. v. Aetna Cas. & Sur. Co., 426 F.3d 709, 714-15 (5th Cir. 1970). 44 In contrast to the general reading in Leonhardt , our reading gives specific meaning to the last phrase of §§ 1367(b), for it preserves a small slice of supplemental jurisdiction that would otherwise have been lost. Moreover, our reading is entirely consistent with our conclusion that §§ 1367 overrules Zahn. As we read the phrase, it preserves ancillary (now supplemental) jurisdiction that existed under §§ 1332 prior to the passage of §§ 1367 and does nothing to prevent the expansion of such jurisdiction accomplished by the rest of §§ 1367. 45
46 For the reasons outlined above, we conclude that the text of §§ 1367 is clear, and that it confers supplemental jurisdiction over the claims of class members in a diversity class action when named plaintiffs have claims with an amount in controversy in excess of $75,000. After concluding that the text of the statute is unambiguous, we would normally not examine its legislative history. [C]courts must presume that a legislature says in a statute what it means and means in a statute what it says there. When the words of a statute are unambiguous, then . . . `judicial inquiry is complete.'  Conn. Nat'l Bank v. Germain, 503 U.S. 249, 253-54 (1992) (quoting Rubin v. United States, 449 U.S. 424, 430 (1981)). See also City of Chicago v. Envt'l Defense Fund, 511 U.S. 328, 337 (1994) ([I]t is the statute, and not the Committee Report, which is the authoritative expression of the law.). 47 However, this is an unusual case. Four courts have held that the text of §§ 1367 is clear, but they have split evenly on what that text means. The Fifth and Seventh Circuits, in Abbott Laboratories and Stromberg Metal Works, have held that the text clearly overrules Zahn. The Tenth and the Eighth Circuits, in Leonhardt and Trimble, have held that the text clearly preserves Zahn. A fifth court, the Third Circuit in Meritcare Inc. v. St. Paul Mercury Ins. Co., has held that the text is ambiguous, and has relied on legislative history to hold that it preserves Zahn. 48 All three courts holding that §§ 1367 preserves Zahn analyzed the legislative history of the statute. The Tenth and Eighth Circuits did so as a means of supporting their holdings, even though they found the text unambiguous. The Third Circuit did so as a means of ascertaining the meaning of the text, but noted that it would have done so even if it had found the text unambiguous: 49 Although there is much to be said for Leonhardt 's view that the text does not displace Zahn's ruling, we conclude that there is sufficient ambiguity in the statute to make resort to legislative history appropriate. . . . Even were we to conclude that Section 1367 is unambiguous, as Abbott Laboratories read[s] it, we would nevertheless turn to the legislative history because it is one of those rare cases [in which] the literal application of a statute will produce a result demonstrably at odds with the intentions of its drafters. 50 Meritcare, 166 F.3d at 222 (quoting United States v. Sherman, 150 F.3d 306, 313 (3d Cir. 1998)). 51 We agree with the Third, Eighth and Tenth Circuits to this degree: the legislative history provides a substantial basis to believe that the omission of claims by Rule 23 plaintiffs from subsection (b) of §§ 1367, and the resulting overruling of Zahn, was an oversight. For example, one of the Senate sponsors of the Judicial Reform Act of 1990 repeatedly described as non-controversial and quite modest those portions of the Act that amended §§ 1367. See 136 Cong. Rec. S 17577 (Oct. 27, 1990) (statement of Sen. Grassley). This is an unlikely characterization for a provision that would open the federal courts to a significant number of additional diversity class actions. Further, the House Judiciary Committee's report on the bill stated that §§ 1367 was not intended to affect the jurisdictional requirements of 28 U.S.C. §§ 1332 in diversity-only class actions, as those requirements were interpreted prior to Finley. H.R. Rep. No. 101-734 at 28-29 (Sept. 10, 1990). That sentence ended with a footnote citing Zahn , strongly suggesting that the proposed statute was intended to preserve the outcome in that case. Finally, the three law professors who helped draft §§ 1367 published an article soon after its enactment declaring that Zahn remain[ed ] good decisional law. Thomas M. Mengler, Stephen B. Burbank, and Thomas D. Rowe, Congress Accepts Supreme Court's Invitation to Codify Supplemental Jurisdiction, 74 Judicature 213, 215 (Dec.Jan. 1991). 52 We do not believe that this is enough to overcome the plain meaning of the text. Legislative history can justify a judicial departure from a clear text if Congress makes an obvious clerical error, particularly if the error results in an absurd or difficult-to-justify result. See Green v. Bock Laundry Machine Co., 490 U.S. 504, 527 (1989) (Scalia, J., concurring) (We are confronted here with a statute which, if interpreted literally, produces an absurd, and perhaps unconstitutional, result. . . . I think it entirely appropriate to consult all public materials, including the background of [the statute ] and the legislative history of its adoption . . . .). But that is not the case here. Even courts that have read §§ 1367 to preserve Zahn agree that the result of such a reading would not be absurd. See, e.g., Russ v. State Farm Mut. Auto. Ins. Co. 961 F. Supp. 808, 819 (E.D. Pa. 1997) ([O]verruling Zahn would not be absurd; arguably, it would be sensible.). Moreover, as shown in our discussion of the Working Paper of the Federal Courts Study Committee, some of those involved in drafting§§ 1367 both knew that the language chosen for §§ 1367 would overrule Zahn and approved of that result on policy grounds. 53 The legislative history therefore does not persuade us that we should refuse to follow what we believe is the clear meaning of the text of §§ 1367. We understand that our holding may be thought to say to Congress, as Judge Pollak put it in Russ,  `We know what you meant to say, but you didn't quite say it. So the message from us in the judicial branch to you in the legislative branch is: Gotcha! And better luck next time.'  961 F. Supp. at 820. We sympathize with Judge Pollak's position, but we do not feel ourselves at liberty to hold that Zahn survives §§ 1367. If courts could ignore the plain meaning of statutory texts because their legislative histories showed that some (or even many) of those who drafted and voted for the texts did not understand what they were doing, the plain meaning of many statutes, not only §§ 1367, would be in jeopardy. 54