After having been away for two months due to a variety of factors (en banc argument in Sixth Circuit, Jewish high holy days, daughter's wedding), we are more than ready to climb back into the saddle with a review of important developments within or affecting the Sixth Circuit since the end of August.
The first concerns an important issue of federal diversity jurisdiction, both original and removal, currently relevant to multi-plaintiff and class-action cases where the damage claims do not exceed $5 million. Federal courts may exercise diversity jurisdiction only where, among other things, the matter in controversy exceeds the sum of $75,000 exclusive of interest and costs. See 28 U.S.C. 1332. This requirement that the matter in controversy in a diversity case must exceed a specified amount, currently $75,000, is "[t]o ensure that diversity jurisdiction does not flood the federal courts with minor disputes." Exxon Mobil Corp. v. Allapattah Services, 545 U.S. __, 125 S. Ct. 2611, 2617 (2005). While a single plaintiff may aggregate the value of as many claims as she may have against the same defendant(s) in order to satisfy the amount-in-controversy requirement, even if the claims have nothing in common except the identity of the parties, the same is not true with respect to multiple plaintiffs.
For 175 years, since the Supreme Court's seminal decision in Oliver v. Alexander, 31 U.S. 143 (1832), multiple plaintiffs with separate and distinct claims have not been permitted to aggregate their respective "amounts in controversy" to satisfy the jurisdictional amount requirement. Even in the class action context, the Court has allowed multiple plaintiffs to aggregate their compensatory damage claims only where they "unite to enforce a single title or right in which they have a common and undivided interest." Snyder v. Harris, 394 U.S. 332, 335 (1969); see also Zahn v. Int'l Paper Co., 414 U.S. 291, 294 (1973), superseded on other grounds by statute, Judicial Improvements Act of 1990, Pub. L. No. 101-650, 104 Stat. 5089, sec. 310.
Four telephone customers living in Ohio and Michigan brought a class action (prior to the enactment of the Class Action Fairness Act (CAFA), Pub. L. No. 109-2, 119 Stat. 4, 9 (2-18-05), codified at 28 U.S.C. 1332(d)(2)) against their respective wireless service providers alleging they falsely represented to customers that there would be no charge for phone calls which were unanswered or rang busy. Seeking compensatory and punitive damages, injunctive relief, restitution and disgorgement for unjust enrichment, the plaintiff class sued in Ohio state court and the defendants removed the case to federal district court on diversity grounds. The Northern District of Ohio denied the plaintiffs' remand motion based on its conclusion that the damages alleged by the disgorgement claim alone exceeded $75,000 in the aggregate. The only remaining defendant, Dobson Cellular Systems, thereafter recovered summary judgment in its favor, and plaintiffs appealed the remand order to the Sixth Circuit, arguing that the district court never had valid diversity jurisdiction over the case.
In Everett v. Verizon Wireless, Inc., 2006 Fed. App. 0324p, 2006 U.S. App. LEXIS 21931 (6th Cir. 8-28-06), the Sixth Circuit held that the district court erred in aggregating plaintiff's disgorgement claims. The Court rejected three of Dobson Cellular's arguments supporting aggregation and determined it need not decide the fourth:
1. Understanding that it had to show plaintiffs had "unite[d] to enforce a single title or right in which they have a common and undivided interest," Dobson Cellular relied on the plaintiffs' unjust enrichment claim to argue that plaintiffs' request for disgorgement of its ill-gotten gains would mean the imposition of a constructive trust and the creation of a "common fund" in which all plaintiffs share an interest. However, the Sixth Circuit ruled that the required "common and undivided interest" exists only when the defendant owes an obligation to the group of plaintiffs as a group and not to the individuals severally:
Aggregation is permitted "where there is not only a common fund from which the plaintiffs seek relief, but where the plaintiffs also have a joint interest in that fund, such that if plaintiffs' rights are not affected by the rights of co-plaintiffs then there can be no aggregation. In other words, the obligation to the plaintiffs must be a joint one."
Everett, supra, at *12, quoting Eagle Star Ins. Co. v. Maltes, 313 F.2d 778, 781 (5th Cir. 1963) (emphasis supplied and citations omitted). In other words, the "common fund" exception does not permit plaintiffs to aggregate their claims whenever they share a proprietary interest in the proceeds of litigation; it permits them to aggregate claims only when they jointly own, or have an undivided interest in, the property at issue in the litigation. "Plaintiffs suing to enforce a 'single title or right' must share their 'common and undivided interest' in vindicating that right before the litigation, not as a result of it." Id. at *14, citing Gilman v. BHC Sec., 104 F.3d 1418, 1424, 1430 (2nd Cir. 1997).
2. Dobson Cellular also argued that there was a "collective action" exception to the non-aggregation principle, on the supposed basis that the class as a whole had an undivided interest in the disgorgement claim because the class members brought it "in addition to" their compensatory damages claims. The Sixth Circuit found this argument to be without merit for three reasons, including (i) the fact that, under Ohio law, unjust enrichment claims are in the alternative rather than in addition to plaintiffs' compensatory damages contract claims (citing Rice v. Wheeling Dollar Sav. & Trust Co., 155 Ohio St. 391, 396-97 (1951) and All Occasion Limousine v. HMP Events, 2004-Ohio-5116), and (ii) there is no logical reason why the nature of the disgorgement remedy alters the underlying rights plaintiffs are seeking to vindicate, and thus why the rule should be different in this circumstance.
3. Consistent with extensive case law from many other circuits, the Court held that multiple plaintiffs likewise may not aggregate punitive damages to meet the amount-in-controversy requirement when they do not share a "joint or common interest or title" in the suit.
4. Finally, the Court addressed the last theory offered by Dobson Cellular to support removal jurisdiction -- the monetary cost of complying with plaintiffs' request for injunctive relief was sufficient to satisfy the jurisdictional amount. It is well-settled that the costs of complying with an injunction may establish the amount-in-controversy. See Hunt v. Washington State Apple Adver. Comm'n, 432 U.S. 333, 347 (1977); McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 181 (1936). However, as the Sixth Circuit had previously remarked, "there is a circuit split as to whether a court may determine the amount in controversy from the perspective of either party (the 'either viewpoint rule') or whether a court may only consider the plaintiff's viewpoint." Olden v. Lafarge Corp., 383 F.3d 495, 503 n.1 (6th Cir. 2004). As in Olden, the Court determined that it need not decide the issue because Dobson Cellular had failed to show any evidence in the record demonstrating that the costs of complying with the requested injunctive relief would probably exceed $75,000.
For class action suits filed after February 18, 2005, CAFA raises the jurisdictional amount requirement to $5 million and specifically authorizes the aggregation of individual claims to meet the increased amount-in-controvery requirement. See 28 U.S.C. 1332(d)(2), 1332(d)(6). Thus, the decision in Everett v. Verizon Wireless supplies the rule of decision in non-class multi-plaintiff cases, and in those class actions not governed by the provisions of CAFA.
Thanks to Tom Theado for bringing this case to our attention.