Cheat Sheet on Subject Matter Jurisdiction and Venue in Class Actions
SUBJECT MATTER JURISDICTION
A class action based on federal question jurisdiction usually raises no problems of subject matter jurisdiction in federal court. For diversity actions, however, there are two related questions at issue: which members of the class are counted with regard to diversity of citizenship and which members of the class are counted with regard to amount in controversy.
In Supreme Tribe of Ben-Hur v. Cauble, the Supreme Court found that diversity of citizenship in class actions is required only of the named parties. 255 U.S. 356 (1921). So if the named parties are completely diverse from the defendant(s) then SMJ is fine, even if class members are NOT diverse. For unincorporated associations, the court generally looks to the individual members of the association to determine if citizenship requirements are met.
In Snyder v. Harris, the Supreme Court found that, with regard to amount-in-controversy requirements, separate and distinct claims could not be aggregated. See 394 U.S. 332 (1969). Snyder, a shareholder of Missouri Fidelity Union Trust Life Insurance Co., sued the company’s board of directors in federal court. Her individual claim for damages was less than the then-requirement of AIC over $10,000. The Court found that aggregation of claims was proper only when one plaintiff aggregated his/her claims against one defendant or where two or more plaintiffs “unite to enforce a single title or right in which they have a common or undivided interest.” Id. at 335. So the representative must have a claim that meets the AIC in order to bring a class action in federal court.
In Zahn v. International Paper Co., 414 U.S. 291 (1973), the Supreme Court considered a class action suit brought by four Vermont lakefront property owners who alleged, on behalf of 200 additional unnamed class members, that defendant, a New York company, had polluted the lake, causing a decline in their property values. The Court held that plaintiffs must individually meet the amount-in-controversy requirements to be members of the class. This just re-affirmed the holding of Snyder.
The Court held that when Congress passed § 1367 it partially overruled Zahn in Exxon Mobile Corp. v. Allapattah Services, Inc., 545 U.S. 546 (2005). In Exxon Mobile, which we read earlier in the course but a different portion of the opinion, the Court found that provided the named (representative) plaintiff meets the AIC requirements, supplemental jurisdiction allows courts to also hear claims by additional plaintiffs who do not meet AIC requirements. The Supreme Court's decision on supplemental jurisdiction here allows plaintiffs, in certain situations, to bootstrap a jurisdictionally-insufficient claim onto one where jurisdiction is proper.
Congress further weighed in through Class Action Fairness Act of 2005 (CAFA), which established a $5 million amount-in-controversy requirement for class actions AND allowed aggregation to meet that AIC.
CAFA allows federal subject matter jurisdiction over large multi-party class action suits with ‘minimal diversity’ – in which at least one plaintiffs is from a different state than the defendant. Do you think this is a good idea? Critics often argue that minimal diversity will dramatically increase the workload for already back-logged federal courts. Supporters counter that federal forums are better suited to hear multi-party class action suits that are often of interstate importance and involve national issues. CAFA is complex, and we will only barely touch the surface in this court and leave more discussion to a class action course.
In Lowdermilk v. United States Bank Nat’l Ass’n, the Ninth Circuit considered whether under CAFA, a class action could be heard in federal court if the plaintiffs allege damages less than $5 million. 479 F.3d 994 (9th Cir. 2007). The court rejected the removal of the claim and remanded to state court.
§§ 1369, the Multiparty, Multiforum Act authorizes federal jurisdiction over any civil action with minimal diversity resulting “from a single accident, when at least 75 natural persons have died in the accident at a discrete location.” See 28 U.S.C. §§ 1369 (a)(1)-(3).
A NOTE ON VENUE
For the purposes of venue, federal courts generally only consider the residences of named class representatives, not of unnamed class members or intervenors. See 7A Wright, Miller & Kane, Federal Practice and Procedure: Civil 3d § 1757.