Tuesday’s Argument in Exxon v. Allapattah Services and Ortega v. Star-Kist Foods

Tuesday, in the consolidated argument of Exxon Corp. v. Allapattah Services, Inc. and Ortega v. Star-Kist Foods, Inc., the Court will take another swing at deciding whether 28 U.S.C. § 1367 (the supplemental jurisdiction statute) allows a federal court with diversity jurisdiction over a claim exceeding the jurisdictional amount to exercise supplemental jurisdiction over related claims that do not. The circuits are deeply divided over the issue, and the Supreme Court whiffed on its prior attempt to resolve it, dividing equally (and affirming without opinion) in the 2000 case of Free v. Abbott Laboratories.

The consolidated cases present two different (and possibly relevant) contexts. In Exxon Corp., a putative class alleges that Exxon breached its dealers’ agreement. The Court is asked to decide whether each class member must individually satisfy the amount-in-controversy. In Ortega, a child injured while opening a can of tuna seeks to join her claims for physical and emotional injuries with her family’s claims for emotional damages and medical expenses. The Court must answer the same question in the context of normal joinder.

Although the First Circuit in Ortega suggested that the distinction between class actions and normal joinder might be relevant, other circuits disagree. At the very least, the consolidated cases will provide the Court with two more pitches with which to get a hit on the supplemental jurisdiction question. Hopefully, the Court will connect on at least one of these swings; otherwise, there will be no joy in civil procedure-ville for the mighty Supreme Court will have struck out.

The Supreme Court has long required that each plaintiff joined in a federal diversity action satisfy the jurisdictional amount. Clark v. Paul Gray, Inc. (1939) reiterated this rule after the passage of the Federal Rules of Civil Procedure, and Zahn v. International Paper Co. (1973) applied it to class actions.

The passage of the supplemental jurisdiction statute (§ 1367) in 1990 threw this well-established rule into question. The first part of that statute gives federal courts supplemental jurisdiction over any claims that are part of the same case or controversy as a claim over which they have original jurisdiction. The second part proceeds to remove certain situations from the reach of supplemental jurisdiction. But while claims against people made parties under Rule 20 (permissive joinder) are excepted, no mention is made of either of the scenarios at issue here – that is, claims under Rule 23 (class actions) or claims by people joined under Rule 20.

The focus of the dispute — which the Court is asked to resolve Tuesday — is whether § 1367 overrules Clark and Zahn. The Fourth, Fifth, Seventh, Ninth, and now Eleventh Circuits have concluded that it does, while the Third, Eighth, Tenth, and now First Circuits disagree.

The underlying conflict in Exxon Corp. involves a 1982 Exxon program to make the price of gas lower for people paying cash by charging dealers a processing fee on credit card purchases. This was initially offset by a reduction in the wholesale price paid by the dealer. However, in 1991, the dealers allegedly discovered that Exxon had terminated this offset after only six months. They sued, claiming that Exxon overcharged for gas in violation of the dealer’s agreement. A jury found for the plaintiffs, and the Eleventh Circuit affirmed. In evaluating the § 1367 claim, the Eleventh Circuit concluded that the language of § 1367 clearly and unambiguously overruled Zahn. The statute provided a general grant of supplemental jurisdiction, narrowed only by the specific exceptions of the second section. Since the court had original jurisdiction over the class representatives and Rule 23 was not a listed exception, supplemental jurisdiction over the absent class members was proper.

In Ortega, Beatriz Blanco-Ortega’s severely cut pinky finger required surgery and physical therapy. It is permanently impaired and may require future surgeries. Beatriz, through her parents, brought suit for physical injuries and pain and suffering. In addition, her mother sued for past and future medical expenses as well as emotional distress damages. Her father and sister, neither of whom lived with Beatriz at the time of the injury, also sought damages for emotional distress. The district court granted summary judgment for Star-Kist because none of the plaintiffs could satisfy the amount-in-controversy requirement. The First Circuit affirmed as to the family members, but reversed as to Beatriz.

A divided court went on to reject the plaintiff’s argument that § 1367 allowed supplemental jurisdiction over the family members’ claims. It held that joining claims that did not satisfy the jurisdictional amount would destroy the court’s jurisdiction to hear Beatriz’s claim in the same way as joining a non-diverse plaintiff would destroy the court’s diversity jurisdiction. Since the court would no longer have original jurisdiction over Beatriz’s claim, § 1367 would be inapplicable. The First Circuit believed that this outcome was supported by legislative history and practical consequences—to rule otherwise would allow supplemental jurisdiction over non-diverse plaintiffs. Judge Torruella dissented, arguing that the plain meaning of the supplemental jurisdiction statute supported jurisdiction in this case and that the majority misinterpreted the term “original jurisdiction.”

Exxon and Star-Kist follow the First Circuit’s lead and argue that joining a plaintiff who does not satisfy the amount-in-controversy requirement destroys the court’s original jurisdiction. They bolster this argument with legislative history, claiming that Congress explicitly preserved the amount-in-controversy and complete diversity requirements, as well as the holding of Zahn. They further rely on doctrines of statutory construction, arguing that Congress would not make such a major change without a clearer indication and that federalism requires statutes giving diversity jurisdiction to federal courts to be strictly construed. Moreover, since no logical distinction exists between amount-in-controversy and complete diversity, finding for the plaintiffs will destroy the complete diversity requirement, a result Congress certainly did not intend. Since § 1367(b) attempts to preserve the diversity requirements, they argue, it would be absurd to allow § 1367(a) to undermine them. Given the need to limit the caseload of the federal courts, Star-Kist also asserts that the jurisdictional requirements should not be loosened. Meanwhile, Exxon will claim that the class action setting fails to provide the two-step process—initial claim by the representatives and massive joinder by the rest of the class—necessary for supplemental jurisdiction.

Allapattah and Ortega argue that a plain reading of § 1367 allows supplemental jurisdiction in this case. They claim that the defendant’s interpretation of “original jurisdiction” would essentially eliminate the use of § 1367 in diversity cases, a result that is illogical given the specific limitations in § 1367(b) on the use of supplemental jurisdiction in diversity cases. Even if legislative history is considered (and both argue that, given the plain meaning of the text, it should not be), the intent of Congress was to overrule Clark and Zahn. The parties will also argue that the amount-in-controversy and complete diversity requirements serve different purposes and therefore are distinguishable. Finally, Allapattah will assert that the practical consequences of the decision are not as drastic as imagined by the defendants since Congress has already limited the complete diversity requirement.

Ninety minutes have been set aside for argument. Arguing for Exxon Corp. will be Carter G. Phillips of Washington, DC, while Eugene E. Stearns of Miami, FL will argue for Allapattah. Donald B. Ayer of Washington, DC will argue for Ortega, and Robert A. Long, Jr. of Washington, DC will argue for Star-Kist. The Court denied the Solicitor General’s request for leave to participate in the oral arguments.

The brief for Ortega is only available on paid services. All other briefs are available here.