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Zahn v. International Paper Co.

decided: September 7, 1972.


Moore, Smith and Timbers, Circuit Judges. Irving R. Kaufman, Circuit Judge (with whom Judges Mansfield and Mulligan concur). Mansfield, Circuit Judge (with whom Circuit Judge Irving R. Kaufman and Mulligan concur). Timbers, Circuit Judge (dissenting).

Author: Smith

J. JOSEPH SMITH, Circuit Judge:

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. § 1332 (a) but the unnamed representatives of the class do not.*fn1 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. § 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.

This case, brought under Rule 23(b) (3), would have been characterized as a "spurious" class action prior to the 1966 amendment of Rule 23. Since the new Rule 23 was intended to substitute a functional, pragmatic approach for the confusing conceptualism of the old rule,*fn2 the question arose whether the old restrictions which had precluded the aggregation of separate claims to compute the amount in controversy in a spurious class action were discarded. In Snyder, the Court stated flatly that the old categories and doctrines still apply to the determination of jurisdictional amount: in class actions which would formerly have been classified as spurious, separate and distinct claims may not be aggregated. It is true that in Snyder no single plaintiff met the jurisdictional amount; as the Court stated the issue, it declined to "hold that 'matter in controversy" encompasses the aggregation of all claims that can be brought together in a single suit, regardless of whether any single plaintiff has a claim that exceeds the jurisdictional amount." Snyder, 394 U.S. at 338, 89 S. Ct. at 1058 (emphasis supplied). Snyder therefore does not squarely hold that every unnamed member of a proposed spurious class must individually satisfy the jurisdictional amount. But appellants' attempt to escape the ambit of Snyder by this route is met by persuasive internal evidence that the Court did not so limit the rule enunciated there.*fn3

The Court stated the jurisdictional rule for the former spurious class action, unaltered by the amended Rule 23, to have been that " each plaintiff had to show that his individual claim exceeded the jurisdictional amount." Id. at 335, 89 S. Ct. at 1056 (emphasis supplied). The Court stressed that the aggregation doctrine, grounded in the statutory phrase "matter in controversy," far antedated Rule 23, and adopted by illustration the language of an early joinder case, Troy Bank v. G. A. Whitehead & Co.:

When two or more plaintiffs, having separate and distinct demands, unite for convenience and economy in a single suit, it is essential that the demand of each be of the requisite jurisdictional amount. . . . 222 U.S. 39, 40, 32 S. Ct. 9, 56 L. Ed. 81.

[ Id. at 336, 89 S. Ct. at 1057 (emphasis supplied)]

And the analogy to joinder cases remains valid:

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.

[ Id. at 337, 89 S. Ct. at 1057 (emphasis in original)]

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.*fn4 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. § 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 non-aggregation doctrine in refusing jurisdiction over the plaintiff class proposed in this case.





A petition for a rehearing having been filed herein by counsel ...

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