Free v. Abbott Laboratories

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 94-30279
IN RE: ABBOTT LABORATORIES, BRISTOL-MEYERS
SQUIBB COMPANY, INC. and MEAD JOHNSON
& COMPANY,
Petitioners.
No. 94-30280
ROBIN FREE and RENEE FREE,
Plaintiffs-Appellees,
versus
ABBOTT LABORATORIES, BRISTOL-MEYERS SQUIBB
COMPANY, INC. and MEAD JOHNSON & COMPANY,
Defendants-Appellants.
Appeal from the United States District Court
for the Middle District of Louisiana
(April 24, 1995)
Before HIGGINBOTHAM, SMITH, and PARKER, Circuit Judges.
HIGGINBOTHAM, Circuit Judge:
This class action brought under the antitrust laws of the
State of Louisiana requires that we decide whether the Judicial
Improvements Act of 1990 overrules Zahn v. International Paper Co.,
414 U.S. 291 (1973). We hold today that it does. We agree with
the district court that the claims of the class representatives met
the requisite amount in controversy and that it has diversity
jurisdiction over their claims, but disagree with its decision to
abstain from exercising it. We agree with the district court that
it had supplemental jurisdiction over all other members of the
class, but disagree with its decision not to exercise it. We
vacate the order remanding to state court.
I.
Robin and Renee Free filed suit in a Louisiana state court on
October 14, 1993, alleging that Abbott Laboratories, Bristol-Meyers
Squibb Company, Inc., and Mead Johnson & Company had conspired to
fix infant formula prices. The Frees filed for themselves and for
a class1 of Louisiana consumers. Defendants removed to federal
court, and plaintiffs moved to remand.
The federal district court granted the motion to remand. The
court held that it lacked federal question jurisdiction and that it
had diversity jurisdiction only over the named plaintiffs' claims
and not over claims of the other members of the class. The
district court declined to exercise supplemental jurisdiction
because the claims raised "novel issues of state law."
The district court remanded the named plaintiffs' claims on
"the basis of . . . the Colorado River/Moses H. Cone doctrine of
abstention."2 It did so to avoid piecemeal litigation and to permit
1
The district court has not certified a class. Our
examination of jurisdiction reflects the allegation of the
plaintiffs and their invocation of jurisdiction -- a putative
class.
2
Colorado River Water Conservation Dist. v. United States,
424 U.S. 800 (1976); Moses H. Cone Memorial Hosp. v. Mercury
2
Louisiana to rule on the "novel and complex issues of state law."
Defendants both appeal and petition for mandamus, asking that we
vacate the order remanding to state court.
II.
28 U.S.C. § 1447(d) shields from review orders remanding for
lack of subject matter jurisdiction, see In re Shell Oil Co., 932
F.2d 1518, 1520 (5th Cir. 1991), cert. denied, 502 U.S. 1049
(1992), or a defect in removal procedure noted by timely motion,
see In re Medscope Marine Ltd., 972 F.2d 107, 110 (5th Cir. 1992).
See Thermtron Prods. Inc. v. Hermansdorfer, 423 U.S. 336 (1976).
Fairly read, the remand order did not rest upon a lack of
subject matter jurisdiction or defective removal procedure. The
court noted no flaw in the removal procedure, and its decision to
abstain follows an explicit finding of subject matter jurisdiction.
Our appellate jurisdiction follows. See In re International Paper
Co., 961 F.2d 558, 561 (5th Cir.) (authorizing review by appeal,
not mandamus, where remand is based upon "circumstances that give
the court discretion to dismiss the case"), cert. denied, 113 S.
Ct. 326 (1992); McDermott Int'l v. Lloyds Underwriters of London,
944 F.2d 1199, 1203-04 (5th Cir. 1991) (regarding remand based upon
Colorado River as discretionary and thus reviewable by appeal, not
mandamus).
Constr. Corp., 460 U.S. 1 (1983).
3
III. DIVERSITY AND SUPPLEMENTAL JURISDICTION
A. DIVERSITY JURISDICTION: THE NAMED PLAINTIFFS' CLAIMS
The court found it had diversity jurisdiction over the named
plaintiffs' claims even though each named and unnamed plaintiff
claimed only $20,000, less than the $50,000 minimum for diversity
jurisdiction. 28 U.S.C. § 1332(a). The district court found that
Louisiana law attributed all of a class's attorney's fees to the
named plaintiffs. It held that the claim of the named plaintiffs
for $20,000 -- once swelled by attorney's fees -- met the $50,000
amount-in-controversy requirement.
Plaintiffs argue that Louisiana statutes distribute the fees
pro rata to all members of the class, with the result that none
meets the amount-in-controversy requirement.
The distribution of attorney's fees centers on two Louisiana
statutes. The first, Article 595 of the Louisiana Code of Civil
Procedure, provides:
The court may allow the representative parties their
reasonable expenses of litigation, including attorney's
fees, when as a result of the class action a fund is made
available, or a recovery or compromise is had which is
beneficial, to the class.
. . .
Official Revision Comments
(a) It is intended, in the first paragraph, that
the reasonable expenses of litigation allowed the
successful representative parties is to be paid out of
the fund or benefits made available by their efforts.
The second key Louisiana statute is Section 51:137 of the
Louisiana Revised Statutes, which provides:
4
Any person who is injured in his business or
property by any person by reason of any act or thing
forbidden by this Part may sue in any court of competent
jurisdiction and shall recover threefold the damages
sustained by him, the cost of suit, and a reasonable
attorney's fee.
Article 595, plaintiffs contend, supports their argument that
the fees are to be distributed among all class members. See, e.g.,
White v. Board of Trustees, 276 So. 2d 714, 719 (La. Ct. App. 1973)
(deducting pro rata shares of an Article 595 attorney's fee from
the awards due to each plaintiff), writ ref'd, 279 So. 2d 694 (La.
1973).
We disagree. Defendants pay attorney's fees and damages. The
plain text of the first sentence of 595 awards the fees to the
"representative parties." (The language allowing the
"representative parties" their fees is echoed in Comment (a).)
Finally, plaintiffs argue that construing Article 595 to
attribute the fees to the named plaintiffs -- rather than to
distribute them among all the plaintiffs -- renders the statute
unconstitutional. The argument continues that the federal courts
have generally held that Zahn forbids attributing the fees of class
members to class representatives. The only circuit court to speak
to this question held that attributing a class's attorney's fees
only to the named plaintiffs instead of pro rata to each member of
the class "would conflict with the policy of Zahn." Goldberg v.
CPC Int'l, Inc., 678 F.2d 1365, 1367 (9th Cir.), cert. denied, 459
U.S. 945 (1982). Many district courts have followed Goldberg.3
3
See, e.g., Copeland v. MBNA Am., N. A., 820 F. Supp. 537,
541-42 (D. Colo. 1993); Mayo v. Key Fin. Servs. Inc., 812 F. Supp.
5
But Goldberg's reading of Zahn sheds little light on the distinct
policy choices behind Louisiana's decision regarding rights of
recovery by class members. That a state chooses a set of rules
that result in an award in excess of $50,000 frustrates no policy
of Zahn. Simply put, under the law of Louisiana the class
representatives were entitled to fees. Their rights of recovery
were not created by a judge's summing the discrete rights of class
members. The district court applied the law of Louisiana. Because
it did so, we are persuaded that the individual claims of the class
representatives met the requisite jurisdictional amount. We turn
now to the question of supplemental jurisdiction over the class
members, confronting at its threshold Zahn's current vitality.
That is the question of Zahn.
B. SUPPLEMENTAL JURISDICTION: THE UNNAMED PLAINTIFFS' CLAIMS
Supplemental jurisdiction over the unnamed plaintiffs' claims
has been an open question since Congress passed the Judicial
Improvements Act of 1990.4
277, 278 n.3 (D. Mass. 1993); Czechowski v. Tandy Corp., 731 F.
Supp. 406, 410 (N.D. Cal. 1990); National Org. for Women v. Mutual
of Omaha Ins. Co., 612 F. Supp. 100, 109 (D.D.C. 1985); see also
Neve Bros. v. Potash Corp. (In Re Potash Antitrust Litig.), 866 F.
Supp. 406, 414 n.19 (D. Minn. 1994) (following Goldberg despite
enactment of Judicial Improvements Act of 1990, 28 U.S.C. § 1367)
which at least arguably undermines Zahn).
4
28 U.S.C. § 1367 provides in relevant part as follows:
(a) Except as provided in subsections (b) and (c) or
as expressly provided otherwise by Federal statute, 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
6
Congress enacted § 1367 against the background of Zahn, in
which the Supreme Court had held that the claim of each member of
a class action must meet the amount-in-controversy requirement.
Zahn, 414 U.S. at 301. Zahn forbade the exercise of supplemental
jurisdiction over the claims of class members who did not do so.
Defendants argue that Congress changed the jurisdictional
landscape in 1990 by enacting § 1367. Section 1367(a) grants
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.
(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.
(c) The district courts may decline to exercise
supplemental jurisdiction over a claim under subsection
(a) if --
(1) the claim raises a novel or complex issue of
State law,
(2) the claim substantially predominates over the
claim or claims over which the district court has
original jurisdiction,
(3) the district court has dismissed all claims
over which it has original jurisdiction, or
(4) in exceptional circumstances, there are other
compelling reasons for declining jurisdiction.
7
district courts supplemental jurisdiction over related claims
generally, and § 1367(b) carves exceptions. Significantly, class
actions are not among the exceptions.
Some commentators have interpreted this silence to mean that
Congress overruled Zahn and granted supplemental jurisdiction over
the claims of class members who individually do not demand the
necessary amount in controversy.5 Some of § 1367's drafters
disagree.6 No appellate court has ruled on the question yet.7 The
5
See, e.g., 1 James W. Moore et al., Moore's Federal
Practice, ¶ 0.97[5], at 928 (2d ed. 1994); 2 Herbert B. Newberg &
Alba Conte, Newberg on Class Actions, § 6.11, at 6-48 (3d ed.
1992); Joan Steinman, Section 1367 -- Another Party Heard From, 41
Emory L.J. 85, 103 (1992); Thomas C. Arthur & Richard D. Freer,
Grasping at Burnt Straws: The Disaster of the Supplemental
Jurisdiction Statute, 40 Emory L.J. 963, 981 (1991).
6
See Thomas D. Rowe, Jr., Stephen B. Burbank, & Thomas M.
Mengler, Compounding or Creating Confusion About Supplemental
Jurisdiction? A Reply to Professor Freer, 40 Emory L.J. 943, 960
n.90 (1991). Professors Rowe, Burbank, and Mengler all had a hand
in crafting the supplemental jurisdiction statute. See Rowe, et
al. supra, 40 Emory L.J. at 949 n.27; H.R. Rep. No. 734, 101st
Cong., 2d Sess. 27, reprinted in 1990 U.S.C.C.A.N. 6860, 6873 n.13.
7
This circuit has twice broached the question, but never
answered it. In More v. Intelcom Support Servs., Inc., we noted
that § 1367 might affect the Zahn rule, but declined to decide that
because the action at issue had been filed before § 1367 took
effect. See 960 F.2d 466, 473 (5th Cir. 1992). Later, in Watson
v. Shell Oil Co., we reasoned that the Zahn rule would demand
dismissal of class members' claims below the jurisdictional
threshold. See 979 F.2d 1014, 1021 (5th Cir. 1992). However, that
case had been filed before § 1367 took effect, and the opinion
makes no mention of that statute. See id. at 1021 & n.27. In any
event, Watson has been vacated. When this court ordered the case
reheard en banc, see 990 F.2d 805 (5th Cir. 1993), the panel
opinion in Watson was vacated, see 5th Cir. R. 35 (Internal
Operating Procedure), and the en banc rehearing never occurred
because the parties settled and the appeal was dismissed.
The Third Circuit is the only other circuit to have considered
the question. In Packard v. Provident Nat'l Bank, the court noted
8
district courts are split even within this circuit, although the
majority appear to hold that Zahn survives the enactment of
§ 1367.8
Perhaps, by some measure transcending its language, Congress
did not intend the Judicial Improvements Act to overrule Zahn. The
House Committee on the Judiciary considered the bill that became
§ 1367 to be a "noncontroversial" collection of "relatively modest
proposals," not the sort of legislative action that would upset any
long-established precedent like Zahn. 1990 U.S.C.C.A.N. at 6861.
Plaintiffs argue that the Act was prompted not by a congressional
the conflict among authorities on our question, but declined to
resolve it. See 994 F.2d 1039, 1045-46 n.9 (3d Cir.), cert.
denied, 114 S. Ct. 440 (1993).
8
Compare Henkel v. ITT Bowest Corp., No. 94-4116, 1994 U.S.
Dist. LEXIS 19118, at *19 (D. Kan. Dec. 19, 1994) (holding that
§ 1367 did not overrule Zahn); Aspe Arquitectos, S.A. de C.V. v.
Jamieson, 869 F. Supp. 593, 595 (N.D. Ill. 1994) (same); Dirosa v.
Grass, No. 94-2551, 1994 U.S. Dist. LEXIS 15100, at *7 (E.D. La.
Oct. 19, 1994) (same); Kaplan v. Mentor Corp., No. 94-6249, 1994
U.S. Dist. LEXIS 15779, at *3 (N.D. Ill. Oct. 17, 1994) (same),
supplemented, 1994 U.S. Dist. LEXIS 15410 (E.D. Ill. Oct. 24,
1994); Benninghoff v. Tolson, No. 94-2903, 1994 U.S. Dist. LEXIS
13428, at *11 (E.D. Pa. Sept. 22, 1994) (same); Clement v.
Occidental Chem. Corp., Nos. 94-1315, 94-1316, 94-1317, 1994 U.S.
Dist. LEXIS 12387, at *19 (E.D. La. Aug. 30, 1994) (same); Neve
Bros. v. Potash Corp. (In re Potash Antitrust Litig.), 866 F. Supp.
at 414 (same); North Am. Mechanical Servs. Corp. v. Hubert, 859 F.
Supp. 1186, 1188-89 (C.D. Ill. 1994) (same); Duet v. Lawes, No. 94-
0739, 1994 U.S. Dist. LEXIS 4755, at *4-5 (E.D. La. Apr. 7, 1994)
(same); Riverside Transp., Inc. v. Bellsouth Telecommunications,
Inc., 847 F. Supp. 453, 456 (M.D. La. 1994) (same); Fink v. Heath,
No. 91-2982, 1991 U.S. Dist. LEXIS 9182, at *7-8 (N.D. Ill. July 8,
1991) (same); and Griffin v. Dana Point Condominium Ass'n, 768 F.
Supp. 1299, 1302 (N.D. Ill. 1991) (same) with Lindsay v. Kvortek,
865 F. Supp. 264, 276 (W.D. Pa. 1994) (determining that § 1367
supersedes Zahn; case did not involve class action); Patterson
Enters., Inc. v. Bridgestone/Firestone, Inc., 812 F. Supp. 1152,
1154 (D. Kan. 1993) (same); Garza v. National Am. Ins. Co., 807 F.
Supp. 1256, 1258 & n.6 (M.D. La. 1992) (same).
9
desire for wholesale revisions of the jurisdictional rules, but by
the more limited desire to restore traditional understandings of
federal jurisdiction, which were upset by Finley v. United States,
490 U.S. 545 (1989). In Finley, the Supreme Court held that
federal courts could not exercise pendent-party jurisdiction
without an express legislative grant, a grant never thought
necessary before. Id. at 556. In short, Congress intended the Act
to "essentially restore the pre-Finley understandings of the
authorization for and limits on other forms of supplemental
jurisdiction," not, arguably, to alter Zahn. 1990 U.S.C.C.A.N. at
6874. A disclaimer in the legislative history strives to make this
point clear by stating: "[T]he section is 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." 1990 U.S.C.C.A.N. at 6875. The passage cites Zahn as a
pre-Finley case untouched by the Act. 1990 U.S.C.C.A.N. at 6875
n.17; see also Rowe et al., supra, 40 Emory L.J. at 960 n.90
(stating that this passage was intended to demonstrate that Zahn
was to survive the enactment of § 1367).
We cannot search legislative history for congressional intent
unless we find the statute unclear or ambiguous. Here, it is
neither. The 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.
10
Omitting the class action from the exception may have been a
clerical error.9 But the statute is the sole repository of
congressional intent where the statute is clear and does not demand
an absurd result. See West Virginia Univ. Hosps., Inc. v. Casey,
111 S. Ct. 1138, 1147 (1991) (refusing to permit the Court's
"perception of the 'policy' of the statute to overcome its 'plain
language'"); United States v. X-Citement Video, Inc., 115 S. Ct.
464, 467-68 (1994) (rejecting lower court's "plain language
reading" of a statute where that reading would create a "positively
absurd" result). Abolishing the strictures of Zahn is not an
absurd result. Justice Brennan's dissent joined by Justices
Douglas and Marshall states the counterposition. Some respected
commentators would welcome Zahn's demise. See, e.g., 1 Moore et
al., supra, § 0.97[5], at 928; Arthur & Freer, supra, 40 Emory L.J.
9
The impressive array of Professors Burbank, Mengler, and
Rowe has observed that "[i]t would have been better had the statute
dealt explicitly with this problem, and the legislative history was
an attempt to correct the oversight." Rowe et al., supra, 40 Emory
L.J. at 960 n.90; that the supplemental jurisdiction statute is
"not a perfect effort." Thomas D. Rowe, Jr., et al., A Coda on
Supplemental Jurisdiction, 40 Emory L.J. 993, 993 (1991).
Some disagree and with inexplicably sharp language, given the
reality that most mistakes become "clear" once they are identified.
See, e.g., 1 Moore et al., supra, § 0.97[5], at 928 (blaming
"Congressional sloth in drafting the supplemental jurisdiction
statute" for confusion over whether Zahn survives § 1367); Richard
D. Freer, Compounding Confusion and Hampering Diversity: Life
After Finley and the Supplemental Jurisdiction Statute, 40 Emory
L.J. 445, 471 (1992) (noting that Congress passed § 1367 too
quickly to notice some of its problems); Karen N. Moore, The
Supplemental Jurisdiction Statute: An Important But Controversial
Supplement to Federal Jurisdiction, 41 Emory L.J. 31, 56-58 (1992)
(chastising Congress and its legislative advisors for enacting an
ambiguous statute); Thomas C. Arthur & Richard D. Freer, Close
Enough For Government Work: What Happens When Congress Doesn't Do
Its Job, 40 Emory L.J. 1007, 1007 (1991) (calling § 1367(b) a
"nightmare of draftsmanship").
11
at 1008 n.6 ("Abrogating Zahn would hardly be absurd" since doing
so would harmonize case law and "enable federal courts to resolve
complex interstate disputes in mass tort situations."). But the
wisdom of the statute is not our affair beyond determining that
overturning Zahn is not absurd. We are persuaded that under § 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.
IV. ABSTENTION AND DISCRETIONARY EXERCISE OF
SUPPLEMENTAL JURISDICTION
Colorado River abstention is to be used only sparingly, see
Colorado River, 424 U.S. at 813, and this case is a poor candidate.
The district court acknowledged that "several of the [Colorado
River] factors are either neutral or weighing in favor of the
exercise of [federal] jurisdiction." It rested its decision on two
concerns: that remanding only the class members' claims would
split the action, and the novel and complex questions of state law.
The first of these two concerns -- the risk of piecemeal
litigation -- is a problem only under the district court's view of
abstention. The second consideration -- that novel and complex
state law issues govern the action -- has more merit. Cf. Moses
Cone, 460 U.S. at 23-24 (disfavoring abstention where federal
question controls). These state law issues included whether
indirect purchasers can state a claim under Louisiana antitrust
law, and whether the claims in this case were preempted by federal
antitrust law.
12
We agree that these may prove to be difficult questions.
Standing alone, however, the novelty or complexity of state law
issues is not enough to compel abstention. See, e.g., Rougon v.
Chevron, U.S.A., Inc., 575 F. Supp. 95, 97 (M.D. La. 1983) (denying
motion to remand to state court even though "the issues presented,
involving previously undecided matters of Louisiana . . . law, are
peculiarly suited to disposition by the state courts of
Louisiana"). Only "'exceptional' circumstances, the 'clearest of
justifications,' . . . can suffice under Colorado River to justify
the surrender of [federal] jurisdiction." Moses Cone, 460 U.S. at
25-26 (emphasis omitted). This is not one of those truly rare and
exceptional cases in which Colorado River abstention is proper.
The district court remanded the claims of other class members
because they presented "novel issues of state law," including
whether indirect purchasers could state a claim under Louisiana
antitrust law and whether the antitrust claim was preempted by
federal law.
Refusing to exercise supplemental jurisdiction over the
unnamed plaintiffs' claims reflects respect for considerations of
comity, but it assumes that the claims of the class representatives
were to be remanded to state court. The court must now adjudicate
claims of the class representatives -- including the same novel and
complex state law issues the district court preferred to leave to
Louisiana. So the interests of comity will not be served by
declining to exercise supplemental jurisdiction over the class
members whose claims do not meet the jurisdictional amount.
13
In short, the entire case should remain in federal court. The
district court had diversity jurisdiction over the named
plaintiffs' claims; § 1367 granted it supplemental jurisdiction
over the claims of the unnamed plaintiffs; and, considering that it
must try the named plaintiffs' claims, it abused its discretion on
the facts here in declining supplemental jurisdiction over the
unnamed plaintiffs' claims. It is not necessary to decide the
problematic contention that the district court also had federal
question jurisdiction, and we do not. We VACATE the district
court's remand order, and REMAND to the district court for further
proceedings. The petition for mandamus is DENIED.
14