Wage Law

The U.S. Supreme Court issued an opinion today in Exxon Mobil Corp. v. Allapattah Services, Inc., holding that federal courts have supplemental jurisdiction over class claims as long as at least one plaintiff's claim exceeds the minimum jurisdictional limit (currently $75,000, but in 1991, when this case was filed, it was $50,000). Kennedy authored the opinion for the 5-4 majority. Ginsberg, Stevens, Breyer and O'Connor dissented (one of the few cases in which O'Conner has been in the minority.) The case arose from an Eleventh Circuit case involving Exxon's "Discount for Cash" class action. The ruling means that class members with claims under $75,000 may still participate in the verdict against Exxon, which, with prejudgment interest, exceeds $1.3 billion.

The decision answers a question that once had a clear answer, but which became less clear in the wake of the "supplemental jurisdiction" doctrine. In class actions brought in federal court under diversity jurisdiction, complete diversity must exist between the named class representative and the named defendant. Snyder v. Harris (1969) 394 U.S. 332, 356. As long as complete diversity exists as to those parties, federal courts can exercise supplemental jurisdiction over third parties joined by the defendant on claims arising out of the same occurrences. 28 USCA § 1367(a); American Nat'l Bank & Trust Co. v. Bailey (7th Cir. 1984) 750 F.2d 577, 582. But whether that applied to parties joined by the plaintiff, as a class representative, was unclear.

At one time, it was clear that separate claims by class members could not be aggregated for jurisdictional determinations. In fact, in Snyder v. Harris (1969) 394 U.S. 332 and In Zahn v. International Paper Co. (1973) 414 U.S. 291, the Supreme Court held that the fact that the plaintiff class representative's claim exceeded diversity limits was immaterial. Unless all claims exceeded that limited, the case would not proceed as a diversity class action. In response to Zahn and its progeny, Congress enacted the "supplemental jurisdiction" doctrine in 28 USCA § 1367, granting the Federal judiciary jurisdiction over other claims that are sufficiently related to the original claim such that they can be considered part of the same case or controversy. . Therefore, it became unclear whether diversity jurisdiction could apply if one plaintiff exceeded the minimum limit of $75,000, and other class members asserted lesser claims. Several circuit court cases had held that the Federal courts did have such jurisdiction.

Exxon has left no doubt. Diversity jurisdiction applies as long as one named plaintiff in the class action steps forward with a sufficient claim. Once one named plaintiff asserts a claim upon which diversity jurisdiction may be based, the other named plaintiffs and the unnamed putatave class members can, by virtue of the supplemental jurisdiction under 28 USCA § 1367, "piggyback" on that plaintiff's claim.

For wage and hour class actions, this case will have little effect. Few individual claims in class actions are worth more than $75,000, and for most of those, the aggregate amount of claims will exceed $5 million, thus separately triggering the jurisdictional criteria under the Class Action Fairness Act of 2005, if there is diversity. However, there may be a few case, such as store manager overtime cases, that could be sent to the U.S. District Court under this ruling, if, for example, there are only 50-100 managers whose claims ranged as high as $75,000 each.