Snyder v. Harris Gas Service Company/Opinion of the Court

Title 28 U.S.C. § 1332 grants jurisdiction to United States district courts of suits between citizens of different States where 'the matter in controversy exceeds the sum or value of $10,000 * *  * .' The issue presented by these two cases is whether separate and distinct claims presented by and for various claimants in a class action may be added together to provide the $10,000 jurisdictional amount in controversy.

Each of these cases involves a single plaintiff suing on behalf of himself and 'all others similarly situated.' In No. 109, Mrs. Margaret E. Snyder, a shareholder of Missouri Fidelity Union Trust Life Insurance Company, brought suit against members of the company's board of directors alleging that they had sold their shares of the company's stock for an amount far in excess of its fair market value, that this excess represented payment to these particular directors to obtain complete control of the company, and that under Missouri law the excess should properly be distributed among all the shareholders of the company and not merely to a few of them. The suit was brought in the United States District Court for the Eastern District of Missouri, 268 F.Supp. 701, diversity of citizenship being alleged as the basis for federal jurisdiction. Since petitioner's allegations showed that she sought for herself only $8,740 in damages, respondent moved to dismiss on the grounds that the matter in controversy did not exceed $10,000. Petitioner contended, however, that her claim should be aggregated with those of the other members of her class, approximately 4,000 shareholders of the company stock. If all 4,000 potential claims were aggregated, the amount in controversy would be approximately $1,200,000. The District Court held that the claims could not thus be aggregated to meet the statutory test of jurisdiction and the Court of Appeals for the Eighth Circuit, following a somewhat similar decision by the Court of Appeals for the Fifth Circuit in Alvarez v. Pan American Life Insurance Co., 375 F.2d 992, cert. denied, 389 U.S. 827, 88 S.Ct. 74, 19 L.Ed.2d 82 (1967), affirmed, 390 F.2d 204 (1968).

In No. 117, Otto R. Coburn, a resident of Kansas, brought suit in the United States District Court for the District of Kansas against the Gas Service Company, a corporation marketing natural gas in Kansas. Jurisdiction was predicated upon diversity of citizenship. The complaint alleged that the Gas Service Company had billed and illegally collected a city franchise tax from Coburn and others living outside city limits. Coburn alleged damages to himself of only $7.81. Styling his complaint as a class action, however, Coburn sought relief on behalf of approximately 18,000 other Gas Service Company cuctomers living outside of cities. The amount by which other members of the class had been overcharged was, and is, unknown, but the complaint alleged that the aggregation of all these claims would in any event exceed $10,000. The District Court overruled the Gas Company's motion to dismiss for failure to satisfy the jurisdictional amount and, on interlocutory appeal, the Court of Appeals for the Tenth Circuit affirmed, holding that because of a 1966 amendment to Rule 23 of the Federal Rules of Civil Procedure relating to class actions, separate and distinct claims brought together in a class action could now be aggregated for the purpose of establishing the jurisdictional amount in diversity cases. 389 F.2d 831. We granted certiorari to resolve the conflict between the position of the Courts of Appeals for the Fifth and the Eighth Circuits and that of the Court of Appeals for the Tenth Circuit.

The first congressional grant to district courts to take suits between citizens of different States fixed the requirement for the jurisdictional amount in controversy at $500. In 1887 this jurisdictional amount was increased to $2,000; in 1911 to $3,000; and in 1958 to $10,000.

The traditional judicial interpretation under all of these statutes has been from the beginning that the separate and distinct claims of two or more plaintiffs cannot be aggregated in order to satisfy the jurisdictional amount requirement. Aggregation has been permitted only (1) in cases in which a single plaintiff seeks to aggregate two or more of his own claims against a single defendant and (2) in cases in which two or more plaintiffs unite to enforce a single title or right in which they have a common and undivided interest. It is contended, however, that the adoption of a 1966 amendment to Rule 23 effectuated a change in this jurisdictional doctrine. Under old Rule 23, class actions were divided into three categories which came to be known as 'true,' 'hybrid,' and 'suprious.' True class actions were those in which the rights of the different class members were common and undivided; in such cases aggregation was permitted. Spurious class actions, on the other hand, were in essence merely a form of permissive joinder in which parties with separate and distinct claims were allowed to litigate those claims in a single suit simply because the different claims involved common questions of law or fact. In such cases aggregation was not permitted: each plaintiff had to show that his individual claim exceeded the jurisdictional amount. The 1966 amendment to Rule 23 replaced the old categories with a functional approach to class actions. The new Rule establishes guidelines for the appropriateness of class actions, makes provision for giving notice to absent members, allows members of the class to remove themselves from the litigation and provides that the judgment will include all members of the class who have not requested exclusion. In No. 117, Gas Service Company, the Court of Appeals for the Tenth Circuit held that these changes in Rule 23 changed the jurisdictional amount doctrine as well. The court noted that' 'Because the claims of the individuals constituting the class in the case at bar are enither 'joint' nor 'common' this action under Rule 23 before amendment would not have been classified as a 'true' class action and aggregation of claims would not have been permitted.' 389 F.2d 831, 833. The Court of Appeals held, however, that a different result was compelled now that the amendment to Rule 23 abolished the distinctions between true and spurious class actions. The court held that because aggregation was permitted in some class actions, it must now be permitted in all class actions under the new Rule. We disagree and conclude, as did the Courts of Appeal for the Fifth and Eighth Circuits, that the adoption of amended Rule 23 did not and could not have brought about this change in the scope of the congressionally enacted grant of jurisdiction to the district courts.

The doctrine that separate and distinct claims could not be aggregated was never, and is not now, based upon the categories of old Rule 23 or of any rule of procedure. That doctrine is based rather upon this Court's interpretation of the statutory phrase 'matter in controversy.' The interpretation of this phrase as precluding aggregation substantially predates the 1938 Federal Rules of Civil Procedure. In 1911 this Court said in 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.

By 1916 this Court was able to say in Pinel v. Pinel, 240 U.S. 594, 36 S.Ct. 416, 60 L.Ed. 817, that it was 'settled doctrine' that separate and distinct claims could not be aggregated to meet the required jurisdictional amount. In Clark v. Paul Gray, Inc., 306 U.S. 583, 59 S.Ct. 744, 83 L.Ed. 1001 (1939), this doctrine, which had first been declared in cases involving joinder of parties, as applied to class actions under the then recently passed Federal Rules. In that case numerous individuals, partnerships, and corporations joined in bringing a suit challenging the validity of a California statute which exacted fees of $15 on each automobile driven into the State. Raising the jurisdictional amount question sua sponte, this Court held that the claims of the various fee payers could not be aggregated 'where there are numerous plaintiffs having no joint or common interest or title in the subject matter of the suit.' 306 U.S., at 588, 59 S.Ct., at 748. Nothing in the amended Rule 23 changes this doctrine. The class action plaintiffs in the two cases before us argue that since the new Rule will include in the judgment all members of the class who do not ask to be out by a certain date, the 'matter in controversy' now encompasses all the claims of the entire class. But it is equally true that where two or more plaintiffs join their claims under the joinder provisions of Rule 20, each and every joined plaintiff is bound by the judgment. And it was in joinder cases of this very kind that the doctrice that distinct claims could not be aggregated was originally enunciated. Troy Bank v. G. A. Whitehead & Co., 222 U.S. 39, 32 S.Ct. 9, 56 L.Ed. 81 (1911); Pinel v. Pinel, 240 U.S. 594, 36 S.Ct. 416, 60 L.Ed. 817 (1916). The fact that judgments under class actions fromerly 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.

Any change in the Rules that did purport to effect a change in the definition of 'matter in controversy' would clearly conflict with the command of Rule 82 that '(t)hese rules shall not be construed to extend or limit the jurisdiction of the United States district courts * *  * .' In Sibbach v. Wilson & Co., this Court held that the rulemaking authority was limited by 'the inability of a court, by rule, to extend or restrict the jurisdiction conferred by a statute.' 312 U.S. 1, 10, 61 S.Ct. 422, 425, 85 L.Ed. 479 (1941). We have consistently interpreted the jurisdictional statute passed by Congress as not conferring jurisdiction where the required amount in controversy can be reached only by aggregating separate and distinct claims. The interpretation of that statute cannot be changed by a change in the Rules.

For the reasons set out above, we think that it is unmistakably clear that the 1966 changes in Rule 23 did not and could not have changed the interpretation of the statutory phrase 'matter in controversy.' It is urged, however, that this Court should now overrule its established statutory interpretation and 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 required jurisdictional amount. It is argued in behalf of this position that (1) the determination of whether claims are 'separate and distinct' is a troublesome question that breeds uncertainty and needless litigation, and (2) the inability of parties to aggregate numerous small claims will prevent some important questions from being litigated in federal courts. And both of these factors, it is argued, will tend to undercut the attempt of the Judicial Conference to promulgate efficient and modernized class action procedures. We think that whatever the merit of these contentions, they are not sufficient to justify our abandonment of a judicial interpretation of congressional language that has stood for more than a century and a half.

It is linguistically possible, of course, to interpret the old congressional phrase 'matter in controversy' as including all claims that can be joined or brought in a single suit through the class action device. But, beginning with the first Judiciary Act in 1789 Congress has placed a jurisdictional amount requirement on access to the federal courts in certain classes of cases, i cluding diversity actions. The initial requirement was $500 and a series of increases have, as pointed out above, finally placed the amount at $10,000. Congress has thus consistently amended the amount-in-controversy section and re-enacted the 'matter-in-controversy' language without change of its jurisdictional effect against a background of judicial interpretation that has consistently interpreted that congressionally enacted phrase as not encompassing the aggregation of separate and distinct claims. This judicial interpretation has been uniform since at least the 1832 decision of this Court in Oliver v. Alexander, 6 Pet. 143, 8 L.Ed. 349. There are no doubt hazards and pitfalls involved in assuming that re-enactment of certain language by Congress always freezes the existing judicial interpretation of the statutes involved. Here, however, the settled judicial interpretation of 'amount in controversy' was implicitly taken into account by the relevant congressional committees in determining, in 1958, the extent to which the jurisdictional amount should be raised. It is quite possible, if not probable, that Congress chose the increase to $10,000 rather than the proposed increases to $7,500 or $15,000 on the basis of workload estimates which clearly relied on the settled doctrine that separate and distinct claims could not be aggregated. Where Congress has consistently re-enacted its prior statutory language for more than a century and a half in the face of a settled interpretation of that language, it is perhaps not entirely realistic to designate the resulting rule a 'judgemade formula.'

To overrule the aggregation doctrine at this late date would run counter to the congressional purpose in steadily increasing through the years the jurisdictional amount requirement. That purpose was to check, to some degree, the rising caseload of the federal courts, especially with regard to the federal courts' diversity of citizenship jurisdiction. Any change in the doctrine of aggregation in class action cases under Rule 23 would inescapably have to be applied as well to the liberal joinder proversions of Rule 20 and to the joinder of claims provisions of Rule 18. The result would be to allow aggregation of practically any claims of any parties that for any reason happen to be brought together in a single action. This would seriously undercut the purpose of the jurisdictional amount requirement. The expansion of the federal caseload could be most noticeable in class actions brought on the basis of diversity of citizenship. Under current doctrine, if one member of a class is of diverse citizenship from the class' opponent, and no nondiverse members are named parties, the suit may be brought in federal court even though all other members of the class are citizens of the same State as the defendant and have nothing to fear from trying the lawsuit in the courts of their own State. See Supreme Tribe of Ben-Hur v. Cauble, 255 U.S. 356, 41 S.Ct. 338, 65 L.Ed. 673 (1921). To allow aggregation of claims where only one member of the entire class is of diverse citizenship could transfer into the federal courts numerous local controvesies involving exclusively questions of state law. In Healy v. Ratta, 292 U.S. 263, 54 S.Ct. 700, 78 L.Ed. 1248 (1934), this Court noted that by successively raising the jurisdictional amount Congress had determined that cases involving lesser amounts should be left to be dealt with by the state courts and said:

'The policy of the statute calls for its strict construction. * *  * Due regard for the rightful independence of state      governments, which should actuate federal courts, requires      that they scrupulously confine their own jurisdiction to the      precise limits which the statute has defined.' 292 U.S. 263,      270, 54 S.Ct. 700, 703.

Finally, it has been argued that unless the established aggregation principles are overturned, the functional advantages alleged to inhere in the new class action Rule will be undercut by resort to the old forms. But the disadvantageous resu ts are overemphasized, we think, since lower courts have developed largely workable standards for determining when claims are joint and common, and therefore entitled to be aggregated, and when they are separate and distinct and therefore not aggregable. Moreover, while the class action device serves a useful function across the entire range of legal questions, the jurisdictional amount requirement applies almost exclusively to controversies based upon diversity of citizenship. A large part of those matters involving federal questions can be brought, by way of class actions or otherwise, without regard to the amount in controversy. Suits involving issues of state law and brought on the basis of diversity of citizenship can often be most appropriately tried in state courts. The underlying claims in the two cases before us, for example, will be determined exclusively on the basis of Missouri and Kansas law, respectively. In No. 109, a separate suit litigating the underlying issues has already been filed in a Missouri state court. In No. 117, the residents of Kansas who contend that certain gas service charges are not authorized by Kansas law can bring a class action under Kansas procedures that are patterned on former Federal Rule 23. There is no compelling reason for this Court to overturn a settled interpretation of an important congressional statute in order to add to the burdens of an already overloaded federal court system. Nor can we overlook the fact that the Congress that pemitted the Federal Rules to go into effect was assured before doing so that none of the Rules would either expand or contract the jurisdiction of federal courts. If there is a present need to expand the jurisdiction of those courts we cannot overlook the fact that the Constitution specifically vests that power in the Congress, not in the courts.

The judgment in No. 109 is Affirmed.

Affirmed.

The judgment in No. 117 is Reversed.

Reversed.

Mr. Justice FORTAS, with whom Mr. Justice DOUGLAS joins, dissenting.