Manulife removed the action to this Court on July 3, 1996. On July 8, 1996, Manulife informed the Judicial Panel on Multidistrict Litigation ("MDL Panel") that, under MDL Rule 1, the case was a "potential tag along" action, and that it should therefore be transferred from the District of New Jersey pursuant to MDL Rules 12 and 13. (Pauline Calande Aff. Ex. A).
The Deeps informed the MDL Panel, by letter dated July 12, 1996, that they intended to file a motion to remand the case to the New Jersey Superior Court. (Id. Ex. B).
After reviewing the correspondence, the MDL Panel, on July 26, 1996, issued a conditional transfer order that would transfer the case to the Southern District of California. The Deeps objected to the conditional transfer order and moved to vacate pursuant to MDL Rule 12(d). They argued, as they do on this motion, that federal jurisdiction is lacking over the claims of the plaintiff class for failure to satisfy the amount in controversy requirement of 28 U.S.C. § 1332. The MDL Panel has not yet ruled on the Deeps' motion to vacate.
A. Standards Governing Motion to Remand
Upon a motion to remand, the removing party bears the burden of demonstrating that removal was proper. Boyer v. Snap-On Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990), cert. denied, 498 U.S. 1085, 112 L. Ed. 2d 1046, 111 S. Ct. 959 (1991). The removing party thus bears the burden of proving that jurisdiction is proper in federal court. Id. Further, removal statutes are strictly construed in favor of remand. Steel Valley Auth. v. Union Switch & Signal Div., 809 F.2d 1006, 1010 (3d Cir. 1987), cert. dismissed, 484 U.S. 1021, 108 S. Ct. 739, 98 L. Ed. 2d 756 (1988).
The Third Circuit has yet to address the removing defendant's burden of proof in this context. Other Circuits have split on the proper burden of proof. Several courts have held that the removing defendant must prove to "a legal certainty" that the plaintiff's claims meet the jurisdictional amount. E.g., Fountain v. Black, 876 F. Supp. 1294, 1298-99 (S.D. Ga. 1994); Chouest v. American Airlines, Inc., 839 F. Supp. 412, 414 (E.D. La. 1993). Others have required proof of the jurisdictional threshold by a preponderance of the evidence. E.g., De Aguilar v. Boeing Co., 11 F.3d 55, 58 (5th Cir. 1993); Gaus v. Miles, Inc., 980 F.2d 564, 566 n.2 (9th Cir. 1992). Finally, some courts require the removing defendant to prove that there is a "reasonable possibility" that the amount in controversy meets the jurisdictional minimum. E.g., Ball v. Hershey Foods Corp., 842 F. Supp. 44, 47 (D. Conn.), aff'd, 14 F.3d 591 (2d Cir. 1993).
Because the removal statutes are generally construed strictly in favor of remand, the Court will apply the more stringent test and require proof to "a legal certainty" that the Plaintiffs' claims pass the jurisdictional threshold. As set forth below, they do. Therefore, jurisdiction is proper with this Court, and the Deeps' motion to remand is denied.
B. Jurisdiction Under the Removal Statutes
Pursuant to 28 U.S.C. § 1441(a), an action brought in state court may be removed only when the federal court would have had original jurisdiction over the action. 28 U.S.C. § 1441(a). In this case, the Complaint does not state a federal claim. The only conceivable basis for federal jurisdiction, therefore, is 28 U.S.C. § 1332 (diversity of citizenship), which provides for federal jurisdiction over civil actions between citizens of different states where the amount in controversy exceeds the sum or value of $ 50,000, exclusive of interest and costs.
The parties do not dispute that diversity of citizenship is complete for jurisdictional purposes. See In re School Asbestos Litig., 921 F.2d 1310, 1317 (3d Cir. 1990) (only named plaintiff need be diverse in class action where federal jurisdiction is based on Section 1332), cert. denied sub nom. U.S. Gypsum Co. v. Barnwell School Dist. No. 451, 499 U.S. 976, 111 S. Ct. 1623 (1991).
Rather, the Deeps contend that certain members of the class do not satisfy the amount in controversy requirement.
As an initial matter, there appears to be little doubt that the named plaintiffs in the action, the Deeps, satisfy the $ 50,000 threshold. In fact, the Deeps have already paid over $ 100,000 in premiums, over which they seek to impose a constructive trust. John Barr Aff. P 3. Together with compensatory damages, punitive damages and attorneys' fees, the value of the Deeps' claim easily exceeds the jurisdictional amount. See Angus v. Shiley, Inc., 989 F.2d 142, 146 (3d Cir. 1993) (federal court makes independent inquiry into the value of the claims alleged by measuring "a reasonable reading of the value of the rights being litigated").
The Deeps argue that this Court lacks jurisdiction over the class because some of the putative class members' claims do not, they contend, meet the jurisdictional threshold. Citing to Zahn v. International Paper Co., 414 U.S. 291, 300, 38 L. Ed. 2d 511, 94 S. Ct. 505 (1973) (each class plaintiff's claim must meet jurisdictional amount in controversy requirement under Fed. R. Civ. P. 23), the Deeps argue that this Court should remand the case.
Manulife's response is two-fold. First, it contends that 28 U.S.C. § 1367, enacted in 1990, overrules Zahn and allows the Court to exercise supplemental jurisdiction over the class plaintiffs' claims that do not independently reach the jurisdictional amount. Second, they cite to In re School Asbestos Litigation, 921 F.2d 1310 (3d Cir. 1990), cert. denied, 499 U.S. 976, 111 S. Ct. 1623 (1991), in which the Third Circuit held that, if certain putative class members fail to meet the jurisdictional amount, the case can still proceed in federal court after dismissing the class members who do not satisfy the strictures of Section 1332. In re School Asbestos differs from this case, however, in that it involved a class action originally brought in federal court, as opposed to the situation here, where the defendant removed the case to federal court.
Because the Court concludes that Section 1367 legislatively overrules Zahn, it need not reach whether the rule in In re School Asbestos is fair to apply in the context of a removed class action suit.
C. The Effect of the 1990 Supplemental Jurisdiction Statute on the Rule of Zahn v. International Paper Co.
Whether Section 1367 overruled the rule in Zahn v. International Paper Co., 414 U.S. 291, 38 L. Ed. 2d 511, 94 S. Ct. 505 (1973), has been the subject of much debate in the academic community and among the courts.
The Third Circuit has yet to rule on the issue.
Most of the district courts, including one within this Circuit, have held that Zahn remains good law after the enactment of Section 1367.
The two Circuits that have addressed the issue, however, have both held that Section 1367 overrules Zahn. In re Abbott Laboratories, 51 F.3d 524 (5th Cir. 1995); Stromberg Metal Works v. Press Mechanical, Inc., 77 F.3d 928 (7th Cir. 1996).
For essentially the same reasons set forth in Abbott and Stromberg, the Court holds that Section 1367 overruled Zahn.
In Zahn v. International Paper Co., 414 U.S. 291, 38 L. Ed. 2d 511, 94 S. Ct. 505 (1973), the Supreme Court held that in class actions based on the court's diversity jurisdiction, each plaintiff in the class independently must satisfy the amount-in-controversy requirement or face the prospect of dismissal for want of jurisdiction, at least as to those claims that did not satisfy the amount-in-controversy requirement. In other words, Zahn forbade the exercise of supplemental jurisdiction over class members' state law claims that did not reach the jurisdictional amount in controversy.
In 1990, Congress enacted 28 U.S.C. § 1367, which provides, in pertinent part:
(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 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 other 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 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.