Russ v. State Farm Mutual Automobile Ins. Co., U.S. District Court, East District of PA (1997)
Author: Bram

Cause of action: The following is a cause of action for fraud, breach of good faith covenant and fair dealing, breach of fiduciary duty, and misrepresentation.  All claims arose under state law; DF's removed the case.

Procedural History: PL's moved the class action case be remanded to the Philly County Court of Common Pleas, pursuant to 28 U.S.C. §1447.  Motion to remand granted by the District Court.

Facts: PL's filed the above class action claim for being victimized by fraudulent sales practices by 3 insurance companies.  The claim values less than $50K, which is the governing jurisdictional amount for diversity actions in 1997, but there is diversity of citizenship.  PL's claim the lack of money claimed in damages should result in a federal remand back to a PA state court; DF wants case tried out of state and into Federal Court for cause of diversity of citizenship.

Issue(s): Under federal rules of civil procedure, when 3 parties with diversity of citizenship attempt to bring a class action cause of action into Federal Court, and two of those three parties' damages are below the $50K threshold required to be tried in Federal court, may the cause of action stand on its diversity of citizenship merits alone?

Court's Rationale/Reasoning: On motion to remand, burden on DF's to establish federal court jurisdiction on the basis of diversity of citizenship.  The court decided to take a look at previous decisions (stare decisis) and legislative intent.

Court history never decided this issue, but had previously decided against a PL whose aggregation of claims vs. a single DF takes care of the situation where PL has multiple state law claims against an diverse DF, none of which satisfied the amount of money in Gibbs.  But even if Article III did permit the claim to float as is, the court decided to look and see if there was any intent in its legislative history which might shed more light on Congress's power.

Legislative history shows that missing from the category of diversity claims which are excerpted from supplemental jurisdiction are diversity claims under rule 23, i.e., diversity actions.  SO, if 28 U.S.C. § 1367 were to be taken on its face, federal courts would be swamped with cases.  The language of the House Judiciary committee adds that 1367 is not intended to affect the jurisdiction requirements of 1332 in diversity-only actions, as those requirements were interpreted by previous case law (Finley v. U.S.).  The judiciary will not throw vaguely worded terminology back in the face of Congress just to spite its face, as all branches are working together.

Rule: (28 U.S.C. § 1367(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 additional parties. (see rest of 28 U.S.C. § 1367).

Holding: No.  If it is determined that Article III permits the exercise of jurisdiction over a claim that didn't fall within the designated categories of original jurisdiction, a court must also inquire as to whether Congress has exercised its constitutionally delegated authority to create such jurisdiction.  Here, the case was not so on the legislative side.