Joseph W. Hales v. Winn-Dixie Stores, Inc.

WIDENER, Circuit Judge

(concurring and dissenting):

I must respectfully dissent, both as to the majority’s disposition of the jurisdictional issues and as to its treatment of the merits of the plaintiffs’ federal claim under 29 U.S.C. § 308 (b).

As to the former, the majority would permit a plaintiff to aggregate his state and federal claims in order to meet the $10,000 jurisdictional requirement under 28 U.S.C. § 1332 (a); for such a holding, I am unable to find support, either in case law or in reason. As to the latter, the majority’s decision that the corporation, and not the committee, is the “administrator” of the profit sharing plan tends to confuse an already uncertain area of the law, given the statute’s ambiguity and our prior holding in Harrold v. Coble, 380 F.2d 18 (4th Cir. 1967), affirming 261 F.Supp. 29 (M.D.N.C.1966), that the committee under a similar plan was liable as the “administrator.”

I.

The plaintiffs are four former employees of a subsidiary of Winn-Dixie Stores, Inc. (Winn-Dixie). Their suit for damages against Winn-Dixie is based upon two counts. In Count I, they seek to recover for Winn-Dixie’s failure to make payments alleged to be due them under the Employer’s Profit Sharing Program of Winn-Dixie Stores, Inc.; in Count II, plaintiffs claim that Winn-Dixie, as “administrator” of that program, is liable under 29 U.S.C. § 308 (b) for its failure to disclose certain information regarding the operation of that program. The Count I claim arises under State law, while the Count II claim arises under federal law. The plaintiffs allege federal court jurisdiction over the State claim under 28 U.S.C. § 1332 (a) (diversity) and over the federal claim under 28 U.S.C. § 1355 (penalty incurred under Act of Congress).

The district court granted summary judgment for the defendant on both *850 claims. As to Count I, the court found diversity jurisdiction lacking since no one of the four plaintiffs has more than $10,000 in controversy; as to Count II, the court found that Winn-Dixie was not the “administrator” of the program under 29 U.S.C. § 308 (b). In view of its disposition of Count II, the federal claim, the district court specifically found it unnecessary to discuss whether the Count I claim might be supported by pendent jurisdiction.

With so much of the majority's opinion as may concern Hale’s diversity claim under Count I, I am in substantial agreement. Under the test stated in St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 288-289 , 58 S.Ct. 586, 590 , 82 L.Ed. 845 (1938), it must appear “to a legal certainty that the claim is really for less than the jurisdictional amount” to justify dismissal. See also McDonald v. Patton, 240 F.2d 424, 425-426 (4th Cir. 1957). Application of that test mandates reversal of summary judgment as to Hales.

As to Count II, however, while the majority’s discussion of possible jurisdiction under 28 U.S.C. § 1355 may be abstractly correct, it is nevertheless dicta for it does not decide the point raised and concludes with the observation that “it is not necessary to determine whether Section 308(b) authorizes the imposition of a penalty.” No holding in the case is based on this reasoning. The majority, then, for the first time in this case, raises the point, sua, sponte, and holds that jurisdiction over Count II properly exists under 28 U.S.C. § 1337 (federal statute regulating commerce). While Section 1337 may provide a proper foundation for federal jurisdiction as to the Count II claims, in view of the fact that Section 1337 was neither pleaded, proved, suggested, nor argued either in the district court or on appeal, and the plaintiffs until the date of filing of the opinion had no idea the jurisdiction of the district court would be based on § 1337, a proper course as to Count II would have been to remand the case to the district court without opinion on the merits of the point with leave to the plaintiffs to amend the jurisdictional allegations of the complaint, if they chose. 1 The majority did not even deign to use the procedure provided by 28 U. S.C. § 1653 and permit amendment in this court, which of course would have given defendants an opportunity to object, but decided a question which had not been raised and about which there was no case or controversy. U.S. Const. Art. III. While federal courts may and should notice lack of jurisdiction on their own motion, F.R.Civ.P. 12(h)(2), Burgess v. Charlottesville Savings & Loan Assoc., 477 F.2d 40 (4th Cir. 1973), the claim of jurisdiction is a different matter. It must be claimed and pleaded by the plaintiff, and affirmatively appear on the face of the complaint. F.R.Civ.P. 8(a); Koll v. Wayzata State Bank, 397 F.2d 124 (8th Cir. 1968); Chasis v. Progress Mfg. Co., 382 F.2d 773 , 776 (3rd Cir. 1967); Barnhart v. Western Md. Ry. Co., 128 F.2d 709, 714 (4th Cir. 1942). Not utilizing the statute, 28 U.S.C. § 1653 , available to allow amendment in this court, but deciding in the abstract a question not raised, and remanding to the district court for amendment there with the question already decided, is in my opinion not an appropriate function of an appellate court. The defendant should not be precluded from litigating a question to which it has not had the opportunity to address itself.

The majority in addition then announces an additional and alternative holding as to Hales, which is not alternative but necessary for Bridges, Eat-man, and Tart to remain in court in their diversity claims. It is that each of the plaintiffs may aggregate his federal claim under Count II with his state claim under Count I to meet the requisite $10,000 amount in controversy required by § 1332(a). I emphasize that there is no disagreement that the state *851 claims of neither Bridges nor Eatman nor Tart amount to as much as $10.000. The fact that joinder is permitted 2 does not mean that the requisite amount in controversy is present. Indeed, the decision of the majority, which effects a judicial change in this circuit in the definition of “matter in controversy,” conflicts with the clear command of Rule 82 that “(t)hese rules shall not be construed to extend or limit the jurisdiction of the United States district courts. ,” 3 See, e. g., Snyder v. Harris, 394 U.S. 332, 337, 338 , 89 S.Ct. 1053 , 22 L.Ed.2d 319 (1969). 4 Similarly, the Supreme Court in Sibbach v. Wilson & Co., 312 U.S. 1, 10 , 61 S.Ct. 422, 425 , 85 L.Ed. 479 (1941) held that the rule making authority was limited by “the inability of a court, by rule, to extend or restrict the jurisdiction conferred by a statute.”

Acting pursuant to the Constitution, Congress has created several bases for federal court jurisdiction. Among these are 28 U.S.C. § 1332 (a) (diversity of citizenship and more than $10,000 *852 amount in controversy); 28 U.S.C. § 1331 (a) (federal question and more than $10,000 amount in controversy); 28 U. S.C. § 1337 (cases arising under a federal statute regulating commerce or protecting commerce against restraints in trade; no amount in controversy required) ; and 28 U.S.C. § 1355 (fine, penalty, or forfeiture by Act of Congress ; no amount in controversy required). In the instant case, the plaintiff has joined claims which depend for their federal jurisdiction on § 1332(a) and quite possibly § 1337. And while acknowledging the amount in controversy in Court I falls below the required $10,000, for at least three of the plaintiffs, the majority holds that these plaintiffs may each aggregate the sums claimed in each count to meet the minimum jurisdictional requirement. This construction, I submit, is forbidden by Rule 82, and plainly violates. Congress' purpose in increasing over the years the jurisdictional amount in controversy.

At 6 Wright and Miller, Federal Practice and Procedure § 1588, at 807 (1971), the authors describe a fact situation indistinguishable from that before us in which diversity exists between A and B:

“But what if A had joined his federal claim for patent infringement with a non-federal claim for unfair competition? The general rule is that when the basis of jurisdiction is a federal question, a party may not join a separate and distinct nonfederal claim that does not independently satisfy jurisdictional requirements. But, if the state claim is sufficiently related to the federal claim, as when it arises out of the same transaction or occurrence, the federal court has discretion to exercise pendent jurisdiction over the state claim.” [Citations omitted]

3A Moore’s Federal Practice, p. 1902, states the same proposition:

“Where jurisdiction is predicated on a federal question as to any one claim, any joined claim for relief under state law requires an independent basis of jurisdiction unless the doctrine of pendent jurisdiction applies.”

According to what is now settled doctrine, a single plaintiff may aggregate his claims arising under state law against an opposing party and thereby satisfy the monetary requirement for federal diversity jurisdiction. E. g., Stone v. Stone, 405 F.2d 94 (4th Cir. 1968); Provident Mutual Life Ins. Co. v. Parsons, 70 F.2d 863, 864 (4th Cir. 1934). 5 But federal courts have always required, where separate federal and nonfederal causes of action are alleged, that each have a jurisdictional basis, unless the nonfederal claim may be regarded as “pendent” to the federal claim. 6 E. g., Hurn v. Oursler, 289 U.S. 238 , 53 S.Ct. 586 , 77 L.Ed. 1148 (1933); Geneva Furniture Co. v. Karpen, 238 U.S. 254 , 35 S.Ct. 788 , 59 L.Ed. 1295 (1915); Zalkind v. Scheinman, 139 F.2d 895 (2d Cir. 1943); Lewis v. Vendome Bags, 108 F.2d 16 (2d Cir. 1940); Snell v. Potters, 88 F.2d 611 (2d Cir. 1937); Newport Industries, Inc. v. Crosby Naval Stores, Inc., 139 F.2d 611 (5th Cir. 1944); General Motors Corp. v. Rubsam Corp., 65 F.2d 217 (6th Cir. 1933), cert. den. 290 U.S. 688 , 54 S.Ct. 123 , 78 L.Ed. 593 (1933); Musher Foundation v. Alba Trading Co., 127 F.2d 9 (2d Cir. 1942); Delman v. Federal Products Corp., 251 F.2d 123 (1st Cir. 1958).

The writers of both the current leading texts on the subject and every court I have found which has considered the question, with the possible isolated exception of one district court case 7 which was not appealed, have come to the conclusion that the rule established by the majority in this ease is not tenable. Stone v. Stone, supra, the only case relied upon by the majority is particu *853 larly inapposite since it involved only aggregation of state claims, and then was decided on this basis against one defendant and as a matter akin to pendent jurisdiction as to the other, esp. pp. 96, 98. The case is not authority for aggregating amounts of federal and state claims to come under a “matter in controversy” provision of a jurisdictional statute. No federal claim existed in Stone .

In the present posture of the case, instead of deciding the matter of pendent jurisdiction, the better course would be to remand for the district court to determine if Count I, the nonfederal claim, might be pendent to Count II, the federal claim. As the Supreme Court observed in UMW v. Gibbs, 383 U.S. 715, 725-726 , 86 S.Ct. 1130, 1138 , 16 L.Ed.2d 218 (1966),

“Pendent jurisdiction, in the sense of judicial power, exists whenever there is a claim ‘arising under [the] Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their Authority . . . .’ U.S.Const., Art. Ill, § 2, and the relationship between that claim and the state claim permits the conclusion that the entire action before the court comprises one constitutional ‘case.’ The federal claim must have substance sufficient to confer subject matter jurisdiction on the court. . . . The state and federal claim must derive from a common nucleus of fact. But if, considered without regard to their federal or state character, a plaintiff’s claims are such that" he would ordinarily be expected to try them all in one judicial proceeding, then, assuming substantiality of the federal issues, there is power in federal courts to hear the whole. . [Pendent jurisdiction’s] justification lies in considerations of judicial economy, convenience and fairness to litigants; . . . ”

Properly, this matter of pendent jurisdiction should, I feel, be developed first at the district court level. See Gibbs , p. 728. The discretion should be that of the district court to be reviewed for abuse, not that of this court to exercise in the first instance. rj

II.

In Harrold v. Coble, 380 F.2d 18 (4th Cir. 1967), this court affirmed a district court holding 8 that the “committee” and not the corporate employer was liable as “administrator” under 29 U.S.C. § 308 (b). Today, this court construes a profit-sharing plan, identical in all material aspects with that in Coble , and reaches the opposite result. While possibly the majority reaches a result more consonant with federal disclosure requirements applicable to such plans, a study of the provisions of the profit-sharing agreements at issue in both cases indicates that the majority is very nearly overruling Coble rather than merely distinguishing it.

Those provisions of the Winn-Dixie plan which the majority finds determinative are duplicates of the earlier Coble plan. Indeed, many of the provisions upon which the decision of the majority depends appear in both plans in haec verba. Both give the company’s respective boards of directors the power to appoint and remove members of the committee. Both plans give the company’s respective boards of directors the power to amend program provisions, or the entire trust agreement. And both boards may remove the trustee, or even, should they wish, terminate the entire profit-sharing agreement. Neither plan designates, in explicit terms, the company or the committee as the person having “ultimate control.” But, it seems clear that Coble , on these facts, should either be overruled by an en banc court or distinguished on firmer grounds. ' I am unable to say that our earlier decision is not to the contrary.

The statute defines the “administrator” of a profit-sharing plan as

*854 “(1) the person or persons designated by the terms of the plan or the collective bargaining agreement with responsibility for the ultimate control, disposition, or v management of the money received or contributed; or

(2) in the absence of such designation, the person or persons actually responsible for the control, disposition, or management of the money received or contributed, irrespective of whether such control, disposition, or management is exercised directly or through an agent or trustee designated by such person or persons.” 29 U.S.C. § 304 (b)(1) and (2).

Clearly, the term “ultimate control” may refer only to a single person or - body which has final determination as to how moneys contributed shall be disposed. Webster’s New International Dictionary, 2nd Ed. And the majority’s suggestion that both the committee and the company may be the administrator seems to strain the clear meaning of the statute. Similarly, this construction places those required to participate in the administration of profit-sharing plans under a considerable burden in determining, upon pain of civil and criminal liabilities, what the law requires of them.

. Singleton v. Vance County School Board. 495 F.2d 1370 (4th Cir. 1974).

. Rule 18(a) of the Federal Rules of Civil Procedure provides as follows :

“A party asserting a claim to relief as an original claim, counterclaim, cross-claim, or third-party claim, may join, either as independent or as alternate claims, as many claims, legal, equitable, or maritime, as he has against an opposing party.”

. The Original Committee Note of 1937 to Rule 82 provides some insight of more than historical interest, and relevant here, as to why Congress felt Rule 82 was necessary:

“These rules grant extensive power of joining claims and counterclaims, in one action, but, as this rule states, such grant does not extend federal jurisdiction. The rule is declaratory of existing practice under the Federal Equity Rules with regard to such provisions as Equity Rule 26 on Joinder of Causes of Action and Equity Rule 30 on Counterclaims. Compare Shulman and Jaegerman, Some Jurisdictional Limitations on Federal Procedure, 45 Jale L.J. 393 (1936).”

See Notes of Advisory Committee on Rules found at 28 U.S.C. Rule 82, p. 51. See also 7 Moore’s Federal Practice § 82.01 [2] ; 12 Wright and Miller, Federal Practice and Procedure § 3141 (1973).

Judge Clark, a draftsman of the federal rules, once remarked in an opinion that

“. . . jurisdiction is not extended by mere devices making possible more complete adjudication of issues in a single case, when based upon jurisdictional principles of long standing, even though the effectiveness of the new devices makes their use more frequent. (Citation omitted.) Obviously a mere broadening of the content of a single federal action must not be confused with the extension of federal power; otherwise, such recognized steps as the union of law and equity or the free joinder of counterclaims would be dragged into the ambit of jurisdictional prohibitions, while actually they compress and desirably reduce the bulk and amount of federal litigation.”

Lesnik v. Public Industrials Corp., 144 F.2d 968, 973-974 (2d Cir. 1944).

. See also Zahn v. International Paper Co., 414 U.S. 291 , 94 S.Ct. 505 , 38 L.Ed.2d 511 (1973). In Snyder v. Harris, the Supreme Court held that Federal Rule 23, as amended in 1966, did not change the scope of the statutory grant of district court jurisdiction, and that separate and distinct claims presented by .and for various claimants in federal diversity actions may not be added together to provide the requisite $10,000 jurisdictional amount in controversy. 394 U.S. at 337-338 . Noting that Congress had steadily increased through the years the jurisdictional amount requirement, the Court stated that Congress’ 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.” 394 U.S. at 339-340 .

Through the years, the “matter in controversy” requirement of 28 U.S.C. § 1332 (a) has steadily increased from $500 in 1789, 1 Stat. 78 , to $2000 in 1887, 24 Stat. 552 , to $3000 in 1911, 36 Stat. 1091 , to the present level of $10,000, set in 1958, 72 Stat. 415 . See Zahn, supra, at n. 1 . The Supreme Court in Healy v. Ratta, 292 U.S. 263, 270 , 54 S.Ct. 700, 703 , 78 L.Ed. 1248 (1934), commenting on the purpose of Congress in successively raising the jurisdictional amount, stated:

“From the beginning suits between citizens of different states . . . could neither be brought in the federal courts nor removed to them, unless the value of the matter in controversy was more than a specified amount. . . . The policy of the statute calls for its strict construction. The power reserved to the states, under the Constitution, to provide for the determination of controversies in their courts, may be restricted only by the action of Congress in conformity to the judiciary sections of the Constitution.”

. See also cases collected at 1 Moore, Federal Practice ¶ 0.97, at 882-83 (1974) ; Wright, Federal Courts § 36 (1970).

. See UMW v. Gibbs, 383 U.S. 715, 724-727 , 86 S.Ct. 1130 , 16 L.Ed.2d 218 (1966).

. Tsavdaridis v. Stevenson & Co., 165 F.Supp. 174 (S.D.N.Y.1958).

. 261 F.Supp. 29 (M.D.N.C.1966).