Amicus Curiae Brief — Ford Motor Co. v. McCauley

No. 01-896 may 6 20m

IN THE RK

Supreme Court of the United States

FORD MOTOR COMPANY AND

CITIBANK (SOUTH DAKOTA) N.A. ,

Petitioners,

V.

JOHN B. MCCAULEY, et al,

Respondents.

On Writ of Certiorari

to the United States Court of Appeals

for the Ninth Circuit

BRIEF OF AMICUS CURIAE

NATIONAL ASSOCIATION OF MANUFACTURERS

IN SUPPORT OF PETITIONERS

JAN S. AMUNDSON CARTER G. PHILLIPS

General Counsel GENE C. SCHAERR*

QUENTIN RIEGEL SUSAN A. WEBER

Deputy General Counsel PAUL J. ZIDLICKY

NATIONAL ASSOCIATION OF MICHAEL S. LEE

MANUFACTURERS PATRICK F. LINEHAN

1331 Pennsylvania Ave., N.W. SIDLEY AUSTIN BROWN &

Washington, DC 20004 WOOD, LLP

(202) 637-3000 1501 K. Street, N.W.

Washington, D.C. 20905

(202) 736-8000

Counsel for Amicus Curiae

May 6, 2002 * Counsel of Record

ann a na

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 - WASHINGTON, D.C. 20001

whether it

any single member of the class.

8

B

é

TABLE OF CONTENTS

QUESTION PRESENTED 000. oooccccsecesccesseeees

TABLE OF AUTHORITIES......00...000..000.c0000c000000000eee

INTEREST OF AMICUS CURIAE 000.000.0000.000.0000000000-

STATEMENT OF THE CASE 20.00

I. UNDER THE NEUTRALITY PRINCIPLE OF

RULE 82, A REQUEST BY A CLASS FOR

INJUNCTIVE RELIEF THAT WOULD

IMPOSE FIXED COSTS IN EXCESS OF

$75,000 SATISFIES THE AMOUNT-IN-

~CONTROVERSY REQUIREMENT, JUST AS

IF THE SAME REQUEST WERE MADE BY A

SINGLE PLAINTIFF OR A GROUP OF

ST cacticcteimisabasctiosensbbissenlobanersdnindepsenbenels

A. The Language Of 28 U.S.C. § 1332(a) And

This Court’s Decisions Make Clear That The

Fixed Costs Of Providing Injunctive Relief

Can Satisfy The Amount-In-Controversy Re-

quirement, Whether The Claim Is Asserted By

An Individual Or A Group Of Individual

TIT os ceriacioneniensmudgdiadbdisacinenneeton e-upanaees

B. Because Class-Action Procedures Cannot

“Extend Or Limit” The Scope Of Diversity

Jurisdiction, The Amount-In-Controversy

Requirement Is Satisfied By A Class Action

Seeking An: Injunction Whenever An

Individual Suit Seeking The Same Relief

Would Satisfy That Requirement......................

(iii)

10

IV

TABLE OF CONTENTS—continued

Il APPLICATION OF RULE 82’S NEUTRALITY

PRINCIPLE TO RECOGNIZE FEDERAL

JURISDICTION IN CASES SUCH AS THESE

SERVES THE POLICIES UNDERLYING

DIVERSITY JURISDICTION WITHOUT

UNDULY BURDENING THE FEDERAL

A. Reversal Of The Decision Below Would

Affect Only A Relatively Small But Important

Set Of Lawsuits Seeking Broad Injunctive

Relief In Addition To Monetary Damages........

B. The Ninth Circuit’s Approach Ignores The

Policies Underlying Diversity Jurisdiction As

Well As The Federal Courts’ Unique Com-

petence To Address Large Class Actions..........

III »s:ccithcssicundsisiapeinsacadctadeamenmasabeeaiamiaidanbitins

Page

18

Vv

TABLE OF AUTHORITIES

CASES Page

In re A.H. Robins Co., 86 F.3d 364 (4th Cir.

Se Dk a 21

In re American Med. Sys., Inc., 75 F.3d 1069 (6th

EASA Ret tact SA 21

Amchem Prods., Inc. vy. Windsor, 521 U.S. 591

ta a ee 2, 3, 20

Anderson v. W.R. Grace & Co., 628 F. Supp.

I iil aallaaliann 4

Ayers v. Township of Jackson, 525 A 2d 287 (N.J.

i a a ay 3

Bank of United States v. Deveaux, 9 US. (5

Cranch) 61 (1809), overruled in part on other

grounds, Louisville, Cincinnati, & Charleston

R.R. v. Letson, 43 U.S. (2 How.) 497 (1844)...... 24

In re Brand Name Prescription Drugs Antitrust

Litig., 123 F.3d 599 (7th Cir. 1997) ..0000.000.... 18

Bristol Tech., Inc. v. Microsoft Corp., 114 F.

Supp. 2d 59 (D. Conn. 2000), vacated on other

grounds, 250 F.3d 152 (2d Cir. 2001)................ 20

Buckley v. Metro-North Commuter R.R., 521 U.S.

REE NER anor RPC 2, 20

In re Cardizem CD Antitrust Litig., 90 F. Supp.

2d 819 (E.D. Mich. 1999)....000.0. ee 18

Castano v. American Tobacco Co., 84 F.3d 734

EERIE A SRE ese Dare 20

Caterpillar Inc. v. Williams, 482 US. 386

EEE EE, SA eE eee ee 19

Cohens v. Virginia, 19 U.S. (6 Wheat.) 264

Ta den 17

Davies v. Corbin, 112 U.S. 36 (1884) ........0.0000.0. 14

Earnest v. General Motors Corp., 923 F. Supp.

1469 (N_D. Ala. 1996) o.oo... cccccccccccscesveseesenseee 4,19

Erie R.R. v. Tompkins, 304 U.S. 64 (1938)............ 24

vi

TABLE OF AUTHORITIES—continued

Page

Franklin v. Gwinnett County Pub. Sch., 503 U.S.

a 20

Ganim v. Smith & Wesson Corp., 780 A.2d 98

i IE SI ie 2 OL Pe ID 3

In re General Motors Corp. Pick-Up Truck Fuel

Tank Prods. Liab. Litig., 134 F.3d 133 (3d Cir.

ERIS TNE eA SE Pe sda 3,4, 19

Gibbs v. EI. DuPont De Nemours & Co., 876 F.

Supp. 475 (W.D.N_Y. 1995) 200.00. 19

Gibson v. Shufeldt, 122 U.S. 27 (1887) .....0.0......... 14

Hunt v. Washington State Apple Adver. Comm'n,

ee > A 11

J.A. Olson Co. v. City of Winona, Miss., 818 F.2d

EE Ie Ee 24

Lane v. Champion Int'l Corp., 844 F. Supp. 724

(S.D. Ala. 1994)... Ee 4,19

Market Co. v. Hoffman, 101 U.S. 112 (1879)....... 11, 12

McClenathan vy. Rhone-Poulenc, Inc., 926 F.

Supp. 1272 (S.D.W. Va. 1996) 0.0.2.0... 20

In re Microsoft Corp. Antitrust Litig., 127 F.

Supp. 2d 702 (D. Md. 2001) ...0...... ee. 18

Mississippi & Mo. R.R. v. Ward, 67 US. (2

REE ee aeRO 11

New Orleans Pac. Ry. v. Parker, 143 U.S. 42

ee ERE Scene mene DS rarere neta 14

Oliver v. Alexander, 31 U.S. (6 Pet.) 143 (1832).. 13, 14

In re Paoli RR. Yard PCB Litig., 916 F.2d 829

RIESE a on. eves 3

Petito v. A.H. Robins Co., 750 So. 2d 103 (Fla.

are oee 2,3

Rooney v. Tyson, 127 F.3d 295 (2d Cir. 1997) ...... 24

Shields v. Thomas, 58 US. (17 How.) 3

RSE NER eee ses ere 12, 13, 14, 15

Smith v. Adams, 130 U.S. 167 (1889).................... 11

Snyder v. Harris, 394 U.S. 332 (1969)... 7, 9, 12, 13, 16

vii

TABLE OF AUTHORITIES—continued

Page

St. Paul Mercury Indem. Co. v. Red Cab Co., 303

a 8,11, 19

Stinson v. Dousman, 61 U.S. (20 How.) 461

EAs IRA ie Sy sec eR 14

In re Three Mile Island Litig., 557 F. Supp. 96

i cs 3,4

Troy Bank vy. G.A. Whitehead & Co., 222 U.S. 39

‘ESM e 14

Wallace v. HealthOne, 79 F. Supp. 2d 1230 (D.

I a 24

Walsh v. Ford Motor Co., 130 FRD. 260

IT ell 20

Zahn v. International Paper Co., 414 US. 291

SINE aici nacdge iota uiasoaidahbethcinticdsdnediaaaessiden 7, 12, 13, 16

CONSTITUTION AND STATUTES

I 10

Judiciary Act of Sept. 24, 1789, 1 Stat. 78............. 10

i peienasiaains 10

EES ASE ee are eee 6, 10, 11

cates 26

EIRENE ao sone noe 17

RULES

Fed. R. Civ. P. 42(a) ..............0.000000.... eee 28

a at enltaiae 6, 17

SCHOLARLY AUTHORITIES

Note, 7he Judicial Panel and the Conduct of

Multidistrict Litigation, 87 Harv. L. Rev. 1001

a en eae a 26

Vili

TABLE OF AUTHORITIES—continued

Page

John A. Beisner & Jessica Davidson Miller,

They're Making a Federal Case Out of It. . . In

State Court, 25 Harv. J.L. & Pub. Pol’y 143

RRR a RB IC 26 SSE Re LER 22, 27

William A. Braverman, Janus Is Not A God of

Justice: Realignment of Parties in Diversity

Jurisdiction, 68 N.Y.U. L. Rev. 1072 (1993)... 25

Deborah Hensler et al., Preliminary Results of the

RAND Study of Class Action Litigation (1997).. 22

Stephen _ Daniel Kaufmann, Comment,

“Federalizing” Class Actions: The Future of

the Jurisdictional Requirements For Diversity-

Based Class Actions, 52 Ala. L. Rev. 1029

Rk eae ree Sid io Oe 26

Brittain Shaw McInnis, 7he $75,000.0/ Question:

What Is the Value of Injunctive Relief?, 6 Geo.

Mason L. Rev. 1013 (1998)... 25

Carter G. Phillips et al, Rescuing Multidistrict

Litigation From the Altar of Expediency, 1997

BYU L. Rev. 821 (1997) ....00000....ccceeee, 26, 27

Mark P. Robinson, Ass’n of Trial Lawyers of

Am., MDL, Class Actions, and Competing

Interests of State Litigation (2001) .................... 28

Victor E. Schwartz et al., Federal Courts Should

Decide Interstate Class Actions: A Call For

Federal Class Action Diversity Jurisdiction

Reform, 37 Harv. J. on Legis. 483 (2000) ......... 21, 25

Edward F. Sherman, Class Actions & Duplicative

Litigation, 62 Ind. L.J. 507 (1987)..................... 26

Georgene Vairo, Judicial v. Congressional

Federalism: The Implications of the New

Federalism Decisions on Mass Tort Cases and

Other Complex Litigation, 33 Loy. L.A. L. Rev.

REI a a a 7 Pe 21

IX

TABLE OF AUTHORITIES—continued

OTHER AUTHORITIES Page

Analysis: Class Action Litigation, Class Action

Watch, Spring 1999, available at http://www.

fed-soc.org/Publications/classactionwatch/class

Manual For Complex Litigation (Third) (1995) ... 26, 27

1 Working Papers of the Advisory Committee on

Civil Rules on Proposed Amendments to Civil

SD I Gh WR civanevinvsevssccsccssnctinevinenins 22

3 Elliot, Debates of the Federal Constitution

ST Sef RR aie 2, ln ee ee 23

14B Charles Alan Wright et al., Federal Practice

and Procedure (3d ed. 1998) ..0.00..................65.. 11, 13

—

IN THE

Supreme Court of the United States

No. 01-896

FORD MOTOR COMPANY AND

CITIBANK (SOUTH DAKOTA) N.A. ,

Petitioners,

V.

JOHN B. MCCAULE:, et al.,

Respondents.

On Writ of Certiorari

to the United States Court of Appeals

for the Ninth Circuit

BRIEF OF AMICUS CURIAE

NATIONAL ASSOCIATION OF MANUFACTURERS

IN SUPPORT OF PETITIONERS

INTEREST OF AMICUS CURIAE

The National Association of Manufacturers (“NAM”)

respecifully submits this brief as amicus curiae in support of

petitioners and urges reversal of the judgment of the United

States Court of Appeals for the Ninth Circuit.’

! Pursuant to Rule 37.6 of the Rules of this Court, amicus states that no

counsel for a party authored this brief in whole or in part, and no person or

entity other than amicus, its member companies, or its counsel, made a

monetary contribution to the preparation or submission of the brief.

Pursuant to Rule 37.3(a), a letter of consent to file this brief from

respondents has been fiied with the Clerk of the Court, petitioners have

filed with the Court a blanket consent for all amici.

2

The NAM is the oldest and largest multi-industry trade

association in the United States. The NAM represents 14,000

member companies and subsidiaries (including 10,000 small

and mid-sized manufacturers) and 350 member associations

serving manufacturers and employees in every industrial

sector and all 50 states.

The NAM and its member companies are vitally interested

in the proper application of the federal diversity statute to a

relatively small, but exceedingly important group of lawsuits

filed against out-of-state manufacturers seeking broad

injunctive relief on behalf of plaintiff classes. At bottom, the

NAM believes that a plaintiff's unilateral decision to proceed

via class action rather than individually should have no

bearing on whether there is federal jurisdiction in such cases.

That is especially true in class-action cases which, like this

one, involve requests for broad injunctive relief.

Such requests take many forms. One that increasingly

arises in state-wide or nationwide toxic tort class actions is a

request for medical monitoring. See, e.g., Amchem Prods.,

Inc. v. Windsor, 521 U.S. 591, 603 (1997) (alleging, inter

alia, medical monitoring claim). Medical monitoring often

involves a court-administered fund, which finances not only

the costs associated with periodic medical examinations, but

also the costs of court-mandated studies on the long-term

effects of a toxic substance or product in question, and

research regarding related conditions. Such relief thus

? This Court, of course, has been skeptical of medical monitoring and

has limited its effect in cases arising under the Federal Employer Liability

Act. Buckley v. Metro-North Commuter R.R., 521 U.S. 424, 438-39

(1997) (assuming that “an exposed plaintiff can recover related reasonable

medical monitoring costs [as an element of damages] if and when he

develops symptoms,” but holding that medical monitoring costs do not

represent a “separate negligently caused economic ‘injury”” for which a

defendant may recover even if he has no current “disease or symptoms”).

Nevertheless, medical monitoring relief has been sought in a number of

different types of mass tort actions. See, e.g., Petito v. A.H. Robins Co.,

-

3

requires not only a court-administered fund, but also the

appointment of (and adequate compensation for) a fund

administrator and an advisory panel of qualified and

knowledgeable individuals that will devise a comprehensive

medical monitoring plan. See, e.g., Petito v. A.H. Robins Co.,

750 So. 2d 103, 106 (Fla. Dist. Ct. App. 1999) (holding that

court in equity may create, supervise, and implement medical

monitoring plan in action against manufacturer of Fen-Phen).

The costs of compliance with such relief, if it is available

under state law, undoubtedly would exceed the jurisdictional

amount, even if the remedy were limited to the cost of the

administration components of the fund. Accordingly, a claim

for injunctive medical monitoring relief should satisfy the

amount-in-controversy requirement.

Other class-action plaintiffs sometimes seek court-ordered

safety programs. See, e.g., Jn re General Motors Corp. Pick-

Up Truck Fuel Tank Prods. Liab. Litig., 134 F.3d 133, 139

(3d Cir. 1998); see also Jn re Three Mile Island Litig., 557 F.

Supp. 96, 97 & nl (MD. Pa. 1982); Ganim v. Smith &

Wesson Corp., 780 A.2d 98, 117 (Conn. 2001) (seeking

injunctive relief against gun manufacturer in form of funding

for “programs focused on handgun safety and owner

responsibility”). In General Motors, for example, a plaintiff

class brought several actions in both state and federal court

against the manufacturer of pick-up trucks alleging that they

had a defectively designed fuel system. 134 F.3d at 137. As

part of a proposed settlement in state court, plaintiffs

sought—and defendant agreed to—defendant-funded “safety

programs, researching the safety of general fuel systems and

testing proposed retrofits for safety and feasibility.” /d. at

139. These proposed programs purportedly would cost a total

750 So. 2d 103 (Fla. Dist. Ct. App. 1999) (pharmaceutical product),

Amchem, 521 U.S. at 597 (exposure to asbestos), Ayers v. Township of

Jackson, 525 A.2d 287 (N.J. 1987) (groundwater contamination), /n re

Paoli R.R. Yard PCB Litig., 916 F.2d 829 (3d Cir. 1990) (exposure to

PCBs).

4

of $5.1 million. /d (explaining that injunctive relief would

result in research and testing for retrofits); see also /n re

Three Mile Island Litig., 557 F. Supp. at 97 (noting that

approved settlement included fund for “evacuation planning

for the future”).

Another category of lawsuits affected by the decision below

are cases seeking an injunction ordering the defendant to

remove a toxic substance from a common area enjoyed by

multiple plaintiffs or plaintiff class. See, eg., Lane v.

Champion Int'l Corp., 844 F. Supp. 724, 727 (S.D. Ala.

1994); Anderson v. W.R. Grace & Co., 628 F. Supp. 1219,

1232 (D. Mass. 1986). In Lane, for example, the plaintiff

class consisted of individuals who owned property adjoining a

bay in which the defendant released toxic substances from its

paper mill. 844 F.Supp. at 726. Part of the relief sought by

the class was an injunction “to force the defendants to clean

up and remove from [the bay] all toxins and other pollutants

they had released there.” /d. at 727 (ordering remand for lack

of jurisdiction only after plaintiffs amended complaint to

exclude request for injunctive relief). Such relief would

satisfy the jurisdictional minimum if the costs of cleanup to

the defendant exceeded $75,000.°

Finally, some class-action plaintiffs have sought damages

and injunctive relief in the form of corrective advertising. In

Earnest v. General Motors Corv., 923 F. Supp. 1469 (N_D.

Ala. 1996), for example, the plaintiff class alleged that the

defendants designed and installed defective engines and

engine control modules in their automobiles, and requested

injunctive relief that included an “advertising campaign to

notify putative class members of the alleged defect.” /d. at

1471. There too, if the cost of implementing the advertising

> See also Anderson v. W.R. Grace & Co., 628 F. Supp. 1219, 1232-33

(D. Mass. 1986) (request for injunction ordering defendant to remove

hazardous substances previously dumped on plaintiffs’ property, and all

contamination from area groundwater).

Dias . <A

5

campaign exceeded $75,000, the jurisdictional amount would

be satisfied.

Given the size and significance of the claims involved,

these cases often spawn parallel suits in other states and

subject out-of-state manufacturers to multiple lawsuits that

must be defended simultaneously across the country.

Although the relative number of such cases is small, the cost

to defendants of complying with the broad injunctive relief

sought can amount to millions and sometimes billions of

dollars.

As demonstrated below, such cases are properly resolved in

federal court. They are precisely the types of claims that the

Constitution contemplated would be the province of federal

courts, and for which the diversity statute was intended.

STATEMENT OF THE CASE

As is clear from Petitioners’ statement of the case (with

which amicus agrees), the essential facts are that the

respondents in this case brought a class-action suit in state

court seeking broad injunctive relief against the petitioners,

Ford Motor Company and Citibank. The suit claims that the

petitioners acted unlawfully in terminating a particular credit-

card rebate program. In addition to seeking compensation for

individual plaintiffs, the plaintiffs seek an injunction that,

among other things, would require Ford and Citibank to

reinstate the program essentially as it existed prior to its

termination. Although the total costs of that reinstatement

would vary to some extent depending on the number of

plaintiffs (and others) choosing to participate, it is undisputed

that the reinstatement would impose fixed costs well in excess

of the statutory $75,000 minimum for diversity jurisdiction.

Those fixed costs would be incurred even if only a single

plaintiff ultimately participated in the program.

On appeal, the Ninth Circuit ruled that these fixed costs

could not be considered in determining whether the statutory

minimum had been met, and therefore ruled that the case

6

must be remanded to state court. The Ninth Circuit

acknowledged that, if the suit had been brought by a single

plaintiff, then these costs would be sufficient to satisfy the

statutory minimum. J.A. 113. However, relying upon its

earlier precedents, the court ruled that—because the suit was

brought on behalf of a class of many plaintiffs—the

petitioners could satisfy the statutory minimum only by

showing, as to each class member, that the fixed costs divided

by the number of class members, plus the amount sought by

that class member individually, exceeded the statutory

minimum. J.A. 116-119. Because petitioners had not made

this showing, the court held that they had failed to establish a

sufficient basis for diversity jurisdiction. /d. at 118-119.

SUMMARY OF ARGUMENT

1 This Court’s settled precedent makes clear that a claim

by a plaintiff class for injunctive relief that would impose on

the defendant fixed compliance costs exceeding $75,000,

regardless of the number of plaintiffs joining the action in

which that claim is raised, satisfies the amount-in-controversy

requirement imposed by 28 U.S.C. § 1332(a).

This case is controlled by the principle, reflected in Federal

Rule of Civil Procedure 82 (“Rule 82”), that procedural rules

can neither “extend” nor “limit” federal jurisdiction. Put

another way, the Federal Rules of Civil Procedure, including

Rule 23, are jurisdictionally “neutral.” Here, there can be no

question that, if plaintiffs proceeded through individual

lawsuits—rather than through a Rule 23 class action—their

individual requests for an injunction reinstating the rebate

program would have satisfied the amount-in-controversy

requirement.

Under settled law, the amount in controversy in a case

involving a claim for injunctive relief is the “sum or value” of

that relief, which may be assessed from the perspective of the

defendant. As a result, the amount-in-controversy

requirement is satisfied if the injunction sought by the

a

7

plaintiff would impose on the defendant compliance costs

exceeding $75,000. It is undisputed in this case that the

injunction sought by the plaintiffs would impose on the

defendants fixed compliance costs in excess of the

jurisdictional minimum. Under settled law, moreover, where

multiple plaintiffs file suit to vindicate a “common and

undivided interest,” the “sum or value” of each plaintiff's

interest may be considered in the aggregate Each of the

plaintiffs in this case has a common and undivided interest in

an injunction requiring petitioners to reinstate the rebate

program at issue

That conclusion cannot be altered by plaintiffs’ decision to

proceed through a class-action mechanism. As Rule 82

makes clear, because Rule 23 of the Federal Rules of Civil

Procedure is a procedural provision, it can neither extend nor

limit the substantive standards governing the amount-in-

controversy requirement. Thus, just as the existence of a

plaintiff class cannot extend diversity jurisdiction, by way of

aggregation, to encompass a group of jurisdictionally

deficient claims by individual defendants, see Snyder v.

Harris, 394 U.S. 332 (1969), Zahn v. International Paper

Co., 414 US. 291 (1973), so also plaintiffs’ decision to

proceed via a class action cannot limit federal diversity

jurisdiction when each plaintiff's claim for injunctive relief

independently satisfies the jurisdictional amount.

Il. Contrary to the decision below, a fair application of

the neutrality principle reflected in Rule 82 to cases involving

claims for class-wide injunctive relief has not and will not

cause the sky to fall on the federal courts. To the contrary,

enforcement of Rule 82 according to its plain terms will affect

only a small, but important number of class actions for which

the purposes underlying diversity jurisdiction are served.

Class actions brought against out-of-state defendants that seek

injunctive relief requiring medical monitoring, safety

programs, remediation of toxic spills, or corrective

advertising campaigns are precisely the types of claims for

which the diversity provision of Article III, and every

subsequent diversity statute, were designed.

First, proper application of the diversity statute and Rule 82

would not cause an influx of “state law nuisance” actions in

federal court, as the Ninth Circuit suggested. Rather, counsel

for plaintiffs who truly wish to remain in state court have the

ability and strong incentives to limit their complaints in a way

that avoids federal jurisdiction—for example, by omitting

claims for broad injunctive relief where money damages

would suffice. Indeed, in the context of money damages, this

Court has explained that plaintiffs can avoid federal

jurisdiction by waiving recovery of damages in excess of the

jurisdictional amount. St. Paul Mercury Indemnity Co. v. Red

Cab Co., 303 U.S. 283, 294 (1938). As a result, the number

of such claims ultimately litigated in federal court would

likely be very small.

Moreover, the small number of cases where plaintiffs insist

on seeking broad injunctive relief are precisely the types of

cases for which diversity jurisdiction was designed. Indeed,

the same incentives that cause plaintiffs to file suit in state

court—e.g., lax class certification standards applied against

out-of-state defendants—are the reasons that the Constitution

and Congress provided litigants the option to proceed in

federal court to avoid such practices. Further, the federal

courts are procedurally and institutionally well equipped to

handle large class actions such as these. Not only do federal

judges bring a more national perpective to such cases, but

they also have the ability to coordinate and consolidate

similar or identical actions pending in multiple courts and to

utilize unique procedural tools permits federal courts to

resolve such cases efficiently, fairly and without undue delay.

9

ARGUMENT

I. UNDER THE NEUTRALITY PRINCIPLE OF

RULE 82, A REQUEST BY A CLASS FOR

INJUNCTIVE RELIEF THAT WOULD IMPOSE

FIXED COSTS IN EXCESS OF $75,000 SATISFIES

THE AMOUNT-IN-CONTROVERSY REQUIRE-

MENT, JUST AS IF THE SAME REQUEST WERE

MADE BY A SINGLE PLAINTIFF OR A GROUP

OF PLAINTIFFS.

This case is controlled by a single, common-sense principle

that is enshrined in Rule 82 of the Federal Rules of Civil

Procedure and the decisions of this Court. It is that a

procedural rule or device “shall not be construed to extend or

limit the jurisdiction of the United States district courts.””

Snyder, 394 U.S. at 337 (quoting Fed. R. Civ. P. 82). In other

words, the procedural mechanisms created by the rules of

civil procedure should be neutral with respect to the reach of

federal jurisdiction.

The decision below both ignores and contravenes this

fundamental principle. As shown below, the language of the

diversity statute, as well as this Court’s decisions construing

it, clearly establish that the fixed costs imposed by an

injunctive order can satisfy the amount-in-controversy

requiremer*, whether the underlying claim is asserted by an

individual plaintiff or a group of individual plaintiffs. What

distinguishes this case from those is that this case involves a

class action under Rule 23. But, under Rule 82’s neutrality

principle, the mere use of the class-action device cannot

“limit the jurisdiction’” of the federal courts, any more than

the use of that device can “‘extend”” federal jurisdiction. /d.

10

A. The Language Of 28 U.S.C. § 1332(a) And This

Court’s Decisions Make Clear That The Fixed

Costs Of Providing Injunctive Relief Can Satisfy

the |Amount-In-Controversy Requirement,

Whether The Claim Is Asserted By An

Individual Or A Group Of Individual Plaintiffs.

The amount-in-controversy requirement is a_ statutory

limitation on the scope of federal jurisdiction authorized by

Article III of the Constitution, which provides, in pertinent

part, that the “judicial Power shall extend to all Cases, in Law

and Equity .. between Citizens of different States.” U.S.

Const. art. Ill, § 2. Section 1332 of Title 28 sets forth

Congress’ grant of federal diversity jurisdiction and provides:

The district courts shall have original jurisdiction of all

civil actions where the matter in controversy exceeds the

sum or value of $75,000, exclusive of interest and costs,

and is between . . . citizens of different States.

28 U.S.C. § 1332(a). The amount-in-controversy requirement

(which was a component of the first diversity statute in the

Judiciary Act of 1789*) was designed to identify those cases

involving diverse parties for which a federal forum for the

resolution of interstate conflicts should be available. Unlike

the federal question statute, which no longer contains an

amount-in-controversy requirement, see 28 U.S.C. § 1331, the

federal diversity statute recognizes that federal jurisdiction

will not extend to every dispute (however trivial) between

diverse plaintiffs and defendants. Rather, where the

citizenship of the plaintiffs is diverse from the citizenship of

the defendants, the controlling jurisdictional question is

‘ That Act conferred diversity jurisdiction on the federal courts “where

the matter in dispute exceeds, exclusive of costs, the sum or value of five

hundred dollars.” Act of Sept. 24, 1789, § 11, 1 Stat. 78. Apart from

periodic adjustments to the jurisdictional amount over the past two

SSeS

since

a

ai,

2

“

A TOT ST >”),

11

whether “the matter in controversy exceeds the sum or value

of $75,000.” /d. § 1332(a). Under Rule 82, the application of

this limitation cannot depend on whether a group of plaintiffs

chooses to proceed through individual lawsuits or through the

use of the class-action mechanism.

1. There can be no doubt that the fixed costs of an

injunctive remedy can satisfy the amount-in-controversy

requirement for federal diversity jurisdiction in a suit brought

by an individual plaintiff, Where a single plaintiff brings

claims for specified damages, the “sum or value” of the

“matter in controversy” is determined by the amount specified

in the complaint. St. Paul Mercury Indem. Co., 303 US. at

290-92 (involving removal from state court based upon

diversity jurisdiction). However, where the complaint does

not specify the precise amount sought, the court must assess

the “sum or value” of the “matter in controversy” to

determine whether it has diversity jurisdiction. See 14B

Charles Alan Wright et al., Federal Practice and Procedure

§ 3702, at 49-52 (3d 1998).

This Court has repeatedly held that the jurisdictional

amount-in-controversy requirement may be satisfied based

upon claims for injunctive relief See, eg., Hunt v.

Washington State Apple Adver. Comm'n, 432 US. 333

(1977), Mississippi & Mo. RR. v. Ward, 67 US. (2 Black)

485 (1862). In so doing, the Court has explained that “the

amount in controversy is measured by the value of the object

of the litigation.” Hunt, 432 U S. at 347. In turn, the “value

of the object” of any such litigation may fairly be understood

as the defendant’s cost of complying with an injunction

sought by the plaintiffs. See, e.g., Market Co. v. Hoffman,

101 US. 112, 113 (1879) (measuring the amount in

controversy by reference to the defendant's cost of complying

with an injunction sought by 206 individual plaintiffs, each of

whom stood to benefit by an amount less than the

jurisdictional minimum), see also Smith v. Adams, 130 US.

167, 175 (1889) (“[T]}he pecuniary value of the matter in

12

dispute may be determined, not only by the money judgment

prayed, where such is the case, but in some cases by . . . the

pecuniary result to one of the parties immediately from the

judgment.”).

Thus, the amount-in-controversy requirement of Section

1332(a) is clearly satisfied if a single plaintiff seeks an

injunction that would require the defendant to expend more

than the jurisdictional minimum in order to comply with it.

See Market Co., 101 US. at 113.

. 2. Moreover, where several plaintiffs join in seeking an

injunction, the law is settled that the costs of complying with

the Injunction can satisfy the amount-in-controversy

requirement to the extent those costs are fixed—that is, to the

extent those costs do not depend on the presence of any

individual plaintiff. As this Court has previously noted,

“when several plaintiffs unite to enforce a single title or

right, in which they have a common and undivided interest, it

is enough if their interests collectively equal the jurisdictional

amount.”” Zahn, 414 U.S. at 294 (quoting Troy Bank v. G.A.

Whitehead & Co., 222 US. 39, 40-41 (1911)); see also

Snyder, 394 U.S. at 337 (same). Thus, when multiple

plaintifi's bring a single claim to vindicate an undivided

interest shared by the plaintiffs collectively, the “sum or

value” of the entire claim may be used td measure the amount

in controversy with respect to each individual plaintiff.

This basic approach is well-established in this Court's

precedents. For example, in Shields v. Thomas, 58 US. (17

How.) 3 (1854), the representatives of a decedent’s estate

brought suit against the husband of the decedent’s widow,

alleging that the former had converted to his own use a

significant portion of the property in the estate. /d at 4. The

plaintiffs obtained a decree requiring the defendant “to pay to

each [plaintiff] the specific sum to which he was entitled, as

his proportion of the property misappropriated by” the

defendant. Jd. When the defendant failed to comply with that

decree, the plaintiffs obtained an injunction ordering him to

13

do so. Jd. The plaintiffs moved to dismiss the appeal to this

Court, arguing that, because no single plaintiff was entitled to

more than $2,000.00 under the decree, appellate jurisdiction

was lacking. /d But the Court rejected that argument,

explaining that

[T]he matter in controversy .. . was the sum due to the

representatives of the deceased collectively; and not the

particular sum to which each was entitled, when the

amount due was distributed among them, according to

the laws of the State. They all claimed under one and

the same title. They had a common and undivided

interest in the claim; and it was perfectly immaterial to

the appellant, how it was to be shared among them. He

had no controversy with either of them on that point. . . .

Id. at 4-5 (emphasis added). In so holding, the Court

distinguished Oliver v. Alexander, 31 U.S. (6 Pet.) 143

(1832), where multiple plaintiffs were deemed not to satisfy

the jurisdictional amount requirement because each plaintiff's

“recovery d{id] not depend upon the recovery of others, but

rest{ed] altogether on its own evidence and merits.” Shields,

58 U.S. (17 How.) at 5. The Shields Court explained that

Oliver was inapposite because the plaintiffs in Shields had a

“common and undivided interest” in the subject of their

claims, whereas the interests claimed by the plaintiffs in

Oliver were “separate and distinct.” /d. at 5.

Subsequent decisions consistently have focused on whether

the plaintiffs have a “common and undivided interest,” such

that the “sum or value” of their claims may be considered in

the aggregate, or “separate and distinct” interests, such that

each plaintiff's claim must be considered individually. See,

e.g., Zahn, 414 U.S. at 294; Snyder, 394 U.S. at 338; see also

14B Charles Alan Wright, supra, § 3704, at 143-47. Like this

case, many (if not most) of the cases falling into the former

14

category have involved claims for injunctive relief, which by

their nature implicate common and undivided interests.”

Actions consisting of “separate and distinct” claims, by

contrast, typically involve claims for money damages arising

out of a single defendant’s breach of several related

obligations, see, e.g., Oliver, 31 U.S. (6 Pet.) at 145-46

(admiralty suit brought by seamen to collect unpaid wages

from ship owners), or claims for equitable relief that can

scarcely be distinguished from claims for money damages,

see, e.g., Gibson v. Shufeldt, 122 US. 27, 39 (1887) (equit-

able claims that would conclusively determine the amount of

money each plaintiff would recover from the defendant).

The claim at issue here—for an injunction requiring the

petitioners to re-establish their credit card rebate program—

obviously is not “separate and distinct” as to each plaintiff.

To the contrary, regardless of other individual claims that the

plaintiffs seek to assert, that particular claim vindicates a

“common and undivided interest” shared by all of the

plaintiffs in this case. As explained previously, every

plaintiff in this case seeks precisely the same relief—a single

injunctien requiring the defendants to reinstate the rebate

program. Although some plaintiffs ultimately may benefit

from that program to a greater degree than others, the

injunction itself would treat all plaintiffs equally. And it is

undisputed that the injunction would impose on each

defendant fixed compliance costs exceeding $75,000—costs

that would not drop below the jurisdictional amount even if

this act’on had been brought by a single plaintiff.

5 See, e.g., Troy Bank v. GA. Whitehead & Co., 222 U.S. 39, 40-41

(1911) (vill in equity to enforce vendor’s lien), New Orleans Pac: Ry. v.

Parker, 143 U.S. 42, 52 (1892) (bill in equity seeking mortgage

foreclosure); Davies v. Corbin, 112 U.S. 36, 40-41 (1884) (bill to enjoin

the collection of certain taxes); Stinson v. Dousman, 61 U.S. (20 How.)

461, 467 (1857) (injunction requiring specific performance under real

estate contract); Shields v. Thomas, 58 U.S. (17 How.) 3, 4 (1854) (bill in

equity to enforce the terms of a pnor judgment).

15

In that sense, therefore, “the matter in controversy” here is

“not the particular sum to which each [plaintiff is] entitled,”

but rather the class’s “common and undivided interest” in

having the rebate program reinstated. Shields, 58 U.S. (17

How.) at 4-5. Thus, the respective interests of the plaintiffs in

this case are sufficiently “common and undivided” that the

“sum or value” of the relief they seek may be considered in

the aggregate, at least to the extent of the fixed costs of

providing that relief.

B. Because Class-Action Procedures Cannot

“Extend or Limit” The Scope Of Diversity

Jurisdiction, The Amount-In-Controversy Re-

quirement Is Satisfied By A Class Action Seeking

An Injunction Whenever An Individual Suit

Seeking The Same Relief Would Satisfy That

Requirement.

Accordingly, there can be no serious question that the cost

of complying with the respondents’ proposed injunction

would be considered as part of the amount in controversy if

the plaintiffs all were suing the respondents as individuals

rather than as part of a class pursuant to Rule 23. The only

question, then, is whether the presence of a Rule 23 class

action makes any difference. As shown below, it cannot,

consistent with Rule 82’s neutrality principle.

In the decision below, the Ninth Circuit did not dispute that

an individual suit seeking the very injunctive relief sought in

this case would satisfy the amount-in-controversy

requirement. However, based on its analysis of this Court’s

decisions in Zahn and Snyder, the Ninth Circuit concluded

that the presence of a class action in this case was sufficient to

preclude satisfaction of that requirement. J.A. 116. Far from

supporting the Ninth Circuit’s conclusion, however, Zahn and

Snyder \ogically confirm the existence of federal diversity

jurisdiction in this case, particularly this Court’s analysis of

Rule 82.

16

In Snyder, not one of the plaintiffs sought damages in

excess of the jurisdictional amount and therefore the amount

in controversy for diversity jurisdiction could have been met

only by aggregating the damages sought by the entire plaintiff

class. 394 US. at 333. Similarly, in Zahn, although the

named plaintiffs each had demonstrated that their claims

exceeded the jurisdictional amount, no such showing could be

made with respect to the unnamed members of the class. 414

US. at 292. In both cases, this Court refused to aggregate the

claims of the multiple plaintiffs, and held instead that “fejach

plaintiff in a . . . class action must satisfy the jurisdictional

amount, and any plaintiff who does not must be dismissed

from the case—‘one plaintiff may not ride in on another’s

coattails.” Jd. at 301; see Snyder, 394 U.S. at 336 (same).

In so doing, however, the Court carefully explained that the

procedural rule governing class actions neither expanded nor

limited the scope of federal subject matter jurisdiction. See

Zahn, 414 US. at 299-300; Snyder, 394 US. at 336-37.

Outside of the class-action context, the Court reasoned, each

and every plaintiff must “individually satisfy the

jurisdictional amouni,” Zahn, 414 US. at 292, and the class-

action mechanism is merely a useful procedural tool that

enables large groups of plaintiffs to join together in a single

action for purposes of convenience. Jd. at 299-300; Snyder,

394 US. at 336-37. The availability of that procedural

mechanism therefore could not authorize a group of plaintiffs

to maintain collectively a federal diversity suit if each

plaintiff could not bring such a claim individually. Zahn, 414

US. at 299-301; Snyder, 394 U.S. at 336-37. To do so, the

Court ruled, “would clearly conflict with the ccmmand of

Rule 82 that ‘[t]hese rules shall not be construed to extend or

limit the jurisdiction of the United States district courts.””

Snyder, 394 U.S. at 337 (quoting Fed. R. Civ. P. 82), see

Zahn, 414 US. at 299.

The facts here are the logical flip-side of Snyder and Zahn.

That is, the availability of class-action procedures cannot

17

“limit” the subject matter jurisdiction of the courts, Fed R.

Civ. P. 82, where each plaintiff in the class could satisfy the

jurisdictional amount based upon the request for injunctive

relief In this case, therefore, in contrast to Zahn and Snyder,

if any of the plaintiffs brought a separate action seeking the

same injunctive relief they now seek as a class, they could

have proceeded in federal court because the “sum or value” of

each such action would exceed $75,000. By the same token,

any such action filed in state court could properly have been

removed to federal district court. See 28 U.S.C. § 1441(a).

Zahn and Snyder thus logically confirm that plaintiffs’

decision to proceed as a class action rather than multiple

individual actions does not “limit” federal subject matter

jurisdiction where the federal courts would have had

jurisdiction over each claim for injunctive relief if plaintiffs

had sued individually. Any such “limit”—including the

limitation imposed by the Ninth Circuit below—would flatly

violate Rule 82.

**** *

The language of Section 1332 and this Court’s decisions

interpreting the amount-in-controversy requirement, when

considered in light of Rule 82’s neutrality principle, make

clear that the federal diversity statute encompasses the request

for injunctive relief by the plaintiff class in this case. Thus,

the Ninth Circuit erred in declining to exercise jurisdiction.

As Chief Justice Marshall put it more than 180 years ago:

We have no more right to decline the exercise of

jurisdiction which is given, than to usurp that which is

not given. The one or the other would be treason to the

constitution.

Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 404 (1821).

Accordingly, respondents’ efforts to limit the scope of

jurisdiction conferred by the diversity statute are properly

directed to Congress, not this Court.

18

ll. APPLICATION OF RULE 82’S NEUTRALITY

PRINCIPLE TO RECOGNIZE FEDERAL

JURISDICTION IN CASES SUCH AS THESE

SERVES THE POLICIES UNDERLYING DIVER-

SITY JURISDICTION WITHOUT UNDULY

BURDENING THE FEDERAL COURTS.

The court of appeals refused to adhere to these principles

based upon a concern that recognition of diversity jurisdiction

here would unduly burden federal courts in future cases. But

that concern is misplaced, both because it vastly overstates

the real-world impact of Rule $2 in this context, and because

it overlooks the key role that federal courts can and should

play in the efficient and fair resolution of such class-action

suits against out-of-state defendants.

A. Reversal Of The Decision Below Would Likely

Affect Only A Relatively Small But Important

Set Of Lawsuits Seeking Broad Injunctive Relief

In Addition To Monetary Damages.

There is no reason to believe that a fair application of Rule

82 in cases such as these will significantly increase the burden

on federal courts—if it has any such effect at all. In the first

place, most of the federal courts to address this issue have

disagreed with the Ninth Circuit and have found that the fixed

costs of complying with an injunction can satisfy the amount-

in-controversy requirement.° For that and other reasons,

many of these suits already are being maintained in federal

° See, e.g., In re Brand Name Prescription Drugs Antitrust Litig., 123

F.3d 599, 610 (7th Cir. 1997) (explaining that correct standard is “the cost

to each defendant of an injunction running in favor of one plaintiff’), /n re

Microsoft Corp. Antitrust Litig., 127 F. Supp. 2d 702, 719 n.16 (D. Md.

2001) (“Of course, the cost to the defendant of an injunction running in

favor of one plaintiff will often be used as the test to determine the amount

in controversy in class actions and other multi-plaintiff cases.”), In re

Cardizem CD Antitrust Litig., 90 F. Supp. 2d 819, 834-35 (E.D. Mich.

1999) (adopting the Seventh Circuit’s approach /n re Brand Name).

—

ee ee

19

court. See, e.g., Gibbs v. E.J. DuPont De Nemours & Co.,

876 F. Supp. 475, 480 (WDN.Y. 1995) (medical

monitoring); General Motors, 134 F.3d at 139 (safety

program), Lane, 844 F. Supp. at 727 (clean-up cf toxic

substance); Earnest, 923 F. Supp. at 1471, 1472.

As discussed in the NAM’s statement of interest, these

cases include class actions seeking injunctive relief in the

form of “medical monitoring,” “safety programs,” “clean-up”

programs, and “corrective advertising.” There is no evidence

that such cases are creating an undue burden in other circuits.

Moreover, a ruling reversing the decision below is unlikely

to affect a plaintiff's incentive to choose a federal forum

rather than a state forum. Given the enormous benefits to

plaintiffs in certain jurisdictions of proceeding in state court, a

reversal of the decision below is much more likely to cause

most plaintiffs to forgo a claim for injunctive relief rather

than proceed in federal court.

Indeed, in all such suits, the plaintiffs and their attorneys

ultimately control whether such cases will proceed in a

federal forum or in state court. As explained in St. Paul

Mercury Indemnity Co. v. Red Cab Co., 303 US. 283 (1938),

if a plaintiff “does not desire to try his case in federal court he

may resort to the expedient of suing for less than the

jurisdictional amount ... .” /d. at 294.

By the same token, in cases such as those at issue here,

there is ample reason to believe that a plaintiff committed to

brining such claims in state court would simply omit claims

for injunctive relief to avoid federal diversity jurisdiction. Cf

Caterpillar Inc. v. Williams, 482 US. 386, 399 (1987)

(plaintiffs may, “by eschewing claims based on federal law,

choose to have the cause heard in state court”). First, and

foremost, plaintiffs may omit such claims because they

believe the likelihood of succeeding on the merits is small.

Many of the types of class-action equitable relief discussed

above have been rejected or criticized by courts across the

20

country.’ Moreover, even if the theory underlying the request

for relief were viable, the right to equitable relief in such

cases arises only if money damages are inadequate. Cf.

Franklin v. Gwinnett County Pub. Sch., 503 U.S. 60,°75-76

(1992) (“[I]t is axiomatic that a court should determine the

adequacy of a remedy in law before resorting to equitable

relief”). For example, the benefits of injunctive relief (such

as the discounts on auto purchases under the credit card

program in this case) often can be realized in state court

through money damages.

Second, plaintiffs may choose to omit such equitable claims

if they perceive an advantage in proceeding in state court

rather than federal court. In federal court, for example, class

actions receive exacting scrutiny. Indeed, in Amchem Prods.

v. Windsor, 521 U.S. 591 (1997), this Court found that a

proposed class of “hundreds of thousands, perhaps millions”

of individuals who were allegedly harmed by past exposure to

asbestos-related products failed to satisfy Rule 23’s

predominance requirement. Id at 597° This rigor on the part

’ See, e.g., Buckley, 521 U.S. at 439 (holding that medical monitoring

costs do not under FELA represent a “separate negligently caused

economic ‘injury’” for which a defendant may recover even if he has no

current “disease or symptoms”), McClenathan v. Rhone-Poulenc, Inc.,

926 F. Supp. 1272, 1281 (S.D.W. Va. 1996) (questioning basis of

injunctive relief in form of “independent safety audits”), Bristol Tech.,

Inc. v. Microsoft Corp., 114 F. Supp. 2d 59, 98 (D. Conn. 2000) (noting

that courts grant requests to order corrective advertising only under certain

limited circumstances), vacated on other grounds, 250 F.3d 152 (2d Cir.

2001); of Walsh v. Ford Motor Co., 130 F.R.D. 260, 266-67 (D.DC.

1990) (declining to certify class under Rule 23(b)(2) where money

damages would “be more certain to provide real benefits to affected

motorists” than the requested injunction ordering recall and retrofit of

defective vehicles).

®The federal courts of appeals have employed equally rigorous

analyses when determining whether to certify a class action. See, e.g,

Castano v. American Tobacco Co., 84 F.3d 734 (Sth Cir. 1996) (reversing

district court’s grant of class certification to a national class of cigarette

=—_—-_ —__ ——

21

of the federal courts stands in sharp contrast to the more

liberal approach toward class certification that class-action

lawyers may enjoy in some state courts.

Indeed, profound concern has been expressed that the

“laissez-faire” approach taken by many state-court judges

often results in “entrepreneurial contingency fee attorneys . . .

bypass[ing] the rigorous review given by federal judges and

obtain{ing] certification of questionable claims and approval

of outrageous settlements.” Victor E. Schwartz ef al.,

Federal Courts Should Decide Interstate C lass Actions: A

Call For Federal Class Action Diversity Jurisdiction Reform,

37 Harv. J. on Legis. 483, 499 (2000). For example, one

study on class actions documented that over a two-year

period, a state court in rural Alabama certified almost as

many class actions (35 cases) as all 90 federal district courts

did in one year (38 cases). /d. In addition, a practice referred

to as “‘drive-by’ class certifications” may occur whereby

some state-court judges certify classes at the request of

plaintiffs’ counse! before defendants have been served with a

complaint or given a chance to respond. See id. at 501.

Such lax standards may account for the recent explosion in

the number of class-action lawsuits being filed in state courts.

See Georgene Vairo, Judicial v. C ongressional Federalism:

The Implications of the New F ederalism Decisions on Mass

Tort Cases and Other Complex Litigation, 33 Loy. L.A. L.

Rev. 1559, 1597 (2000) (noting that the Amchem decision

accelerated the trend of attorneys seeking “to certify

settlement classes in state courts where the rules on

certification are perceived to be more liberal”). According to

smokers); cf. Jn re American Med. Sys., Inc., 75 F.3d 1069, 1089 (6th Cir.

1996) (noting that “strict adherence to Rule 23 in products liability cases

involving drug or medical products which require FDA approval is

especially important”) (emphasis omitted), /n re AH. Robins Co. , 86 F.3d

364, 375-76 (4th Cir. 1996) (refusing to allow plaintiffs’ attorneys to

receive additional ten percent in fees from unanticipated surplus of

settlement funds set aside for class members)

22

the Federal Judicial Conference’s Advisory Committee on

Civil Rules, U.S. companies have in recent years experienced

a 300-1,000 per cent increase in the number of class actions

filed against them, with the vast majority of them having been

filed in state courts. 1 Working Papers of the Advisory

Committee on Civil Rules on Proposed Amendments to C ivil

Rule 23, at ix-x (May 1, 1997). This trend is confirmed by a

study performed by the RAND Corporation, which concluded

in 1997 that the “doubling or tripling ... of the number of

putative class actions” has been concentrated in the state court

systems, “because plaintiffs .. . see increased unwillingness

among federal judges to certify or sustain certification of

class actions.” Deborah Hensler et al., Preliminary Results of

the RAND Study of Class Action Litigation 15 (1997).

Another survey conducted in 1999 revealed that while federal

court class actions had increased by 340 per cent over the past

decade, state-court class-action filings had increased 1,315

per cent. See Analysis: Class Action Litigation, Class Action

Watch, Spring 1999, at 3, available at http://www fed-

soc org/Publications/classactionwatch/classv | i3_pdf ‘

For all these reasons, if this Court rules that a claim for

broad injunctive relief with fixed costs in excess of $75,000

satisfies the amount-in-controversy requirement, plaintiffs

with access to class-action-friendly state courts are not likely

to forgo those benefits just to maintain a claim for injunctive

relief. They are much more likely to forgo their claims for

° A more recent study published in 2001 (“the Harvard study”)

examined data from the dockets of three state courts widely viewed as

“class action magnets.” John H. Beisner & Jessica Davidson Miller,

They're Making A Federal Case Out of It... In State Court, 25 Harv.

JL. & Pub. Pol’y 143, 205 (2001). The results of the Harvard study

confirmed that the filing of state-court class actions has increased in

numbers wildly disproportionate to their populations. Id. at 161-62 & ti.

lL. In addition, the study found that the majority of class actions filed in all

three counties were brought on behalf of nationwide classes. Id. at 163-64

& tbi. 2.

—_

23

broad injunctive relief and focus instead on damage claims

that fall below the federal threshold.

B. The Ninth Circuit’s Approach Ignores The

Policies Underlying Diversity Jurisdiction As

Well As The Federal Courts’ Unique

Competence To Address Large Class Actions.

On the other hand, to the extent a plaintiff nevertheless

insists on seeking broad, class-wide equitable relief against an

out-of-state defendant, that is precisely the type of case that

can and should proceed in federal court. In this regard, the

decision below simply ignores the purposes underlying

diversity jurisdiction and the federal courts’ unique

competence to address such cases in a fair, efficient and just

manner

1. Federal diversity jurisdiction was envisioned by the

Framers and first enacted by the Congress more than 200

years ago to address concerns regarding bias and the

appearance of bias in cases involving citizens of different

states.

In Federalist No. 80, for example, Alexander Hamilton

suggested that “the national judiciary ought to preside in all

cases in which one State or its citizens are opposed to another

State or its citizens” because the federal judiciary “having no

local attachments, will likely be impartial between the

different States and their citizens.” Federalist No. 80

(Alexander Hamilton). James Madison echoed the view that

federal diversity jurisdiction is necessary to avoid local bias.

He reasoned that “a strong prejudice may arise in some states,

against the citizens of others, who may have claims against

them” and, as a result, a “citizen of another State might not

chance to get justice in a state court, and at all events he

might think himself inured.” 3 Elliot, Debates of the Federal

Constitution 486 (1836).

Consistent with these views, this Court has explained that

Congress conferred diversity jurisdiction in the Judiciary Act

24

of 1789 “to prevent apprehended discrimination in state

courts against those not citizens of the State.” Erie RR v

Tompkins, 304 U.S. 64, 74 (1938)."°

Federal diversity jurisdiction also serves the purpose of

combating the perception of bias by out-of-state defendants

Chief Justice Marshall recognized the constitutional

significance of even the perception of bias

However true the fact may be, that tribunals of the states

will administer justice as impartially as those of the

nation, to parties of every description, it is not less true

that the constitution itself entertains apprehensions of this

subject, or views with such indulgence the possible fears

and apprehension of suitors, that it has established

national tribunals for the decision of controversies

between _. citizens of different states.

Bank of United States v. Deveaux, 9 U.S. (5 Cranch) 61, 87

(1809), overruled in part on other grounds, Louisville,

Cincinnati, & Charleston R.R. v. Letson, 43 U.S. (2 How.)

497 (1844). Thus, federal diversity jurisdiction serves not

only to protect out-of-state defendants against actual bias, but

also to bolster public confidence in the dual state and federal

judicial systems by addressing concerns regarding the mere

appearance of discrimination in favor of local residents.

'° Federal courts continue to recognize the need to protect out-of-state

defendants against state-court hostility through diversity jurisdiction. See,

e.g., Rooney v. Tyson, 127 F.3d 295, 297 n.1 (2d Cir. 1997) (recognizing

that asking state court to decide case pending in federal court “would

contravene the object of diversity jurisdiction of presenting the actual

parties to a litigation with a neutral, federal, playing field”), /.A. Olson

Co. v. City of Winona, Miss., 818 F.2d 401, 404 (Sth Cir. 1987)

(“Diversity jurisdiction exists for the purpose of providing a federal forum

for out-of-state litigants where they are free from prejudice in favor of a

local litigant.”); Wallace v. HealthOne, 79 F. Supp. 2d 1230, 1232 (D.

Colo. 2000) (“The history and purpose of diversity jurisdiction is to

provide a neutral forum for out-of-state parties who fear that they will be

subjected to local prejudice if forced to litigate as strangers in a state

court.”).

EEE LT

25

Anecdotal accounts of bias against out-of-state defendants

in the context of class-action litigation are, unfortunately, well

documented and take a number of forms. For example,

commentators report that there may be local hostility toward

an out-of-state defendant by the presiding judge, who is

elected by a constituency that may have a strong bias against

the out-of-state company. See Brittain Shaw McInnis, The

$75,000.01 Question: What Is the Value of Injunctive Relief”,

6 Geo. Mason L. Rev. 1013, 1027-28 (1998) (hereinafter

MclInnis) (noting that “[i}n some instances, |. . judges can end

up deciding cases that involve attorneys or parties who have

made substantial contributions to their campaigns”), see also

William A. Braverman, Janus Is Not A God of Justice:

Realignment of Parties in Diversity Jurisdiction, 68 NYU

L. Rev. 1072, 1083 n.50 (1993) (noting that empirical studies

suggest state-judge biases against out-of-state defendants)

Indeed, some commentators have underscored that “[i}n states

where judges are elected, some judges may feel political

pressure to approve large class-action settlements so as to

project an image of looking out for consumer interests and

bringing large sums of money into their jurisdictions.

Schwartz ef al., supra, at 502. Diversity jurisdiction is the

constitutionally prescribed antidote to these problems,

whether real or perceptual.

2 To the extent such class-action cases end up in federal

rather than state court, moreover, federal courts are well

suited to deal with them. Indeed, federal courts offer

institutional strengths that enhance their ability to resolve

class-action lawsuits seeking broad (¢.g., nation-wide)

injunctive relief efficiently and effectively—in many cases far

more efficiently than their state-court counterparts.

First, the federal judiciary typically has greater resources—

including human resources such as a full complement of law

clerks, secretaries and satellite court personnel—than most

state trial courts for handling complex class-action litigation

and for coordinating and disposing of duplicative litigation

26

efficiently See Edward F. Sherman, Class Actions &

Duplicative Litigation, 62 Ind. LJ. 507, §50-51 (1987), see

also Stephen Daniel Kaufmann, Comment, “Federalizing”

Class Actions: The Future of the Jurisdictional Requirements

For Diversity-Based Class Actions, §2 Ala. L. Rev. 1029,

1054 (2001) (noting that federal judges, unlike state-court

judges, generally have access to several law clerks, magistrate

judges and special masters) Among other things, these

resources permit federal judges to focus more attention on

dispositive legal or evidentiary issues, pre-trial motions for

summary judgment, and other developments that may permit

the disposition of cases prior to the expenditure of vast

resources by both sides.

Second, Congress has empowered the federal courts to

coordinate and consolidate cases that raise common factual or

legal questions to promote efficient and just dispute

resolution. See 28 U.S.C. § 1407(a). Specifically, § 1407(a)

provides that “[wJhen civil actions involving one or more

common questions of fact are pending in different [federal

judicial] districts, such actions may be transferred to any

district for coordinated or consolidated pretrial proceedings”

by the judicial panel on multidistrict litigation. Jd Such

transfers are proper where they “will be for the convenience

of parties and witnesses and will promote the just and

efficient conduct of such actions.” Jd As the Manual for

Complex Litigation puts it, “[oJne of the values of

multidistrict proceedings is that they bring before a single

judge all of the cases, parties, and counsel comprising the

litigation,” and “afford a unique opportunity for the

negotiation of a global settlement.” Manual For Complex

Litigation (Third) § 31.132, at 254 (1995); see also Note, The

Judicial Panel and the Conduct of Multidistrict Litigation, 87

Harv. L. Rev. 1001, 1001 (1974) (noting that transfer and

consolidation under § 1407 aimed to “achieve the objectives

of eliminating conflict and duplication and assuring efficient

and economical pretrial proceedings”), Carter G. Phillips et

27

al, Rescuing Multidistrict Litigation From the Altar of

Expediency, 1997 BYU L. Rev. $21, 833 (1997) (hereinafter

Rescuing Multidistrict Lingation) (“{I]n enacting § 1407,

Congress chose to allow judicial efficiency to outweigh

individual convenience...)

The availability of multidistrict litigation (MDL)

proceedings in the federal court system offers several

advantages to parties in complex class actions. For one thing,

this system protects class-action defendants against abusive

procedural tactics employed by plaintiffs’ counsel to run up

the costs of litigation. John A. Beisner & Jessica Davidson

Miller, They're Making a Federal Case Out of It. . . In State

Court, 25 Harv. J.L. & Pub. Pol’y 143, 152-53 (2001).""

MDL proceedings also offer numerous procedural and

practical benefits These include eliminating the need to

conduct multiple productions of documents in several states

and condensing discovery into a national depository in a

single location. Manual For Complex Litigation (Third)

§ 31.131, at 251 (noting that the Judicial Panel considers

requests for MDL “mindful that the objective of transfer is to

eliminate duplication of discovery, avoid conflicting rulings

and schedules, [and] reduce litigation cost”); see also

Rescuing Multidistrict Litigation, at 823 (noting that more

efficient use of pretrial judicial resources outweighs the harm

to litigants).

Yet another class of benefits associated with moving state-

court class actions into MDL includes the advantages that

federal courts may provide to defendants generally. For

example, one commentator has observed that federal courts

"' For example, plaintiffs’ counsel often file nearly identical class

actions before multiple state courts, which results in the proliferation of

duplicative class action litigation in different jurisdictions. Beisner &

Miller, supra, at 152-53. Asa result, defendants have found themselves

litigating concurrently in multiple venues, and incumnng significant

transaction costs. /d. at 153.

28

may be more rigorous with respect to dispositive motions and

admissibility of evidence, particularly scientific evidence and

expert testimony, and that state courts may be more liberal in

terms of discovery and less restrictive with protective

orders.”

* * * * *

For all these reasons, adherence to Rule 82 in this context

will not substantially increase the burdens on federal courts

because, in the vast majority of cases, plaintiffs and their

lawyers will simply forgo broad requests for injunctive relief

rather than subject themselves to federal jurisdiction And

any such cases that do wind up in federal court will be the

very kinds of cases for which the diversity provisions of

Article Ill, and the subsequent diversity statutes, were

designed. From both a procedural and_ institutional

standpoint, federal courts are well suited to handle the

complexities of these large class actions, and allowing them

to do so will enhance justice for all parties by promoting the

efficient and fair resolution of these cases. There simply is no

sound policy reason to depart from the neutrality principle of

Rule 82 by allowing the class-action device artificially to

restrict the scope of federal jurisdiction in cases seeking broad

injunctive relief.

'? Mark P. Robinson, Ass'n of Trial Lawyers of Am., MDL, Class

Actions, and Competing Interests of State Litigation 357 (2001) (CLE).

Similarly. federal courts are authorized under Rule 42 of the Federal Rules

of Civil Procedure to order actions consolidated into a single action

“[w]hen actions involving a common question of law or fact are pending

before the court.” Fed. R. Civ. P. 42(a). Thus, if the class action

defendant can have multiple state-court actions successfully removed and

transferred to a single federal court, such actions could ultimately be

consolidated into a single action before that court under Rule 42. This

would bring organization, efficiency and lower litigation costs to all

involved parties.

-— sel OZ CL

29

CONCLUSION

For these reasons, and those stated in petitioners’ brief, the

judgment of the court of appeals should be reversed.

Respectfully submitted,

JAN S. AMUNDSON CARTER G. PHILLIPS

General Counsel GENE C. SCHAERR*

QUENTIN RIEGEL SUSAN A. WEBER

Deputy General Counsel PAUL J. ZIDLICKY

NATIONAL ASSOCIATION OF MICHAEL S. LEE

MANUFACTURERS PATRICK F. LINEHAN

1331 Pennsylvania Ave., N.W. SIDLEY AUSTIN BROWN &

Washington, DC 20004 Woop, LLP

(202) 637-3000 1501 K. Street, N.W.

Washington, D.C. 20005

(202) 736-8000

Counsel for Amicus Curiae

May 6, 2002 * Counsel of Record