Let Us Count the Ways: How Should the Amount in Controversy be Calculated in Diversity Class Actions?

Abstract

This article previews the issues and arguments in Ford Motor Company and Citibank (South Dakota) v. McCauley, an appeal before the Supreme Court in the 2002-03 Term. Ford Motor Co. v. McCauley raises a straight-forward clash regarding one of the most fundamental requirements for establishing federal diversity jurisdiction: namely, how to calculate the $75,000 jurisdictional amount required for federal subject matter jurisdiction. This appeal fundamentally asks the Supreme Court sort out the multiple, confusing, and quirky rules that have developed over two hundred years of federal jurisprudence. Adding spice to the 'how do we count?' mix, the Court has the challenge of explaining how amount-in-controversy rules apply in the class action context. The central issue before the Court in Ford Motor Company v. McCauley concerns whether federal courts should follow the 'plaintiff's viewpoint' rule or the 'either viewpoint' rule in determining whether the $75,000 amount-in-controversy requirement for federal diversity is satisfied in a federal class action seeking both compensatory and injunctive relief against multiple defendants. In addition, the Court must determine whether federal courts may calculate the requisite amount in controversy with reference to the defendants' costs of implementing the requested injunction, either as to one class member or all class members.

It remains to be seen whether the Supreme Court will demur sorting through the conflicting and confusing counting principles because of the pending Class Action Fairness Act, which provisions would modify the rules relating to federal diversity class actions and the amount in controversy requirement. Similar bills have been introduced in Congress since 1998, and Congress has not yet enacted any of these bills. Thus, the Court may decide to step into this breach and bring order to prevailing doctrinal confusion.

But, if the Court articulates less-than-favorable amount-in-controversy counting rules that negatively impacts defendants, this could energize their advocates to spur Congress to enact the Class Action Fairness Act to undo an unfavorable Supreme Court decision. However, if the Court articulates plaintiff-favoring counting rules, this will no doubt additionally energize the plaintiffs' class action bar to defeat the Class Action Fairness Act.

Keywords: federal diversity jurisdiction, amount in controversy, injunctive relief, plaintiff's viewpoint rule, Class Action Fairness Act