Abbott Laboratories, In re

• Decision Date: 24 April 1995
• Docket Number: 94-30280,Nos. 94-30279,s. 94-30279
• Citation: 51 F.3d 524
• Parties: , 1995-1 Trade Cases P 70,969 In re ABBOTT LABORATORIES, Bristol-Meyers Squibb Company, Inc. and Mead Johnson & Company, Petitioners. Robin FREE and Renee Free, Plaintiffs-Appellees, v. ABBOTT LABORATORIES, Bristol-Meyers Squibb Company, Inc. and Mead Johnson & Company, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 524

51 F.3d 524

63 USLW 2678, 1995-1 Trade Cases P 70,969

In re ABBOTT LABORATORIES, Bristol-Meyers Squibb Company Inc. and Mead Johnson & Company, Petitioners Robin FREE and Renee Free, Plaintiffs-Appellees, v. ABBOTT LABORATORIES, Bristol-Meyers Squibb Company, Inc. and Mead Johnson & Company, Defendants-Appellants.

Nos. 94-30279, 94-30280.

United States Court of Appeals Fifth Circuit.

April 24, 1995.

William R. D'Armond, Kean, Miller, Hawthorne, D'Armond, McCowan & Jarman, Baton Rouge, LA, for Abbott Laboratories.

Phillip A. Wittmann, John M. Landis, Stone, Pigman, Walther, Wittmann & Hutchinson, New Orleans, LA, Douglas D. Broadwater, Max R. Shulman, Cravath, Swaine & Moore, New York City, for Bristol-Meyers & Mead Johnson & Co.

Patrick W. Pendley, Plaquemine, LA, Daniel E. Gustafson, Heins, Mills & Olsen, Minneapolis, MN, Daniel A. Small, Cohen, Milstein, Hausfeld & Toll, Washington, DC, for appellees.

Appeal from the United States District Court for the Middle District of Louisiana.

Before HIGGINBOTHAM, SMITH and PARKER, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

This class action brought under the antitrust laws of the State of Louisiana requires that we decide whether the Judicial Improvements Act of 1990 overrules Zahn v. International Paper Co., 414 U.S. 291, 94 S.Ct. 505, 38 L.Ed.2d 511 (1973). We hold today that it does. We agree with the district court that the claims of the class representatives met the requisite amount in controversy and that it had diversity jurisdiction over their claims, but disagree with its decision to abstain from exercising it. We agree with the district court that it had supplemental jurisdiction over all other members of the class, but disagree with its decision not to exercise it. We vacate the order remanding to state court.

I.

Robin and Renee Free filed suit in a Louisiana state court on October 14, 1993, alleging that Abbott Laboratories, Bristol-Meyers Squibb Company, Inc., and Mead Johnson & Company had conspired to fix infant formula prices. The Frees filed for themselves and for a class ¹ of Louisiana consumers. Defendants removed to federal court, and plaintiffs moved to remand.

The federal district court granted the motion to remand. The court held that it lacked federal question jurisdiction and that it had diversity jurisdiction only over the named plaintiffs' claims and not over claims of the other members of the class. The district court declined to exercise supplemental jurisdiction because the claims raised "novel issues of state law."

The district court remanded the named plaintiffs' claims on "the basis of ... the Colorado River/ Moses H. Cone doctrine of abstention." ² It did so to avoid piecemeal litigation and to permit Louisiana to rule on the "novel and complex issues of state law." Defendants both appeal and petition for mandamus, asking that we vacate the order remanding to state court.

II.

28 U.S.C. Sec. 1447(d) shields from review orders remanding for lack of subject matter jurisdiction, see In re Shell Oil Co., 932 F.2d 1518, 1520 (5th Cir.1991), cert. denied, 502 U.S. 1049, 112 S.Ct. 914, 116 L.Ed.2d 814 (1992), or a defect in removal procedure noted by timely motion, see In re Medscope Marine Ltd., 972 F.2d 107, 110 (5th Cir.1992). See Thermtron Prods. Inc. v. Hermansdorfer, 423 U.S. 336, 96 S.Ct. 584, 46 L.Ed.2d 542 (1976).

Fairly read, the remand order did not rest upon a lack of subject matter jurisdiction or defective removal procedure. The court noted no flaw in the removal procedure, and its decision to abstain follows an explicit finding of subject matter jurisdiction. Our appellate jurisdiction follows. See In re International Paper Co., 961 F.2d 558, 561 (5th Cir.) (authorizing review by appeal, not mandamus, where remand is based upon "circumstances that give the court discretion to dismiss the case"), cert. denied, --- U.S. ----, 113 S.Ct. 326, 121 L.Ed.2d 245 (1992); McDermott Int'l v. Lloyds Underwriters of London, 944 F.2d 1199, 1203-04 (5th Cir.1991) (regarding remand based upon Colorado River as discretionary and thus reviewable by appeal, not mandamus).

III. DIVERSITY AND SUPPLEMENTAL JURISDICTION

A. DIVERSITY JURISDICTION: THE NAMED PLAINTIFFS' CLAIMS

The court found it had diversity jurisdiction over the named plaintiffs' claims even though each named and unnamed plaintiff claimed only $20,000, less than the $50,000 minimum for diversity jurisdiction. 28 U.S.C. Sec. 1332(a). The district court found that Louisiana law attributed all of a class's attorney's fees to the named plaintiffs. It held that the claim of the named plaintiffs for $20,000--once swelled by attorney's fees--met the $50,000 amount-in-controversy requirement.

Plaintiffs argue that Louisiana statutes distribute the fees pro rata to all members of the class, with the result that none meets the amount-in-controversy requirement.

The distribution of attorney's fees centers on two Louisiana statutes. The first, Article 595 of the Louisiana Code of Civil Procedure, provides:

The court may allow the representative parties their reasonable expenses of litigation, including attorney's fees, when as a result of the class action a fund is made available, or a recovery or compromise is had which is beneficial, to the class.

. . . . .

Official Revision Comments

(a) It is intended, in the first paragraph, that the reasonable expenses of litigation allowed the successful representative parties is to be paid out of the fund or benefits made available by their efforts.

The second key Louisiana statute is Section 51:137 of the Louisiana Revised Statutes, which provides:

Any person who is injured in his business or property by any person by reason of any act or thing forbidden by this Part may sue in any court of competent jurisdiction and shall recover threefold the damages sustained by him, the cost of suit, and a reasonable attorney's fee.

Article 595, plaintiffs contend, supports their argument that the fees are to be distributed among all class members. See, e.g., White v. Board of Trustees, 276 So.2d 714, 719 (La.Ct.App.) (deducting pro rata shares of an Article 595 attorney's fee from the awards due to each plaintiff), writ ref'd, 279 So.2d 694 (La.1973).

We disagree. Defendants pay attorney's fees and damages. The plain text of the first sentence of 595 awards the fees to the "representative parties." (The language allowing the "representative parties" their fees is echoed in Comment (a).)

Finally, plaintiffs argue that construing Article 595 to attribute the fees to the named plaintiffs--rather than to distribute them among all the plaintiffs--renders the statute unconstitutional. The argument continues that the federal courts have generally held that Zahn forbids attributing the fees of class members to class representatives. The only circuit court to speak to this question held that attributing a class's attorney's fees only to the named plaintiffs instead of pro rata to each member of the class "would conflict with the policy of Zahn." Goldberg v. CPC Int'l, Inc., 678 F.2d 1365, 1367 (9th Cir.), cert. denied, 459 U.S. 945, 103 S.Ct. 259, 74 L.Ed.2d 202 (1982). Many district courts have followed Goldberg. ³ But Goldberg 's reading of Zahn sheds little light on the distinct policy choices behind Louisiana's decision regarding rights of recovery by class members. That a state chooses a set of rules that result in an award in excess of $50,000 frustrates no policy of Zahn. Simply put, under the law of Louisiana the class representatives were entitled to fees. Their rights of recovery were not created by a judge's summing the discrete rights of class members. The district court applied the law of Louisiana. Because it did so, we are persuaded that the individual claims of the class representatives met the requisite jurisdictional amount. We turn now to the question of supplemental jurisdiction over the class members, confronting at its threshold Zahn 's current vitality. That is the question of Zahn.

B. SUPPLEMENTAL JURISDICTION: THE UNNAMED PLAINTIFFS' CLAIMS

Supplemental jurisdiction over the unnamed plaintiffs' claims has been an open question since Congress passed the Judicial Improvements Act of 1990. ⁴

Congress enacted Sec. 1367 against the background of Zahn, in which the Supreme Court had held that the claim of each member of a class action must meet the amount-in-controversy requirement. Zahn, 414 U.S. at 301, 94 S.Ct. at 511-12. Zahn forbade the exercise of supplemental jurisdiction over the claims of class members who did not do so.

Defendants argue that Congress changed the jurisdictional landscape in 1990 by enacting Sec. 1367. Section 1367(a) grants district courts supplemental jurisdiction over related claims generally, and Sec. 1367(b) carves exceptions. Significantly, class actions are not among the exceptions.

Some commentators have interpreted this silence to mean that Congress overruled Zahn and granted supplemental jurisdiction over the claims of class members who individually do not demand the necessary amount in controversy. ⁵ Some of Sec. 1367's drafters disagree. ⁶ No appellate court has ruled on the question yet. ⁷ The district courts are split even within this circuit, although the majority appear to hold that Zahn survives the enactment of Sec. 1367. ⁸

Perhaps, by some measure transcending its language, Congress did not intend the Judicial Improvements Act to overrule Zahn. The House Committee on the Judiciary considered the bill that became Sec. 1367 to be a "noncontroversial" collection of "relatively modest proposals," not the sort of legislative action that would upset any long-established precedent like Zahn. 1990 U.S.C.C.A.N. at 6860, 6861. Plaintiffs argue that the Act was prompted not by a congressional desire for wholesale revisions of the jurisdictional rules, but by the more limited desire to restore traditional understandings of federal jurisdiction, which were...