Crosby v. America Online, Inc.

• Decision Date: 30 April 1997
• Docket Number: No. 1:97 CV 263.,1:97 CV 263.
• Parties: William CROSBY, et al., Plaintiffs, v. AMERICA ONLINE, INC., Defendant.
• Court: U.S. District Court — Northern District of Ohio

967 F.Supp. 257

William CROSBY, et al., Plaintiffs, v. AMERICA ONLINE, INC., Defendant.

No. 1:97 CV 263.

United States District Court, N.D. Ohio, Eastern Division.

April 30, 1997.

COPYRIGHT MATERIAL OMITTED

Patrick J. Perotti, Dworken & Bernstein, Painesville, OH, for Plaintiffs.

Michael J. Garvin, Deborah Coleman and Sharon Riegel, Hahn, Loeser & Parks, Cleveland, OH, Lucia Nale, Mayer, Brown & Platt, Chicago, IL, for Defendant.

MEMORANDUM AND ORDER

OLIVER, District Judge.

The Plaintiffs, William Crosby and one other as representatives of a class, sue for equitable and monetary relief alleging Ohio law claims against the Defendant, America Online, Inc. ("AOL"). AOL sells access to the computer generated international marketplace for information and communication known as "the internet." The prospective class of Plaintiffs would include all Ohio customers of AOL since December 1, 1996, who paid a flat fee for access to AOL. The class is composed of approximately 270,000 members¹.

The Plaintiffs allege that on December 1, 1996, AOL switched from a metered rate of payment for its services to a flat monthly rate for "unlimited" access to the internet. According to the Plaintiffs, that change resulted in a dramatic increase in the number of AOL clients and AOL sold its service to more persons than its equipment had the ability to handle. As a result, AOL was unable to connect all of its customers to the internet in a timely manner, thereby preventing AOL customers from actually receiving unlimited access to the internet. On that basis, the Plaintiffs bring claims for, inter alia, breach of contract, fraud and violation of the Ohio Consumer Sales Practices Act. They seek injunctive relief preventing AOL from advertising or selling its services to new customers without an appropriate disclaimer, money damages "not to exceed $45,000 per class member," attorney's fees, costs and any other appropriate relief.

The Plaintiffs originally filed their claims in the Court of Common Pleas for Cuyahoga County, Ohio. AOL removed the case to this court under 28 U.S.C. § 1441(a) on the ground that this court has diversity jurisdiction pursuant to 28 U.S.C. § 1332. The Plaintiffs now move the court to remand the case pursuant to 28 U.S.C. § 1447(c), arguing AOL cannot show this case meets the $75,000 amount-in-controversy requirement of 28 U.S.C. § 1332(a). Because the court finds it does not have jurisdiction over this case, it grants the motion. For the reasons stated herein, this case is remanded to the Court of Common Pleas for Cuyahoga County, Ohio, where it was originally filed.

I. STANDARD FOR REMAND

Initially, the court must determine the proper standard for determining whether it has jurisdiction over this case, and upon which party lies the burden of proving jurisdiction. The relevant jurisdictional statute confers upon this court the power to adjudicate "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)(1).

Generally, the party seeking to litigate in federal court bears the burden of establishing the existence of federal subject matter jurisdiction. McNutt v. Gen'l Motors Acceptance Corp. of Indiana, 298 U.S. 178, 189, 56 S.Ct. 780, 785, 80 L.Ed. 1135 (1936) (declaring that "the court may demand that the party alleging jurisdiction justify his allegations by a preponderance of evidence"). In this case, then, it is AOL that bears the burden of proving jurisdiction, because the Plaintiffs would prefer to have stayed in state court, where they first filed their case.

When a plaintiff originally files her claim in federal court, the sum claimed by the plaintiff controls for the purpose of assessing whether the amount-in-controversy requirement contained in 28 U.S.C. § 1332(a)(1) is satisfied, so long as the amount claimed appears to have been made in good faith. St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89, 58 S.Ct. 586, 590-91, 82 L.Ed. 845 (1938). Such a case will not be dismissed for lack of diversity jurisdiction unless the defendant can demonstrate to a "legal certainty" that the plaintiff was in error regarding the claimed amount-in-controversy. Id. at 289, 58 S.Ct. at 590. The "legal certainty standard" also applies when the plaintiff originally files her complaint in state court alleging a specific amount of damages and the defendant removes the case to federal court. Gafford v. General, Elec. Co., 997 F.2d 150, 157 (6th Cir.1993). Normally, then, if a plaintiff claims in good faith an amount-in-controversy exceeding $75,000, federal jurisdiction is obtained.

The standard differs, though, "where the plaintiff seeks to recover some unspecified amount that is not self-evidently greater or less than the federal amount-in-controversy requirement." Id. at 158 (citation omitted). In such cases, "the defendant must prove, `more likely than not,' that the plaintiff's claims meet the federal amount-in-controversy requirement²." Id. (granting a motion for reconsideration where the defendant satisfied its burden on removal of showing the plaintiff's claims exceeded the amount-in-controversy requirement) (citation omitted). The court applies that preponderance of the evidence standard herein, since the Plaintiffs' claims for fraud (which would allow recovery of punitive damages) and for attorney's fees make it impossible to say they seek to recover an amount self-evidently less than $75,000. See, Garza v. Bettcher Indus., Inc., 752 F.Supp. 753, 763 (E.D.Mich.1990) (applying the preponderance of the evidence standard in finding the defendant had shown the case met the amount-in-controversy requirement). Thus, the court must remand this action unless AOL can show by a preponderance of the evidence that the Plaintiffs' claims meet the amount-in-controversy requirement.

II. LAW AND ANALYSIS

A. Amount-in-Controversy in Class Claims

1. Aggregation of Class Claims

The Plaintiffs do not dispute the diversity of citizenship between AOL and the putative plaintiff class. However, they do challenge AOL's assertion that the "matter in controversy exceeds the sum or value of $75,000." Specifically, the Plaintiffs assert that the amount in controversy must exceed $75,000 for each of the 270,000 plaintiffs in the putative class, an amount that would exceed a total of $20 billion³. The Plaintiffs conclude that because there is no realistic possibility the plaintiff class could actually recover damages approaching that amount, this court must remand the case for lack of diversity jurisdiction.

AOL responds by noting that the Plaintiffs have demanded attorney's fees and punitive damages. AOL argues that an award of attorney's fees and punitive damages is not properly allocated pro rata to each class member; rather, any award of punitive damages and attorney's fees should be "aggregated," so that a total award in this case — including compensatory damages, attorney's fees and/or punitive damages — exceeding $75,000 would suffice to meet the amount-in-controversy requirement of 28 U.S.C. § 1332. AOL asserts that it is entirely reasonable to expect the total award in this case could exceed $75,000, so the court should exercise jurisdiction and deny the motion to remand.

The court agrees with AOL that in addition to compensatory damages, potential awards of attorney's fees and punitive damages can count toward the amount-in-controversy. Clark v. Nat'l Travelers Life Ins. Co., 518 F.2d 1167, 1168 (6th Cir.1975) (stating, "a statutory attorney's fee can be considered in determining whether the jurisdictional amount is met"); Sellers v. O'Connell, 701 F.2d 575, 579 (6th Cir.1983) (holding that "[a] punitive damage claim must be included [in the amount-in-controversy] unless such damages are barred by the applicable state law"). Thus, the critical question in this case becomes whether potential awards of compensatory damages, attorney's fees or punitive damages should be "aggregated," instead of measured pro rata.

If each Plaintiff's share of a potential award of attorney's fees or punitive damages may be aggregated to meet the jurisdictional amount, AOL need only show it is more likely than not that such a potential award will exceed $75,000. On the other hand, if each Plaintiff's share of a potential award of attorney's fees or punitive damages must be allocated pro rata, AOL must show it is more likely than not that such a potential award will exceed $20 Billion. Effectively, if the potential award may be aggregated, AOL carries its burden of proving the court has jurisdiction. If the potential award may not be aggregated, AOL has not carried its burden. The court concludes it should not aggregate each Plaintiff's share of potential awards of compensatory damages, attorney's fees or punitive damages, and thus, that it does not have jurisdiction in this case.

In general, aggregation is appropriate only "when two or more plaintiffs unite to enforce a single title or right in which they have a common and undivided interest.'" Sellers, 701 F.2d at 579 (quoting Snyder v. Harris, 394 U.S. 332, 335, 89 S.Ct. 1053, 1056, 22 L.Ed.2d 319(1969)). Such an interest exists when, "if one plaintiff cannot or does not collect his share, the shares of the remaining plaintiffs are increased." Id. The Sellers court found the class claims could not be aggregated because "each plaintiff seeks to receive a fixed sum." Id. The same is true in this case. The Plaintiffs have distinct interests in their claims because, as in Sellers, they sue under their individual contracts with AOL. See, More v. Intelcom Support Servs., Inc., 960 F.2d 466, 472-473 (5th Cir. 1992) (refusing to aggregate class action claims for amount-in-controversy purposes where workers sued the same employer under their individual employment contracts).

Moreover, when based upon such separate claims, attorney's fees should not...