Sixth Circuit Rules that Class Plaintiffs Cannot Aggregate Claims to Satisfy Amount-in-Controversy Requirement
The Sixth Circuit ruled last week that class plaintiffs may not aggregate their claims to satisfy the $75,000 threshold for diversity jurisdiction.
The insurance coverage dispute in Siding & Insulation, Co. v. Acuity Mut. Ins. stemmed from a class action alleging that Beachwood Hair Clinic, Inc. violated the Telephone Consumer Protection Act (TCPA) by disseminating more than 37,000 unsolicited fax advertisements between 2005 and 2006. Beachwood and its insurer, Acuity Mutual Insurance Co., agreed to a $4 million class settlement with the class representative, The Siding and Insulation Co. The settlement stipulated that separate litigation between Acuity and Siding would resolve a $2-million coverage dispute under Beachwood’s policy, leading Siding to file this declaratory judgment action against Acuity under Beachwood’s policy. The Northern District of Ohio denied coverage and granted summary judgment in Acuity’s favor. Siding appealed; the Sixth Circuit vacated the district court’s judgment due to Siding’s inability to identify a singular interest with putative class members satisfying the diversity statute’s amount-in-controversy requirement.
Citing to the Seventh Circuit’s decision in Travelers Prop. Cas. v. Good, 689 F.3d 714 (7th Cir. 2012), the Sixth Circuit determined that a class of individual plaintiffs lacks a joint interest in an insurance fund sufficient to aggregate their claims for purposes of federal jurisdiction. The Court distinguished between class members who share a pre-existing (pre-litigation) interest in the subject of the litigation and class members whose successful vindication of a right will lead to a single pool of money that will be allocated among the plaintiffs. Travelers, 689 F.3d at 722 (quoting Gilman v. BHC Sec., Inc., 104 F.3d 1418, 1427 (2d Cir. 1997). As to the latter category classes, the Court held that multiple claims against a single instrument (such as an insurance policy) do not qualify as a common and undivided prelitigation interest that justifies aggregation of class members’ claims.
In the alternative, Siding argued that federal jurisdiction existed based on the underlying settlement between Siding and Beachwood, which put Acuity’s $2 million policy at stake. Siding argued that either party’s interest in a lawsuit should satisfy the amount-in-controversy requirement, invoking the so-called “either viewpoint rule,” which is the subject of a circuit split. The Court skirted the issue, declining to resolve whether the “either viewpoint rule” ever bears on amount-in-controversy disputes, and holding instead that the rule does not apply to class action suits. See In re: Ford Motor Co./Citibank, 264 F.3d 952, 959 (9th Cir. 2001) (noting that class plaintiffs cannot avoid the non-aggregation rule by praying for an injunction and citing the cost to defendant of complying with the injunction).
Finding no exception to the anti-aggregation rule, Judge Cook vacated the district court’s judgment and remanded the case for dismissal for want of jurisdiction.
Siding illustrates that even if a class seeks damages in a known amount that exceeds $75,000 threshold for federal jurisdiction, the class still may not aggregate its claims unless and until the amount exceeds the $5 million requirement for jurisdiction under the Class Action Fairness Act. Even though both Siding and Acuity sought federal jurisdiction to resolve their dispute, this dispute was nonetheless ineligible for the benefits of CAFA’s relaxed jurisdictional requirements.
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Stephen E. Embry is a member of the Firm's class action, privacy and mass tort groups. He frequently defends participants in consumer class actions and mass tort litigation. Stephen is a national litigator and advisor who is experienced in developing solutions to complex litigation and corporate problems.