Free v. Abbott Laboratories

Citations: 51 F.3d 524; 1995 U.S. App. LEXIS 9421; 1995 WL 236697Docket: 94-30279, 94-30280

Court: Court of Appeals for the Fifth Circuit; April 24, 1995; Federal Appellate Court

Original Court Document: View Document

Combined Opinion SummaryCombined Opinion Original

EnglishEspañolSimplified EnglishEspañol Fácil

The United States Court of Appeals for the Fifth Circuit addressed a class action lawsuit under Louisiana antitrust laws involving Abbott Laboratories, Bristol-Myers Squibb Company, and Mead Johnson Company. The primary issue was whether the Judicial Improvements Act of 1990 overrules the precedent set in Zahn v. International Paper Co., with the court concluding that it does. The appellate court concurred with the district court's finding of sufficient amount in controversy for the class representatives to establish diversity jurisdiction but contested the district court's decision to abstain from exercising jurisdiction.

Robin and Renee Free initiated the lawsuit in Louisiana state court, alleging a conspiracy to fix infant formula prices. After the defendants removed the case to federal court, the plaintiffs sought to remand it, leading to the district court's decision to remand based on a lack of federal question jurisdiction and its claim that it had diversity jurisdiction only for the named plaintiffs, not the entire class. The court declined to exercise supplemental jurisdiction due to what it termed "novel issues of state law," opting instead for abstention under the Colorado River/Moses H. Cone doctrine to prevent piecemeal litigation.

The appellate court clarified that 28 U.S.C. 1447(d) prevents review of remand orders based on subject matter jurisdiction or procedural defects. However, since the remand was not based on these grounds but on discretionary abstention, the court held appellate jurisdiction existed. 

Regarding diversity jurisdiction, the district court determined that it had jurisdiction over the named plaintiffs' claims despite each claiming only $20,000, below the $50,000 threshold, by attributing attorney's fees to the named plaintiffs. Conversely, the plaintiffs contended that Louisiana law distributes attorney's fees pro rata among class members, meaning none of the plaintiffs would meet the amount-in-controversy requirement.

The distribution of attorney's fees in class action lawsuits in Louisiana is governed by two statutes: Article 595 of the Louisiana Code of Civil Procedure and Section 51:137 of the Louisiana Revised Statutes. Article 595 allows courts to award reasonable litigation expenses, including attorney's fees, to representative parties when a class action results in a beneficial fund or recovery for the class. This statute indicates that fees are to be paid from the fund or benefits obtained.

Section 51:137 permits individuals injured in their business or property due to unlawful acts to sue for triple damages, costs, and reasonable attorney's fees. Plaintiffs argue that Article 595 supports distributing attorney's fees among all class members, citing a precedent where pro rata shares were deducted from awards. However, the defendants maintain that the statute specifically awards fees to "representative parties," as reiterated in the comments associated with Article 595. 

Plaintiffs further contend that interpreting Article 595 to assign fees solely to named plaintiffs violates constitutional principles, referencing the Supreme Court's decision in Zahn, which restricts attributing class fees to representatives. The Ninth Circuit's ruling in Goldberg supports this view, but its application is questioned in the context of Louisiana's policy on recovery rights. The district court concluded that under Louisiana law, class representatives are entitled to fees, independent of how the claims of class members are aggregated.

The excerpt also addresses the issue of supplemental jurisdiction over unnamed plaintiffs' claims post-Judicial Improvements Act of 1990. This Act introduced 28 U.S.C. § 1367, which potentially alters the jurisdictional requirements established by Zahn, as it allows for supplemental jurisdiction over claims that are part of the same case or controversy, despite individual class members not meeting the amount-in-controversy requirement.

Supplemental jurisdiction encompasses claims involving the joinder or intervention of additional parties. However, in civil actions where district courts have original jurisdiction solely based on diversity under section 1332, they lack supplemental jurisdiction over claims by plaintiffs against parties joined under Federal Rules of Civil Procedure Rules 14, 19, 20, or 24, as well as claims by proposed plaintiffs under Rule 19 or intervening plaintiffs under Rule 24, if doing so would conflict with section 1332's jurisdictional requirements. 

District courts may decline to exercise supplemental jurisdiction if a claim raises a novel or complex state law issue, substantially predominates over claims with original jurisdiction, if all original jurisdiction claims are dismissed, or for other exceptional circumstances. Although district courts generally have supplemental jurisdiction over related claims, section 1367(b) outlines specific exceptions, notably excluding class actions. There is an ongoing debate among commentators regarding whether Congress intended to overrule the Zahn decision, which limited jurisdiction over claims of class members who do not meet the amount in controversy requirement. 

No appellate court has resolved this issue. The Fifth Circuit has discussed but not definitively answered the question in two cases, More v. Intelcom Support Servs. Inc. and Watson v. Shell Oil Co., both of which were filed before the enactment of 1367. The Third Circuit noted that district courts are split on this issue, with a majority believing Zahn remains effective post-1367. It is suggested that Congress did not aim to overturn established precedents like Zahn when enacting the Judicial Improvements Act, viewing it instead as a collection of modest proposals to clarify jurisdictional rules disrupted by prior cases.

The Supreme Court in Finley determined that federal courts lack pendent-party jurisdiction without explicit legislative authorization, which Congress aimed to restore to pre-Finley interpretations regarding supplemental jurisdiction. The legislative history clarifies that the Act does not alter the jurisdictional requirements of 28 U.S.C. § 1332 in diversity-only class actions, maintaining Zahn's relevance. The statute empowers federal courts to hear supplemental claims with specific exceptions, and class actions are not listed among these, suggesting a potential clerical error rather than a substantive change. The clarity of the statute negates the need to delve into legislative intent. Although some legal scholars criticize the supplemental jurisdiction statute as inadequately drafted, abrogating Zahn is not seen as an absurdity; rather, it could enhance federal courts' ability to adjudicate complex interstate disputes. The district court is supported in exercising supplemental jurisdiction over class members who do not meet the amount-in-controversy requirement. Regarding Colorado River abstention, it should be applied sparingly, and this case does not meet the criteria for abstention, as the factors favor federal jurisdiction.

The decision is based on two main concerns: the risk of splitting the action by remanding only the class members' claims, and the complexity of state law issues involved. The first concern pertains to the potential for piecemeal litigation, which arises from the district court's interpretation of abstention. The second, more substantial concern involves whether indirect purchasers can assert claims under Louisiana antitrust law and the potential preemption of these claims by federal law. While these state law issues are acknowledged as complex, their novelty alone does not justify abstention. Exceptional circumstances are required for such abstention under Colorado River doctrine. The district court remanded the claims of unnamed class members due to the complexity of state law issues but did so without sufficient justification since similar issues would still need adjudication for the named plaintiffs. The court ultimately determined that the entire case should remain in federal court, as the district court had diversity jurisdiction over the named plaintiffs and supplemental jurisdiction over the unnamed plaintiffs' claims. The remand order is vacated, and the case is sent back to the district court for further proceedings, with a denial of the petition for mandamus.