Case Law Update: Supreme Court Dodges Amount-in-controversy Issue in Class Actions; 10th Circuit Declines to Follow Brower For EPA "Overfiling"

Ford Motor Company v. McCauley, 264 F. 3d 952 (9th Cir. 2001), cert. dismissed, 2002 U.S. LEXIS 5372 (2002).

On Oct. 7, 2002, the U.S. Supreme Court heard oral arguments in Ford Motor Company v. McCauley. Many believed that the Court would decide whether the potential cost to the defendant of complying with injunctive relief sought in a class action can be used to satisfy the amount-in-controversy requirement for diversity jurisdiction. 2002 U.S. LEXIS 5372 (2002); 122 S.Ct. 1063 (2002) (certiorari granted). The Ninth Circuit had held that the administrative costs of complying with injunctive relief cannot be used to satisfy the jurisdictional amount requirement of 28 U.S.C. § 1332(a). McCauley, 264 F. 3d 952 (9th Cir. 2001). However, on Oct. 15, 2002, Supreme Court dismissed the case because the Court decided that certiorari had been improvidently granted. Although the Court did not reach the merits in McCauley, these same issues will reappear in environmental and toxic court litigation, and the Court ultimately may decide the question.

The McCauley case arose from class action lawsuits filed by credit cardholders challenging the termination of a credit card rebate program. Through this program, cardholders could earn rebates toward a new Ford vehicle, with a maximum allowable rebate of $3,500 over five years. The contractual restriction on the maximum allowable rebate kept the individual monetary damages well below the jurisdictional requirement. However, the plaintiffs also sought injunctive relief - reinstatement of the rebate program.

In an effort to defeat removal efforts, the McCauley plaintiffs argued that the amount-in-controversy inquiry should focus on the value of the claim to the plaintiff (the "plaintiff's viewpoint rule"), which here involved contractual obligations that by the contract's own terms could not exceed $3,500. The plaintiffs further asserted that to consider the defendant's costs would allow large corporate defendants a free pass to federal court because any corporate-wide policy or program change will incur high administrative costs.

Ford argued that in a case seeking injunctive relief, the value of the amount-in-controversy is the defendant's cost in complying with the injunctive relief sought by the class (the "either viewpoint rule"). Ford also contended that because the cost of reinstating the rebate program would be the same regardless of whether one individual or the entire class sought relief, the claim is "common and undivided." Ford maintained that the non-aggregation principle does not apply to "common and undivided" claims, such as the claims asserted by the cardholders, and thus the damages could be aggregated to satisfy the $75,000 jurisdictional requirement.

The same issues raised in McCauley appear in toxic tort and environmental litigation cases when a class seeks injunctive relief or damages of less than $75,000.00 per class member. For example, the lower courts disagree on the proper standard for analyzing the amount-in-controversy requirement in medical monitoring class actions. Several district courts have allowed diversity jurisdiction in medical monitoring class actions. These courts focus their amount-in-controversy analysis on the cost of the medical monitoring program to the defendant. Jackson v. Johnson & Johnson, 2001 U.S. Dist. LEXIS 22329 (W.D. Tenn. 2001) (reasoning that clerical and administrative costs alone would exceed $75,000); In re: Diet Drugs, 2000 U.S. Dist. LEXIS 17525 (E.D. Pa. 2000) (finding that the cost of the monitoring procedures satisfied amount-in-controversy requirement); Gibbs v. E.I. DuPont de Nemours & Co., Inc., 876 F. Supp. 475 (W.D.N.Y. 1995) (using defendant's figures to conclude that the value of the "object of the litigation" - the medical monitoring program - exceeded the jurisdictional requirement). Conversely, other courts have determined that the cost of the program is not relevant to the jurisdictional analysis and that the monitoring costs for each individual plaintiff may not be aggregated. Doe v. Interstate Brands Corp., 1998 U.S. Dist. LEXIS 5523 (N.D. Ill. 1998) (refusing to aggregate monitoring costs); Clement v. Occidental Chem. Corp., 1994 U.S. Dist. LEXIS 12387, *20 (E.D. La. 1994) (rejecting the "defendant's viewpoint" rule with respect to requested medical monitoring).

United States v. Power Engineering Co., 303 F.3d 1232 (10th Cir. Sept. 4, 2002).

The Colorado Department of Public Health and Environment (CDPHE) assessed civil penalties against Power Engineering Company (PEC) after PEC failed to comply with a Final Administrative Compliance Order resulting from hazardous waste violations. PEC failed to pay the penalties and the CDPHE sought enforcement in state court. Before the CDPHE issued the Final Administrative Compliance Order, the EPA requested that the CDPHE also enforce the Resource Conservation and Recovery Act's (RCRA) financial assurance requirements against PEC. When the CDPHE did not enforce the RCRA requirements, EPA filed its own suit against PEC in Colorado District Court.

In the district court, PEC argued that EPA's suit was "overfiling," a term defined in Harmon Industries v. Brower as "the EPA's process of duplicating enforcement actions." 191 F.3d 894, 898 (8th Cir. 1999). PEC relied on the Eighth Circuit's determination that the EPA is not permitted to overfile when the state has already taken enforcement action. The district court disagreed and granted summary judgment in favor of EPA.

The Tenth Circuit Court of Appeals determined that the RCRA statute is ambiguous on the issue of overfiling. Following Chevron v. NRDC, 467 U.S. 837 (1984), the court deferred to the EPA's interpretation, which was that Congress intended only to prohibit duplicative citizen suits, not duplicative federal suits. The court declined to follow the Eighth Circuit's opinion that the "in lieu of" language found in the RCRA allows the state exclusive enforcement responsibility.

Since the Eighth Circuit's decision in 1999, several courts have distinguished the Harmon decision and allowed the EPA to overfile, particularly in Clean Water Act cases. District courts in Ohio, Illinois and Wisconsin noted that while the RCRA statute contains the "in lieu of" language, the Clean Water Act does not. These jurisdictions have allowed the EPA to overfile in Clean Water Act cases. United States v. Murphy Oil USA, Inc., 143 F. Supp. 2d 1054 (W.D. Wis. 2001); United States v. Rock Island, 182 F. Supp. 2d 690 (C.D. Ill. 2001); United States v. LTV Steel, Co., Inc., 118 F. Supp. 2d 827 (N.D. Ohio 2000); United States v. Youngstown, 109 F. Supp. 2d 739 (N.D. Ohio 2000). Other courts have declined to apply Harmon to criminal enforcement powers and citizen suits. United States v. Elias, 269 F.3d 1003 (9th Cir. 2001) (determining that the EPA retains criminal enforcement powers even when the state has an authorized program); Stewart-Sterling One, LLC v. Tricon Global Rest., Inc., 2002 U.S. Dist. LEXIS 15746 (E.D. La. 2002) (reasoning that overfiling does not restrict right to file citizen suits).