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U.S. District Court Examines Supplemental Jurisdiction in the Context of Class Actions

Marlin Johnson v. Organo Gold Int’l, Inc., et al.
No. 15-390-LPS (United States District Court for the District of Delaware, November 20, 2015)
by Richard J. Medoff, Law Clerk
Semmes, Bowen & Semmes (www.semmes.com)

Available at: http://www.ded.uscourts.gov/sites/default/files/opinions/lps/
2015/november/15-390.pdf

Marlin Johnson v. Organo Gold Int’l, Inc., et al. involves a plaintiff’s motion to remand a class action that he filed against a coffee company in the Superior Court of Delaware in and for New Castle County, after the coffee company removed the case to the United States District Court for the District of Delaware. The Court concluded that the plaintiff’s personal injury claim, as well as the claims of the absent class members, were based on a common nucleus of operative facts, and thus, that the Court was authorized to exercise supplemental jurisdiction over the case pursuant to 28 U.S.C. § 1367, despite the fact that the injuries of the absent class members were unknown. Thus, Judge Leonard P. Stark denied the plaintiff’s motion to remand.

By way of factual background, on March 19, 2015, Plaintiff Marlin Johnson ("Plaintiff'), a resident of Florida, filed a civil action against Defendants Organo Gold International, Inc., Organo Gold International LLC, and Organo Gold Management Inc. (collectively, "Organo" or "Defendants"), in the Superior Court of Delaware in and for New Castle County. In his complaint, Plaintiff alleged that he suffered serious complications after undergoing gastric bypass surgery due to his consumption of Organo coffee containing the fungus Ganoderma Lucidum. He claimed that Defendants failed to warn him of the dangerous side effects of Ganoderma Lucidum, and further failed to label the amount of Ganoderma Lucidum in its product. Consequently, Plaintiff contended that Defendants were liable for his resulting injuries. Plaintiff also purported to bring a class action on behalf of over one-hundred (100) individuals and entities within the State of Delaware that purchased Organo products containing Ganoderma Lucidum. In his Complaint, Plaintiff asserted six (6) counts for: (i) declaratory relief; (ii) breach of express and implied warranties; (iii) consumer fraud; (iv) negligence; (v) negligent labeling and failing to warn; and (vi) misrepresentation.

On May 15, 2015, Defendants filed a notice of removal in the United States District Court for the District of Delaware, contending that the Court had subject matter jurisdiction based on diversity of citizenship, 28 U.S.C. § 1332(a), and the Class Action Fairness Act ("CAFA"), 28 U.S.C. § 1332(d). On May 29, 2015, Plaintiff filed a motion to remand, arguing that there was no diversity of citizenship between the parties and that Defendants had not shown that the amount in controversy exceeded the $75,000 jurisdictional threshold, and further that jurisdiction did not exist under CAFA because Defendants had not made an adequate showing that the aggregated amount in controversy was in excess of $5,000,000.

The Court began its analysis by explaining that pursuant to 28 U.S.C. § 1441, a defendant in a state court proceeding may have the right to remove such a case to federal court if, based upon the face of the filed pleadings, subject matter jurisdiction would have existed in federal court for the plaintiffs claims. Where federal subject matter jurisdiction is based on diversity, there must be both complete diversity of the parties and the requisite jurisdictional amount of at least $75,000. See 28 U.S.C. § 1332(a). Where federal subject matter jurisdiction is based on CAFA, there must be at least minimal diversity of the parties and the requisite jurisdictional amount of greater than $5,000,000. See 28 U.S.C. § 1332(d).

Regarding the diversity requirement, the Court concluded that complete diversity of citizenship existed because it was undisputed that Plaintiff was a resident of Florida and that Defendants were Nevada business entities. Regarding the amount in controversy requirement, the Court noted that Plaintiff did not dispute that the value of his own personal injury claim exceeded $75,000. Thus, with respect to Plaintiff's individual personal injury claim, the Court concluded that the amount in controversy requirement was satisfied, and thus, that the Court had original jurisdiction over at least Plaintiff's individual personal injury claim.

The Court's analysis turned next to whether supplemental jurisdiction existed over the claims of the absent class members. Plaintiff argued that his own personal injury could not be used to impart subject matter jurisdiction over the absent class members, whose injuries were unknown. In taking that view, Plaintiff relied on the Third Circuit's decision in Packard v. Provident Nat 'l Bank, 994 F.2d 1039, 1045 (3d. Cir. 1993) (citing Zahn v. Int'l Paper Co., 414 U.S. 291, 301 (1973)), which to Plaintiff stood for the proposition that "in a diversity-based class action, … each member of the class must claim at least the jurisdictional amount."

The Court, however, noted that, as held by Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 566-67 (2005), Zahn — on which the Third Circuit relied in Packard — was overruled when Congress amended 28 U.S.C. § 1367 to authorize supplemental jurisdiction in class actions "where some, but not all, of the plaintiffs in a diversity action allege a sufficient amount in controversy." The Court further noted that Allapattah also provides that CAFA "does not moot the significance of our interpretation of § 1367, as many proposed exercises of supplemental jurisdiction, even in the class-action context, might not fall within the CAFA's ambit." Id. at 572.

Plaintiff argued that Allapattah was inapposite, however, because it only authorized supplemental jurisdiction over "the claims of other plaintiffs in the same Article III case or controversy," (id. at 549) and his personal injury claims arose from different operative facts than the other class members’ claims, rendering his individual claims a different case or controversy. Specifically, Plaintiff contended that the operative facts for his personal injury claim consisted of the complications following his gastric bypass surgery. The Court, however, disagreed with Plaintiff's characterization.

The Court explained that claims are part of the same case or controversy when they derive from a "common nucleus of operative facts.” United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 725 (1966). Although Plaintiff conceded that his personal injury claim shared common operative facts with the claims of the absent class members, he maintained that those shared facts did not form the nucleus of the case. Again, the Court disagreed.

The Court found that Plaintiff’s personal injury claim, as well as the claims of the absent class members, were based on a common nucleus of operative facts, specifically Organo's failure to adequately label its product and warn class members about the risks of consuming Ganoderma Lucidum. The Court further found that nothing in the Complaint distinguished Plaintiff’s injuries from those of the absent class members.

Because the claims shared a common nucleus of operative fact, the Court concluded that they were all part of the same case or controversy, and thus, Plaintiff could not escape Allapattah's holding that § 1367 authorizes supplemental jurisdiction over class actions "where some, but not all, of the plaintiffs ... allege a sufficient amount in controversy." 545 U.S. at 566. Accordingly, the Court held that original jurisdiction based on diversity existed over all of the claims in the case, and that the case has been properly removed to federal court. Having reached this conclusion, the Court noted that it need not further decide whether jurisdiction existed based on CAFA. Accordingly, the Court denied Plaintiff’s motion to remand.