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noting that the amount in controversy for equitable relief is measured by "the value of the object of the litigation" from the plaintiff's viewpoint
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CIVIL ACTION NO. 03-2386.
June 10, 2003.
MEMORANDUM
Presently before this Court is the Motion to Remand filed by the Plaintiff, Delores Alsbrooks ("Alsbrooks"). The Defendant, Fairbanks Capital Corp. ("Fairbanks"), filed a Notice of Removal for this case on April 16, 2003. Fairbanks alleges that this Court has jurisdiction over the action pursuant to 28 U.S.C. § 1332. Alsbrooks argues that her claims do not exceed the requisite $75,000 jurisdictional amount required for diversity jurisdiction and, therefore, this action should be remanded pursuant to 28 U.S.C. § 1447(c). For the reasons set forth below, the Motion will be granted and the case will be remanded.
I. FACTS
On March 18, 2003, Alsbrooks filed a Class Action Complaint against Fairbanks in the Court of Common Pleas of Philadelphia County. Alsbrooks seeks, on behalf of a proposed class, declaratory and injunctive relief against Fairbanks for sending allegedly deceptive and invalid foreclosure notices, attempting to collect various charges that it was not entitled to, and failing to notify homeowners properly of their right to apply for the Homeowners Emergency Mortgage Assistance Program. Specifically, Alsbrooks requests the following relief: (a) a declaratory judgment that Fairbanks' conduct violates the law; (b) injunctive relief enjoining Fairbanks from commencing or continuing any foreclosures against class members unless and until it complies fully with Pennsylvania law and ceases to demand padded charges and illegal fees; (c) an audit and accounting of all class members' accounts to reverse any illegal fees or charges; (d) damages and/or restitution or amounts improperly applied by Fairbanks; (e) disgorgement of Fairbanks' unjustly obtained funds; (f) an award of attorney's fees, litigation expenses and costs; and (g) such other and further relief as is just and appropriate. As stated above, Fairbanks filed a Notice of Removal for this action on April 16, 2003 alleging that diversity jurisdiction was proper because all parties were diverse and the amount in controversy exceeded $75,000.
II. STANDARD
In order to bring a case in or remove a case to federal court based on diversity jurisdiction, the parties must be diverse from one another and the matter in controversy must exceed $75,000. 28 U.S.C. § 1332(a). In this case, Fairbanks claims that the amount in controversy exceeds $75,000, while Alsbrooks disputes that assertion. "The requirement that the amount in controversy be greater than [$75,000] `must be narrowly construed so as not to frustrate the congressional purpose behind it: to keep the diversity caseload of the federal courts under some modicum of control.'" Pierson v. Source Perrier, S.A., 848 F. Supp. 1186, 1188 (E.D. Pa. 1994) (quoting Packard v. Provident Nat'l Bank, 994 F.2d 1039, 1044-45 (3d Cir. 1993)). Furthermore, "all doubts as to the existence of federal jurisdiction must be resolved in favor of remand."Samuel-Bassett v. Kia Motors Am. Inc., 143 F. Supp.2d 503, 506 (E.D. Pa. 2001) (citing Packard, 994 F.2d at 1044-45). Moreover, as the party asserting jurisdiction, Fairbanks bears the burden of proving that jurisdiction is proper. Packard, 994 F.2d at 1045.
Lastly, the general rule is that "class members may not aggregate their claims in order to reach the requisite amount in controversy and thus each member of the class must independently meet the jurisdictional amount requirement in order to establish diversity jurisdiction under § 1332; each member who fails to meet the jurisdictional amount must be dismissed from the case."Samuel-Bassett, 143 F. Supp.2d at 506-07 (citing In re Life USA Holding Inc., 242 F.3d 136, 142 (3rd Cir. 2001)); Zahn v. Int'l Paper Co., 414 U.S. 291, 294-95 (1973); Snyder v. Harris, 394 U.S. 332, 335-36 (1969). However, there is an exception to the non-aggregation rule "when class members sue jointly to enforce a common title or right in which they have a common and undivided interest." Packard, 994 F.2d at 1050 n. 14. "A common and undivided interest, allowing plaintiffs to aggregate their claims, exists only when plaintiffs' claims derive from rights which they hold in group status." Pierson 848 F. Supp. at 1188 (internal quotation marks omitted). "In other words, a class has a common and undivided interest where only the class as a whole is entitled to the relief requested."Aetna U.S. Healthcare, Inc. v. Hoechst Aktiengesellschaft, 54 F. Supp.2d 1042, 1048 (D. Kan. 1999) ("Aetna I") (internal quotation marks omitted). Furthermore, "[e]ven if plaintiffs' claims present common questions of law and fact, as they must if they are to be certified as a class, it does not necessarily imply that their rights are held in group status." Pierson, 848 F. Supp. at 1188. "Aggregation is not allowed where each class member claims an individual injury, such as a unique amount, that in theory must be proved separately." Id. (citingPackard, 994 F.2d at 1050 n. 14).
III. ANALYSIS
Fairbanks proffers two main arguments for establishing that the amount in controversy exceeds $75,000. First, Fairbanks alleges that Alsbrooks' claim for disgorgement of its allegedly ill-gotten fees would create a common title or right in which all the putative class members have a common and undivided interest. Therefore, Fairbanks argues that this money sought to be disgorged should be aggregated when determining the amount in controversy. Second, Fairbanks alleges that the value of all of the injunctive relief requested by Alsbrooks, aggregated together and taken from the perspective of the cost to itself, the defendant, would meet the jurisdictional amount. As discussed below, both arguments fail.
A. The Disgorgement Claim
As stated above, Fairbanks contends that by requesting that it disgorge all of its allegedly ill-gained funds to the plaintiffs, Alsbrooks has created a common and undivided interest among the putative class. It is readily apparent that there is disagreement among the courts regarding whether a plea for disgorgement creates a common and undivided interest and thus whether the money should be aggregated for purposes of determining the amount in controversy. See e.g. Gibson v. Chrysler Corp., 261 F.3d 927 (9th Cir. 2001) (finding that a disgorgement plea did not trigger the non-aggregation exception); Morrison v. Allstate Indem. Co., 228 F.3d 1255 (11th Cir. 2000) (finding same); Gilman v. BHC Sec. Inc., 104 F.3d 1418 (2nd Cir. 1997) (finding same); Harris v. Physicians Mut. Ins. Co., 240 F. Supp.2d 715 (N.D. Ohio 2003) (finding same); McCoy v. Erie Ins. Co., 147 F. Supp.2d 481 (S.D.W. Va. 2001) (finding same); Dorian v. Bridgestone/Firestone Inc., No. 00-4470, 2000 WL 1570627 (E.D. Pa. Oct. 19, 2000) (finding same); Aetna I, 54 F. Supp.2d 1042 (finding same); Pierson, 848 F. Supp. 1186 (finding same); but see Durant v. Servicemaster Co., 147 F. Supp.2d 744 (E.D. Mich. 2001) (finding that a plea for disgorgement allowed plaintiffs' claims to be aggregated); In re Microsoft Corp. Antitrust Litig., 127 F. Supp.2d 702 (D. Md. 2001) (finding same); Aetna U.S. Healthcare, Inc. v. Hoechst Aktiengesellschaft, 48 F. Supp.2d 37 (D.C. 1999) ("Aetna II") (finding same). This Court chooses to follow the reasoning of prior Eastern District of Pennsylvania cases as well as the majority view on this issue: a claim of disgorgement does not trigger the non-aggregation exception and does not establish a common title or right in which the putative class members have a common and undivided interest. As stated by the Honorable Jay C. Waldman of this court, the contention that "plaintiff's prayer for disgorgement creates a common and undivided interest of a type which may permit aggregation . . . has been persuasively rejected."Dorian, 2000 WL 1570627, at *3.
The Second Circuit and the Ninth Circuit have stated that "`what controls is the nature of the right asserted, not whether successful vindication of the right will lead to a single pool of money that will be allocated among the plaintiffs.'" In re Ford Motor Co./Citibank (South Dakota), N.A., 264 F.3d 952, 961 (9th Cir. 2001) (quoting Gilman, 104 F.3d at 1427); see also Pierson, 848 F. Supp. at 1188 (stating that "[t]he proper focus should not be upon the type of relief that plaintiffs seek, but rather upon the nature and value of the rights that they have asserted"). Those same courts also held that, "despite its cloak of collectiveness, the plaintiffs' disgorgement claim was not aggregable for jurisdictional purposes because `[t]he claim remains one on behalf of separate individuals for the damage suffered by each due to the alleged conduct of defendant.'" Id. (quoting Gilman, 104 F.3d at 1427). Moreover, the "plaintiffs' claims cannot be aggregated simply because they frame their prayer for damages as equitable, rather than legal, relief." Pierson, 848 F. Supp. at 1189 (citing Packard, 994 F.2d at 1050).
In this case, each potential plaintiff separately paid the allegedly illegal fees to Fairbanks and each seeks to enforce his or her own right to recoup those fees from Fairbanks. Each potential plaintiff has his or her own mortgage at issue. Each potential plaintiff could have brought suit on his or her own behalf. No collective right exists in this action and "[p]rior to litigation, no group status or common interest was involved."Aetna I, 54 F. Supp.2d at 1050 (citing Gilman, 104 F.3d at 1430). To hold that by simply requesting disgorgement, Plaintiffs could bring their state claims before a federal court, or that a defendant could remove such claims, would completely undermine the general rule that plaintiffs' claims in a class action may not be aggregated.
Moreover, "`[a]bsent unusual circumstances, unjust enrichment remedies do not provide a generalized recovery of a fixed fund for the class. Instead, each plaintiff is entitled to the defendants' profits which resulted from the wrongdoing to that particular plaintiff.'" Aetna I, 54 F. Supp.2d at 1050 (quoting Campbell v. General Motors Corp., 19 F. Supp.2d 1260, 1268 (N.D. Ala. 1998)). "`To the extent possible, disgorged funds should be apportioned among the individual claimants rather than being treated as a single collective right in which putative class members have an undivided interest.'" Id. (quoting Dixon v. Ford Motor Credit Co., 98-1633, 1998 WL 440304, at *3 (E.D. La. Jul. 31, 1998)). "`While the damages are admittedly based on the defendants' profits, and not the plaintiffs' harm, each recovery is an individual right and constitutes an individual interest.'" Id. (quoting Dixon, 1998 WL 440304, at *3).
For the above reasons, Alsbrooks' plea for disgorgement does not establish a common title or right in which the putative class members have a common and undivided interest. Therefore, the claim is subject to the non-aggregation rule and Fairbanks' argument to the contrary fails.
B. The Injunction Claim
Fairbanks also claims that the costs of the requested injunctions would be enough to satisfy the jurisdictional amount requirement. "In actions seeking declaratory or injunctive relief, it is well established that the amount in controversy is measured by the value of the object of the litigation." Hunt v. Washington State Apple Adver. Com'n, 432 U.S. 333, 347 (1977). Fairbanks claims that the "`object of the litigation' is the value of the revenue that would be lost by Fairbanks in the event that an injunction is granted and Fairbanks is prohibited from charging the disputed fees and charges in the future." (Resp. to Mot., p. 8). Fairbanks further contends that Alsbrooks "cannot dispute that the collective value of the relief sought (the cost of sending new notices to thousands of borrowers, the cost of foregoing various changes in fees in connection with future defaults, and the cost of conducting an accounting of thousands of accounts) will exceed $75,000.00." (Id. at 9).
However, it is clear that in the Third Circuit, the "object of the litigation" is to be viewed from the plaintiffs' standpoint and not from the defendants'. Dorian, 2000 WL 1570627, at *3 (finding that the Third Circuit has rejected the contention that the cost of the defendant's compliance with the injunctive relief sought by the plaintiff should be considered part of the amount in controversy); McNamara v. Philip Morris Cos., Inc., No. 98-4430, 1999 WL 554592, at *3 (E.D. Pa. Jul. 09, 1999);Johnson v. Gerber Prods. Co., 949 F. Supp. 327, 330 (E.D. Pa. 1996) (stating that "`it is the value to the plaintiff to conduct his business or personal affairs free from the activity sought to be enjoined that is the yardstick for measuring the amount in controversy'" (quoting In re Corestates Trust Fee Litig., 39 F.3d 61, 65 (3d Cir. 1994)); Pierson, 848 F. Supp. at 1189 (stating that "the value of equitable relief must be determined from the viewpoint of the plaintiff rather than the defendant"); see also Packard, 994 F.2d at 1050 (stating that "[i]n a diversity-based class action seeking primarily money damages, allowing the amount in controversy to be measured by the defendant's cost would eviscerate Snyder's holding that the claims of class members may not be aggregated in order to meet the jurisdictional threshold").
If this Court were to aggregate Fairbanks' costs in complying with the injunctive relief requested by Alsbrooks in determining the amount in controversy it,
"would provide plaintiffs with a means by which to evade the impact of Snyder and Zahn v. International Paper Co.,. . . . If defendants are allowed to remove such suits to federal court, then plaintiffs must be allowed to file them in federal court originally. All that plaintiffs would need to do to avoid the rule of Snyder and Zahn would be to pray for an injunction."McNamara, 1999 WL 554592, at *4 (quoting Snow v. Ford Motor Co., 561 F.2d 787, 790 (9th Cir. 1977)). Fairbanks' analysis of the "object of the litigation", utilizing its own aggregated costs in complying with the injunction, has been rejected in this Circuit. Moreover, there is no evidence that the cost to any particular plaintiff of having his or her account audited, receiving a new notice from Fairbanks, or of the savings of fees to any particular plaintiff would reach the jurisdictional amount threshold. Therefore, Fairbanks has not met its burden of establishing that the costs of the injunction, taken from each individual prospective plaintiff's view, would meet the $75,000 threshold and its argument to the contrary must fail. IV. CONCLUSION
Fairbanks acknowledges that attorney's fees may not be aggregated in determining the amount in controversy. However, Fairbanks argues that any portion of attorney's fees attributable to Alsbrooks should be considered in reaching the jurisdictional amount. There is no indication that Alsbrooks' pro rata share of attorney's fees would place the value of this case above the $75,000 threshold.
Requesting disgorgement of allegedly ill-gained fees does not create a common title or right in which the putative class members have a common and undivided interest. Therefore, those fees may not be aggregated in determining the amount in controversy. Furthermore, when viewing the value of injunctive relief, it must be viewed from the plaintiffs' perspective, not by the aggregate amount that the defendant would have to pay. As a result, Fairbanks has failed to establish that amount in controversy in this action exceeds $75,000. Therefore, this Court does not have jurisdiction over the case, and it must be remanded.
An appropriate Order follows.
ORDER
AND NOW, this 10th day of June, 2003, upon consideration of the Plaintiff's Motion to Remand (Doc. No. 6), and the Defendant's Response, it is hereby ORDERED that the Motion is GRANTED and the Clerk of Court shall REMAND this matter to the Court of Common Pleas in Philadelphia County and mark this case as CLOSED.