Class Actions -- 2002



Ford Motor Co. v. McCauley   (U.S. Supreme Court)

Requirements for diversity jurisdiction

The Supreme Court granted certiorari 2/19/02 to resolve a circuit split regarding whether the cost to the defendant of complying with an injunction sought by a plaintiffs' class satisfies the federal diversity statute's $75,000 amount-in-controversy requirement. The plaintiffs' class in the Ford case sought an injunction reinstating a rebate program offered by the defendants. According to plaintiffs, the cost to the defendants of complying with the proposed injunction would have exceeded the $75,000. The circuit courts are nearly evenly split over how to value an injunction for jurisdictional purposes, with about half looking to the benefit each individual plaintiff would derive from the proposed injunction and half looking to the higher of the benefit to each plaintiff or the cost to the defendant of compliance. The Ninth Circuit compromised and held that the correct approach depends on the "nature of and value of the right asserted." If each plaintiff or class member is asserting an individual right, the court must consider the cost to the defendant, but only the cost of an injunction running in favor of one plaintiff. If the right is "common and undivided," the court must consider the higher of the benefit to each plaintiff or the cost to the defendants of a judgment in the plaintiffs' favor. This case is of interest to all companies involved in class action litigation in the federal courts.

On 10/15/02, the Court dismissed its review of the case as improvidently granted.