PALEY v. COCA COLA COMPANY

SWAINSON, J. (for reversal).

This case is one of a series of lawsuits arising out of a nationwide game-contest called "Big Name Bingo". It ran from March 10, 1969 to May 31, 1969. Defendant Coca-Cola sponsored the contest and defendant Glendinning Companies acted as the promotional agent. The game consisted of game cards which contained ten questions. The questions consisted of a brief statement identifying the achievement of some famous person. The question was to be matched with a picture of the person. The pictures were impressed on the underside of Tab and Coca-Cola bottlecaps and can covers. The rules stated that there might not be a correct answer for each question. The prize for successfully completing a card was $100. Plaintiffs asserted that defendants had acted fraudulently in not informing the public that some of the questions required two answers. Plaintiffs allege that as a result of this rule change only a few of the 1.5 million entrants were adjudged winners of the $100 prize. Plaintiff Paley first brought a suit in Federal district court against the same defendants. This was dismissed on November 17, 1970. Paley v Coca-Cola Co and Glendinning Companies, Inc, Civ No 35219 (ED Mich, 1970). Subsequent to the dismissal, on November 19, 1970, Paley filed a class action in Oakland County Circuit Court. An amended complaint was filed on December 14, 1970. Twenty-two additional plaintiffs from California, Massachusetts and the District of Columbia were included in the amended complaint. Five of these plaintiffs had filed a lawsuit in Federal court in California. This suit had likewise been dismissed, Carlson v Coca-Cola Co and Glendinning Companies, Civ No 701544 GSL (ND Cal, Oct 16, 1970), and is being appealed to the Ninth Circuit Court of Appeals. Other legal action has also arisen from this game. In the complaint filed in Oakland Circuit Court, plaintiff Paley brought a class action on behalf of himself and 1,500,000 individuals who had entered the contest. It is conceded that the claim of Paley and each of the other 22 named plaintiffs is in the amount of $100. Plaintiff further conceded for purposes of deciding Coca-Cola's motion to dismiss that the claims of the representative plaintiff and each member of the class be separate and distinct claims and that the claims were not equitable. Plaintiff in his complaint stated:

"(1) That this litigation is maintained by virtue of and under authority of Rule 208, GCR 1963."

Plaintiff alleged three separate grounds for relief. First, that the defendants employed false and deceptive advertising and that the actions of defendants constituted unfair methods of competition in violation of MCLA 445.801 et seq.; MSA 19.853(1) et seq. and MCLA 445.701 et seq.; MSA 28.31 et seq.; second, breach of contract; and third, fraud.

On December 30, 1970, defendant Coca-Cola filed a motion to dismiss for lack of jurisdiction. On January 15, 1971, defendant Glendinning Companies filed motions for summary judgment and accelerated judgment. On February 22, 1971, the trial court dismissed the action on the ground that it lacked jurisdiction. The Court of Appeals reversed holding that the individual plaintiffs could aggregate their claims to meet the jurisdictional requirement of circuit court. 39 Mich. App. 379. We granted leave to appeal. 387 Mich. 797.

We agree with the Court of Appeals that this case involves a narrow and precise issue. As Judge O'HARA stated, 39 Mich. App. 380 :

"In question form it is: whether or not multiple plaintiffs in a claimed class action may aggregate their individual and separate claims in order to satisfy the minimum jurisdictional amount necessary to maintain an original action in the circuit court?"

I. JURISDICTIONAL REQUIREMENT

At the outset, we must distinguish between the power of our Court to control practice and procedure in the courts of this state, and the power of the Legislature to vest jurisdiction in the courts of this state. Const 1963, art 6, § 13 provides:

"The circuit court shall have original jurisdiction in all matters not prohibited by law; appellate jurisdiction from all inferior courts and tribunals except as otherwise provided by law; power to issue, hear and determine prerogative and remedial writs; supervisory and general control over inferior courts and tribunals within their respective jurisdictions in accordance with rules of the supreme court; and jurisdiction of other cases and matters as provided by rules of the supreme court."

The phrase "in all matters not prohibited by law" means that the Legislature may limit by statute that constitutionally vested plenary jurisdiction of the circuit court. Under MCLA 600.605; MSA 27A.605, the original jurisdiction of the circuit court is defined as follows:

"Circuit courts have original jurisdiction to hear and determine all civil claims and remedies, except where exclusive jurisdiction is given in the constitution or by statute to some other court or where the circuit courts are denied jurisdiction by the constitution or statutes of this state."

The constitutionally vested plenary jurisdiction of the circuit court has been limited by the jurisdictional provision of the district court as found in MCLA 600.8301; MSA 27A.8301 which provides:

"The district court shall have exclusive jurisdiction in civil actions when the amount in controversy does not exceed $10,000.00."

The rule making power of the Supreme Court is derived from Const 1963, art 6, § 5 which provides:

"The supreme court shall by general rules establish, modify, amend and simplify the practice and procedure in all courts of this state. The distinctions between law and equity proceedings shall, as far as practicable, be abolished. The office of master in chancery is prohibited."

Pursuant to the grant of authority in the 1963 Constitution and its predecessor, Const 1908, art 7, § 5, our Court has promulgated general court rules. GCR 1963, 208.1 provides the procedure in class action cases. However, GCR 1963, 208.1 does not create jurisdiction in the circuit courts. It only provides the rules of procedure if circuit court jurisdiction already exists. Our Court has dealt with the distinction between rules of procedure and jurisdiction in numerous cases. In Shannon v Ottawa Circuit Judge, 245 Mich. 220 (1928), our Court was faced with a local procedural rule which inhibited the making of contracts between attorneys and clients and substantially affected the chances of certain plaintiffs to successfully prosecute a lawsuit. This Court invalidated the local court rule and quoted from Washington-Southern Nav Co v Steamboat Co, 263 U.S. 629, 635; 44 S Ct 220; 68 L Ed 480 (1924) where the Court stated:

"`The function of rules of court is to regulate the practice of the court and facilitate the transaction of its business.

"`A rule of court cannot enlarge or restrict jurisdiction, or abrogate or modify the substantive law.'"

245 Mich. 223.

In Ray Jewelry Co v Darling, 251 Mich. 157, 160 (1930), the Court stated:

"It may be conceded that the common pleas court was created in pursuance of legislation and derives all its power and authority from it. It may not expand or contract, enlarge or diminish, the jurisdiction conferred upon it by rule or otherwise." (Emphasis added.)

It is thus well settled that the jurisdictional requirements of MCLA 600.8301; MSA 27A.8301 and MCLA 600.605; MSA 27A.605 are dispositive of where the plaintiffs' action must be brought in this case. GCR 1963, 208.1 does not control the jurisdictional issue in this case. If plaintiffs' action was properly brought in the circuit court, they can invoke GCR 1963, 208.1(3) and proceed as a class action. If the action was not properly brought in the circuit court, GCR 1963, 208.1(3) cannot leap the jurisdictional barrier and create circuit court jurisdiction where none existed. Thus, we are faced with the issue of whether the claims of each plaintiff, admittedly less than the $3,000 jurisdictional requirement which existed at the time of the filing of this cause of action may be aggregated to achieve circuit court jurisdiction. This is a question of first impression in our state. Defendants cite two cases which they assert stand for the proposition that claims may not be aggregated to achieve circuit court jurisdiction, Henderson v Detroit M R Co, 131 Mich. 438 (1902); Barker v Vernon Twp, 63 Mich. 516 (1886). Barker stated as dicta that each party joined as a plaintiff had to individually meet the jurisdictional requirements. 63 Mich. 520. The statement in Henderson seems to imply that aggregation is not permissible, but does not explicitly state that contention. Because the holdings in these cases did not turn on the question of aggregation, and because they were decided before our Court recognized the propriety of class actions in Detroit v Detroit United Railway, 226 Mich. 354 (1924), these cases are clearly not dispositive of the issue involved.

We hold that the aggregation of claims will not be permitted as a mode of obtaining circuit court jurisdiction in class action cases. We find the reasoning of the United States Supreme Court in Snyder v Harris, 394 U.S. 332; 89 S Ct 1053; 22 L Ed 2d 319 (1969) persuasive. The Court was dealing with two cases. In each, the plaintiff sued for himself and all others similarly situated. In each, the plaintiff alleged personal damages insufficient to sustain Federal jurisdiction and requested the Court to aggregate the various claims. In denying the request, the Court stated (p 335):

"The traditional judicial interpretation * * * has been from the beginning that the separate and distinct claims of two or more plaintiffs cannot be aggregated in order to satisfy the jurisdictional amount requirement. Aggregation has been permitted only (1) in cases in which a single plaintiff seeks to aggregate two or more of his own claims against a single defendant and (2) in cases in which two or more plaintiffs unite to enforce a single title or right in which they have a common and undivided interest. * * * Spurious class actions * * * were in essence merely a form of permissive joinder in which parties with separate and distinct claims were allowed to litigate those claims in a single suit simply because the different claims involved common questions of law or fact. In such cases aggregation was not permitted: each plaintiff had to show that his individual claim exceeded the jurisdictional amount."

This refusal was based upon a settled interpretation of the phrase "matter in controversy" which is similar to the phrase "amount in controversy" used in MCLA 600.8301; MSA 27A.8301 to define the upper dollar limit of district court jurisdiction.

Plaintiffs have argued that following Snyder will retard if not eliminate the use of the class action device in matters such as consumer protection suits. We share the plaintiffs' concern but not their conclusion. Such suits commonly present traditional forms of equitable claim which permits entry into the circuit courts. Once properly within that domain, a class action will be appropriate.

An example is Bond v Ann Arbor School Dist, 383 Mich. 693 (1970), where two plaintiffs brought suit on behalf of themselves and all parents of school children within the district. They sought a judgment declaring certain fees and charges to be unconstitutional, an injunction prohibiting any further charges and a refund of all those fees and charges collected since the suit was instituted. As to the propriety of the class action, this Court stated (p 702):

"The Court of Appeals found plaintiffs' action to be a proper class suit. The action was treated as a class suit by the trial court. If the class action was properly brought, the fact that the fees to be recovered are small for each member of the class, or that expense may be entailed in making a refund, or that the funds have been used by defendant, ought not to bar recovery. It is in the very nature of a class action that the claim of each individual member of the class may be such as to alone scarcely warrant pursuit of repayment. If an action is successful, the fruits of the action should not be denied to the class unless the reasons for denial are most cogent. We do not perceive here such difficulties as would merit denying recovery. This situation was one peculiarly adapted to a class suit. The claim of each member of the class alone did not warrant an action, all members were affected in like manner by the action of defendant, and the issue was one that demanded legal clarification."

The plaintiffs in the instant case, unlike those in Bond, have pursued a purely legal remedy.

Also instructive is Justice LEVIN'S opinion in Pressley v Wayne County Sheriff, 30 Mich. App. 300 (1971). Plaintiff sued for a writ of mandamus on behalf of himself and all others similarly situated. A statute permitted those accused of traffic offenses to post bond by depositing ten percent of the amount of bail set by the court. Some judges claimed the right to deny this benefit to certain offenders by also requiring a surety deposit.

The circuit court granted the relief sought but only as to the particular plaintiff. In indicating that relief should have been extended to all others with the class, Justice LEVIN offered the following quotation from Montgomery Ward Co, Inc v Langer, 168 F.2d 182, 187 (CA 8, 1948), (p 318):

"`The class action was an invention of equity [citation omitted], mothered by the practical necessity of providing a procedural device so that mere numbers would not disable large groups of individuals, united in interest, from enforcing their equitable rights nor grant them immunity from their equitable wrongs.'"

Justice LEVIN then proceeded to list some relevant factors (p 320):

"As in Ann Arbor School District, the claim of each member of the class might not warrant an action; surely the attorneys representing Pressley would have found it simpler to obtain a $50 surety bond than to commence and prosecute this litigation. All members of the class Pressley represents are affected in like manner by the actions he complains of and the issue is one that demands legal clarification.

"The adaptation of the class action to the protection of the rights of indigent accused persons is a sensible extension of this procedural device which was fashioned in equity to assure that important rights would not go unvindicated. In Adderly v Wainwright (MD Fla, 1968), 46 FRD 97, the court ruled that habeas corpus applicants attacking the Florida death penalty in capital cases could maintain a class action. There were in excess of 50 prisoners in the class sought to be represented but, as here, the size of the class was subject to constant fluctuations. The court declared that both the size of the class sought to be represented and its lack of stability made joinder of all members impracticable. There were common questions of law and fact involving the death penalty and Florida's practice in capital cases. The coincidence of the interests of the representatives and the other members of the class was thought to insure that the interest of the class would be adequately and fairly protected by the representative parties."

It should be clear that our decision today does not speak in terms so broad as to foreclose legitimate class action claims. The class action device remains a valuable and necessary vehicle for obtaining adequate relief in certain situations.

Amicus Curiae also cite numerous cases in which circuit court jurisdiction was allowed without the minimal jurisdictional amount being present. They contend that these cases are support for the proposition that Michigan has recognized aggregation of claims or, at the very least, the right to prosecute class actions in circuit court despite the jurisdictional amount. However, these cases merely reinforce the views expressed above. In all of these cases, the plaintiff asserted a separate basis of jurisdiction from the minimum amount of damages. Thus, in Alan v Wayne County, 388 Mich. 210 (1972), plaintiff had filed a complaint for declaratory judgment and an injunction. It is clear that the circuit court is the only court that has jurisdiction to grant injunctive relief. The district court by the terms of MCLA 600.8301; MSA 27A.8301 does not deprive the circuit court of jurisdiction in cases involving equitable relief. Plaintiff thus had a separate basis of circuit court jurisdiction and once the plaintiff was in circuit court, he had the right to utilize any procedural rule including GCR 1963, 208.1. All of the other cases are likewise distinguishable.

Finally, we must briefly answer the assertions of the Amicus Curiae that since all class actions are equitable in nature, they must be maintained in circuit court. We do not accept this assertion. This proposition is based on the fact that a class action is a distinct form of relief such as an injunction or writ of mandamus. However, class actions are merely procedural devices to expedite proceedings in certain cases. The type of class action involved in this case, the so-called spurious action (see GCR 1963, 208.1[3]) is actually a form of permissive joinder of parties. It is not a separate cause of action and the rules under GCR 1963, 208.1 do not create a new cause of action. Thus, we hold that the Court of Appeals was incorrect in permitting the aggregation of claims.

The judgment of the Court of Appeals is reversed and the judgment of the trial court dismissing the action is affirmed. Costs to defendant.

T.E. BRENNAN and M.S. COLEMAN, JJ., concurred with SWAINSON, J.

LEVIN, J., did not sit in this case.