Boyd v. Homes of Legend

• Decision Date: 16 September 1999
• Docket Number: 97-6834 and 97-6835,Nos. 97-6833,s. 97-6833
• Citation: 188 F.3d 1294
• Parties: (11th Cir. 1999) Toby BOYD, Plaintiff-Appellee, v. HOMES OF LEGEND, INC., a corporation, Defendant-Appellant. Daniel R. Foster, Sharon Foster, et al., Plaintiffs-Appellees, v. Homes of Legend, Inc., a corporation, Defendant-Appellant. Kenneth M. Bass, Plaintiff-Appellee, v. Homes of Legend, Inc., a corporation, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1294

188 F.3d 1294 (11th Cir. 1999)

Toby BOYD, Plaintiff-Appellee, v. HOMES OF LEGEND, INC., a corporation, Defendant-Appellant.

Daniel R. Foster, Sharon Foster, et al., Plaintiffs-Appellees, v. Homes of Legend, Inc., a corporation, Defendant-Appellant.

Kenneth M. Bass, Plaintiff-Appellee, v. Homes of Legend, Inc., a corporation, Defendant-Appellant.

Nos. 97-6833, 97-6834 and 97-6835.

United States Court of Appeals Eleventh Circuit.

Sept. 16, 1999.

Appeals from the United States District Court for the Middle District of Alabama. (Nos. CV-97-T-142-E, CV-97-T-152-N, CV-97-T-161-N), Myron H. Thompson, Judge.

Before TJOFLAT, Circuit Judge, and GODBOLD and HILL, Senior Circuit Judges.

TJOFLAT, Circuit Judge:

I.

In these three consolidated cases, Boyd, Bass, and Foster,¹ retail purchasers of mobile homes (from a mobile home dealer) claim that their homes were defective and unmerchantable when purchased, and they seek compensatory and punitive damages from the manufacturer under the Magnuson-Moss Act, 15 U.S.C. 2311(d) (1994), for breach of warranty, both express and implied, and under several state-law tort theories of recovery. In one of the cases, Foster, the purchaser also seeks the same damages from the dealer. In each case, the buyer and the dealer memorialized the transaction by executing a retail installment contract. The contract contained an arbitration provision, providing for binding arbitration of any claim "arising from or relating to this Contract or the parties thereto."

This litigation began in Alabama circuit court in January 1997.² After the purchasers filed their complaints, the manufacturer removed the cases to the United States District Court for the Middle District of Alabama;³ the manufacturer represented that the district court had subject matter jurisdiction over the controversies because one of the purchasers' claims sought relief under the Magnuson-Moss Act.⁴ Once in federal court, the manufacturer, contending that it was entitled to the protection of the mandatory arbitration provision contained in the retail installment contracts, moved the district court pursuant to the Federal Arbitration Act, 9 U.S.C. 1-16 (1994), to enter an order compelling the purchasers to arbitrate their claims against it and staying further proceedings in the cases. In Foster, the dealer also sought an order compelling arbitration.

Before the district court could address these motions, the purchasers moved the court to remand the cases to state court on the ground that the district court lacked subject matter jurisdiction. They cited the same Magnuson-Moss Act provision the manufacturer had cited as the basis for the district court's subject matter jurisdiction, 15 U.S.C. 2310(d) (1994). That provision states, in relevant part:

(1) [A] consumer who is damaged by the failure of a supplier, warrantor, or service contractor to comply with any obligation ... under a written warranty, implied warranty, or service contract, may bring suit for damages and other legal and equitable relief--

....

(B) in an appropriate district court of the United States, subject to paragraph (3) of this subsection.

....

(3) No claim shall be cognizable in a suit brought under paragraph (1)(B) of this subsection--

....

(B) if the amount in controversy is less than the sum or value of $50,000 (exclusive of interests and costs) computed on the basis of all claims to be determined in this suit....

15 U.S.C. 2310(d)(1), (3).

The purchasers contended that the only claims the court could consider in determining the amount in controversy, and thus the court's subject matter jurisdiction, were their breach of warranty claims,⁵ and that none of those claims properly could be valued at $50,000 or more. The value of those claims, the purchasers argued, was, in each case, the purchase price paid for the mobile home. In Boyd, the purchase price was $15,540; in Bass, the price was $18,400; in Foster, it was $25,680. The purchasers acknowledged that the ad damnum clauses at the end of their complaints prayed for "such sum of compensatory and punitive damages as a jury may assess, in excess of $10,000, all together with interest, costs, and attorney's fees under the Magnuson-Moss Warranty Act."⁶ They contended, however, that only the purchase prices of their mobile homes could be used in calculating the amount in controversy; accordingly, the prayer for punitive damages, interest, costs, and attorney's fees should be disregarded. These items should be disregarded, they said, because Alabama Supreme Court precedent precluded the recovery of punitive damages in actions for breach of warranty (whether express or implied), and 15 U.S.C. 2310(d)(3) precluded the use of interest, costs, and attorney's fees (an element of costs) in determining the amount in controversy.

The district court rejected the purchasers' argument that punitive damages could not be taken into account in resolving the jurisdictional issue and therefore denied their motions for remand. In doing so, the court appears to have relied exclusively on the purchasers' attorneys' presumed compliance with Rule 11 of the Federal Rules of Civil Procedure when, in the ad damnum clauses of the complaints, counsel sought the recovery of "compensatory and punitive damages ..., all together with interest, costs, and attorneys fees under the Magnuson-Moss Warranty Act." In its dispositive order, the court said:

The court assumes that plaintiffs have complied with Rule 11 of the Federal Rules of Civil Procedure, which provides that, "By presenting to the court ... a pleading, written motion, or other paper, an attorney or unrepresented party is certifying that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances, ... the claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of a new law." In other words, the court assumes that under existing law or an "extension, modification, or reversal of existing law or the establishment of new law," the plaintiffs are entitled to both compensatory and punitive damages under the Magnuson-Moss Act. (If the plaintiffs have violated Rule 11, then they should so inform the court.) Because plaintiffs are seeking both compensatory and punitive damages, the court finds by a preponderance of the evidence that defendants have satisfied the jurisdictional amount required.

On October 1, 1997, in a published decision, Boyd v. Homes of Legend, Inc., 981 F.Supp. 1423 (M.D.Ala.1997), the district court disposed of the several motions to compel arbitration and to stay further proceedings in the cases. The court denied the manufacturer's motions, concluding that the manufacturer was not entitled to invoke the arbitration clause contained in the retail installment contracts. The court, however, granted the dealer's motion in Foster; in addition, it dismissed the dealer from that case. The Foster purchasers thereafter moved the court to enter final judgment against them on their claims against the dealer pursuant to Rule 54(b) of the Federal Rules of Civil Procedure. The court granted their motion, and entered a Rule 54(b) judgment.

The Foster purchasers now appeal that judgment--for the purpose of challenging the district court's decision compelling them to arbitrate their claims against the dealer and dismissing their lawsuit. We have jurisdiction of their appeal under 28 U.S.C. 1291 (1994). The manufacturer also appeals, challenging the district court's denial of its motions to compel arbitration and to stay proceedings. We have jurisdiction of its appeal under 9 U.S.C. 16(a)(1)(A), (B).

II.

As noted above, the purchasers, in their motions to remand, asserted that the district court lacked subject matter jurisdiction to entertain their claims. The district court found that it had jurisdiction because, in each case, the purchaser's attorneys represented, under penalty of Rule 11 sanction, that the purchaser's compensatory damages (measured by the purchase price of his mobile home) and the possibility of a punitive damages award established the $50,000 jurisdictional amount. None of the purchasers has taken issue with the court's finding on appeal. In other words, the purchasers have conceded the jurisdictional point.

We cannot accept their concession. In addition to our obligation to satisfy ourselves that we have jurisdiction over these appeals, we must also be satisfied that the district court had jurisdiction to entertain these cases on the merits. See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, ----, 118 S.Ct. 1003, 1012-13, 140 L.Ed.2d 210 (1998).⁷ When the lower court lacks jurisdiction, we have jurisdiction on appeal for the sole purpose of correcting the lower court's error in entertaining the suit. See Tamiami Partners, Ltd. v. Miccosukee Tribe of Indians of Fla., 177 F.3d 1212, 1221 (11th Cir.1999). Accordingly, we are obliged to consider whether the district court erred when it held that it had subject matter jurisdiction to resolve these controversies.⁸

The presence of subject matter jurisdiction in these cases turns on whether the purchasers could recover punitive damages if they prevailed on their breach of warranty claims against the manufacturer--and, in Foster, against the dealer as well--under the Magnuson-Moss Act.⁹ The answer to this question depends on the remedies the law of Alabama, where the purchasers bought their mobile homes, provides in breach of warranty cases.

That we should look to state law, rather than federal law, to determine whether punitive damages are available under the Magnuson-Moss Act was decided in MacKenzie v. Chrysler Corporation, 607 F.2d 1162 (5th Cir.1979), a case that constitutes binding precedent in this circuit.¹⁰ In MacKenzie, the purchaser of a new car sued the manufacturer...