631 F.3d 392 (7th Cir. 2011), 09-1603, Greenberger v. GEICO General Ins. Co.

Docket Nº:09-1603.
Citation:631 F.3d 392
Opinion Judge:SYKES, Circuit Judge.
Party Name:Steven GREENBERGER, individually and on behalf of all others similarly situated, Plaintiff-Appellant, v. GEICO GENERAL INSURANCE COMPANY, et al., Defendants-Appellees.
Attorney:Michael S. Hilicki (argued), Walner Law Firm, Ltd., Chicago, IL, for Plaintiff-Appellant. Sheila Carmody, Snell & Wilmer, Phoenix, AZ, Andrew M. Jacobs (argued), Snell & Wilmer, Tucson, AZ, for Defendants-Appellees.
Judge Panel:Before EASTERBROOK, Chief Judge, and KANNE and SYKES, Circuit Judges.
Case Date:January 10, 2011
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit
 
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631 F.3d 392 (7th Cir. 2011)

Steven GREENBERGER, individually and on behalf of all others similarly situated, Plaintiff-Appellant,

v.

GEICO GENERAL INSURANCE COMPANY, et al., Defendants-Appellees.

No. 09-1603.

United States Court of Appeals, Seventh Circuit.

January 10, 2011

Argued Sept. 25, 2009.

Page 393

[Copyrighted Material Omitted]

Page 394

Michael S. Hilicki (argued), Walner Law Firm, Ltd., Chicago, IL, for Plaintiff-Appellant.

Sheila Carmody, Snell & Wilmer, Phoenix, AZ, Andrew M. Jacobs (argued), Snell & Wilmer, Tucson, AZ, for Defendants-Appellees.

Before EASTERBROOK, Chief Judge, and KANNE and SYKES, Circuit Judges.

SYKES, Circuit Judge.

Steven Greenberger's car was damaged in an accident, and the next day his insurer, GEICO General Insurance Co., estimated the damage and wrote him a check to cover his claim. Greenberger accepted this payment but never repaired the car. Instead, he donated the car to charity and later sued GEICO in state court alleging breach of contract, consumer fraud in violation of 815 ILL. COMP. STAT.. 505/1 et seq. , and common-law fraud. The suit was filed as a class action, so GEICO removed it to federal court under the Class Action Fairness Act, 28 U.S.C. § 1332(d).

Though legally distinct, Greenberger's contract and fraud claims are all premised on the same basic factual allegation: that GEICO systematically omits necessary repairs from its collision-damage estimates in violation of the promise to restore the policyholder's vehicle to its preloss condition. The district court sidestepped the class-certification question, dismissed the statutory consumer-fraud claim, and then entered summary judgment for GEICO on

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the breach-of-contract and common-law fraud counts. Greenberger appeals.

We affirm. All of Greenberger's claims are foreclosed by the Illinois Supreme Court's comprehensive decision in Avery v. State Farm Mutual Automobile Insurance Co., 216 Ill.2d 100, 296 Ill.Dec. 448, 835 N.E.2d 801 (2005). Among other important holdings, Avery established the common-sense proposition that a policyholder's suit against his insurer for breach of its promise to restore his collision-damaged car to its preloss condition cannot succeed without an examination of the car. Id., 296 Ill.Dec. 448, 835 N.E.2d at 826. Greenberger gave away his car, and without it, he cannot prove that what GEICO paid him was inadequate to restore the car to its preloss condition.

Avery also made clear that fraud claims must contain something more than reformulated allegations of a contractual breach. Id., 296 Ill.Dec. 448, 835 N.E.2d at 844. Greenberger alleges that GEICO never intended to restore his car to its preloss condition and failed to disclose that it regularly breaches this contractual promise. These are breach-of-contract allegations dressed up in the language of fraud. They cannot support statutory or common-law fraud claims.

I. Background

On July 4, 2002, Greenberger, a professor and administrator at a Chicago law school, was involved in an automobile accident, and his 1994 Acura sustained damage to its bumper, steering box, suspension, and lower body. The next day, a GEICO insurance adjuster inspected the car at Greenberger's home and wrote him a check for $3,284.69 ($3,784.69 minus a $500 deductible). Greenberger cashed the check but did not repair his car. Five months later, a stranger approached Greenberger in a parking lot and expressed interest in buying the car. Greenberger permitted this prospective buyer to take the Acura to a friend's body shop for an estimate of what it would cost to repair it. The buyer's mechanic, Sarkit Tokat of Lake Side Auto Rebuilders, delivered an estimate of $4,938.65, about $1,150 higher than GEICO's estimate. The sale was not made, however, and in December 2002 Greenberger donated the car to charity without making any repairs.

Exactly three years after accepting GEICO's payment on his claim, Greenberger filed this proposed class-action lawsuit in Cook County Circuit Court alleging breach of contract, violation of the Illinois Consumer Fraud and Deceptive Practices Act, 815 ILL. COMP. STAT.. 505/1 et seq. , and common-law fraud.1 He claimed that GEICO systematically underpays on its auto-accident claims by omitting necessary repairs from vehicle-damage estimates. This practice, he alleged, violates GEICO's contractual promise to restore the insured's vehicle to its preloss condition and constitutes statutory and common-law fraud. GEICO removed the case to federal court under the Class Action Fairness Act, 28 U.S.C. § 1332(d) (" CAFA" ).

The district court dismissed the statutory consumer-fraud claim without prejudice. Greenberger amended his complaint and again the court dismissed the statutory claim, this time with prejudice, and also denied Greenberger's motion to file a third amended complaint. Greenberger's other claims, however, were allowed to proceed. The court eventually granted GEICO's motion for summary judgment on the

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breach-of-contract and common-law fraud claims, and accordingly did not address the issue of class certification. After an unsuccessful motion for reconsideration, Greenberger appealed.

At oral argument we asked counsel whether the district court's failure to certify a class had any effect on the court's subject-matter jurisdiction. In supplemental briefing GEICO argued that federal jurisdiction was intact under CAFA even though the district court bypassed the issue of class-certification. Greenberger argued the opposite: that the district court lost jurisdiction to consider his claims on the merits because it never certified the case as a class action.

II. Discussion

A. Jurisdiction

As we have noted, we raised the question of subject-matter jurisdiction from the bench and ordered supplemental briefing on whether the district court's failure to certify a class has any effect on federal jurisdiction. The supplementals were filed, but we have since resolved the jurisdictional issue in another case, and our jurisdiction is secure. In Cunningham Charter Corp. v. Learjet, Inc., 592 F.3d 805, 806 (7th Cir.2010), we held that federal jurisdiction under CAFA does not depend on class certification. Id. More specifically, Cunningham held that a district court's denial of class certification does not oust the court's subject-matter jurisdiction. Id.

CAFA confers federal jurisdiction over certain qualifying class actions-those " in which at least one member of the class is a citizen of a different state from any defendant (that is, in which diversity may not be complete)." Id. " Class action" is defined as " any civil action filed under Rule 23 of the Federal Rules of Civil Procedure or similar State statute or rule of judicial procedure authorizing an action to be brought by 1 or more representative persons as a class action." 28 U.S.C. § 1332(d)(1)(B) (emphasis added). This language, we said in Cunningham, means that federal jurisdiction does not depend on whether the district court actually certifies a class. 592 F.3d at 806-07. Instead, jurisdiction is determined based on the facts at the time of filing or removal and is not lost by subsequent developments in the case. Id. This understanding of CAFA comports with the general principle that (with immaterial exceptions) " jurisdiction once obtained normally is secure." Id. at 807; see also St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 292-93, 58 S.Ct. 586, 82 L.Ed. 845 (1938).

Applying Cunningham here, the district court's failure to certify a class has no effect on federal jurisdiction. At the time of removal, Greenberger's suit was a qualifying class action under CAFA. That the district court sidestepped the issue of class certification does not undermine subject-matter jurisdiction. We may proceed to the merits.

B. Breach-of-Contract Claim

We review the district court's grant of summary judgment de novo, construing all facts and reasonable inferences in Greenberger's favor. Trentadue v. Redmon, 619 F.3d 648, 652 (7th Cir.2010). Summary judgment is appropriate if there is no genuine dispute of material fact and GEICO is entitled to judgment as a matter of law. FED.R.CIV.P. 56(c).

To prevail on his breach-of-contract claim, Greenberger has the burden of proving that the amount GEICO paid on his auto-collision claim was insufficient to restore his car to its preloss condition. Because Greenberger donated his car to charity, he cannot make the showing of

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proof required to establish a breach of GEICO's contractual promise. This conclusion flows directly from the Illinois Supreme Court's decision in Avery. See 296 Ill.Dec. 448, 835 N.E.2d at 826.

Avery was a nationwide class action against State Farm Automobile Insurance Company challenging the insurer's practice of not using original equipment manufacturer parts (" OEM parts" ) to repair its insureds' vehicles. The plaintiff-policyholders claimed that this practice breached State Farm's promise to restore collision-damaged cars to their preloss condition and also was fraud. Id., 296 Ill.Dec. 448, 835 N.E.2d at 815. They won a massive award-$1.1 billion-but the judgment did not hold up on review in the Illinois Supreme Court. As relevant here, the court held that the breach-of-contract award could not be affirmed because

in order to establish a breach of the " pre-loss condition" promise, plaintiffs would have to show that the parts specified or used by State Farm, whether OEM or non-OEM parts, did not restore the vehicle to its preloss condition. A necessary first step in making this showing would be to examine each class member's vehicle to determine its preloss condition.

Id., 296 Ill.Dec. 448, 835 N.E.2d at 826. Avery thus stands for the proposition that a claim for breach of an auto insurer's promise to restore an insured's car to its preloss condition cannot succeed without an examination of the car.

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