Ayres v. General Motors Corp.

Decision Date29 November 2000
Docket NumberNo. 98-8696,98-8696
Citation234 F.3d 514
Parties(11th Cir. 2000) Lisa M. AYRES, on behalf of herself and other persons similarly situated, Ronald L. Swann, Administrator of the Estate of Richard W. Swann, et al., Plaintiffs- Appellees, v. GENERAL MOTORS CORPORATION and Delco Electronics Corporation, Defendants- Appellants.
CourtU.S. Court of Appeals — Eleventh Circuit

Appeal from the United States District Court for the Northern District of Georgia.(No. 96-02476-1-CV-GET), G. Ernest Tidwell, Judge.

Before ANDERSON, Chief Judge, and TJOFLAT and FAY, Circuit Judges.

ANDERSON, Chief Judge:

This is an interlocutory appeal by Defendants-Appellees General Motors Corporation ("General Motors") and Delco Electronics Corporation ("Delco") of the district court's denial of their motion for summary judgment. The district court certified the appeal as one involving a question of law as to which there is substantial ground for difference of opinion and with respect to which an immediate appeal from the order may materially advance the ultimate termination of this litigation; thus, we have appellate jurisdiction under 28 U.S.C. 1292(b). For the reasons stated below, we reverse.

Lisa Ayres, George Collins, and Helen Woodson ("Plaintiffs") each purchased an automobile which was manufactured by General Motors and contained a GMP-4 Electronic Control Module ("ECM") manufactured by Delco.1 Each of these plaintiffs purchased the automobile as a used automobile. These Plaintiffs2 brought suit against General Motors and Delco ("Defendants") under Georgia's civil RICO statute, O.C.G.A. 16-14-1 et seq., in the Superior Court of Fulton County, Georgia.3 The Plaintiffs claim that the ECMs are defective and that this defect can cause engine stalling, engine surging, erratic operation and other performance problems which could result in an unsafe situation. In addition, the Plaintiffs claim that the Defendants knew of the defect but fraudulently concealed it because of the great expense in remedying the defect. This fraudulent concealment, they argue, caused them injury, in particular the resultant diminution in the value of their cars and the expense of assorted repairs allegedly related to the defect. However, the Plaintiffs have identified no misrepresentation made by the Defendants to them related to the alleged defect; in fact, the Defendants made no communications at all to the Plaintiffs.4 The Plaintiffs complain that the Defendants failed to disclose the defect to them.

The Defendants removed the action to the United States District Court for the Northern District of Georgia and moved for summary judgment. The district court denied summary judgment on the Georgia RICO claims. In particular, the court found that the Plaintiffs established, at least for summary judgment purposes, that the Defendants had violated the federal mail fraud and wire fraud statutes, 18 U.S.C. 1341, 1342, which are predicate offenses constituting racketeering under Georgia's RICO statute. The district court held that "[n]on-disclosure of information can be a violation of the mail fraud statute when a party has some independent duty to disclose." The court then concluded that the National Traffic and Motor Vehicle Safety Act ("Safety Act"), 49 U.S.C. 30118 et seq., created such an independent duty for the Defendants to disclose alleged safety defects to the Plaintiffs and that the Defendants' failure to disclose constitutes mail and wire fraud, which in turn forms the basis of the Georgia civil RICO claim.

As a preliminary matter, we address Plaintiffs' motion to dismiss for lack of jurisdiction, asserting that the district court lacked jurisdiction when Defendants removed. Removal is proper when a federal court would have original jurisdiction. See 28 U.S.C. 1441(a). When the Defendants removed in September 1996, the Plaintiffs moved for remand. The district court denied this motion. It concluded that original jurisdiction, in this case diversity jurisdiction, existed under 28 U.S.C. 1332 because the parties were diverse and the amount in controversy requirement was satisfied by aggregating the punitive damages as permitted by Tapscott v. MS Dealer Service Corp., 77 F.3d 1353 (11th Cir.1996). Although the original complaint was filed in December 1995, the district court found that the removal was timely because prior to Tapscott, which was decided after Plaintiffs filed their complaint, the Defendants could not have aggregated punitive damages to reach the amount in controversy requirement.

During the course of this appeal, the Eleventh Circuit in Cohen v. Office Depot, Inc., 204 F.3d 1069 (11th Cir.2000), held that the binding former Fifth Circuit decision, Lindsey v. Alabama Tel. Co., 576 F.2d 593 (5th Cir.1978),5 controlled the issue of whether or not punitive damages can be aggregated for amount in controversy purposes and held that such aggregation is not permitted. See Cohen, 204 F.3d at 1073-76. Accordingly, the Cohen Court abrogated Tapscott under the prior precedent rule and held that punitive damages must be divided by the number of class members and attributed to each member of the class. Thus, the district court's aggregation of punitive damages as permitted by Tapscott is no longer a sound basis for jurisdiction.

Nonetheless, we believe that there is a sound basis for removal jurisdiction. In particular, 28 U.S.C. 1441(b) provides removal jurisdiction for "any civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States." See also 28 U.S.C. 1331. In Gully v. First National Bank in Meridian, 299 U.S. 109, 57 S.Ct. 96, 81 L.Ed. 70 (1936), Justice Cardozo explained:

How and when a case arises "under the Constitution or laws of the United States" has been much considered in the books. Some tests are well established. To bring a case within the statute, a right or immunity created by the Constitution or laws of the United States must be an element, and an essential one, of the plaintiff's cause of action. The right or immunity must be such that it will be supported if the Constitution or laws of the United States are given one construction or effect, and defeated if they receive another. A genuine and present controversy, not merely a possible or conjectural one, must exist with reference thereto, and the controversy must be disclosed upon the face of the complaint, unaided by the answer or by the petition for removal. Indeed, the complaint itself will not avail as a basis of jurisdiction in so far as it goes beyond a statement of the plaintiff's cause of action and anticipates or replies to a probable defense.

Id. at 112-13, 57 S.Ct. at 97-98. Although a case may arise under federal law "where the vindication of a right under state law necessarily turned on some construction of federal law," Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 9, 103 S.Ct. 2841, 2846, 77 L.Ed.2d 420 (1983), "the mere presence of a federal issue in a state cause of action does not automatically confer federal-question jurisdiction." Merrell Dow Pharmaceuticals, Inc. v. Thompson, 478 U.S. 804, 813, 106 S.Ct. 3229, 3234, 92 L.Ed.2d 650 (1986).

Such federal-question jurisdiction is available here because, as this opinion makes clear below, a violation of the federal mail and wire fraud statutes is an essential element of the Plaintiffs' cause of action, the proof of which involves resolution of a substantial, disputed question of federal law.6 Again as made clear below, resolution of this case depends entirely on interpretation of the federal mail and wire fraud statutes and their interaction with the Safety Act. See Jairath v. Dyer, 154 F.3d 1280, 1282 (11th Cir.1998) ("[F]ederal-question jurisdiction may also be available if a substantial, disputed question of federal law is a necessary element of a state cause of action."); Ormet Corp. v. Ohio Power Co., 98 F.3d 799, 806 (4th Cir.1996) (recognizing that, even though a cause of action may be created by state law, it may involve the "resolution of a federal question sufficiently substantial to arise under federal law within the meaning of 28 U.S.C. 1331"). Plaintiffs' Fourth Amended and Recast Complaint claims that "[t]he defendants have repeatedly used the mails and wires to perpetrate their scheme of fraudulent concealment of the defects with engine control modules" and bases the Georgia RICO claim on Defendants' conspiracy to "deprive Plaintiffs of money by multiple illegal acts which involved use of the mails and wires and which constitute a pattern of racketeering activity in violation of the Georgia RICO Act."7 Examination of the Georgia RICO statute, see infra n. 13, and Plaintiffs' argument makes it abundantly clear that this part of their complaint refers to the federal right, enforceable through the federal RICO statute, to be free from violations of the federal mail and wire fraud statutes.8 Thus, establishing a violation of the federal mail and wire fraud statutes is an essential element of Plaintiffs' cause of action.9 We note that the instant situation-in which Plaintiffs must prove federal crimes involving a violation of the federal mail and wire fraud statutes to satisfy the necessary predicate acts of their Georgia RICO cause of action-would seem to fall squarely within the language of Gully and Franchise Tax Board, in which the Supreme Court indicated that it was well established that federal question jurisdiction exists where a plaintiff's cause of action has as an essential element the existence of a right under federal law which will be supported by a construction of the federal law concluding that the federal crime is established, but defeated by another construction concluding the opposite. However, to find federal question jurisdiction in this case, we need not go so far as to hold that every state RICO cause of action...

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