Carton v. Gen. Motors Acceptance Corp.

Decision Date13 July 2010
Docket NumberNo. 09-2906.,09-2906.
Citation611 F.3d 451
PartiesDawn CARTON; James Carton; Jodi Feller; Terry Feller; Cody Medinger; Stephanie Nieland, Appellants,v.GENERAL MOTORS ACCEPTANCE CORPORATION, a Corporation doing business as GMAC, Appellee.
CourtU.S. Court of Appeals — Eighth Circuit

Steven J. Crowley, argued, Burlington, IA, for Appellants.

Stephanie L. Hinz, argued, Cedar Rapids, IA (Thad J. Collins, on the brief), for Appellee.

Before RILEY, Chief Judge, COLLOTON and BENTON, Circuit Judges.

RILEY, Chief Judge.

Motorcyclists Dawn Carton, James Carton, Jodi Feller, Terry Feller, Cody Medinger, and Stephanie Nieland (collectively, Appellants) brought an action against General Motors Acceptance Corporation (GMAC), arising out of injuries Appellants sustained when they were struck by a leased vehicle driven by Tiffany Gannon. GMAC held the lease on the vehicle driven by Gannon. Appellants sued GMAC, alleging GMAC, as owner of the vehicle, was vicariously liable for Gannon's negligence, and directly liable for negligently (1) entrusting the vehicle to Gannon, (2) failing to repossess the vehicle after GMAC obtained a replevin judgment due to Gannon's failure to make lease payments, and (3) failing to discover Gannon was impaired and uninsured. The district court 1 granted GMAC's motion to dismiss the claims, finding Iowa Code § 321.493 and 49 U.S.C. § 30106 (“Graves Amendment) barred Appellants' vicarious liability claim and the Graves Amendment also barred Appellants' direct negligence claims. We affirm.

I. BACKGROUNDA. Factual Background

On December 7, 2005,2 Gannon leased a 2006 Chevy Cobalt from Ballweg Chevrolet, Inc., in Middleton, Wisconsin. Ballweg Chevrolet thereafter assigned the lease to GMAC. The lease was for a term of 48 months, and Gannon was required to make monthly payments of $205.95. The lease was “scheduled to end one month after the last payment [wa]s due,” but the lease provided Gannon could end the lease at any time, and GMAC “may end th[e] lease if [Gannon were] in default.” The lease agreement stated Gannon would be in default, “if more than one full monthly ... payment [wa]s more than 10 days past due.” Under the lease, Gannon had the opportunity to cure the default, but if she failed to do so, GMAC had the right to (1) end the lease and require Gannon to pay an early end charge, (2) sue Gannon for damages and to get the vehicle back, and (3) pursue any other remedy permitted by law.

By January 2007, Gannon was no longer making lease payments. GMAC informed Gannon she was in default. On February 27, 2007, GMAC filed a replevin action against Gannon in Wisconsin state court, seeking to repossess the vehicle. On April 20, 2007, the Wisconsin court entered judgment for replevin in favor of GMAC. Gannon continued to drive the vehicle, without insurance, until July 14, 2007.

On the afternoon of July 14, 2007, Appellants were drivers and passengers on three motorcycles traveling westbound on a two-lane highway near Janesville, Wisconsin. Gannon was driving eastbound in the leased vehicle. As Gannon approached the Appellants, she crossed the center lane and collided with all three motorcycles. Five out of the six Appellants suffered serious physical injuries and have permanent physical impairments.

B. Procedural Background

Appellants, all residents of Iowa, filed a complaint in the district court against GMAC,3 pursuant to 28 U.S.C. § 1332. Appellants first alleged GMAC was vicariously liable for Gannon's negligence because Gannon was no longer a lessee on the date of the accident, but, instead, was driving the vehicle with the implied or express consent of GMAC, the owner of the vehicle. Appellants next alleged GMAC was directly liable for Appellants' injuries because GMAC negligently (1) entrusted the vehicle to Gannon, (2) failed to take reasonable steps to enforce its replevin judgment and re-take possession of the vehicle from Gannon, and (3) failed to discover Gannon was driving the vehicle while impaired and without insurance.

GMAC filed a motion to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6). GMAC argued the substantive law of Wisconsin should apply to Appellants' claims, and under Wisconsin law, Appellants' damages would be capped at $50,000, which would be insufficient to meet 28 U.S.C. § 1332's jurisdictional requirement of $75,000 in controversy. GMAC also claimed both the Graves Amendment and Iowa Code § 321.493 barred Appellants' vicarious liability claims, and the Graves Amendment precluded Appellants' negligence claims. Finally, GMAC contended even if the Graves Amendment did not bar Appellants' negligence claims, the claims failed to state a claim upon which relief could be granted.

The district court granted GMAC's motion to dismiss and entered judgment in favor of GMAC. The court first conducted a choice of law analysis and determined Iowa law, rather than Wisconsin law, applied to Appellants' claims, disposing of GMAC's subject matter jurisdiction challenge. The district court next determined the Graves Amendment barred Appellants' vicarious liability claims, finding the lease was still in effect on the date of the accident despite the fact GMAC had obtained a replevin judgment. The court similarly determined Iowa Code § 321.493 barred Appellants' vicarious liability claims because, as the lessee in possession of the vehicle at the time of the accident, Gannon was considered the “owner” of the vehicle under Iowa law. The district court then found the Graves Amendment precluded Appellants' direct negligence claims against GMAC because Appellants “fail[ed] to point to any legal authority imposing a duty on [GMAC] to ensure that its lessees comply with the various duties asserted in the Complaint.” Because the district court determined the Graves Amendment barred Appellants' negligence claims, the district court declined to address the merits of the negligence claims. Appellants assert the district court erred in dismissing their claims.

II. DISCUSSIONA. Standard of Review

We review de novo a district court's grant of a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6). See Northstar Indus., Inc. v. Merrill Lynch & Co., 576 F.3d 827, 831 (8th Cir.2009). In so doing, we construe the complaint in the light most favorable to the nonmoving party. See id. at 832. “Dismissal is proper when the plaintiff's complaint fails to state a claim upon which relief can be granted.” Id. at 831-32 (citing Fed.R.Civ.P. 12(b)(6)). “To survive a motion to dismiss, the factual allegations in a complaint, assumed true, must suffice ‘to state a claim to relief that is plausible on its face.’ Id. at 832 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). “The court accepts as true all factual allegations, but is ‘not bound to accept as true a legal conclusion couched as a factual allegation.’ McAdams v. McCord, 584 F.3d 1111, 1113 (8th Cir.2009) (quoting Ashcroft v. Iqbal, 556 U.S. ----, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009)).

B. Choice of Law and Jurisdiction

In the district court, GMAC suggested the substantive law of Wisconsin applied to Appellant's claims, and under Wisconsin law, Appellants could not meet 28 U.S.C. § 1332's amount in controversy requirement because their damages would be capped at $50,000. Although neither party challenges the district court's decision to apply the substantive law of Iowa to Appellants' claims or the court's resulting determination diversity jurisdiction existed, subject matter jurisdiction is a threshold question we must address at the outset. See Sianis v. Jensen, 294 F.3d 994, 997 (8th Cir.2002). Reviewing the district court's choice of law determination de novo see Donaldson Co. v. Burroughs Diesel, Inc., 581 F.3d 726, 731 (8th Cir.2009) (standard of review), we agree with the district court's well-reasoned analysis of Iowa's choice of law rules and particularly Veasley v. CRST Int'l, Inc., 553 N.W.2d 896, 897-99 (Iowa 1996) (applying Iowa law in a negligence action brought by an Iowa resident against the owner of a vehicle that caused an accident which injured the Iowa resident in Arizona). Because Iowa law applies to Appellants' claims, and Iowa law does not impose a $50,000 damages cap on Appellants' claim, we are satisfied diversity jurisdiction exists.

C. Vicarious Liability

Appellants contend the district court erred in finding the Graves Amendment and Iowa Code § 321.493 barred Appellants' vicarious liability claims. In order to determine whether GMAC may be held vicariously liable for Gannon's negligence, we must first determine whether the lease agreement between Gannon and GMAC was still in effect on the date of the accident, July 14, 2007. Appellants insist the lease agreement had been terminated prior to July 14, 2007, because Gannon had been in default for seven months and GMAC had obtained a replevin judgment. Appellants alternatively argue, even if the lease were not terminated by the replevin judgment as a matter of law, there is a fact question as to whether the relationship between Gannon and GMAC constituted a lease or whether Gannon was merely driving the vehicle with GMAC's express or implied permission.

The district court found GMAC's replevin judgment in Wisconsin state court did not terminate the lease, and, thus, the lease was still in effect at the time of the accident. The district court reasoned, under Wisconsin law,4 a replevin judgment “determine[s] only the right to possession of the collateral or leased goods, but such judgment shall not bar any subsequent action for damages or deficiency.” Wis. Stat. § 425.205(1)(e). The district court declared, [W]hen a lessor elects to pursue a replevin judgment, the replevin judgment merely gives a lessor the right to repossess the property subject to the replevin judgment-it does not provide for the termination of any underlying obligation by operation of law.”

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