Chavis v. Fidelity Warranty Services, Inc.

• Decision Date: 13 February 2006
• Docket Number: No. C/A1:05CV1813MBS.,C/A1:05CV1813MBS.
• Citation: 415 F.Supp.2d 620
• Parties: Oliver D. CHAVIS and Annette W. Chavis, on behalf of themselves and all others similarly situated, Plaintiffs, v. FIDELITY WARRANTY SERVICES, INC., Defendant.
• Court: U.S. District Court — District of South Carolina

415 F.Supp.2d 620

Oliver D. CHAVIS and Annette W. Chavis, on behalf of themselves and all others similarly situated, Plaintiffs, v. FIDELITY WARRANTY SERVICES, INC., Defendant.

No. C/A1:05CV1813MBS.

United States District Court, D. South Carolina, Aiken Division.

February 13, 2006.

B. Randall Dong, Mike Kelly Law Group, LLC, Columbia, SC, Daniel Webster Williams, Bedingfield & Williams, Barnwell, SC, for Plaintiffs.

Lee E. Dixon, Stephen G. Morrison, William Parham Simpson, Nelson Mullins Riley and Scarborough, Columbia, SC, for Defendant.

ORDER and OPINION

SEYMOUR, District Judge.

On May 23, 2005, named Plaintiffs Oliver and Annette Chavis filed this action in the Court of Common Pleas for Barnwell County, South Carolina on behalf of themselves and others similarly situated. Plaintiffs allege that Defendant Fidelity Warranty Services charged and received premiums on automobile warranties in violation of the Magnuson-Moss Warranty Act (the "M/M Act"). See 15 U.S.C. § 2310(d)(3). On June 23, 2005, Defendant removed the case to federal court alleging jurisdiction under 28 U.S.C. § 1332(d).¹

This matter is now before the court on Plaintiffs' Motion to Remand the case to state court filed on July 25, 2005. Defendant filed a memorandum in opposition to Plaintiffs' motion on August 12, 2005. Plaintiffs responded on August 26, 2005. The court held a hearing on the matter on November 30, 2005. The court has thoroughly reviewed the pleadings, motions, memoranda, and considered the testimony offered at the hearing. The court concludes that Plaintiffs' motion to remand should be denied.

I. FACTS

Plaintiffs allege that Defendant sold them a warranty on a used vehicle for $1,895.00. Memo. in Support of Remand, 1. Plaintiffs further allege that this warranty was sold after Defendant disclaimed all express and implied warranties on the vehicle. Id. Plaintiffs claim that the warranty they purchased contained a false or fraudulent "affirmation, promise, description, or reservation" intending to mislead them and similarly situated warranty purchasers. Id. at 2.

In their lawsuit filed in state court, Plaintiffs do not seek recovery for a specific dollar amount. However, they demanded in their complaint damages "not to exceed $50,000.00 per class member, exclusive of interest and costs." Complaint, 2. Plaintiffs did not name any class members beyond themselves but noted that "the class consists of more than one hundred (100) persons and is so numerous that joinder of individual members is impracticable." Id.

II. LAW

The issue before the court is whether the underlying case properly was removed to federal court. Plaintiffs argue federal jurisdiction is inappropriate because their complaint fails to satisfy the requirements set forth in the M/M Act at 15 U.S.C. § 2310(d)(3)(B) that would allow this class action suit to be brought in federal court. Defendant argues the case is properly before the court under the broader parameters for federal jurisdiction in class-action lawsuits brought about by the Class Action Fairness Act of 2005 ("CAFA"). Pub.L. No. 109-2, 119 Stat. 4 (2005).

A. The Magnuson-Moss Warranty Act

The Magnuson-Moss Warranty Act is "a remedial statute designed to protect the purchasers of consumer goods from deceptive warranty practices." Miller v. Willow Creek Homes, Inc., 249 F.3d 629, 630 (7th Cir.2001). However, in certain circumstances, the M/M Act is an "`unusual' statute in that it permits consumers to sue on state-law warranty claims in federal court, regardless of whether the parties are of diverse citizenship." Collins v. Computer-training.com, Inc., 376 F.Supp.2d 599, 601 (D.Va.2005) (citing Gardynski-Leschuck v. Ford Motor Co., 142 F.3d 955, 956 (7th Cir.1998)). The statutory authority to bring such suits reads, in pertinent part:

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

(A) in any court of competent jurisdiction in any State or the District of Columbia; or

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

15 U.S.C. § 2310(d)(1). Section 2310(d)(3)(B) states that no claim shall be cognizable in a suit brought under § 2310(d)(1)(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 ...." Section 2310(d)(3)(C) notes that no claim is cognizable in a suit brought under § 2310(d)(1)(B) as a class action if "the number of named plaintiffs is less than one hundred."

The Act's jurisdictional provisions generally serve two purposes:

1) to avoid trivial or minor actions being brought as class actions in the federal district courts; and, 2) to overcome the absence of an amount in controversy requirement in 28 U.S.C. § 1337, since the Magnuson-Moss Warranty Act is an act regulating commerce.

Dance v. U.S. Intern. Motors, 647 F.Supp. 1205, 1207 (D.D.C.1986) (quoting Novosel v. Northway Motor Car Corp., 460 F.Supp. 541 (N.D.N.Y.1978) (citing H.R.Rep. No. 1107, 93d Cong., 2d Sess. 42 (1974), reprinted in 1974 U.S.C.C.A.N., 7702, 7724)).

The court finds that jurisdiction under § 2310(1)(B) is inappropriate. Though Plaintiffs have alleged that their class membership "consists of more than one hundred (100) persons," Complaint, 2, they have named only two of these individuals. This failure contravenes the M/M Act's requirement that the number of named plaintiffs must be one hundred or greater for a class action to maintained in federal court under the M/M Act. 15 U.S.C. § 2310(3)(C).² Similarly, though the M/M Act regulates interstate commerce, this action cannot lie in federal court based solely on 28 U.S.C. § 1337 as the M/M Act forecloses on this traditional source of federal jurisdiction. Dance, 647 F.Supp. at 1207. However, while federal jurisdiction may not be grounded in 15 U.S.C. § 2310(3)(C), an alternative source of federal jurisdiction exists.

Section 2310(d)(1)(A) provides that jurisdiction is appropriate under the M/M Act "in any court of competent jurisdiction in any State." 15 U.S.C. § 2310(d)(1)(A) (emphasis added). This paragraph is generally viewed as authorizing state courts to hear claims brought under the M/M Act that do not conform to the strict requirements for federal jurisdiction. Saval, 710 F.2d at 1030 ("Claims not enforceable in federal court because of the restrictions found in § 2310(d)(3) may be brought in state court [under 15 U.S.C. § 2310(d)(1)(A) ]."). However, this is not the sole purpose of section 2310(d)(1)(A). Indeed, many courts have allowed federal jurisdiction to be maintained over Magnuson-Moss claims that fail to conform to the strict limitations of § 2310(d)(3) when an alternate basis for federal jurisdiction exists. They have ordinarily done so implicitly, but often explicitly, relying on § 2310(d)(1)(A)'s mandate that jurisdiction can lie in any court of "competent jurisdiction." 15 U.S.C. § 2310(d)(1)(A).

In Barnes v. West, Inc., 249 F.Supp.2d 737, 739 (E.D.Va.2003), the Eastern District of Virginia was faced with a claim under the M/M Act that failed to allege more than the requisite jurisdictional requirement of $50,000. After noting that federal jurisdiction was not appropriate under § 2310(d)(3), the court continued:

This conclusion does not end the analysis because the [M/M Act] also provides that [M/M Act] claims can be brought "in any court of competent jurisdiction in any State or District of Columbia" without regard to the amount in controversy. 15 U.S.C. § 2310(d)(1)(A). Thus, [M/M Act] claims that cannot independently be heard in federal court owing to the absence of the requisite amount in controversy, can still be heard in federal court in circumstances where supplemental jurisdiction is properly exercised under 28 U.S.C. § 1367. In those circumstances, the amount in controversy requirement is no obstacle to the claim being heard in federal court because the basis for federal jurisdiction over the [Magnuson-Moss] claim is not 15 U.S.C. § 2310(d)(1)(B), but rather 28 U.S.C. § 1367.

Id. (internal citation omitted).

The district court in Wetzel v. American Motors Corp., 693 F.Supp. 246, 248 (D.Pa.1988)., came to a similar conclusion. The Wetzel court noted that "[the Act's] limitation on the amount in controversy precludes a federal cause of action where jurisdiction is predicated only on federal question jurisdiction (28 U.S.C. §§ 1331, 1337), but does not preclude federal jurisdiction where there are state claims to which [the claim based on the M/M Act] is pendent and the parties are of diverse citizenship." Id. (emphasis added). Indeed, many other courts have similarly found that federal jurisdiction may still be appropriate when the requirements of § 2310(d)(3) are not satisfied. See, e.g., Watts v. Volkswagen Artiengesellschaft, 488 F.Supp. 1233, 1237 (D.Ark.1980) (analyzing whether an alternate basis for federal jurisdiction exists separate from the M/M Act by noting that "[w]e do not have jurisdiction under 28 U.S.C. [§ ] 1332 (diversity of citizenship) or 28 U.S.C. [§ 1331 (general federal question) because the amount claimed by each plaintiff does not exceed $10,000.00."); Seybold v. Francis P. Dean, Inc., 628 F.Supp. 912, 916 (D.Pa. 1986) (extending pendent jurisdiction over Magnuson-Moss claim despite failure to meet the $50,000 requirement); Schwiesow, 74 F.Supp.2d at 547 (noting that despite the absence of jurisdiction under the M/M Act, jurisdiction may be appropriate under 28 U.S.C. § 1332 if the amount in controversy was satisfied).³ The court finds that federal jurisdiction may be appropriate for M/M Act claims that fail to satisfy the requirements of 15 U.S.C. § 2310(d)(1)(B) if a valid alternative...