Davis v. Carl Cannon Chevrolet-Olds, CHEVROLET-OLD

• Citation: 182 F.3d 792
• Decision Date: 26 July 1999
• Docket Number: CHEVROLET-OLD,INC,No. 98-6567,98-6567
• Parties: (11th Cir. 1999) Geneva DAVIS, Michael H. Roberts, Plaintiffs-Appellants, v. CARL CANNON; General Motors Acceptance Corporation, et al., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

Page 792

182 F.3d 792 (11th Cir. 1999)

Geneva DAVIS, Michael H. Roberts, Plaintiffs-Appellants, v. CARL CANNON CHEVROLET-OLDS, INC; General Motors Acceptance Corporation, et al., Defendants-Appellees.

No. 98-6567.

United States Court of Appeals, Eleventh Circuit.

July 26, 1999.

Appeal from the United States District Court for the Northern District of Alabama. (No. CV97-P-2889-J), Sam Pointer, Jr., Chief Judge.

Before COX, Circuit Judge, FAY, Senior Circuit Judge, and NANGLE^*, Senior District Judge.

COX, Circuit Judge:

The question this appeal poses is whether, in a class action, a potential attorneys' fee awarded out of a common fund may count in the aggregate toward the jurisdictional minimum necessary to establish diversity jurisdiction. We hold that it may not.

1. Background

The plaintiffs here, and the class they ask to represent, are purchasers of extended service contracts on General Motors vehicles. According to the plaintiffs, General Motors Acceptance Corporation, in conspiracy with GM dealerships, fraudulently concealed that the dealerships make a profit on such contracts. The plaintiffs thus sued GMAC and a local dealership in the Circuit Court of Walker County, Alabama, a rural county northwest of Birmingham. The ad damnum clause in each of the complaint's six substantive counts seeks only "compensatory damages as may be allowed by law." (R.1-8 at 2-6.) The end of the complaint, moreover, contains the following "do not remove me" "disclaimer" in capital, boldface letters:

NOTWITHSTANDING ANY ALLEGATION MADE WITHIN THIS COMPLAINT, THIS ACTION IS BROUGHT SOLELY PURSUANT TO THE COMMON LAW AND STATUTORY LAW OF THE STATE OF ALABAMA. NO CLAIM IS MADE UNDER OR FOR ANY CAUSE OF ACTION ARISING UNDER THE CONSTITUTION OR LAWS OF THE UNITED STATES OF AMERICA. FURTHER, NOTWITHSTANDING ANY ALLEGATION CONTAINED HEREIN, THE PLAINTIFF AND EACH AND EVERY MEMBER OF

THE CLASS DEFINED HEREIN EXPRESSLY WAIVE AND FOREGO [sic ] ANY CLAIM FOR PUNITIVE DAMAGES AND LIMIT THEIR CLAIMS SOLELY TO COMPENSATORY DAMAGES. THE PLAINTIFF AND EACH CLASS MEMBER ALSO EXPRESSLY WAIVE ANY CLAIM FOR DAMAGES OVER SEVENTY-FIVE THOUSAND DOLLARS ($75,000.00). THIS CLASS [sic ] IS A MONEY DAMAGE CASE BROUGHT ONLY UNDER RULE 23(B)(3), ALABAMA RULES OF CIVIL PROCEDURE; THEREFORE, ANY CLASS MEMBER WHO WISHES TO PURSUE PUNITIVE DAMAGES IN AN AMOUNT GREATER THAN SEVENTY-FIVE THOUSAND DOLLARS ($75,000.00) MAY OPT-OUT [sic ] AND DO SO.

(Id. at 8.)

GMAC nonetheless removed the action to federal court. The plaintiffs moved to remand, pointing out the diversity jurisdiction-defeating features of their complaint: first, they joined a local GM dealership; and second, they disclaimed on behalf of the class all damages above the $75,000 jurisdictional amount.¹ Notwithstanding these features, the district court denied the plaintiffs' motion to remand. First, the court concluded that the GM dealership was fraudulently joined to defeat jurisdiction. (The dealership was then voluntarily dismissed, so no fraudulent-joinder issue is before us.) Second, the court concluded that the complaint, while disclaiming all compensatory and punitive damages over $75,000 per plaintiff, alleged the requisite amount in controversy because the lawyers did not disclaim a fee exceeding that amount. The district court certified its order for interlocutory appeal under 28 U.S.C. 1292(b). The plaintiffs sought to appeal, and we permitted it.

2. Discussion

a. Zeroing in on the issue. Several undisputed background rules frame the issue here. Removal jurisdiction exists only when the district court would have had original jurisdiction over the action. See 28 U.S.C. 1441(a); Wisconsin Dep't of Corrections v. Schacht, 524 U.S. 381, 118 S.Ct. 2047, 2051, 141 L.Ed.2d 364 (1998). One ground of original jurisdiction in the district court-the only one asserted here-is complete diversity of the parties' citizenship and an amount in controversy exceeding $75,000. See 28 U.S.C. 1332(a)²; Carden v. Arkoma Assocs., 494 U.S. 185, 187, 110 S.Ct. 1015, 1017, 108 L.Ed.2d 157 (1990). Because the district court found fraudulent joinder, and the plaintiffs dismissed the only nondiverse party, the only issue here is whether the amount in controversy is more than $75,000. And that issue is further narrowed because each plaintiff seeks no more than $75,000, and the compensatory damage claims of individual class members may not be aggregated to satisfy the amount. See Zahn v. International Paper Co., 414 U.S. 291, 301, 94 S.Ct. 505, 512, 38 L.Ed.2d 511 (1973). Punitive damage claims are aggregated,³ but the plaintiffs have disclaimed such damages; for the moment we assume that the disclaimer is effective. We also assume, without deciding, that the plaintiffs' claim for injunctive relief does not exceed $75,000 in value. The sole possibility for satisfying the requisite amount in controversy, therefore, is the claim for attorneys' fees.

There is no dispute among the parties that plaintiffs' lawyers will seek a fee ultimately paid by the defendant. While the complaint contains no such claim, the plaintiffs' lawyers candidly acknowledged at oral argument that they were not working for free, and the district court took an attorney-fee claim to be implicit in the class-action complaint. The parties do disagree, however, over how Alabama law will shape that fee award, for reasons that we will explain.

Alabama generally follows the American rule that each party must bear her own attorneys' fees. Apart from statutory and contractual fee-shifting provisions, neither of which is available here, Alabama recognizes two principal kinds of "equitable" fee-shifting. See Horn v. City of Birmingham, 718 So.2d 694, 703 (Ala.1998). The first is the so-called "common fund" doctrine, which authorizes the trial court to deduct as an attorneys' fee a reasonable percentage (which apparently means at least 20%) of a common fund that class representatives have collected for distribution among the class. See Edelman & Combs v. Law, 663 So.2d 957, 959-60 (Ala.1995). The second is the "common benefit" doctrine, which permits an award of fees to be paid by the defendant, independent of any fund, when the plaintiffs have conferred some kind of benefit on the public. See, e.g., Brown v. Alabama, 565 So.2d 585, 592 (Ala.1990). GMAC contends, and the plaintiffs dispute, that a fee here could just as well be awarded under the common-benefit doctrine as under the common-fund doctrine.

On this issue the plaintiffs have the upper hand. Alabama courts have invoked the common-benefit doctrine only when there is a benefit conferred upon the "general public." Horn, 718 So.2d at 702; Battle v. City of Birmingham, 656 So.2d 344, 347 (Ala.1995); Bell v. Birmingham News Co., 576 So.2d 669, 670 (Ala.Ct.Civ.App.1991). And in every appellate-level case affirming a fee award under this doctrine, a benefit was conferred on a large segment of the public by bringing "an end to an improper practice" of a governmental entity. See Horn, 718 So.2d at 706 (plaintiffs stopped Birmingham from improperly approving the construction of a waste-transfer facility); Brown, 565 So.2d at 592 (plaintiffs' suit caused state law enforcement agencies to stop issuing traffic tickets without verification); Bell, 576 So.2d at 670-71 (plaintiff newspaper stopped Birmingham City Council from casting secret ballots). Compare Dandy's Discount Package Store, Inc. v. Sizemore, 597 So.2d 1370, 1372 (Ala.Ct.Civ.App.1992) (liquor stores who challenged tax and were successful had not conferred sufficient benefit on general public to warrant fee award independent of fund); Advertiser Co. v. Auburn Univ., 579 So.2d 645, 648 (Ala.Ct.Civ.App.1991) (trial court justified in refusing fees where action to force disclosure of document, while successful, did not establish any precedent or stop any ongoing illegal government practice).

The common-benefit doctrine would not apply here. Because of the complaint's vagueness, it is hard to imagine exactly what kind of injunctive relief could follow a successful suit, but the relief would at most restrain GMAC from certain marketing practices. Such relief would in no wise benefit the "general public"; it would be a boon to only the relatively small number of consumers who purchase certain products from GMAC. If Alabama courts respect their precedents, then any award of attorneys' fees will be deducted from the plaintiffs' damages fund. Because of this conclusion about Alabama law, we leave for another case the question of whether an attorneys' fee awarded as a discrete, but noncontractual and nonstatutory, element of recovery may be counted as a single sum toward the jurisdictional amount rather than allocated among the individual class members' amounts in controversy. Cf. Coventry Sewage Assocs. v. Dworkin Realty Co., 71 F.3d 1, 3 n. 2 (1st Cir.1995) ("[A]lthough attorneys' fees usuallywill not constitute a portion of the amount in controversy, there is an exception where, as here, the fees are contractual."); In re Abbott Labs., 51 F.3d 524, 526-27 (5th Cir.1995) (award of attorneys' fee against defendant under Louisiana statute is attributed only to the class representatives, and therefore can satisfy the jurisdictional amount in controversy); Premier Indus. Corp. v. Texas Indus. Fastener Co., 450 F.2d 444, 447 (5th Cir.1971) ("[T]he value of attorney's fees [plaintiff] was entitled to recover under the Settlement Agreement ... is properly includable in determining the amount in controversy.").

The narrow question we answer now is thus only whether a fee to be deducted from a common fund may, if it exceeds $75,000, satisfy the amount-in-controversy requirement.

b. The rule and its application. Precedent compels us to answer this question "no." The rule of decision comes from a series of Supreme Court cases, dating back to at least 1854, interpreting "matter in controversy"⁴ to permit aggregation of multiple plaintiffs' claims...