Floyd Cnty. Mut. Ins. Ass'n ex rel. McGregor v. CNH Indus. Am. LLC

• Decision Date: 01 December 2021
• Docket Number: No. 21-1075,21-1075
• Citation: 18 F.4th 1024
• Parties: FLOYD COUNTY MUTUAL INSURANCE ASSOCIATION, as subrogee ON BEHALF OF Clark R. MCGREGOR, on behalf of Ronald R. McGregor Revocable Trust on behalf of McGregor Farms, Inc., Plaintiff - Appellant v. CNH INDUSTRIAL AMERICA LLC, Defendant - Appellee
• Court: U.S. Court of Appeals — Eighth Circuit

18 F.4th 1024

FLOYD COUNTY MUTUAL INSURANCE ASSOCIATION, as subrogee ON BEHALF OF Clark R. MCGREGOR, on behalf of Ronald R. McGregor Revocable Trust on behalf of McGregor Farms, Inc., Plaintiff - Appellant

v.CNH INDUSTRIAL AMERICA LLC, Defendant - Appellee

No. 21-1075

United States Court of Appeals, Eighth Circuit.

Submitted: September 23, 2021

Filed: December 1, 2021

Michelle Donna Hurley, David J. Taylor, Yost & Baill, Minneapolis, MN, for Plaintiff-Appellant.

Maureen A. Bickley, Matthew C. Blickensderfer, Frost & Brown, Cincinnati, OH, Haley Ann Johnston, Frost & Brown, Indianapolis, IN, Gregory M. Lederer, Lederer & Weston, Cedar Rapids, IA, for Defendant-Appellee.

Before SMITH, Chief Judge, GRUENDER and STRAS, Circuit Judges.

GRUENDER, Circuit Judge.

On September 30, 2017, a tractor manufactured by CNH Industrial America LLC caught fire. Floyd County Mutual Insurance Association sued CNH in federal court under a theory of product liability, claiming that its insureds owned the tractor and other property on the tractor, both of which were damaged in the fire, and that Floyd County Mutual was subrogated to its insureds’ claims against CNH because Floyd County Mutual had paid its insureds’ claim for the damage. Floyd County Mutual invoked 28 U.S.C. § 1332 as the basis for the district court's subject-matter jurisdiction. After requesting supplemental briefing on the matter, however, the district court¹ concluded that § 1332 ’s amount-in-controversy requirement was not met because the damage to the tractor itself was not recoverable under Iowa law and the value of the remaining damage did not exceed $75,000. Accordingly, the district court dismissed the case for lack of subject-matter jurisdiction. Floyd County Mutual appeals, and we affirm.

We consider de novo whether the district court had subject-matter jurisdiction. Ritchie Cap. Mgmt., L.L.C. v. JP Morgan Chase & Co. , 960 F.3d 1037, 1046 (8th Cir. 2020). The only candidate basis for jurisdiction in this case is § 1332, which requires diversity of citizenship and an amount in controversy in excess of $75,000. A complaint that alleges more than $75,000 in damages nonetheless fails the amount-in-controversy requirement if recovery for all but $75,000 or less is barred as a matter of law. See Rasmussen v. State Farm Mut. Auto. Ins. , 410 F.3d 1029, 1031 (8th Cir. 2005) (concluding that the amount-in-controversy requirement was not met because governing law would permit recovery for, at most, only $50,000 of the damages alleged); Packard v. Provident Nat'l Bank , 994 F.2d 1039, 1046-50 (3d Cir. 1993) (resolving an open question of state law to determine whether the extent of legally permitted recovery exceeded $75,000). In a diversity case, state law governs the extent of damages available to a successful plaintiff. Gander v. FMC Corp. , 892 F.2d 1373, 1382 (8th Cir. 1990).

Here, the damages alleged in the complaint were limited to $145,000.00 in damage to the tractor and $22,787.81 in damage to other property. Thus, if Iowa law does not permit recovery for the tractor, then recovery for all but $22,787.81 of the damages alleged would be barred as a matter of law. In that case, § 1332 ’s amount-in-controversy requirement would not be met.

Whether Iowa law permits recovery for the tractor depends on the scope of Iowa's economic-loss doctrine, which aims to prevent the "tortification of contract law" by precluding parties from recovering from one another in tort for risks that they "can be presumed to have allocated between themselves in their contract." See Annett Holdings, Inc. v. Kum & Go, L.C. , 801 N.W.2d 499, 503 (Iowa 2011). The Iowa Supreme Court has adopted a "multi-factor test" for "whether a particular claim is cognizable in tort or contract." Determan v. Johnson , 613 N.W.2d 259, 262 (Iowa 2000). "Notwithstanding [its] adherence to this multi-factor test," however, the Iowa Supreme Court "require[s] at a minimum that the damage for which recovery is sought [in a product-liability case] must extend beyond the product itself." Id. ; see also Des Moines Flying Serv., Inc. v. Aerial Servs. Inc. , 880 N.W.2d 212, 221 (Iowa 2016) (indicating that product liability "require[s] personal injury or property damage apart from the product itself"). For example, although the Iowa Supreme Court has identified "harm result[ing] from a sudden or dangerous occurrence," such as a vehicle catching on fire, as an injury cognizable in tort, it does not permit recovery for such harm under a theory of product liability if the harm was limited to the defective product itself. Determan , 613 N.W.2d at 262-63 (internal quotation marks omitted).

Thus, if the fire had damaged the tractor alone, then this would be an easy case. Iowa's economic-loss doctrine clearly bars recovery under a theory of product liability for damage caused by a vehicle's spontaneous combustion if the damage is limited to the vehicle itself. Id.

But Floyd County Mutual has alleged that the fire damaged not only the tractor but also other property. Iowa's economic-loss doctrine generally permits recovery for the other property in a case like this. See id. at 262. The question is whether it permits recovery for the tractor as well.

Floyd County Mutual maintains that the Iowa Supreme Court decided this question, albeit implicitly, in American Fire & Casualty Co. v. Ford Motor Co. , 588 N.W.2d 437 (Iowa 1999). There, a "truck caught fire causing property damage to the truck and its contents." Id. at 438. "After discharging its obligation to [the truck owner] under its policy, [the insurer] brought [a] products liability action [against the truck manufacturer], claiming a defect caused the [truck] to catch fire." Id. The court concluded that the economic-loss doctrine did not bar recovery because the vehicle's spontaneous combustion was "a sudden or dangerous occurrence." Id. at 439-40. At no point did the court indicate that recovery would be limited to the truck's contents. Floyd County Mutual concludes that the court meant to permit recovery for the truck itself.

The district court was unpersuaded. "Damages was not an issue before the Supreme Court in American Fire ," it pointed out, and because the Iowa Supreme Court's jurisdiction did not depend on the amount in controversy, it "had no reason sua sponte to analyze what damages the plaintiff could recover." Accordingly, the district court concluded that it was "too much of a stretch" to infer from American Fire ’s silence about the extent of recovery that the court meant to permit recovery for the truck. CNH echoes this argument in its brief on appeal.

We agree with Floyd County Mutual that American Fire cannot be dismissed so easily. As Floyd County Mutual points out, the plaintiff in American Fire did not seek recovery for the truck's contents. True, the court noted in passing that the fire caused "damage to the truck and its contents ." Id. at 438 (emphasis added). But it also noted that "[t]he trial court dismissed this suit ... because it involved a claim only for loss of the product itself." Id. And the parties’ briefs confirm that the plaintiff sought recovery only for the truck. See Appellant's Brief at 2, Am. Fire , 588 N.W.2d 437, (No. 97-1142), 1997 WL 34502361, at *2 (seeking recovery for "payments to or on behalf of its insured for the damage allegedly caused by the fire to the vehicle " and indicating that it was appealing the trial court's grant of "the motion to dismiss as to the claim for property damages to the Ford pickup " (emphases added)); Appellee's Final Brief at 10, Am. Fire , 588 N.W.2d 437, (No. 97-1142), 1997 WL 34502363, at *10 ("American Fire does not allege recovery for personal injury or damage to property; it seeks recovery solely for damage to the allegedly defective vehicle itself ." (emphasis added)).

The problem for Floyd County Mutual is that the same feature of American Fire that shows that the court meant to permit recovery for the product itself—the fact that the plaintiff did not seek recovery for anything else—also renders American Fire incompatible with Determan , which was decided one year later. According to Determan , the economic-loss doctrine bars recovery in a product-liability case, even one involving a "sudden and dangerous occurrence," unless "the damage for which recovery is sought ... extend[s] beyond the product itself." 613 N.W.2d at 262 (emphasis added).

Thus, American Fire did not address the situation that we face here; namely, a situation in which the plaintiff seeks recovery both for damage to the product itself and for damage to other property. Instead, like Determan , American Fire addressed a situation in which the plaintiff sought recovery only for damage to the product itself. And its holding—that a plaintiff can recover in tort for such damage, 588 N.W.2d at 439-40 —was abrogated by Determan ’s holding, one year later, that a plaintiff cannot recover in tort for such damage, 613 N.W.2d at 262. Cf. The Conveyor Co. v. Sunsource Tech. Servs., Inc. , 398 F. Supp. 2d 992, 1010-11 (N.D. Iowa 2005) (noting that Determan issued its holding "despite the existence of precedent such as American Fire " and following Determan rather than American Fire ). But see Determan , 613 N.W.2d at 262 (construing American Fire in dicta as compatible with its holding because the fire damaged not only the truck but also its contents, apparently overlooking the fact that the plaintiff did not seek recovery for the truck's contents).

Contrary to what Floyd County Mutual claims, then, the Iowa Supreme Court has not yet decided whether a plaintiff may recover under a theory of product liability for damage to the product itself when the plaintiff also seeks recovery for damage to other property. Accordingly, "we must predict how [the Iowa Supreme Court] would rule" if confronted with the question.² See Holbein v. TAW Enters., Inc. , 983 F.3d 1049, 1061 (8th Cir. 2020) (en banc). "In making our prediction, we may...