Goodner v. Clayton Homes, Inc.
| Decision Date | 10 September 2012 |
| Docket Number | CASE NO. 4:12-CV-04001 |
| Parties | THOMAS GOODNER and LINDA GOODNER, individually and on behalf of a class of all other similarly situated individuals; PLAINTIFFS v. CLAYTON HOMES, INC.; CMH HOMES, INC.; and VANDERBILT MORTGAGE & FINANCE, INC. DEFENDANTS |
| Court | U.S. District Court — Western District of Arkansas |
Before the Court is Plaintiffs Thomas and Linda Goodner's Motion to Remand. (ECF No. 12). Defendants Clayton Homes, Inc., CMH Homes, Inc., and Vanderbilt Mortgage & Finance, Inc. have responded (ECF No. 32), and Plaintiffs have replied. (ECF No. 33).1 The matter is ripe for the Court's consideration. For the following reasons, the motion will be granted.
Plaintiffs filed this putative class-action suit in Lafayette County Circuit Court on November 10, 2011. The complaint seeks damages for violations of the Arkansas Deceptive Trade Practices Act and Arkansas Unfair Practices Act, unjust enrichment, and constructive fraud. Those claims arise from an alleged kickback scheme between CMH Homes, Inc. ("CMH") and Vanderbilt Mortgage & Finance, Inc. ("VMF"), both of which are owned by Clayton Homes, Inc. According to the Plaintiffs, the scheme consisted in CMH, a manufactured-home seller, receiving kickbacks from VMF, a finance company, for referring home buyers to VMF forfinancing. The Plaintiffs swore in separate affidavits not to seek more than $75,000 on behalf of any class member and not more than $5,000,000 for the whole class. Those amounts are the minimum amounts-in-controversy required for federal-court diversity jurisdiction. In other words, the stipulations were admittedly an attempt to keep the case in state court. Nevertheless, Defendants removed the case to this Court on January 6, 2012, relying on diversity jurisdiction under the Class Action Fairness Act ("CAFA") at 28 U.S.C. § 1332(d), and federal-question jurisdiction under 28 U.S.C. § 1331.
Defendants argue that the Plaintiffs' stipulations are insufficient to defeat CAFA jurisdiction and keep the case out of federal court. They further argue that federal-question jurisdiction exists because the complaint contains substantial federal questions. Plaintiffs respond that the stipulations are binding and effective to defeat federal-court jurisdiction, and that the federal issues in this case are not substantial enough to warrant federal-question jurisdiction.
A defendant invoking federal-court diversity jurisdiction through removal must prove the required statutory amount in controversy by a preponderance of the evidence. Hargis v. Access Capital Funding, LLC, 674 F.3d 783, 798 (8th Cir. 2012) (quoting Bell v. Hershey Co., 557 F.3d 953, 956 (8th Cir. 2009)). The defendant does not have to prove by a preponderance that the amount in controversy is more than the statutory amount, but rather that a fact finder might legally conclude that it is. Hartis v. Chicago Title Ins. Co., 656 F.3d 778, 781 (8th Cir. 2009) (quoting Bell, 557 F.3d at 958)). If a defendant meets its burden, then a plaintiff seeking remand must establish to a legal certainty that the amount in controversy is less than the statute requires. Bell, 557 F.3d at 956. The legal-certainty standard is not met if even a possibility exists ofrecovering more than the statutory minimum. Back Doctors Ltd. v. Metropolitan Property & Casualty Ins. Co., 637 F.3d 827, 831 (7th Cir. 2011).
Here, the Court need not consider whether the Defendants have shown by a preponderance that the amount in controversy might exceed the statutory minimum; the Plaintiff's stipulations, if they are binding, are enough to establish to a legal certainty that the statutory minimum is not met in this case. Rolwing v. Nestle Holdings, Inc., 666 F.3d 1069, 1074 (8th Cir. 2012).
a. Plaintiffs' stipulations
Removal is defeated by adding to the complaint a binding stipulation promising not to seek greater damages than the jurisdictional minimum required by CAFA: $75,000 per plaintiff and $5 million for all plaintiffs. Bell, 557 F.3d at 958. The parties here agree on that point. They disagree on whether Plaintiffs' stipulations are binding. Plaintiffs, as putative class representatives, each stipulated not to "seek damages or restitution" in excess of the jurisdictional minimums "inclusive of treble damages, costs, and attorneys' fees," or punitive damages. (ECF No. 1-1, at 21). Defendants make six challenges to Plaintiffs' stipulations.
Defendants first argue that Plaintiffs' stipulations fail because they do not preclude injunctive relief. Plaintiffs have sued under, among other statutes, the Arkansas Unfair Practices Act, ARK. CODE ANN. § 4-75-201 et seq. (West 2012). The statute allows any person to maintain an action to enjoin a violation of the act, "and, if injured thereby, for the recovery of damages." ARK. CODE ANN. § 4-75-211. According to Defendants' interpretation, damages are merely an accessory to injunctive relief under the act. Thus, Defendants argue, the statute requires Plaintiffs to seek injunctive relief even against their will.
The Court need not address the question whether Plaintiff may maintain an action under the Unfair Practices Act without seeking or getting injunctive relief. It is enough to note that there is, as a factual matter, no injunctive relief available in this case. Defendants stopped their alleged kickback scheme before the Plaintiffs brought this suit, so there is nothing to enjoin. See Warren Wholesale Co., Inc. v. McLane Co., Inc., 374 Ark. 171, 175, 286 S.W.3d 709, 712 (Ark. 2008) ( ); Chochorowski v. Home Depot USA, 585 F. Supp. 2d 1085, 1095 (E.D. Mo. 2008) ().
Defendants argue that even if the offending kickback scheme stopped before this suit was filed, Plaintiffs must seek to enjoin collection of future interest on the kickback. The statute suggests otherwise. The statute allows an action "to enjoin a continuance of any act or acts in violation of this subchapter." ARK. CODE ANN. § 4-75-211. Plaintiffs sued under ARK. CODE ANN. § 4-75-208, which forbids "[t]he secret payment or allowance of...commissions...." Defendants' "act or acts in violation" of the Unfair Practices Act, if there were any, were the secret payment of kickbacks. Continued receipt of future interest resulting from the kickback is not the underlying violation to be enjoined; it is rather an effect of the violation, and raises damages questions. Because collection of future interest is not the injunction-worthy violation of the act in this case, Plaintiffs are not compelled to seek injunctive relief against future-interest collection.
Defendants also argue that Plaintiffs' commitment not to "seek" certain damages does not preclude them from "accepting" certain damages. Arkansas Rule of Civil Procedure 54(c) is the crux of Defendants' argument. The rule states that "every final judgment shall grant the relief to which the party in whose favor it is rendered is entitled, even if the party has not demanded such relief in his pleadings." Thus, Defendants argue, an Arkansas state court is required to award Plaintiffs more than they seek. The circumstances of this case, however, preclude such a windfall.
First, magic words are not needed to make a stipulation binding. Smith v. American Bankers Ins. Co. of Florida, No. 2:11-cv-02113, 2011 WL 6090275, at *5 (W.D. Ark. Dec. 7, 2011) (). Second, cases interpreting Federal Rule of Civil Procedure 54(c), which is essentially identical to the Arkansas rule, show that Rule 54(c) may not be used as the Defendants fear it will be. Despite a "liberal policy in favor of Rule 54(c) amendments," Rule 54(c) is not without limits. Baker v. John Morrell & Co., 382 F.3d 816, 831-32 (8th Cir. 2004). "A party will not be granted relief that is not pled when it would unduly prejudice the opposing party." Trim Fit, LLC v. Dickey, 607 F.3d 528, 531 (8th Cir. 2010); Goff v. USA Truck, Inc., 929 F.2d 429, 430 (8th Cir. 1991). A court should hold the Plaintiff to his theory as pleaded "[i]f the complaint explicitly or implicitly disclaims certain legal characterizations of the claim." Vidimos, Inc. v. Laser Lab Ltd., 99 F.3d 217, 222 (7th Cir. 1996). More germane to this case, "a verdict in excess of the demand could well be deemed prejudicial to the party that sought removal to federal court when the party seeking remand uses a damages-limitation provision to avoid federal court." Morgan v. Gay, 471 F.3d 469, 477 (3rd Cir. 2006).
Considering these principles, it is difficult to see how Plaintiffs could receive disclaimed relief. Defendants would clearly be prejudiced if Plaintiffs received relief beyond the scope of the stipulations and complaint. Moreover, Plaintiffs' remand pleadings openly disclaim unsought relief. None of Defendants' cited cases show that, in these circumstances, Plaintiffs could recover more than they seek.
Defendants next argue, citing ARK. CODE ANN. § 16-63-221, that Arkansas law explicitly allows Plaintiffs to amend their binding stipulations. This constant opportunity to amend, Defendants argue, undercuts the binding effect of Plaintiffs' stipulations. Plaintiffs respond that they are judicially estopped from amending their stipulations. The Court agrees.
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