Lieb v. American Motors Corp.

• Decision Date: 01 April 1982
• Docket Number: No. 81 Civ. 1004 (RLC).,81 Civ. 1004 (RLC).
• Citation: 538 F. Supp. 127
• Parties: Richard LIEB, on behalf of himself and on behalf of all others similarly situated, Plaintiff, v. AMERICAN MOTORS CORPORATION and Jeep Corporation, Defendants.
• Court: U.S. District Court — Southern District of New York

538 F. Supp. 127

Richard LIEB, on behalf of himself and on behalf of all others similarly situated, Plaintiff, v. AMERICAN MOTORS CORPORATION and Jeep Corporation, Defendants.

No. 81 Civ. 1004 (RLC).

United States District Court, S. D. New York.

April 1, 1982.

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Milberg, Weiss, Bershad & Specthrie, New York City, for plaintiff; Jerome M. Congress, New York City, of counsel.

Stroock & Stroock & Lavan, New York City, for defendants; David Sher, Joseph L. Forstadt, Jay P. Mayesh, Brian M. Cogan, John B. Berringer, New York City, of counsel.

OPINION

ROBERT L. CARTER, District Judge.

This is an action alleging safety and design defects in the American Motors Jeep, model CJ-5, and fraud in the marketing of that vehicle. Defendants, American Motors Corporation ("AM") and Jeep Corporation ("Jeep"), move to dismiss the complaint for failure to state a cause of action and for failure to satisfy jurisdictional prerequisites. Plaintiff, Richard Lieb, opposes the motion and seeks to amend his complaint to strike one cause of action, to add another cause of action and a third defendant, and to modify the amount in controversy.

In July, 1977, Lieb purchased a new CJ-5 jeep from Birchard Buick in Pittsfield, Massachusetts for $5,899. Although Lieb is a New York citizen, he purchased the car for use at a home he owns in Massachusetts. He was displeased with the vehicle from the outset because of control problems. Lieb apprised Jeep of his steering difficulties after one and a half years of limited and unsatisfactory use and several attempted repairs. Jeep arranged for further servicing and modification of the automobile at a dealer near Lieb's permanent residence in Long Island. After this servicing proved inadequate, Lieb demanded that Jeep replace the vehicle or face a lawsuit.

The gravamen of the complaint is defendants' marketing the CJ-5 despite their knowledge that the vehicle is inherently unsafe for multi-purpose driving. Plaintiff contends that the 1977 through 1981 CJ-5 models were designed and manufactured in a way that created a substantial risk that they would roll over while executing moderate speed turns. Defendants allegedly are and were aware of this dangerous condition, yet they disseminated promotional and sales material portraying the CJ-5 as especially safe and stable and warranting the automobile as defect free and fit for highway and off the road use.

The original complaint stated four causes of action. Lieb contended that defendants violated the Magnuson-Moss Warranty Act ("Magnuson-Moss" or "Act"), 15 U.S.C. §§ 2301-2312 (1976), by failing to comply with their written and implied warranties. A second cause of action was predicated on violations of the National Traffic and Motor Vehicle Safety Act ("NTMVSA"), 15 U.S.C. § 1381 et seq. (1976). The other two causes rested on state grounds. Lieb alleged that the defendants' warranties abridged consumer protection laws. He also asserted that the defendants defrauded him and the public by portraying the CJ-5 as an especially stable vehicle while concealing its rollover potential.

The suit is brought as a class action on behalf of all persons who have purchased 1977 through 1981 CJ-5 jeeps. Statements in the complaint imply that certain class members may have suffered physical or property damage. Lieb, however, has not experienced any such harm; his actual damages, if any, are limited to economic loss. In addition to actual damages, in the original complaint Lieb sought injunctive relief and punitive damages of $15,000.

The amended complaint drops the NTMVSA action and adds a claim under state products liability law. In addition, the amount of punitive damages sought has been enlarged to $50,000. A third defendant, American Motor Sales Corporation, has been included. Finally, the revised complaint augments the factual allegations of the original by identifying the defendants' allegedly harmful practices with greater specificity.

Leave to amend is freely granted "unless the plaintiff is guilty of undue delay or bad faith or unless permission to amend would unduly prejudice the opposing party." S. S. Silberblatt, Inc. v. East Harlem Pilot Block, 608 F.2d 28, 42 (2d Cir. 1979); see Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962); F.R.Civ.P. 15(a). The proposed amendments clarify the complaint without prejudicing the defendants. Some of the changes were necessitated by plaintiff's counsel's apparent unfamiliarity with the law, such as the unavailability of a private right of action under the NTMVSA, see Handy v. General Motors Corp., 518 F.2d 786, 788 (9th Cir. 1975); 15 U.S.C. § 1399(a) (1976), or the jurisdictional requirements of Magnuson-Moss, see 15 U.S.C. § 2310(d)(3) (1976). The amendments enhance defendants' ability to respond to plaintiff's allegations by eliminating some untenable claims and by stating with greater clarity the facts supporting the action. The new cause of action, for products liability, arises from the same facts stated in the original complaint. Its addition reflects uncertainty regarding changing legal rules and choice of state law to govern the case. Although plaintiff's counsel should have drafted the original pleadings with greater care and only after a more thorough study of the relevant laws, there is no evidence of bad faith and the case is not so advanced to render the modifications unduly tardy. Accordingly, the motion to amend will be granted.

I. The Magnuson-Moss Claim

The Magnuson-Moss Act authorizes consumers to sue warrantors "for damages and other legal and equitable relief" for failure to comply with any written or implied warranty. 15 U.S.C. § 2310(d)(1) (1976). The action may be brought in state or federal court, 15 U.S.C. § 2310(d)(1)(A)-(B) (1976), but the Act restricts federal court jurisdiction to only those suits satisfying three requirements. The amount in controversy for any single claim must be at least $25. For all claims aggregated, the amount in controversy, exclusive of interest and costs, must equal or exceed $50,000. Finally, to maintain a class action, at least one hundred plaintiffs must be named. 15 U.S.C. § 2310(d)(3) (1976); see, e.g., In re General Motors Corp. Engine Interchange Lit., 594 F.2d 1106, 1114 n.2 (7th Cir. 1979), cert. denied sub nom. Oswald v. General Motors Corp., 444 U.S. 870, 100 S.Ct. 146, 62 L.Ed.2d 95 (1979); Watts v. Volkswagen Artiengesellschaft, 488 F.Supp. 1233, 1235-36 (W.D.Ark.1980).

A. Class Claims

Although the lawsuit is captioned as a class action, only one plaintiff, Richard Lieb, is named in the complaint. Lieb attempts to avoid the unequivocal requirements for bringing a class action under Magnuson-Moss by asserting that he need not name other plaintiffs until class certification is sought. In addition, he seeks court endorsement of a proposal to solicit potential class members through an extensive advertising campaign. The wisdom and even the legality of such a program is questionable, but these issues cannot be considered because jurisdiction over the class action claim is clearly lacking.

"Jurisdiction is to be determined as of the commencement of suit." Wigand v. Flo-Tek, Inc., 609 F.2d 1028, 1032 (2d Cir. 1979); see Smith v. Sperling, 354 U.S. 91, 93 n.1, 77 S.Ct. 1112, 1113 n.1, 1 L.Ed.2d 1205 (1957). A court cannot superintend a prospective plaintiff's activities designed to satisfy jurisdictional prerequisites after the complaint is filed. The complaint is deficient measured against the explicit and unambiguous statutory mandate and must be dismissed as a class action. Barr v. General Motors Corp., 80 F.R.D. 136, 139 (S.D.Ohio 1978), relied on by Lieb to support his argument that he need not meet the 100 name requirement prior to class certification, provides no justification for such delay. That court dismissed a Magnuson-Moss class action because a 100 names had not been listed at the time of certification. See id. Although dicta implied that certification was the appropriate occasion to apply the hundred plaintiff requisite, the court suggested no reason to depart from the rule that statutorily imposed jurisdictional requirements must be satisfied at the time that jurisdiction is invoked or challenged. See Watts v. Volkswagen Artiengesellschaft, supra, 488 F.Supp. at 1236 (dismissing, prior to motion for certification, class action with only two named plaintiffs).

B. Amount in Controversy

Addressing Lieb's claim as an individual action, defendants contend that less than $50,000 is in controversy. In evaluating a motion to dismiss for failure to satisfy the jurisdictional amount, the sum claimed by the plaintiff controls if the claim is made in good faith unless the defendant shows "to a legal certainty" that the claim is inadequate. St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 288, 58 S.Ct. 586, 590, 82 L.Ed. 845 (1938). To fulfill the $50,000 requirement, Lieb relies on his amended claim for punitive damages and his prayer for an injunction. Defendants contest the availability of either punitive or injunctive relief and assert that under Magnuson-Moss Lieb is limited to actual damages, an amount that cannot exceed the purchase price of the car.

1. Punitive Damages

The use of punitive or exemplary damages to satisfy amount in controversy requirements triggers special judicial scrutiny. See Zahn v. International Paper Company, 469 F.2d 1033, 1033 n.1 (2d Cir. 1972), aff'd on other grounds, 414 U.S. 291, 94 S.Ct. 505, 38 L.Ed.2d 511 (1973); Novosel v. Northway Motor Car Corp., 460 F.Supp. 541, 545 (N.D.N.Y.1978). The court must examine the claim to ascertain whether the law allows such damages; jurisdiction, however, is not defeated unless the court is certain that plaintiff cannot recover the amount demanded. Tackett v. Kidder, 616 F.2d 1050, 1053 (8th Cir. 1980); Beckerman v. Sands, 364 F.Supp. 1197, 1200-01 (S.D.N. Y.1973) (Lasker, J.)...