Miller v. Herman, No. 08-3093.

• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)
• Writing for the Court: BAUER, MANION, and TINDER, Circuit
• Citation: 600 F.3d 726
• Parties: John P. MILLER, Plaintiff-Appellant, v. James G. HERMAN, et al., Defendants-Appellees, and Pella Products, Inc., Defendant/Third-Party Plaintiff-Appellee, and Joseph Nobilio Carpenters, Third-Party Defendant-Appellee.
• Docket Number: No. 08-3093.
• Decision Date: 25 March 2010

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John P. MILLER, Plaintiff-Appellant,
v.
James G. HERMAN, et al., Defendants-Appellees, and
Pella Products, Inc., Defendant/Third-Party Plaintiff-Appellee, and
Joseph Nobilio Carpenters, Third-Party Defendant-Appellee.

No. 08-3093.

United States Court of Appeals, Seventh Circuit.

Argued January 13, 2010.

Decided March 25, 2010.

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COPYRIGHT MATERIAL OMITTED

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Thomas R. Stilp (argued), Messer & Stilp, Chicago, IL, for Plaintiff-Appellant.

James G. Herman, Individually, Johnsburg, IL, pro se.

Joseph F. Spitzzeri, David M. Macksey (argued) Johnson & Bell, Richard M. Waris, Pretzel & Stouffer, Chicago, IL, for Defendants-Appellees.

Before BAUER, MANION, and TINDER, Circuit Judges.

TINDER, Circuit Judge.

Appellant John P. Miller contracted with appellee James G. Herman for the construction of a new home. Herman installed Pella windows in the home as part of that contract, and, according to Miller, the windows have leaked, causing him personal and property damage. He brought this action against Herman, Herman's construction company, James G. Herman & Associates, and Pella Products, Inc. ("Pella") pursuant to the Magnuson-Moss Warranty—Federal Trade Commission Improvement Act, 15 U.S.C. §§ 2301-2312 ("Magnuson-Moss" or "the Act"), and various Illinois law theories. On motion by Herman and Herman & Associates, the district court dismissed the suit for lack of subject matter jurisdiction. Miller appeals. We affirm the dismissal of the Magnuson-Moss claims on modified grounds, though we vacate the dismissal of Miller's state law claims and any related crossclaims, third-party claims, and counterclaims, and order a limited remand so the district court can determine whether it should exercise supplemental jurisdiction over them.

I. BACKGROUND

In April 2003, John P. Miller and his then-wife Terese Miller entered into an oral contract with builder James G. Herman and his company, James G. Herman & Associates, for the construction of a new, custom-built, $497,700.38 home in Lakemoor, Illinois. (We recite the facts as the Millers allege, with all reasonable inferences in their favor.) In mid-June 2003, Herman purchased for the Millers' home windows and doors (collectively "windows") manufactured and warranted by Pella Products. As construction of the home progressed, Herman and subcontractor Joseph Nobilio installed the windows into the nascent structure.

From the time of their installation in summer 2003 through December 2003,

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when Herman completed the home and represented to the Millers that it was habitable, the windows leaked and allowed water into the home. The Millers complained to Herman and Pella, and in response Herman caulked around the windows. The Miller family moved into the home sometime thereafter. Notwithstanding the additional caulking, the windows continued to leak. Mold growing in the home eventually caused the Millers' daughter to have an asthma attack and prompted the Millers to seek professional mold remediation

In April 2005, the Millers contacted Pella and requested that it inspect a casement window in the basement of the home. Pella sent two representatives to the home, and they removed and inspected the window as requested. They observed water damage and concluded that it had been caused by faulty installation rather than a defective window. They reinstalled the window, but Miller alleges that they, too, deviated from Pella's official installation instructions. There is no indication that the Millers asked for, or that Pella performed, any inspection or reinstallation of the other windows.

The windows continued to leak, and the Millers eventually filed a complaint in Illinois state court. They voluntarily dismissed that complaint, however, to pursue the present action against Herman, Herman & Associates, and Pella in the Northern District of Illinois, where they filed an eight-count complaint. Four of the counts, Counts I-IV, sounded in state law against Herman: breach of contract, breach of the implied warranty of habitability, violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, and common law fraud. Count VIII, products liability, was levied against Pella. The remaining three counts, Counts V, VI, and VII, in the Millers' view provided the requisite jurisdictional hook to carry the lot into federal court. All three, Count V against Herman and Counts VI and VII against Pella, were breach of warranty claims pleaded with reference to Magnuson-Moss, which provides a civil cause of action for consumers "damaged by the failure of a supplier, warrantor, or service contractor to comply with any Act obligation ... or under a written warranty, implied warranty, or service contract ...." 15 U.S.C. § 2310(d)(1) (emphasis added). The Act's "unusual jurisdictional clause," quoted in the preceding sentence, permits "an aggrieved customer to sue on state-law claims in federal court, whether or not the parties are of diverse citizenship." Gardynski-Leschuck v. Ford Motor Co., 142 F.3d 955, 956 (7th Cir.1998). Indeed, Counts V and VI both allege breaches of Illinois warranty law. The only requirements a non-class-action plaintiff must meet to get state law warranty claims into federal court under Magnuson-Moss both relate to the amount in controversy: the amount in controversy of each claim must exceed $25, and the total amount in controversy, exclusive of interests and costs, must be at least $50,000. 15 U.S.C. § 2310(d)(3).

Herman & Associates moved to dismiss the Millers' complaint for lack of subject matter jurisdiction. See Fed.R.Civ.P. 12(b)(1). It did not argue that the amount-in-controversy requirements had not been satisfied,¹ but instead asserted

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that the district court lacked subject matter jurisdiction because the windows installed in the Millers' home were not "consumer products" within the meaning of the Act. See 15 U.S.C. § 2301(1); 16 C.F.R. § 700.1. Since the Millers were not raising complaints related to "consumer products," Herman & Associates reasoned, Magnuson-Moss did not apply to the claim and thus there was no federal question jurisdiction under 28 U.S.C. § 1331. And if that were the case, the district court would be unable to exercise supplemental jurisdiction over the state law claims pursuant to 28 U.S.C. § 1367(a). See Arbaugh v. Y & H Corp., 546 U.S. 500, 514, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006) ("When a federal court concludes it lacks subject matter jurisdiction, the court must dismiss the complaint in its entirety."). (Diversity jurisdiction, 28 U.S.C. § 1332, is of no concern here because Miller, Herman, and Herman & Associates all hail from Illinois.) The Millers filed a reply to the motion in which they argued, citing state case law and Federal Trade Commission ("FTC") interpretations, that the windows were consumer products. Shortly thereafter, the district court denied Herman & Associates' motion with the enigmatic explanation that its ruling was "based on our reading of the Magnuson-Moss Warranty Act."

Eight months later, Herman & Associates, this time in conjunction with Herman, again moved to dismiss the complaint on Rule 12(b)(1) grounds. The Herman defendants asked the court to reconsider its earlier decision in light of an Illinois Appellate Court decision holding that windows installed in new homes were not "consumer products." See Weiss v. MI Home Prods., Inc., 376 Ill.App.3d 1001, 315 Ill.Dec. 690, 877 N.E.2d 442, 445 (2007). They accompanied their motion with a Fed.R.Civ.P. 56(b) motion for summary judgment on alternative, unrelated grounds.

While the Herman defendants' motions were pending, Pella filed its own Rule 56(b) motion for summary judgment. In its supporting memorandum, Pella raised the same argument that the Herman defendants had raised in the Rule 12(b)(1) context: the windows at issue are not "consumer products." (Pella also adopted, in a footnote, the Herman defendants' motion.) Rather than couching the argument in jurisdictional terms, Pella asserted that "as a matter of law, the windows and doors at issue in this case are outside of the definition of a consumer product contained in Magnuson-Moss. As a result, an essential element of plaintiffs' claim is missing and there are no set of facts under which plaintiffs' claim can succeed." Dkt. No. 94 at 6. Pella cited some of the FTC's interpretations of the Act, see 16 C.F.R. § 700.1, and case law, including the Weiss case, to support its position. Pella also attached an FTC advisory opinion, 88 F.T.C. 1030, to its memorandum.

The district court ordered consolidated briefing on the Herman defendants' and Pella's motions. The Millers accordingly filed a single universal response memorandum, in which they argued that the windows were "consumer products." They did not address the disparate procedural postures of the motions they were opposing; they simply requested that the district court "deny the Defendants' Motion

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to Dismiss and Motion for Summary Judgment."

The district court did not accede to the Millers' request. In its memorandum order and opinion, after discussing the FTC's interpretations, 16 C.F.R. § 700.1(e) and (f), the district court concluded:

We find that the Millers contracted with Herman for the construction of a new home, not for the individual sale of windows. Because those windows were intended to be integrated into the Millers' home, we find that they do not constitute "consumer products" under the Magnuson-Moss Act, but are instead building materials indistinguishable from the real property. Thus, the Millers have no valid claims under the Magnuson-Moss Act, and this court therefore lacks subject matter jurisdiction over any of the Millers' claims. Accordingly, Herman's motion to dismiss this case is granted. We note that the defendants have also moved for summary judgment on the Millers' state law claims. The defendants may reassert those arguments in state

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