Schultz v. General R.V. Center

• Decision Date: 11 January 2008
• Docket Number: No. 06-2322.,06-2322.
• Citation: 512 F.3d 754
• Parties: Walter and Julie SCHULTZ, Plaintiffs-Appellants, v. GENERAL R.V. CENTER; Damon Corp., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

512 F.3d 754

Walter and Julie SCHULTZ, Plaintiffs-Appellants, v. GENERAL R.V. CENTER; Damon Corp., Defendants-Appellees.

No. 06-2322.

United States Court of Appeals, Sixth Circuit.

Argued: November 29, 2007.

Decided and Filed: January 11, 2008.

ARGUED: Adam S. Alexander, The Alexander Law Firm, Royal Oak, Michigan, for Appellants. Michael D. Dolenga, Dolenga & Dolenga, Farmington, Michigan, for Appellees. ON BRIEF: Adam S. Alexander, The Alexander Law Firm, Royal Oak, Michigan, for Appellants. Michael D. Dolenga, Jeffrey R. Nowicki, Dolenga & Dolenga, Farmington, Michigan, for Appellees.

Before: SILER, GIBBONS, and McKEAGUE, Circuit Judges.

OPINION

McKEAGUE, Circuit Judge.

Walter and Julie Schultz ("Plaintiffs") filed suit against General R.V. Center and Damon Corp. ("Defendants") in federal district court, alleging that their new R.V. is defective in violation of federal and state consumer laws. The district court granted summary judgment for Defendants on all counts, and Plaintiffs appealed. Following the conclusion of briefing, Defendants filed before this court a motion to dismiss for lack of subject matter jurisdiction on the basis that the Magnuson-Moss Warranty Act's amount in controversy requirement has not been satisfied. For the reasons stated below, we find that federal subject matter jurisdiction exists and DENY Defendants' motion to dismiss. With regard to the merits, we AFFIRM the district court's grant of summary judgment in favor of Defendants.

I. BACKGROUND

On or about June 1, 2003, Plaintiffs purchased and took delivery of a new 2003 Damon Escaper R.V. from General R.V. Center for a total cost of $192,000. Damon Corp. manufactured the living area of the R.V. and provided an express limited warranty covering the portions of the R.V. that it manufactured. According to Plaintiffs, throughout their ownership of the R.V. they have experienced problems that have necessitated numerous visits to General R.V.'s service center for repairs. On July 12, 2004, Plaintiffs ceased operation of the R.V. and filed the instant action in the United States District Court for the Eastern District of Michigan alleging: (1) breach of express and implied warranties; (2) revocation of acceptance; (3) Magnuson-Moss Warranty Act violations; (4) misrepresentation and negligence; and (5) violations of the Michigan Consumer Protection Act. Finding that there was no genuine issue of material fact with regard to any of Plaintiffs' claims, the district court granted summary judgment in favor of Defendants. Plaintiffs timely appealed. After briefing had concluded, Defendants filed with this court a motion to dismiss for lack of subject matter jurisdiction. Because it is a threshold matter, we begin by addressing Defendants' jurisdictional argument.

II. ANALYSIS

A. Subject Matter Jurisdiction

Defendants argue that federal subject matter jurisdiction is lacking in this case because the total amount in controversy is less than the $50,000 required by the Magnuson-Moss Warranty Act ("MMWA"), 15 U.S.C. § 2310(d)(3)(B). In support of their argument, Defendants rely primarily on our decision in Golden v. Gorno Bros., Inc., 410 F.3d 879, 885 (6th Cir.2005), and the Seventh Circuit's decision in Schimmer v. Jaguar Cars, Inc., 384 F.3d 402, 406 (7th Cir.2004). Neither Golden nor Schimmer is controlling in this case, and we find that federal subject matter jurisdiction exists because the MMWA's $50,000 amount in controversy requirement has been satisfied.

Subject matter jurisdiction may be raised at any stage in the proceedings, including on appeal. Franzel v. Kerr Mfg. Co., 959 F.2d 628, 630 (6th Cir.1992). When a statute conditions federal court jurisdiction on the satisfaction of an amount in controversy requirement, the failure to meet that specified amount divests the federal courts of subject matter jurisdiction. See St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 288-89, 58 S:Ct. 586, 82 L.Ed. 845 (1938). It is well-settled that "if a plaintiff brings an action in federal court and a defendant seeks dismissal on amount-in-controversy grounds, the case will not be dismissed unless it appears that the plaintiff's assertion of the amount in controversy was made in bad faith." Gafford v. Gen. Elec. Co., 997 F.2d 150, 157 (6th Cir.1993). A showing of bad faith is made if the defendant demonstrates "to a legal certainty[] that the original claim was really for less than the amount-in-controversy requirement." Id.

Although we have generally applied the legal certainty test in the context of 28 U.S.C. § 1332's amount in controversy requirement for diversity jurisdiction, we agree with our sister circuits that it applies with full force and effect in the context of MMWA's amount in controversy requirement. See Kelly v. Fleetwood Enterps., Inc., 377 F.3d 1034, 1037 (9th Cir.2004) (applying the legal certainty test to a claim under the MMWA); see also Gardynski-Leschuck v. Ford Motor Co., 142 F.3d 955, 958 (7th Cir.1998) (applying the legal certainty test to a claim under the MMWA). Under the legal certainty test, federal subject matter jurisdiction exists "if there is a probability that the value of the matter in controversy exceeds the jurisdictional amount." Kovacs v. Chesley, 406 F.3d 393, 397 (6th Cir.2005) (internal quotations omitted).

Applying these principles here, in order to prevail on their motion to dismiss, Defendants must demonstrate to a legal certainty that Plaintiffs would be unable to recover at least $50,000 were they to succeed on their claims against. Defendants. See Kelly, 377 F.3d at 1037-38. In re an attempt to meet this burden, Defendants unpersuasively argue that under our decision in Golden and the Seventh Circuit's decision in Schimmer, the total amount in controversy is less than the $50,000 required by the MMWA.

The MMWA is a somewhat unique federal statute in that merely alleging a violation of the act is insufficient to confer federal question jurisdiction; a separate $50,000 amount in controversy requirement must also be satisfied. According to the MMWA: "No claim shall be cognizable [in federal court] if the amount in controversy is less than the sum or value of $50,000 (exclusive of interests and costs) computed on the basis of all claims to be determined in this suit." 15 U.S.C. § 2310(d)(3)(B). Our decision in Golden announced the formula to be used in determining whether there is at least $50,000 in controversy as required by the MMWA. First, Golden explained that any finance charges should not be considered in calculating the amount in controversy. Golden, 410 F.3d at 885. Second, Golden held that the total amount in controversy is the difference between the value of the allegedly defective vehicle and the price of a replacement vehicle, less the value of any use Plaintiffs obtained from the allegedly defective vehicle. Id.

In Golden, the plaintiff sought to revoke acceptance of his new customized 2001 Ford Mustang on the grounds that various ton-conformities substantially impaired the car's value. Id. at 880. The purchase price of the Mustang, including finance charges, was $61,708.80. Id. at 882. Absent such charges, the price was $42,903.41. Id. at 883. Arguing that the amount in controversy did not exceed $50,000, the defendant in Golden filed a motion to dismiss on the basis that there was no federal subject matter jurisdiction under the MMWA. Id. at 881. This court affirmed the district court's finding that Golden had not satisfied the $50,000 requirement because—without the finance charges—the replacement value of the car was $42,903.41 while the value of the allegedly defective car was $25,000, resulting in a total amount in controversy of $17,903.41. Id. at 885. The Golden court stressed that the plaintiff could not satisfy the amount in controversy requirement regardless of the value of the allegedly defective car because "the pre-tax purchase price of the Mustang ... was significantly below the amount required for federal jurisdiction Golden would not dispute that if he paid cash for the vehicle the amount in controversy would be less than $50,000." Id. at 883. Thus, unlike the instant case, in Golden there was no dispute that the amount in controversy was less than $50,000 once the finance charges were removed.¹

Our decision in Golden extensively relied on the Seventh Circuit's decision in Schimmer for the proposition that the amount in controversy under the MMWA should be calculated by subtracting the value of the allegedly defective vehicle from the cost of a replacement vehicle. Golden, 410 F.3d at 882-83. In Schimmer, the plaintiff purchased a Jaguar automobile from the defendant for $69,513. Schimmer, 384 F.3d at 406. Unlike the transaction in Golden, Schimmer paid for the Jaguar in cash; thus, the $69,513 figure was the actual purchase price uninflated by any finance charges. Id. at 403. Also, in Schimmer the case was originally filed in state court and removed to federal district court by the defendant. Id. at 403-04. As a result, the precise issue before the court in Schimmer was whether the matter should be remanded to the state court because the defendant could not demonstrate to a "reasonable probability" that federal subject matter jurisdiction existed under the MMWA. Id. at 404. The Schimmer court stated that the defendant could not show removal was proper merely by arguing that the amount sought in the complaint exceeded $50,000. Id. at 405. Rather, Schimmer explained that to determine the amount in controversy the court should calculate the difference between the purchase price of the vehicle and the value of the allegedly defective vehicle. Id. at 406. Applying that formula in Schimmer, the cost of a replacement car was $69,513 and—according to expert testimony—the value of the allegedly defective Jaguar was $54,013, resulting in a total amount in controversy of $15,500, an amount well below the MMWA's $50,000 requirement. Id. at 406....