Chadwick et al v. TNAL Motors LLC

Filing 16

MEMORANDUM OPINION: The court will GRANT IN PART and DENY IN PART Respondent's motions 6 & 12 . The Chadwicks must replead their petition by September 20, 2024 in a matter that establishes that this court has jurisdiction, failure to do so will result in the dismissal of this case. Signed by Judge Corey L Maze on 9/3/2024. (LCB)

FILED
2024 Sep-03 PM 03:35
U.S. DISTRICT COURT
N.D. OF ALABAMA

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ALABAMA
MIDDLE DIVISION
PHOEBE CHADWICK et al.
Plaintiffs,
v.

Case No. 4:23-cv-1491-CLM

TNAL MOTORS LLC d/b/a
TWIN CITY USED CARS et al.,
Defendants.
MEMORANDUM OPINION
Phoebe and Gwen Chadwick bought a car from Twin City Used Cars
(“Twin City”), who later sent the car to Alexander Ford, Inc. for service
repairs. The Chadwicks ask this court to compel arbitration for a dispute
arising out of the sale and repair of the car. Twin City and Alexander Ford
(“Respondents”) move to dismiss for lack of subject matter jurisdiction.
(Docs. 6, 12). For the reasons stated within, the court GRANTS IN PART
AND DENIES IN PART Respondents’ motions. (Docs. 6, 12).
BACKGROUND 1
A. The Vehicle
Phoebe Chadwick and her mom, Gwen, visited Twin City’s car lot
in search of a new car for Phoebe. After Phoebe showed interest in an
Acura SUV, a sales agent encouraged her to buy a 2017 Ford Edge. The
agent said the car had just come in from an auction and was not yet
detailed, but Phoebe agreed to go for a test drive. During the test drive, a
check engine light came on. The agent ensured the Chadwicks that there
was a simple fix, and that the car was safe and dependable. So the
Chadwicks entered a retail installment sales contract (“RISC”) with Twin
City to buy and finance the car. 2 (Doc. 1-1). While the Chadwicks were
1 These facts are taken from Petitioners’ arbitration claim before the American Arbitration
Association. (Doc. 1-1).
2 Phoebe bought the car for herself but financed it in Gwen’s name.

signing the final paperwork, the Twin City agent said they were getting a
great deal of $19,895 because Twin City bought the car from an auction
for $19,300. The Chadwicks and the agent agreed that Twin City would
deliver the car to Phoebe’s home within three to four days after detailing
the car, changing the oil, and resolving the check engine light issue. The
agent also ensured the Chadwicks that if anything was ever wrong with
the car, Twin City would provide Phoebe with a loaner vehicle.
A week later, Twin City delivered the car to Phoebe’s home. But the
car had not been detailed and the first time Phoebe cranked the car, the
engine light still came on. When she took the car to an auto parts shop to
check the light, she was told that an engine cylinder was misfiring. So
Phoebe called Twin City, who told her not to have the engine replaced at
a different Ford dealership. Instead, it would take the car to the
dealership with which Twin City works for repair business—Alexander
Ford.
Alexander Ford replaced the engine, but the car broke down less
than three months later while Phoebe was out of town. So Phoebe had the
car towed to a different Ford dealership. There, service technicians told
Phoebe they could not find the previous engine replacement listed under
the car’s VIN number, but they found new issues caused by the engine
replacement. Phoebe paid to have the issues repaired. A month later, the
car broke down again and Phoebe had the car towed to a different
dealership. Service technicians there told her the engine needed to be
replaced again, and that they also could not find the previous engine
replacement under the car’s VIN number. When the technicians removed
the engine from the car, it looked to be old and used. Phoebe paid for a
new engine to be installed and for other repairs. A month later, the car
was back at another dealership for issues related to the new engine.
Phoebe also contacted a previous owner of the car who said he bought it
from Twin City for about $3,000 less than Phoebe, and that the car only
ran for three weeks in the year that he owned it.

Over 11 months, Phoebe had to pay for towing, repairs, rental cars,
and related travel expenses while her car was in the shop each time. She
says that her monetary damages totaled $42,439,31:

(Doc. 10, p. 4).
B. The Arbitration
The RISC contained an arbitration provision that says: “Any claim
or dispute, whether in contract, tort, statute or otherwise … , between you
and us or our employees, agents, successors or assigns, which arises out
of or relates to your credit application, purchase or condition of this
vehicle, this contract or any resulting transaction or relationship
(including any such relationship with third parties who do not sign this
contract) shall … be resolved by neutral, binding arbitration … .”
The arbitration provision also provides that “[Twin City] will pay
your filing, administration, service or case management fee and your
arbitrator or hearing fee all up to a maximum of $5000, unless the law or
the rules of the chosen arbitration organization require us to pay more.”
(Doc. 1-1, p. 5).

So The Chadwicks filed a claim with the American Arbitration
Association (“AAA”), alleging violations of the Alabama Deceptive Trade
Practices Act (“ADTPA”); fraud; recklessness, wantonness and negligence;
negligent supervision; and revocation of acceptance under the Alabama
Uniform Commercial Code (“Alabama UCC”). (Doc. 1-1). But Twin City
failed to pay the required arbitration fees, so the AAA declined to
administer the case. (Doc. 1-1, pp. 25-30).
The Chadwicks now ask this court to compel arbitration under the
Federal Arbitration Act and to order Twin City to pay arbitration costs
consistent with the RISC agreement’s arbitration provision.
Alexander Ford first moved to dismiss for lack of subject matter
jurisdiction. (Doc. 6). Twin City joined in that motion and adopted each of
Alexander Ford’s arguments. (Doc. 12). The court addresses both motions
at once.
STANDARD OF REVIEW
When a claim is challenged for lack of subject matter jurisdiction
pursuant to Federal Rule of Civil Procedure 12(b)(1), the party bringing
the claim bears the burden of establishing proper subject matter
jurisdiction. Sweet Pea Marine Ltd. v. APJ Marine, Inc., 411 F.3d 1242,
1247 (11th Cir. 2005). And “[i]f the plaintiff fails to shoulder that burden,
the case must be dismissed.” Williams v. Poarch Band of Creek Indians,
839 F.3d 1312, 1314 (11th Cir. 2016) (citing In re Trusted Net Media
Holdings, LLC, 550 F.3d 1035, 1042 (11th Cir. 2008)).
DISCUSSION
Respondents contend that this federal court lacks jurisdiction to
compel arbitration. Under the Federal Arbitration Act (“FAA”), parties
can petition a United States court for an order to compel arbitration, but
only if that court would have jurisdiction over the dispute. 9 U.S.C. § 4 (“A
party aggrieved by the alleged failure, neglect, or refusal of another to
arbitrate under a written agreement for arbitration may petition any
United States district court which, save for such agreement, would have

jurisdiction under title 28 … for an order directing that such arbitration
proceed in the manner provided for in such agreement.”) (emphasis
added). The FAA “bestow[s] no federal jurisdiction but rather requir[es]
[for access to a federal forum] an independent jurisdictional basis” over
the parties’ dispute. Vaden v. Discover Bank, 556 U.S. 49, 59 (2009)
(quoting Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 582 (2008)).
So the court must determine whether it would have jurisdiction to
hear the contractual dispute between the Chadwicks and Respondents if
the RISC agreement did not have an arbitration clause.
A. Federal Question Jurisdiction (28 U.S.C. § 1331)
In their complaint, the Chadwicks cite the federal question statute,
28 U.S.C. § 1331, as giving this court jurisdiction because their case
“arises under the Federal Arbitration Act, 9 U.S.C. § 4.” (Doc. 1, ¶ 6). But
as explained, the FAA alone does not create a federal question; it says that
the Chadwicks can petition a federal district court if the court would have
jurisdiction “save for such [arbitration] agreement. 9 U.S.C. § 4. So the
court must determine whether the Chadwicks have established that this
court has federal question jurisdiction apart from the FAA. To do this, “[a]
federal court may ‘look through’ a § 4 petition to determine whether it is
predicated on an action that ‘arises under’ federal law.” Vaden, 556 U.S.
at 62. According to the Eleventh Circuit, this means that the court must
look to the underlying dispute—not the argument over its arbitrability—
and, regardless of whether the controversy between the parties is
embodied in preexisting litigation, ask: “Would a federal court have
jurisdiction over an action arising out of that full-bodied controversy?”
Cmty. State Bank v. Strong, 651 F.3d 1241, 1255 (11th Cir. 2011) (citing
Vaden, 556 U.S. at 68 n.16). “In other words, the proper jurisdictional
inquiry is whether either party to the § 4 petition ‘could file a federalquestion suit’ based on the parties’ underlying dispute.” Id.
The Chadwicks attach their FAA Claim to their petition. (Doc. 1-1).
In it, they allege seven counts—all violations of Alabama statutory and

common law. (Doc. 1-1, pp. 17-24). None of the seven counts allege a
violation of federal law.
As a result, the court would not have federal question jurisdiction
absent the arbitration clause. So the FAA, 9 U.S.C. § 4, does not create a
federal question that vests jurisdiction under 28 U.S.C. § 1331. In fact,
when Respondents challenged the Chadwicks’ reliance on 28 U.S.C. §
1331 (doc. 6), the Chadwicks pivoted to 28 U.S.C. § 1332, arguing that the
court instead has diversity jurisdiction. (Doc. 10, p. 2). So the court moves
there next. See Moses H. Cone Mem’l Hosp., 460 U.S. at 25 n.32.
B. Diversity Jurisdiction
1. The law: To invoke the court’s diversity jurisdiction, the
Chadwicks must show that the parties are completely diverse and the
amount in controversy exceeds $75,000. 28 U.S.C. § 1332. Complete
diversity means that “every plaintiff must be diverse from every
defendant.” Travaglio v. Am. Exp. Co., 735 F.3d 1266, 1268 (11th Cir.
2013) (citations omitted). “Citizenship, not residence, is the key fact that
must be alleged in the complaint to establish diversity for a natural
person.” Id. at 1269 (quoting Taylor v. Appleton, 30 F.3d 1365, 1367 (11th
Cir. 1994)). “Citizenship is equivalent to ‘domicile,’” which requires “both
residence in a state and ‘an intention to remain there indefinitely.’” Id.
(citations omitted).
A corporation is a citizen of its state of incorporation and the state
where it has its principal place of business. 28 U.S.C. § 1332(c)(1). A
principal place of business is “the place where a corporation’s officers
direct, control, and coordinate the corporation’s activities” (i.e., the “nerve
center”). Hertz Corp. v. Friend, 559 U.S. 77, 92-93 (2010). A limited
liability company is a citizen of any state of which a member of the
company is a citizen. Rolling Greens MHP, L.P. v. Comcast SCH Holdings
LLC, 374 F.3d 1020, 1022 (11th Cir. 2004); Flintlock Const. Servs., LLC v.
Well-Come Holdings, LLC, 710 F.3d 1221, 1224 (11th Cir. 2013). To
sufficiently allege the citizenship of a limited liability company, a party
must identify the citizenships of all its members. Rolling Greens, 374 F.3d

at 1022; Underwriters at Lloyd’s, London v. Osting-Schwinn, 613 F.3d
1079, 1091 (11th Cir. 2010) (quotation omitted). This means alleging (1)
who the members of the LLC are and (2) the citizenship (not mere
residency) of those members.
2. Amount in Controversy: Respondents say that the Chadwicks
have failed to prove the amount in controversy exceeds $75,000. (Docs. 11,
12). Alexander Ford says it only replaced the engine which, including
parts and labor, was only $6,033.06. (Doc. 11, pp. 3-4). Twin City adopted
Alexander Ford’s argument but did not respond separately.
The court disagrees. The Chadwicks seek $42,439.31 in monetary
damages arising from the total cost of the vehicle, out-of-pocket expenses
from having the car towed and repaired, rental car expenses, and related
travel expenses. They seek damages for time off work, loss of personal
time, mental and emotional anguish, and financial distress. They also
seek treble damages for their ADTPA claim and punitive damages for
their fraud claims. (Doc. 10, p. 5; Doc. 1-1, pp. 18-20). And the Chadwicks
have pled facts to support that Alexander Ford’s engine replacement could
have caused nearly all of Phoebe’s monetary damages after buying the car.
Considering these facts and the damages sought, the Chadwicks have met
their burden of showing the amount in controversy exceeds $75,000. See
Blackwell, 620 F. Supp. 2d at 1291 (“[A] punitive award of slightly more
than double the compensatory damages claim would occasion an amount
in controversy that exceeds the jurisdictional minimum.”).
3. Complete Diversity: That said, the court finds that the Chadwicks
have not established complete diversity among the parties. The
Chadwicks allege that complete diversity exists because (a) Phoebe and
Gwen are both residents of Georgia and (b) Respondents are “business
entities in Alabama and Tennessee each with a business location in
Alabama.” (Doc 10, p. 3). While the Chadwicks might ultimately be
correct, these allegations are not enough to establish diversity under
Eleventh Circuit precedent.

The Chadwicks must correct these deficiencies:
1. The Chadwicks must plead that they are citizens of
Georgia, not merely residents. The Chadwicks should
indicate whether they are domiciled in Georgia (i.e.,
whether they reside there and intend to remain there
indefinitely). Travaglio, 735 F.3d at 1269.
2. Twin City is an LLC. So the Chadwicks must identify
each of Twin City’s members and allege the citizenship of
each of those members. Rolling Greens, 374 F.3d at 1022.
3. Alexander Ford is a corporation. The Chadwicks must
establish Alexander Ford’s (1) state of incorporation and
(2) principal place of business—meaning the place where
its officers “direct, control, and coordinate the
corporation’s activities.” Hertz Corp., 559 U.S. at 92-93.
The court cannot proceed until the Chadwicks sufficiently address these
issues because, until the court is satisfied that it has subject matter
jurisdiction, it is “powerless to continue.” Bochese, 405 F.3d at 974-75. For
this reason, the court will not address Respondents’ arguments on the
merits of Petitioner’s petition.
—
“Defective allegations of jurisdiction may be amended.” 28 U.S.C. §
1653. So the court will allow the Chadwicks an opportunity to replead
facts to establish that diversity jurisdiction exists. The Chadwicks have
until on or before September 20, 2024, to replead their petition. Once the
Chadwicks file their amended petition, Respondents will have the
opportunity to again file responsive pleadings, and the court will consider
whether the deficiencies have been resolved.

CONCLUSION
For the reasons stated within, the court GRANTS IN PART AND
DENIES IN PART Respondents’ motions. (Docs. 6, 12). The Chadwicks
must replead their petition by September 20, 2024, in a manner that
establishes that this court has jurisdiction. Failure to do so will result in
dismissal of this case.
DONE and ORDERED on September 3, 2024.

_________________________________
COREY L. MAZE
UNITED STATES DISTRICT JUDGE