Stelzer v. Carmax Auto Superstores California, LLC et al

Filing 32

ORDER to Show Cause re: Amount in Controversy Exceeded $75,000 at Time of Removal. The court remands this matter to state court. Signed by Judge Cynthia Bashant on 7/24/2014.(Sent certified copy to state court) (knb)(jrd)

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1 2 3 4 5 6 7 8 9 10 11 UNITED STATES DISTRICT COURT 12 SOUTHERN DISTRICT OF CALIFORNIA 13 14 CYNTHIA STELZER, Plaintiff, 15 16 17 18 19 Case No. 13-cv-1788 BAS (JMA) ORDER TO SHOW CAUSE RE: AMOUNT IN CONTROVERSY EXCEEDED $75,000 AT TIME OF REMOVAL v. CARMAX AUTO SUPERSTORES CALIFORNIA, LLC, Defendant. 20 21 On August 1, 2013, Defendant Carmax Auto Superstores California, LLC 22 removed this case from state court pursuant to 28 U.S.C. § 1332. On the merits, it 23 is likely that Plaintiff Cynthia Stelzer’s Amended Complaint would be dismissed 24 for the same reasons similar complaints have been dismissed in other cases and for 25 failure to comply with the court’s order granting Defendant’s motion to dismiss. 26 ECF 19; See, e.g., Chulick-Perez v. Carmax Auto Superstores California, LLC, 27 2:13-CV-02329-TLN, 2014 WL 2154479 (E.D. Cal. May 22, 2014). 28 However, this Court cannot reach the merits of the claim because the amount –1– 13-cv-1788 BAS (JMA) 1 in controversy does not reach the statutory minimum of $75,000, required for 2 diversity jurisdiction under 28 U.S.C. § 1332. 3 The Court must reevaluate the previous decision (ECF 18) to deny remand 4 in light of newly revealed evidence that Defendant contemplated and subsequently 5 did repurchase the vehicle in question, significantly reducing the potential amount 6 in controversy. 7 I. LEGAL STANDARD 8 A defendant can remove any action filed in state court over which federal 9 courts have original jurisdiction. 28 U.S.C. 1441(a). That said, the removal statute 10 is strictly construed against removal, and “[t]he strong presumption against 11 removal jurisdiction means that the defendant always has the burden of 12 establishing that removal is proper.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th 13 Cir. 1992). “Federal jurisdiction must be rejected if there is any doubt as to the 14 right of removal in the first instance.” Id. The propriety of removal turns on 15 whether the case could have originally been filed in federal court, Chicago v. Int’l 16 Coll. of Surgeons, 522 U.S. 156, 163 (1997), and the Court’s analysis must focus 17 on the pleadings “as of the time the complaint is filed and removal is effected.” 18 Strotek Corp. v. Air Transport Ass’n of America, 300 F.3d 1129, 1131 (9th Cir. 19 2002); see also Sparta Surgical Corp. v. Nat’l Ass’n of Sec. Dealers, Inc., 159 F.3d 20 1209, 1213 (9th Cir. 1998). 21 II. DISCUSSION 22 Stelzer previously contested diversity jurisdiction. ECF 12. At the time, the 23 facts supported federal jurisdiction. ECF 18. However, the facts regarding the 24 amount in controversy have changed, and therefore that legal analysis must be 25 revisited. 26 CarMax argues that the amount in controversy exceeds $75,000 for two 27 reasons: the injunctive relief sought, which it values at $350,000, and the potential 28 attorney’s fees, which it values at $77,400. –2– 13-cv-1788 BAS (JMA) a) 1 Amount in Controversy 2 When a complaint filed in state court affirmatively alleges that the amount in 3 controversy is less than the jurisdictional threshold of $75,000, the party seeking 4 removal must prove to a “legal certainty” that the threshold is met. Tele Munchen 5 Fernseh GMBH & Co. v. Alliance Atlantis Int’l Distrib, LLC, 2013 WL 6055328 at 6 *2 (C.D. Cal. Nov. 15, 2013) (citing Guglielmino v. McKee Foods Corp., 506 F.3d 7 696, 699 (9th Cir. 2007)). But, when it’s unclear or ambiguous from the face of a 8 complaint whether the jurisdictional threshold is met, a “preponderance of the 9 evidence” standard applies. Id.; see also Matheson v. Progressive Speciality Ins. 10 Co., 319 F.3d 1089, 1090 (9th Cir. 2003). 11 The court looks to the complaint filed in state court, not to an amended 12 complaint filed after removal. See Heichman v. American Tel. & Tel. Co., 943 13 F.Supp. 1212, 1216–17 (C.D.Cal. 1995); see also St. Paul Mercury Indem. Co. v. 14 Red Cab Co., 303 U.S. 283 (1938). While “[i]t is true that, when a defendant 15 removes a case to federal court based on the presence of a federal claim, an 16 amendment eliminating the original basis for federal jurisdiction generally does not 17 defeat jurisdiction[,]” Rockwell Int'l Corp. v. United States, 549 U.S. 457, 474 18 (2007),1 later events may clarify a previously uncertain jurisdictional issue. See 19 Asociacion Nacional de Pescadores v. Dow Quimica 988 F.2d 559 (5th Cir.1993) 20 cert. denied, 510 U.S. 1041 (1994); see also St. Paul Mercury Indemnity Co. v. Red 21 Cab Co., 303 U.S. 283, 293 (1938)). 22 The claimed amount in controversy cannot be based upon speculation and 23 conjecture. Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 1090–91 24 (9th Cir. 2003). Rather, the Court can consider “summary-judgment-type evidence 25 relevant to the amount in controversy at the time of removal,” including 26 declarations and affidavits. Id. at 1090. However, the court may also accept a 27 28 1 (citing Carnegie–Mellon Univ. v. Cohill, 484 U.S. 343, 346, 357 (1988). –3– 13-cv-1788 BAS (JMA) 1 plaintiff’s decision to “sue for less than the amount she may be entitled to if she 2 wishes to avoid federal jurisdiction and remain in state court.” Lowdermilk v. U.S. 3 Bank Nat’l Ass’n, 479 F.3d 994, 999 (9th Cir. 2007). 2 4 In an action by a single plaintiff against a single defendant, all claims can be 5 aggregated and can include special and general damages, punitive damages, and 6 attorneys’ fees. Campbell v. Hartford Life Ins. Co, 825 F.Supp.2d 1005, 1008 7 (E.D.Cal. 2011). 1. Actual and Punitive Damages 8 9 Here, actual damages are pled with specificity. Stelzer, in her Statement of 10 Actual and Punitive Damges, claimed $32,000 in punitive damages and $40,000 in 11 actual damages. The Court will give Stelzer the benefit of the doubt and assume 12 she meant $40,000 for punitive damages, as her remand brief makes clear that the 13 $32,000 amount is for actual damages and the $40,000 amount is for punitives. 14 ECF 12, 5. 15 Stelzer states she agreed in principle to repurchase on July 2, 2013. ECFs 31 16 ¶ 11, 30-1 ¶ 8. This statement is corroborated by Exhibit 2 to Daniel Bloor’s 17 Declaration, which contains an email stating, “CarMax agrees to provide your 18 client with full restitution as a correction to satisfy her claim for damages under the 19 CLRA and her claim under the Song Beverly Act.” ECF 30-1, 12. 20 Thus, only the $40,000 in punitive damages remains in contention. Under 21 Lowdermilk, Stelzer can stipulate to a lower damages award, and thus her 22 limitation of punitive relief to $40,000 is accepted.3 23 24 25 26 27 28 2 Lowdermilk’s reasoning still seems applicable when the action does not involve a class. Suing for a lower amount is overruled in the class-action context by Standard Fire Ins. Co. v. Knowles, 133 S.Ct 1345 (2013) because “[t]hat principle is not viable in actions involving absent class members.” Rodriguez v. AT&T Mobility Servs. LLC, 728 F.3d 975, 981 (9th Cir. 2013) (examining Standard Fire). However this logic, and therefore ruling, seems to only apply for class actions. 3 In any case, CarMax does not rebut these damages to a legal certainty. –4– 13-cv-1788 BAS (JMA) 2. Attorney’s Fees 1 2 It is unsettled in the Ninth Circuit whether attorneys’ fees incurred after the 3 date of removal are included in the amount in controversy. Curtean Garland v. 4 WinCo Holdings, Inc., 2013 WL 3479563 at *2 (D. Or. July 8, 2013). The court 5 previously decided that fees after the date of removal are not included in the 6 amount in controversy, citing Wastier v. Schwan’s Consumer Brands, 2007 WL 7 4277552 at *3 (S.D. Cal. Dec. 5, 2007). The Court will continue to adhere to this 8 determination. At most, attorneys’ fees in this case amount to CarMax’s $1,200 9 estimate for the “Case Intake and Claim Generation Phase” of this case, which 10 would cover everything up through removal.4 and the presence of identical 11 complaints filed by Stelzer’s counsel in other cases. ECF 14-4, Edwards Decl., 11. 12 “This makes CarMax’s estimate of $77,400 wildly excessive.” ECF 18, 9:23 13 (citing ECF 14-4, Edwards Decl., 18). 14 supports at most $1,200 in controversy as attorneys’ fees in this case, bringing the 15 aggregated total of punitive damages and attorneys’ fees to $41,200. The preponderance of the evidence 3. Injunctive Relief 16 17 The Supreme Court has established that “[i]n actions seeking declaratory or 18 injunctive relief, it is well established that the amount in controversy is measured 19 by the value of the object of the litigation.” Hunt v. Washington State Apple Adver. 20 Comm'n, 432 U.S. 333, 347 (U.S.N.C. 1977). As early as 1916, it was “settled 21 doctrine” that separate and distinct claims cannot be aggregated to meet the 22 jurisdictional amount. Pinel v. Pinel, 240 U.S. 594 (cited by Snyder v. Harris, 394 23 U.S. 332, 337 (1969)). Even in the case of a joined lawsuit, “various fee payers 24 could not be aggregated[.]” Snyder, 394 U.S. at 337. In Clark v. Paul Gray, Inc., 25 306 U.S. 583 (1939), this logic was applied to class actions challenging a $15 fee 26 on automobiles within California. These claims, even though the numerous 27 28 4 It is likely that the fees were even lower because Stelzer’s counsel appears to use a form complaint. See Lee v. CarMax, 13-CV-7648-MWF-VBK (C.D. Cal. 2013). –5– 13-cv-1788 BAS (JMA) 1 plaintiffs were all joined in the lawsuit, could not be aggregated because “there are 2 numerous plaintiffs having no joint or common interest or title in the subject matter 3 of the suit.” Id at 588 (cited by Snyder, 394 U.S. at 337). 4 In the Ninth Circuit, this rule on money damages is extended to injunctive 5 relief based on an “either viewpoint” rule. Ridder Bros. Inc., v. Blethen, 142 F.2d 6 395, 399 (9th Cir. 1944). Under this rule, either the plaintiff’s potential recovery 7 or the potential cost to the defendant of complying with the injunction must exceed 8 the jurisdictional threshold. See In re Ford Motor Co./Citibank (South Dakota), 9 N.A., 264 F.3d 952 (9th Cir. 2001).5 However, the Ninth Circuit has specifically 10 and repeatedly declined to extend the either viewpoint rule to class action claims 11 seeking equitable relief because it would permit plaintiffs with minimal damages to 12 “dodge the non-aggregation rule by praying for an injunction.” See id. (quoting 13 Snow v. Ford Motor Co., 561 F.2d 787, 791 (9th Cir. 1977). 14 Because the cost of the injunction is not specifically pled in the complaint, 15 the preponderance of evidence standard under Lowdermilk applies. This Court 16 finds that presenting an already-produced document to a buyer would consume, at 17 most, minutes of time for each customer. Assuming that CarMax’s high-end 18 assumptions that it would need to expend an extra 2 minutes 27 seconds per 19 customer at $27 per hour in wages, it would cost CarMax a little over $1.10 to 20 provide a buyer with an inspection report. See ECF 30, Schlicter Decl., 10 ¶ 18. 21 When CarMax initially changed its certificate policy, it “simply” sent an email to 22 employees. ECF 31, Rosner Decl. 2 ¶ 10. This may add as much as an hour or 23 24 25 26 27 28 5 Some circuits follow the “plaintiff-viewpoint” rule, which measures the value of the litigation “solely from the plaintiff’s perspective.” Ericsson GE Mobile Communications, Inc. v. Motorola Communications & Elecs., Inc., 120 F.3d 216, 218–19 (quoted by Campbell v. Gen. Motors Corp., 19 F. Supp. 2d 1260, 1266 (N.D. Ala. 1998)). Campbell found no aggregation of a class’s claims for injunctive relief against General Motors, in part based on the plaintiff-viewpoint rule. As discussed, the either viewpoint rule’s scope is limited in class actions or class action-like circumstances, leading to a similar—but not identical—amount in controversy under either analysis. –6– 13-cv-1788 BAS (JMA) 1 two to draft in a small committee. 2 The object of the litigation, here, is to enjoin CarMax from wrongfully 3 failing to provide a certificate. Hypothetically, CarMax might be wronging all of 4 its purchasers, creating an ever-growing aggregate claim. If CarMax extended out 5 its time frame far enough and assumed continued hardship, even an incredibly 6 minor loss could create an amount in controversy above any threshold set by law. 7 This is clearly an inappropriate interpretation of the intentionally limited scope of 8 diversity jurisdiction and an undermining of the Ninth Circuit’s precedent 9 disfavoring aggregation. Instead, the Court must first look to the plaintiff’s 10 potential gain and then the potential loss to the defendant, but only as its loss 11 relates to the plaintiff in the case. Thus, the fixed cost of implementing the policy 12 change and the particular cost to provide one plaintiff with the required report is 13 the proper valuation of the injunction. 14 Accordingly, the amount in controversy added from the injunction barely 15 moves the needle from the $41,200 for punitive damages and attorney’s fees. The 16 Court finds that the preponderance of the evidence supports an amount in 17 controversy of $41,471.11. Any concessions from Seltzer or CarMax regarding 18 the amount in controversy are not a valid basis for federal jurisdiction. 19 Heichman, 943 F.Supp. at 1216. Under either a preponderance of the evidence or 20 legal certainty test, this fails to meet the jurisdictional requirement that the amount 21 in controversy exceed $75,000. 22 III. See CONCLUSION 23 For the reasons given above, the court REMANDS this matter to state court. 24 IT IS SO ORDERED. 25 DATED: July 24, 2014 26 27 28 –7– 13-cv-1788 BAS (JMA)

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