Frederico v. Home Depot ( 2007 )

Opinions of the United
2007 Decisions States Court of Appeals
for the Third Circuit
11-9-2007
Frederico v. Home Depot
Precedential or Non-Precedential: Precedential
Docket No. 06-2266
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 06-2266
JANELLE FREDERICO, individually and on behalf
of a class of similarly situated persons,
Appellant
v.
HOME DEPOT
Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil No.05-cv-05579)
District Judge: Hon. Joel A. Pisano
Argued July 12, 2007
Before: SLOVITER, ALDISERT and ROTH, Circuit Judges.
(Filed: November 9, 2007)
Khalid A. Elhassan (Argued)
EICHEN LEVINSON & CRUTCHLOW, LLP
40 Ethel Road
Edison, NJ 08817
Attorney for Appellant
Dwight D. Davis (Argued)
S. Stewart Haskins
Tracy Klinger
KING & SPALDING, LLP
1180 Peachtree Street
Atlanta, GA 30309
Nicholas Stevens
STARR, GREN, DAVISON & RUBIN
103 Eisenhower Parkway
Roseland, NJ 07068
Attorneys for Appellee
OPINION OF THE COURT
ALDISERT, Circuit Judge.
Plaintiff Janelle Frederico, for herself and on behalf of
a class of similarly situated persons, appeals a judgment of the
2
United States District Court for the District of New Jersey that
dismissed her complaint against The Home Depot, Inc.
Alleging fraud and breach of contract, the complaint was
dismissed without prejudice pursuant to Rules 9(b) and
12(b)(6), Federal Rules of Civil Procedure.
Her action was originally filed in the Superior Court of
New Jersey, Law Division, Middlesex County. Home Depot
then removed the case to the District Court for the District of
New Jersey. Frederico made no motion to remand to state
court. The District Court decided that jurisdiction was proper
under 28 U.S.C. § 1332(d), pursuant to the Class Action
Fairness Act of 2005 (“CAFA”). After the matter reached us,
we raised the issue of jurisdiction sua sponte and offered the
parties an opportunity to respond by letter to our concerns.
A threshold matter requires our attention: we must first
decide whether the District Court’s dismissal without
prejudice meets the finality requirement of 28 U.S.C. § 1291
to vest this Court with jurisdiction. We will decide that matter
in the affirmative and proceed to consider: (1) which party has
the burden of establishing federal jurisdiction in the removal
process; (2) the extent of that party’s burden of proof; and (3)
whether diversity jurisdiction is established by the record
before us. After finding federal jurisdiction, we will address
the merits of the case. For the reasons that follow we will
affirm the judgment of the District Court.
I.
3
On Saturday, August 6, 2005, Frederico rented a
flatbed truck from a Home Depot store located in South
Plainfield, New Jersey, owned and operated by Defendant.
Home Depot regularly provides short-term leases of trucks to
customers to assist customers with the transportation of large
purchases. During the transaction, Frederico signed a Vehicle
Delivery Agreement (“Agreement”) that provided “Date and
Time Out: 08/06/2005 6:23 pm” and “Date and Time Due In:
08/06/2005 7:38 pm.” App. at 80. According to the
Agreement, Frederico was to rent the truck for a total of 75
minutes. The District Court summarized other relevant terms
of the Agreement:
1. Plaintiff’s truck was due back to the store
at 7:38 pm on August 6, 2005.
2. The rental rate for the truck was $19.00
for the first seventy-five minutes and
$5.00 for each additional fifteen minutes.
3. The vehicle must be returned “to the
Home Depot location where rented, on
the date and at the time specified . . . IF
NOT, A CLEANING CHARGE, DROP
CHARGE, AND/OR RATE CHANGE
MAY APPLY.”
4. The vehicle “MUST BE RETURNED
TO THE STORE BEFORE CLOSING
ON THE DAY OF RENTAL.”
5. The store hours listed were 6:00 - 10:00
on Saturdays.
4
6. “THE AGREEMENT DOES NOT
PERMIT RENTAL OF THE VEHICLE
FOR MORE THAN ONE DAY OR
PAST THE TIME AT WHICH THE
HOME DEPOT DEMANDS RETURN
OF THE VEHICLE.”
Id. at 121.
Frederico alleges that she “returned the truck to Home
Depot on August 6, 2005, but was informed by Defendant that
the rental department was closed, that Home Depot had no
after-hours rental facilities or procedures, and to re-return the
truck the following morning.” Compl. ¶ 8. She returned the
next morning1 and paid $287.14, of which $269.00
represented the thirteen hours and forty-four minutes that she
possessed the vehicle.
Frederico subsequently filed a class action complaint
in state court, alleging that Home Depot breached its contract,
violated the New Jersey Consumer Fraud Act, N.J.S.A. §
56:8-1 et seq. (2005) (“NJCFA”), and committed common
law fraud. Her complaint states:
The proposed class consists of (i) all New
Jersey individual consumers (ii) who rented a
vehicle from a Home Depot store with no after-
1
The Vehicle Delivery Invoice shows “Date and Time In:
08/07/2005 8:07 am.” App. at 80.
5
hours rental return facilities or procedures, (iii)
who were unable to return the vehicle to Home
Depot after-hours, and (iv) who were charged
‘late’ rental return fees for the after-hours
period during which no vehicles could have
been returned.
Id. ¶ 18.
II.
Sua sponte, we raised the question of whether this
court has jurisdiction over the District Court’s judgment here
entered “without prejudice.”2 Frederico invoked the
jurisdiction of this Court pursuant to 28 U.S.C. § 1291, which
grants this Court jurisdiction over appeals from final decisions
of district courts. Appellant’s Br. at 1.
We conclude that the District Court’s March 9, 2006
Order granting Home Depot’s motion to dismiss, from which
Frederico appeals, is a final order, notwithstanding its
“without prejudice” modifier. “Guided by the Supreme
Court’s directive that we employ a ‘practical rather than a
technical construction’ of § 1291’s finality requirement,” we
have held that a dismissal with leave to amend will be treated
as a final order if the plaintiff has elected to “stand upon the
original complaint.” Shapiro v. UJB Financial Corp., 964 F.2d
2
The parties addressed this issue in subsequent letter
briefs to assist us in our determination.
6
272, 278 (3d Cir. 1992) (quoting Cohen v. Beneficial Indus.
Loan Corp., 337 U.S. 541, 546 (1949)); see also Berke v.
Bloch, 242 F.3d 131, 135 (3d Cir. 2001) (concluding that it is
“well-settled” in the Court of Appeals for the Third Circuit
that an order dismissing a complaint without prejudice is final
if the plaintiff has elected to stand on his complaint).
Proceeding with appellate review here is consistent with the
goal of the final judgment rule – to prevent piecemeal
litigation – because, “if plaintiff cannot or will not bring a
second action, there is no risk of multiple litigation.” Trevino-
Barton v. Pittsburgh Nat’l Bank, 919 F.2d 874, 878 (3d Cir.
1990).
Under this standard, the dismissal of the complaint is
final and appealable because Frederico clearly indicated an
intent to stand on the original complaint. At no time during
the District Court’s consideration of Home Depot’s motion to
dismiss, which included initial and supplemental briefing as
well as oral argument, did Frederico offer or seek to amend
the complaint to address the pleading deficiencies noted by
Home Depot. Instead, she repeatedly asserted that the
allegations contained in the complaint were legally sufficient.
See, e.g., Plaintiff’s Memorandum in Law in Opposition to
the Defendant’s Motion to Dismiss, Frederico v. Home
Depot, 2:05-cv-00579JAP, at 2 (January 3, 2006) (“The
claims contained in Plaintiff’s Complaint are sufficient as a
matter of law, and should not be dismissed.”).
After the District Court dismissed the complaint and
the clerk’s office officially terminated the action, Frederico
7
did not seek to amend the complaint. Her only response was
to file a notice of appeal. On appeal, she continues to argue
that the factual allegations contained in her complaint are
sufficient. See, e.g., Appellant’s Br. at 9 (“The lower court’s
opinion is premised on the mistaken assumption that the
Appellant/Plaintiff should have pled the evidence and facts
underlying her Complaint.”). Because Frederico has elected to
stand on her original complaint rather than amend or refile it,
the order dismissing the complaint without prejudice is final.
See, e.g., Lucas v. Township of Bethel, 319 F.3d 595, 600 (3d
Cir. 2003) (dismissal without prejudice was final and
appealable because plaintiff chose to stand on the complaint);
Batoff v. State Farm Ins. Co., 977 F.2d 848, 851 n.5 (3d Cir.
1992) (holding that plaintiff elected to stand on complaint by
failing to amend within specified time period); Tiernan v.
Devoe, 923 F.2d 1024, 1031 (3d Cir. 1991) (finding appellate
jurisdiction over dismissal without prejudice based on
statements made in letter brief filed after appeal was
initiated); Letter from William O. Crutchlow, Counsel for
Appellant Janelle Frederico, to the Office of the Clerk, United
States Court of Appeals for the Third Circuit (July 3, 2007)
(“In the instant matter, Appellant/Plaintiff stands by her
complaint.”).
III.
We now must decide whether this class action case
removed to a federal court as a diversity matter properly
meets the requisite amount in controversy set by CAFA. It is
now settled in this Court that the party asserting federal
8
jurisdiction in a removal case bears the burden of showing, at
all stages of the litigation, that the case is properly before the
federal court. Samuel-Bassett v. Kia Motors America, Inc.,
357 F.3d 392, 396 (3d Cir. 2004); see also Morgan v. Gay,
471 F.3d 469, 473 (3d Cir. 2006) (“Under CAFA, the party
seeking to remove the case to federal court bears the burden
to establish that the amount in controversy is satisfied.”). Our
standard of review for issues of subject matter jurisdiction,
including cases arising under CAFA, is plenary. Morgan, 471
F.3d at 472.
A.
We are aware that the quantum of proof to be used in
ascertaining the requisite amount in removal cases sounding
in diversity has caused some disagreement among the district
courts of this circuit.3 We also note the concern that “‘[c]ourts
in the Third Circuit [have been] unencumbered by consistency
in their characterization of a defendant’s burden of proving
the amount in controversy on a motion to remand.’” Samuel-
Bassett, 357 F.3d at 396 (quoting Irving v. Allstate Indemnity
Co., 97 F. Supp. 2d 653, 654 (E.D. Pa. 2000)). Since that
concern was first voiced, two cases decided by this Court
sought to bring clarity and consistency to the jurisprudence in
our circuit: Samuel-Bassett, 357 F.3d at 392 (class action
removal case arising prior to the enactment of CAFA), and
3
For a summary of such district court cases, see Samuel-
Bassett, 357 F.3d at 396-397.
9
Morgan, 471 F.3d at 469 (class action removal case arising
under CAFA). It is to these cases we now turn.
1.
Samuel-Bassett, decided prior to the enactment of
CAFA, articulated a template for addressing subject matter
jurisdiction challenges by examining two Supreme Court
cases: St. Paul Mercury Indemnity Co. v. Red Cab Co., 303
U.S. 283 (1938), and McNutt v. General Motors Acceptance
Corp. of Indiana, 298 U.S. 178 (1936).
In Red Cab, the plaintiff filed suit in state court and, in
response to defendant’s removal of the case, subsequently
reduced its claim below the requisite amount. 303 U.S. at 285
(holding that “events occurring subsequent to removal which
reduce the amount recoverable, whether beyond the plaintiff’s
control or the result of his volition, do not oust the district
court’s jurisdiction once it has attached”). The Supreme Court
articulated what has become known as the “legal certainty
test,” observing that when a case is brought in federal court,
“the sum claimed by the plaintiff controls if the claim is
apparently made in good faith.” Id. at 288. The case will be
dismissed only if, “from the face of the pleadings, it is
apparent, to a legal certainty, that the plaintiff cannot recover
the amount claimed, or if, from the proofs, the court is
satisfied to a like certainty that the plaintiff never was entitled
to recover that amount.” Id. at 289.
10
In McNutt, the plaintiff brought suit in federal court
and defendant contested the assertion in the complaint that the
requisite matter in controversy was involved. McNutt, 298
U.S. at 179-180. The Supreme Court held: “[T]he court may .
. . insist that the jurisdictional facts be established or the case
be dismissed, and for that purpose the court may demand that
the party alleging jurisdiction justify his allegations by a
preponderance of evidence.” Id. at 189.
This Court, in Samuel-Bassett, disentangled the “legal
certainty” and “preponderance of the evidence” approaches of
McNutt and Red Cab by distinguishing them on the grounds
of whether the jurisdictional dispute surrounded factual
matters: “In [McNutt], although a challenge to the amount in
controversy had been raised in the pleadings, no evidence or
findings in the trial court addressed the issue. In that respect
Red Cab differs because these factual findings had been
made.” Samuel-Bassett, 357 F.3d at 397. As a result, in the
many cases where disputes over factual matters are involved,
the McNutt preponderance of the evidence standard is
appropriate for resolving the dispute. By contrast, in those
cases “when relevant facts are not in dispute or findings have
been made,” the district court should adhere to the “legal
certainty test cited in such cases as Meritcare[ Inc. v. St. Paul
Mercury Insurance Co.], 166 F.3d 214[ (3d Cir. 1993)];
Packard[ v. Provident Nat’l Bank], 994 F.2d 1039[ (3d Cir.
1993)]; Bloom v. Barry, 755 F.2d 356 (3d Cir. 1985); and
Nelson v. Keefer, 451 F.2d 289 (3d Cir. 1971).” Samuel-
Bassett, 357 F.3d at 398. Under the legal certainty test, as it
appears in those cases, “[w]hen it appears to a legal certainty
11
that the plaintiff was never entitled to recover the
jurisdictional amount, the case must be dismissed.” Packard,
994 F.2d at 1046; see also Meritcare, 166 F.3d at 217 (“When
it appears to a legal certainty that the plaintiff was never
entitled to recover the minimum amount set by Section 1332,
the removed case must be remanded . . . .”); Bloom, 755 F.2d
at 358 (“[T]he court properly applied the ‘legal certainty’ test
with respect to the jurisdictional amount announced in [Red
Cab].”); Nelson, 451 F.2d at 293 (citing Red Cab for the
proposition that to determine “good faith,” “[i]t must appear
to a legal certainty that the claim is really for less than the
jurisdictional amount to justify dismissal”) (citing Jaconski v.
Avisun Corp., 359 F.2d 931, 934 (3d Cir. 1966)).
As Judge Norma L. Shapiro observed in Valley v.
State Farm Fire and Cas. Co.:
All these cases [cited by Samuel-Bassett] cite to
and rely upon the Red Cab legal certainty
standard . . . . The legal certainty standard
established by the Court of Appeals in Samuel-
Bassett is the same standard established by the
Supreme Court in Red Cab.
Under Red Cab, a case must be
dismissed or remanded if it appears to a legal
certainty that the plaintiff cannot recover more
than the jurisdictional amount of $75,000. The
rule does not require the removing defendant to
prove to a legal certainty the plaintiff can
12
recover $75,000 – a substantially different
standard. This reading of the legal certainty test
is supported by Meritcare, Bloom, Packard, and
Nelson. None of these cases require the
defendant to prove the jurisdictional amount to
a legal certainty in order to remain in federal
court.
504 F. Supp. 2d 1, 3-4 (E.D. Pa. 2006) (internal citations
omitted).
2.
Two years after Samuel-Bassett, this Court was
presented with our first class action diversity removal case
brought under CAFA, Morgan v. Gay, 471 F.3d at 469.
Morgan came to our Court on an appeal from a district court
order granting plaintiff’s motion to remand to state court, on
the grounds that the amount in controversy required to
support a diversity action under 28 U.S.C. § 1332(d)(2), an
amount in excess of $5 million, had not been demonstrated.4
Id. at 471. In Morgan, the plaintiff expressly limited the
amount in controversy to an amount lower than the
jurisdictional requirement, stating in the complaint that “the
total amount of such monetary relief for the class as a whole
shall not exceed $5 million in sum or value.” Id.
4
CAFA also requires a minimum of 100 persons for a
diversity class action. 28 U.S.C. § 1332(d)(5)(B).
13
The claims in Samuel-Bassett, Red Cab and McNutt
did not involve such a limitation. The different circumstances
in Morgan called for a different approach to determine
whether there was federal jurisdiction. Against the well-
established backdrop that the plaintiff is the master of her own
claim and thus “may limit [her] claims to avoid federal
subject matter jurisdiction,”5 the panel concluded that where
the plaintiff so limits her claim, “[t]he party wishing to
establish subject matter jurisdiction has the burden to prove to
a legal certainty that the amount in controversy exceeds the
statutory threshold.” Id. at 474. This “legal certainty” standard
differs from that of the cases cited by Samuel-Bassett. In
those cases, the challenger to subject matter jurisdiction had
to prove, to a legal certainty, that the amount in controversy
could not exceed the statutory threshold.6 See Packard, 994
5
“CAFA does not change the proposition that the
plaintiff is the master of her own claim.” Morgan, 471 F.3d at
474.
6
The panel noted as an aside in Samuel-Bassett that:
We recognize that requiring a defendant to show
to a legal certainty that the amount in controversy
exceeds the statutory minimum may lead to some
bizarre situations. As the Court observed in Shaw
v. Dow Brands, Inc., 994 F.2d 364, 366 (7th Cir.
1993), oral argument presented a “comic scene:
plaintiff’s personal injury lawyer protests up and
down that his client’s injuries are as minor and
14
F.2d at 1046; Meritcare, 166 F.3d at 217; Bloom, 755 F.2d at
358; Nelson, 451 F.2d at 293.
In Morgan, by contrast, we held that where the
plaintiff expressly limits her claim below the jurisdictional
amount as a precise statement in the complaint, applying the
maxim that the plaintiff is the master of her own complaint,
the proponent of the federal subject matter jurisdiction is held
to a higher burden; that is, the proponent of jurisdiction must
show, to a legal certainty, that the amount in controversy
exceeds the statutory threshold.
B.
insignificant as can be, while attorneys for the
manufacturer paint a sob story about how the
plaintiff’s life has been wrecked.” It would not be
a surprise that when the time came for assessment
of damages the parties would once again switch
their views by some 180 degrees.
357 F.3d at 398. We do not read the introductory sentence of the
above paragraph as the holding of Samuel-Bassett. Indeed, it
argues against placing such a burden on a defendant. Moreover,
Shaw did not advocate such a burden on the defendant. To the
contrary, it observed: “Defendants seeking removal may meet
that burden by a preponderance of evidence . . . which we take
to mean proof to a reasonable probability that jurisdiction
exists.” 994 F.2d at 366 (internal citation omitted).
15
Thus, Morgan does not conflict with the reasoning and
holding of Samuel-Bassett. The Samuel-Bassett dichotomy
still paves the basic procedural avenue: “In many cases . . .
disputes over factual matters may be involved. In resolving
those issues, the McNutt preponderance of the evidence
standard would be appropriate. Once the findings of fact have
been made, the court may determine whether Red Cab’s ‘legal
certainty’ test for jurisdiction has been met.” 357 F.3d at 398.
Morgan provided a more complete roadmap. First, it
added a precept that may be applied to all diversity class
actions that have been removed: “Because ‘the complaint may
be silent or ambiguous on one or more of the ingredients
needed to calculate the amount in controversy,’ ‘[a]
defendant’s notice of removal serves the same functions as
the complaint would in a suit filed in federal court.’” Morgan,
471 F.3d at 474 (quoting Brill v. Countrywide Home Loans,
Inc., 427 F.3d 446, 449 (7th Cir. 2005)). Second, Morgan
erected guideposts in those cases where the plaintiff’s
complaint specifically (and not impliedly) and precisely (and
not inferentially) states that the amount sought in a class
action diversity complaint “for the class as a whole shall not
exceed $5 million in sum or value.” Id. at 471. In such cases
“[t]he party wishing to establish subject matter jurisdiction
has the burden to prove by a legal certainty that the amount in
controversy exceeds the statutory threshold.” Id.7
7
In evaluating the precedential reach of Morgan, we look
at the “detailed set of facts” that undergird the rule of law
emerging therefrom. Here we start with a definition of
16
The distinction between a case governed by Morgan
and a case governed by Red Cab and Samuel-Bassett is
crystal clear. Morgan applies where the complaint specifically
avers that the amount sought is less than the jurisdictional
minimum. There, a defendant seeking removal must prove to
a legal certainty that plaintiff can recover the jurisdictional
precedent:
A judicial precedent attaches a specific legal
consequence to a detailed set of facts in an
adjudged case or judicial decision, which is then
considered as furnishing the rule for the
determination of a subsequent case involving
identical or similar facts and arising on the same
court or a lower court in the judicial hierarchy.
Allegheny County Gen. Hosp. v. NLRB, 608 F.2d 965, 969-970
(3d Cir. 1979) (footnote omitted); see also Roscoe Pound,
Hierarchy of Sources and Forms in Different Systems of Law,
7 TUL. L. REV. 475, 482 (1933).
In Morgan, the adjudicative facts were that the plaintiff’s
complaint deliberately limited recovery for class action damages
to not exceed $5 million. Thus, the holding of Morgan that
“[t]he party wishing to establish subject matter jurisdiction has
the burden to prove by a legal certainty that the amount in
controversy exceeds the statutory threshold,” 471 F.3d at 471,
is a viable precedent to only those diversity class action removal
cases where the original complaint contains such a limitation.
17
amount. By contrast, Samuel-Bassett applies where the
plaintiff has not specifically averred in the complaint that the
amount in controversy is less than the jurisdictional minimum.
There, the case must be remanded if it appears to a legal
certainty that the plaintiff cannot recover the jurisdictional
amount.
Against this framework, we turn to the case before us.
IV.
“In removal cases, determining the amount in
controversy begins with a reading of the complaint filed in the
state court.” Samuel-Bassett, 357 F.3d at 398. Here, Frederico
does not state an exact sum sought in her complaint. Instead,
her complaint “seeks, inter alia, damages and compensation to
all class members from the Defendant, interest, punitive
damages, costs of suit, treble damages and attorneys’ fees as
permitted under the Consumer Fraud Act, and any other
damages deemed just and proper by the Court.” Compl. ¶ 1.
The class size alleged is “thousands, if not . . . tens of
hundreds of thousands, of individuals.” Id. ¶ 19. Frederico
herself paid $287.14 for her use of the rental vehicle. Id.
Exhibit B.
In addition, to determine whether the minimum
jurisdictional amount has been met in a diversity case
removed to a district court, a defendant’s notice of removal
serves the same function as the complaint would if filed in the
18
district court. Morgan, 471 F.3d at 474. Thus, we examine
Home Depot’s contentions set forth therein:
Assuming that Plaintiff’s payment of $287.14
represents the average actual damages of each
member of the putative class and the maximum
punitive damages allowable under New Jersey
law were awarded (see N.J. Stat. § 2:A:15-
5.14(b)), Plaintiff need only prevail on behalf of
2,903 class members for the class recovery to
exceed $5,000,000. Given that Plaintiff has
alleged a putative class consisting of
“thousands” if not “tens of hundreds of
thousands” of members, it is more likely than
not that $5,000,000 or more is in controversy in
this case. See Compl., ¶¶ 17, 19. See Penn v.
Wal-Mart Stores, Inc., 116 F. Supp. 2d 557, 562
(D.N.J. 2000) (“In the absence of Third Circuit
precedent on the issue of what the defendant
needs to show to satisfy the amount in
controversy requirement when the plaintiff
alleges unspecified damages, the Court will
adopt the preponderance of the evidence
standard.”).
Moreover, Plaintiff also seeks attorneys’ fees,
which can exceed six figures in a class action
and are properly aggregated and considered for
purposes of determining the amount in
controversy under CAFA. See 28 U.S.C. §
19
1332(d)(6) (“In any class action, the claims of
the individual class members shall be
aggregated to determine whether the matter in
controversy exceeds the sum or value of
$5,000,000, exclusive of interest and costs.”);
see also Suber v. Chrysler Corp., 104 F.3d 578,
585 (3d Cir. 1997) (“Moreover, in calculating
the amount in controversy, we must consider
potential attorneys’ fees.”).
Home Depot, Notice of Removal ¶¶ 20, 21 (filed Nov. 28,
2005).
In response to this Court’s letter requesting that the
parties “address whether the allegations in the complaint and
notice of removal that ‘the matter in controversy exceeds the
sum or value of $5 million dollars, exclusive of interest and
costs,’” vested the District Court with jurisdiction, both
parties filed replies. Letter from Marcia M. Waldron, Clerk
for the United States Court of Appeals for the Third Circuit,
to Counsel for Janelle Frederico and Home Depot (June 26,
2007).
In its reply, Home Depot essentially restates the
averments set forth in Paragraphs 20 and 21 of its Notice of
Removal. Frederico’s reply states, in relevant part:
Although [Home Depot’s] letter [to the Court in
response to the Court’s query as to jurisdiction]
quotes Appellant/Plaintiff’s complaint that “the
20
matter in controversy exceeds the sum or value
of $5 million dollars, exclusive of interests and
costs,” it should be noted that the complaint
does not contain such a quote, does not contain
any mention of the sum or value of the matter in
controversy, nor, for that matter, does
Appellant’s complaint assert federal jurisdiction
at all.
This suit was initially brought in state court –
specifically, New Jersey Superior Court,
Middlesex County. Thereafter, Respondent
asserted diversity and CAFA jurisdiction, and
removed the case from state court to federal
court. As such, Appellant leaves it to the
Respondent to explain Respondent’s basis for
asserting jurisdiction.
Letter from William O. Crutchlow, Counsel for Appellant
Janelle Frederico, to the Office of the Clerk, United States
Court of Appeals for the Third Circuit (July 3, 2007)
(emphasis in original).
In Morgan, the plaintiff expressly limited, in her
complaint, the damages sought to less than the jurisdictional
threshold. 471 F.3d at 471. Here, by contrast, Frederico does
not explicitly limit the amount in controversy to $5 million or
less. Therefore, the case falls under the framework established
by Samuel-Bassett.
21
Frederico’s response to the Court’s query regarding
jurisdiction supplies us with no useful information with which
to calculate the amount in controversy. She is playing her
cards close to the vest: Her answer neither agrees with the
facts alleged in the removal notice nor contests them.
Nonetheless, Home Depot’s argument for jurisdiction is based
on allegations made initially by Frederico herself.
Accordingly, the present posture of the case is one where the
relevant facts are not expressly in dispute between the parties.
Even where allegations are not challenged by the adversary,
“the court may still insist that the jurisdictional facts be
established or the case be dismissed, and for that purpose the
court may demand that the party alleging jurisdiction justify
his allegations by a preponderance of the evidence.” McNutt,
298 U.S. at 189.
We do not believe such an insistence is necessary in
this case. The District Court accepted and relied on the facts
alleged in Home Depot’s Notice of Removal when it
concluded that it had diversity jurisdiction. App. at 120 n.3.
Furthermore, neither party contests the underlying facts and
both instead rely upon them. Cf. McCann v. Newman
Irrevocable Trust, 458 F.3d 281, 290 (3d Cir. 2006) (“If a
defendant does not challenge the [jurisdictional] facts alleged
in the plaintiff’s pleadings, a court may rule on the [Rule
12(b)(1)] motion by accepting these allegations as true.”). We
will therefore apply Red Cab’s legal certainty test to the facts
alleged by Frederico in her complaint and incorporated by
Home Depot into its Notice of Removal.
22
Here Frederico is seeking $287.14 in compensatory
damages.8 In addition, she is seeking punitive damages, which
we must consider when calculating the amount in
controversy. Golden v. Golden, 382 F.3d 348, 356 (3d Cir.
2004). Under New Jersey law, Frederico can collect punitive
damages of up to five times the compensatory damages.
N.J.S.A. § 2A:15-5.14(b). Thus, she can collect $1,435.70 in
punitive damages. Combined with compensatory damages,
the punitive damages bring Frederico’s total damages to
$1,722.84.
8
Our calculations are based on compensatory damages of
$287.14. That amount represents the total paid by Frederico,
including the typical rental rate, late fees, 6% sales tax, and the
domestic security charge of $2.00. As we do not know when
Frederico first attempted to return the vehicle, we do not know
what amount of $287.14 represents the amount she objects to.
Assuming that she returned the vehicle at the closing time listed
on the Agreement (10 PM), her accepted costs would have been
$32.74 (including applicable sales tax and the domestic security
charge). As a result, she would seek compensatory damages of
$254.40, punitive damages of $1,272.00, and attorneys fees of
$457.92, bringing her total damages to $1,984.32. Even under
this damage calculation, the class size, in order to meet the
amount in controversy requirement, need only be 2,520
individuals, a number significantly within the “tens of hundreds
of thousands” alleged by Frederico and recounted by Home
Depot.
23
We must also consider attorney’s fees. See Suber v.
Chrysler Corp., 104 F.3d 578, 585 (3d Cir. 1997). Fees could
be as much as thirty percent of the judgment. See In re Rite
Aid Corp. Securities Litigation, 396 F.3d 294, 303 (3d Cir.
2005) (noting study done by the Federal Judicial Center that
found a median percentage recovery range of 27-30% for all
class actions resolved or settled over a four-year period).
Thirty percent of a $1,722.84 judgment is $516.85, bringing
Frederico’s total damages to $2,239.69.
Finally, $5 million, the jurisdictional threshold, divided
by the total amount of damages sought for Frederico herself,
$2,239.69, produces a requisite class size of 2,233
individuals. See 28 U.S.C. § 1332(d)(6) (“In any class action,
the claims of the individual class members shall be aggregated
to determine whether the matter in controversy exceeds . . .
$5,000,000 . . . .”). This class size necessary to meet the
requisite amount in controversy is well under the “tens of
hundreds of thousands” of class members that appears in both
Frederico’s complaint and Home Depot’s Notice of Removal.
Thus, we are satisfied that the Red Cab legal certainty
test is met: as it does not appear to a legal certainty that
Frederico cannot recover the jurisdictional amount, the case
need not be remanded and we may proceed to the substantive
merits of this appeal.
V.
24
In her complaint, Frederico alleged that Home Depot
violated the NJCFA, committed common law fraud, and
breached its contract with her. She contends that the District
Court erred in granting Home Depot’s motion to dismiss
under Rules 12(b)(6) and 9(b), Fed. R. Civ. P.
Our review of the District Court’s order is plenary.
Santiago v. GMAC Mortgage Group, Inc., 417 F.3d 384, 386
(3d Cir. 2005). Pursuant to Rule 12(b)(6), a court may dismiss
a complaint that fails “to state a claim upon which relief can
be granted.” We accept as true all well-pleaded factual
allegations and construe them in the light most favorable to
the plaintiff. Santiago, 417 F.3d at 386; Hayes v. Gross, 982
F.2d 104, 105-106 (3d Cir. 1992).
We conclude that Frederico failed to state a claim upon
which relief may be granted.
A.
We turn first to Frederico’s contentions that Home
Depot committed common law fraud and violated the NJCFA
by materially misrepresenting or omitting in the Agreement
(1) the “terms, conditions, and ‘late’ fees associated with the
return of rental vehicles,” (2) “that the ‘late’ fees were not
grossly excessive,” and (3) “that its vehicle rental return
procedures were intended to enable Home Depot to illegally
profit” by causing delay in the return of rental vehicles.
Compl. ¶¶ 37, 42, 40.
25
1.
To state a claim for fraud under New Jersey law, a
plaintiff must allege (1) a material misrepresentation of fact;
(2) knowledge or belief by the defendant of its falsity; (3)
intention that the other person rely on it; (4) reasonable
reliance thereon by the other person; and (5) resulting
damage. Gennari v. Weichert Co. Realtors, 691 A.2d 350,
367-368 (N.J. 1997).
The stringent pleading restrictions of Rule 9(b), Fed.
R. Civ. P., apply to such a claim: “In all averments of fraud or
mistake, the circumstances constituting fraud or mistake shall
be stated with particularity. Malice, intent, knowledge and
other conditions of mind of a person may be averred
generally.” Pursuant to Rule 9(b), a plaintiff alleging fraud
must state the circumstances of the alleged fraud with
sufficient particularity to place the defendant on notice of the
“precise misconduct with which [it is] charged.” Lum v. Bank
of America, 361 F.3d 217, 223-224 (3d Cir. 2004). To satisfy
this standard, the plaintiff must plead or allege the date, time
and place of the alleged fraud or otherwise inject precision or
some measure of substantiation into a fraud allegation. See id.
at 224.
We agree with the District Court that Frederico’s fraud
claim does not meet the stringent pleading requirements of
Rule 9(b). Frederico does not state with particularity the
circumstances of the alleged fraud or otherwise inject the
requisite precision into her allegations. In her complaint, she
26
only makes generic references to Home Depot’s “excessive
‘late’ rental fees,”9 Compl. ¶ 37, failure to disclose lack of
after-hours rental return facilities or procedures, id. ¶ 39, and
false representation that “vehicle rentals and late fees
associated therewith would not accumulate beyond the time at
which Plaintiff and class members returned or attempted to
return rented vehicles to Home Depot,” id. ¶ 41. None of
these broad statements disclose the particular argument made
on appeal as to the substance of the misrepresentation,
9
A plain reading of this allegation would suggest that the
rates themselves, as charged and found in the Agreement, were
excessive. See App. at 126 (“With respect to the fees charged,
Defendant clearly represented in the Agreement that the rental
rate for the truck was $19.00 for the first seventy-five minutes
and $5.00 for each additional fifteen minutes that Plaintiff
retained possession of the truck. The receipt for the truck rental
that Plaintiff attached to her complaint shows that this is exactly
the rate that Plaintiff was charged for the thirteen hours and
forty-four minutes that she retained possession of the truck.
Thus, Plaintiff’s protestations that such fees were ‘excessive’ are
baseless.”) (opinion of the District Court). Frederico, however,
does not appear to be making this argument. Frederico’s brief on
appeal reveals her argument to be that such fees were excessive
because of the undisclosed gap between the time the rental
department closes (a time not disclosed in the Agreement) and
the time the store closes (a time disclosed in the Agreement).
Without such detail appearing in the complaint, however, Home
Depot was not placed “on notice of the precise misconduct with
which [it is] charged.” Lum, 361 F.3d at 223-224.
27
namely, that Home Depot misrepresented “the actual hours
during which vehicles could be returned so as to avoid or halt
the accumulation of late fees.”10 Appellant’s Br. at 21-22.
Frederico did not provide such information in her
complaint and thus did not meet her obligation to put Home
Depot “on notice of the precise misconduct with which [it is]
charged.” Lum, 361 F.3d at 223-224. As the District Court
observed, Frederico “fail[ed] to allege that any particular
statement made by Defendant in the Agreement was in fact
false,” app. at 126, and:
fail[ed] to allege when she attempted to return
the truck to Home Depot and whether this
attempted return was prior to the time it was due
at 7:38 pm or even before the store closed at
10:00 pm. Further, Plaintiff does not allege who
at Home Depot informed her that she could not
return the vehicle at that unspecified time and
that she should return the following morning.
10
That is, Frederico is arguing that the Agreement stated
closing was at 10 PM, see App. at 78 (“VEHICLE MUST BE
RETURNED TO THE STORE BEFORE CLOSING ON THE
DAY OF RENTAL.”), and seemed to therefore suggest vehicles
could be returned up until then. However, the rental department
in fact closed earlier (not disclosed in the Agreement) and thus
any attempt to return the vehicle before closing but after the
rental department closed resulted in the unexpected overnight
accumulation of late fees.
28
See e.g., Klein v. General Nutrition Co., Inc.,
186 F.3d 338, 345 (3d Cir. 1999) (“The
complainant fails to attribute the statement to
any specific member of GNC management. Fed.
R. Civ. P. 9(b) requires, at a minimum, that the
plaintiff identify the speaker of allegedly
fraudulent statements.”); Granite State Ins. Co.
v. UJEX, Inc., Civ. No. 03-1220, 2005 WL
1618792, at *8 (D.N.J. July 11, 2005)
(dismissing fraud claim under Rule 9(b) where
complaint was utterly devoid of the averments
required by Rule 9(b), including the identity of
the alleged speaker).
Id. at 128.
We are mindful of Frederico’s observation that without
the benefit of discovery she could not learn the name of the
employee with whom she interacted when attempting to
return the truck. Appellant’s Br. at 33 n.2. Nevertheless, her
complaint only refers generally to being “informed by
Defendant,” Compl. ¶ 8, and does not disclose the
circumstances surrounding her discussion with, or any
information about, the particular individual who informed her
that the rental department was closed.11 Furthermore, although
11
The District Court noted that information as to the
identity of the person who told Frederico to return the truck the
next day “does not appear to be in the exclusive control of the
Defendant, and Plaintiff does not make such an allegation. See
29
Frederico has subsequently stated in her briefs that her initial
attempt to return the truck occurred prior to 10:00 PM, see,
e.g., Appellant’s br. at 15 (“[A]lthough the Appellant returned
the vehicle to the store before 10 PM, Home Depot refused to
accept the return.”); Plaintiff’s Memorandum in Law in
Opposition to the Defendant’s Motion to Dismiss, Frederico
v. Home Depot, 2:05-cv-00579JAP, at 2 (January 3, 2006)
(same), we do not consider after-the-fact allegations in
determining the sufficiency of her complaint under Rules 9(b)
and 12(b)(6). See Commw. of Pa. ex. rel Zimmerman v.
PepsiCo, Inc., 836 F.2d 173, 181 (3d Cir. 1988) (“‘It is
axiomatic that the complaint may not be amended by the
briefs in opposition to a motion to dismiss.’”) (quoting Car
Carriers, Inc. v. Ford Motor Corp., 745 F.2d 1101, 1107 (7th
Cir. 1984)); Unger v. National Residents Matching Program,
928 F.2d 1392, 1400 (3d Cir. 1991).
For the foregoing reasons, Frederico’s common law
fraud claim was properly dismissed.
2.
F.D.I.C. v. Bathgate, 27 F.3d 850, 876 (3d Cir. 1994) (stating
that where a plaintiff cannot be expected to have personal
knowledge of certain details of the alleged fraud, to satisfy Rule
9(b), the plaintiff must allege that the necessary information lies
within defendant’s exclusive control and provide facts to
illustrate that plaintiff’s claims are not baseless).” App. at 10
n.5.
30
To state a claim under the NJCFA, a plaintiff must
allege that the defendant engaged in an unlawful practice that
caused an ascertainable loss to the plaintiff. Cox v. Sears
Roebuck & Co., 647 A.2d 454, 462-465 (N.J. 1994). The
District Court found that Frederico failed to state such a
claim. We agree.
a.
Frederico fails to allege Home Depot engaged in an
unlawful practice. The NJCFA defines “unlawful practice” as:
The act, use or employment by any person of
any unconscionable commercial practice,
deception, fraud, false pretense, false promise,
misrepresentation, or the knowing concealment,
suppression, or omission of any material fact
with intent that others rely upon such
concealment, suppression, or omission, in
connection with the sale or advertisement of any
merchandise . . . .
N.J.S.A. § 56:8-2. “Unlawful practices fall into three general
categories: affirmative acts, knowing omissions, and
regulation violations.” Cox, 647 A.2d at 462.
The “unlawful practice” engaged in by Home Depot,
alleged by Frederico, is the “instituti[on] and implement[ation
of] business processes intended to delay the return of rental
vehicles so as to enable Home Depot to profit from charging
31
Plaintiff and similarly situated consumers excessive ‘late’
rental return fees.” Compl. ¶ 28.
Frederico does not contend that Home Depot charged
her late fees at a rate higher than that agreed upon and
disclosed in the Agreement. Instead, as discussed above, her
argument on appeal is that, “[u]nder the express terms of the
Rental Agreement, the Appellant was required to return the
vehicle to the Home Depot store before that store closed,” the
store hours were listed, showing that the store was open until
10 PM, and although she attempted to return the vehicle
before 10 PM, she learned that the “rental department closes
hours before the time listed on [the] Agreement.” Appellant’s
Br. at 14, 15. From this sequence of events, Frederico argues
that by refusing to accept the vehicle before the closing time
listed on the Agreement, and instead instituting an
“undisclosed condition” that vehicles must be returned before
the rental department closes, “Home Depot deliberately made
it impossible for consumers such as Ms. Frederico to return
the rental vehicles pursuant to the terms of the Rental
Agreement,” resulting in unexpected late fees, and that such a
practice “clearly falls within the deceptive, fraudulent, and
unconscionable commercial practices prohibited by the
[NJ]CFA.” Id. at 15, 16.
Frederico’s complaint, however, does not provide such
detail. As the District Court observed:
[In her complaint, ]Plaintiff does not state when
she attempted to return the truck to Home Depot
32
and who told her that she could not return the
vehicle at that time. See, e. g., F.D.I.C. v.
Bathgate, 27 F.3d 850, 876 (3d Cir. 1994)
(dismissing plaintiff’s NJCFA and common law
fraud claims under Rule 9(b) where plaintiff
failed to identify the speaker of the allegedly
misleading statements and otherwise allege
facts to support plaintiff’s charges). Based on
plaintiff’s [sic] bare allegations, the Court
cannot conclude that Defendant engaged in any
unlawful practice.
App. at 130 (emphasis in original); see also Klein, 186 F.3d at
345 (“The complaint fails to attribute the statement to any
specific member of . . . management. Fed. R. Civ. P. 9(b)
requires, at a minimum, that the plaintiff identify the speaker
of allegedly fraudulent statements.”).
Frederico merely asserts in her complaint that Home
Depot “violated the [NJ]CFA by its use of false and
misleading representations in connection with the terms,
conditions, and ‘late’ fees associated with the return of rental
vehicles.” Compl. ¶ 33. Without information as to when
Frederico attempted to return the vehicle, whether before the
closing listed on the Agreement (10 PM) or after, the grounds
for and contours of the alleged unlawful practice are unclear.
As with the common law fraud claim discussed above, Home
Depot is not placed on notice that the particular practice
complained of is nondisclosure of the fact that there is a gap
between the closing time of the store (as listed in the
33
Agreement) and the closing time of the rental department, and
that late fees accrue if a customer attempts to return the
vehicle between those two times.
Frederico therefore failed to sufficiently allege an
unlawful practice with requisite specificity.
b.
In addition, Frederico failed to show that Home
Depot’s alleged unlawful practice caused her loss. We agree
with the District Court that:
Without knowing when Plaintiff attempted to
return the truck to Home Depot, it is impossible
to determine whether it was Home Depot’s
conduct, or Plaintiff’s own conduct in not
returning the truck on time, that caused her to
retain the truck overnight and incur rental
charge[s] for the night of August 6, 2005. . . .
See Cannon v. Cherry Hill Toyota, Inc., 161 F.
Supp. 2d 362, 374-75 (D.N.J. 2001) (“New
Jersey courts have interpreted the NJCFA as
requiring a causal link between the practice and
the harm.”); New Jersey Citizen Action v.
Schering-Plough Corp., 842 A.2d 174, 178 (N.J.
Super. Ct. App. Div. 2003) (dismissing NJCFA
claim for failure to state a claim where plaintiffs
failed to demonstrate that any losses they may
have suffered were caused by defendants).
34
Ohio App. at 130. That is, had she attempted to return the vehicle
after the store’s listed closing (10 PM), Home Depot’s
“unlawful conduct” of not disclosing that the rental
department closed earlier would not have caused her to incur
the late fees.
The District Court’s dismissal of Frederico’s NJCFA
claim, therefore, was proper.
B.
Finally, we turn to Frederico’s breach of contract
claim. To state a claim for breach of contract, she must allege
(1) a contract between the parties; (2) a breach of that
contract; (3) damages flowing therefrom; and (4) that the
party stating the claim performed its own contractual
obligations. See Video Pipeline, Inc. v. Buena Vista Home
Entertainment, Inc., 210 F. Supp. 2d 552, 561 (D.N.J. 2002).
In her complaint, Frederico claims that Home Depot
“breached its standard Vehicle Delivery Agreement with
Plaintiff and members of the class. Plaintiff and members of
the class suffered an ascertainable loss as a result of
Defendant’s breach of contract.” Compl. ¶ 46. Frederico
alleges that the Home Depot breached the Agreement for the
truck rental by refusing to allow her to return the truck on
August 6, 2005. She claims that an unspecified person at the
Home Depot store informed her that the rental department
was closed and that the store had no after-hours facilities, and
35
that accordingly she has to wait until the next morning and
pay $287.14 instead of $19.00.
We are satisfied with the District Court’s dismissal of
Frederico’s contract claim. Both parties agree that the first
element, the existence of a contract, is met by the Agreement.
As the District Court found, however, Frederico failed to
“provide allegations to support the second, third, and fourth
elements of the breach of contract claim”:
Plaintiff failed to allege the time on August 6,
2005 that she attempted to return the truck. This
deficiency makes it impossible to determine
whether the defendant breached any promises
made in the Agreement or whether plaintiff
breached her own contractual obligation to
return the vehicle by 7:38 p.m. and in any event,
before the store closed at 10:00 p.m.
App. at 125.
With respect to the second and third elements, then,
Frederico’s complaint does not disclose how Home Depot
breached the Agreement: she was charged the agreed upon
amount for the time the vehicle was in her possession.
Without knowing when Frederico first attempted to return the
vehicle, it is unclear whether Defendant’s refusal to accept the
first return was in breach of the Agreement. Because it cannot
be determined that Home Depot breached the agreement, it
36
cannot be inferred that Frederico’s damages “flowed” from
the breach.
With respect to the fourth element, that the party
alleging the breach performed its contract obligations,
Frederico argues on appeal:
[A]ll that the Rental Agreement required of
consume[r]s such as Ms. Frederico in order to
avoid or halt the accumulation of late fees was
to satisfy the following conditions: (1) return
the vehicle (2) to the store (3) before the store’s
closing. Appellant satisfied all those conditions
– she returned the vehicle, to the store from
which she had rented that vehicle, and did so
before that store had closed. As such, the
Appellant fulfilled the express terms of the
Rental Agreement.
Appellant’s Br. at 5-6.
Frederico, however, did not plead in her complaint that
she returned the vehicle at the time specified in the
Agreement (7:38 PM) or even before the store’s closing (10
PM). Her complaint only states “Plaintiff returned the truck to
Home Depot on August 6, 2005, but was informed by
Defendant that the rental department was closed.” Compl. ¶ 8.
Contrary to Frederico’s brief, the District Court was not
requiring her to specify “the exact hour at which [she]
attempted the rental return.” Appellant’s Br. at 33. Instead,
37
she must simply plead that the time of the attempted return
was made in accordance with the Agreement, and thus that
she satisfied her own contractual obligations. This she did not
do, and therefore the District Court’s dismissal of Frederico’s
contract claim was proper.
*****
For the foregoing reasons, the judgment of the District
Court will be affirmed.
38