Rosen v. Chrysler Corp. ( 2000 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2000 FED App. 0086P (6th Cir.)
File Name: 00a0086p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
;

MARK S. ROSEN; MARC

SLUTZKY; RONALD BLIGH;

GEORGE J. AMBROSIO, on

No. 99-1017
behalf of themselves and all

others similarly situated, >
Plaintiffs-Appellees, 



v.


CHRYSLER CORPORATION,
n/k/a DAIMLERCHRYSLER 

Defendant-Appellant. 
CORPORATION,

1
Appeal from the United States District Court
for the Eastern District of Michigan at Ann Arbor.
No. 97-60374—George C. Steeh, District Judge.
Argued: December 6, 1999
Decided and Filed: March 9, 2000
Before: COLE and GILMAN, Circuit Judges; CARR,
District Judge.*
*
The Honorable James G. Carr, United States District Judge for the
Northern District of Ohio, sitting by designation.
1
2 Rosen, et al. v. Chrysler Corp. No. 99-1017 No. 99-1017 Rosen, et al. v. Chrysler Corp. 7
_________________ Third, the amended complaint requests that damages be
awarded for violation of the New Jersey Consumer Fraud Act.
COUNSEL (J.A. at 91-92). The New Jersey Consumer Fraud Act
provides for treble damages. Cox v. Sears Roebuck & Co.,
ARGUED: Jeffrey S. Russell, LAW OFFICE OF BRYAN 647 A.2d 454, 465 (N.J. 1994) (observing that once plaintiff
CAVE, St. Louis, Missouri, for Appellant. Jerome M. proves an unlawful practice under the New Jersey Consumer
Congress, MILBERG, WEISS, BERSHAD, HYNES & Fraud Act, treble damages are required). As the parties
LERACH, New York, New York, for Appellees. correctly point out (J.A. at 21-23), the District Court
ON BRIEF: Jeffrey S. Russell, Charles A. Newman, LAW neglected to consider the possibility of treble damages in its
OFFICE OF BRYAN CAVE, St. Louis, Missouri, John W. analysis. (J.A. at 114-17). A trebling of rescission damages
Rogers, St. Louis, Missouri, for Appellant. Jerome M. alone potentially could exceed the $50,000 amount in
Congress, MILBERG, WEISS, BERSHAD, HYNES & controversy.
LERACH, New York, New York, for Appellees.
In conclusion, plaintiffs’ allegations satisfy the amount in
_________________ controversy requirement when considering recission,
constructive trust and treble damages under New Jersey law.
OPINION The District Court’s contrary finding is not supportable as a
_________________ legal certainty. For this reason, we need not consider the
questions of supplemental jurisdiction, punitive damages, and
JAMES G. CARR, District Judge. This is an appeal from aggregation raised by the parties.
a decision by the United States District Court for the Eastern
District of Michigan to dismiss a class action lawsuit for lack CONCLUSION
of subject matter jurisdiction. For the following reasons, we
REVERSE the judgment of the District Court, and REMAND For the foregoing reasons, the opinion of the District Court
the case for further proceedings. is REVERSED and the case REMANDED for further
proceedings consistent with this opinion.
BACKGROUND
Named plaintiffs are owners and lessors of Jeep Grand
Cherokees, manufactured by DaimlerChrysler (defendant) and
equipped with the Quadra-Trac four wheel drive system.
They allege that they were fraudulently induced to buy or
lease their Grand Cherokees based on misrepresentations
regarding Quadra-Trac and seek to represent a class of Grand
Cherokee owners and lessors similarly defrauded. Their
amended complaint accuses defendant of 1) common law
fraud, 2) negligent misrepresentation, and 3) fraud under the
New Jersey Consumer Fraud Act. (J.A. at 44-46). For relief,
the amended complaint seeks payment of attorneys’ fees,
punitive damages, treble damages, rescission of the purchase
price (approximately $30,000) of plaintiffs’ Grand Cherokees,
6 Rosen, et al. v. Chrysler Corp. No. 99-1017 No. 99-1017 Rosen, et al. v. Chrysler Corp. 3
not including counterclaims or offsets); Savarse v. Edrick a constructive trust over all proceeds received by defendant
Transfer & Storage, Inc., 513 F.2d 140, 142 (9th Cir. 1975) “as a result of [its] wrongful conduct,” and other
(declining to count offset against amount in controversy); compensatory damages. (J.A. at 47).
Cohen v. North Ridge Farms, Inc., 712 F. Supp. 1265, 1266
(E.D. Ky. 1989) (holding that amount in controversy is met in Named plaintiffs sued defendant in federal court in New
diversity action, in which plaintiff sought recission of contract Jersey on the basis of diversity of citizenship. The case was
for purchase of a returnable good, without regard to offset); transferred to Michigan. Once in Michigan, the District
Associated Press v. Berger, 460 F. Supp. 1003, 1004 (W.D. Court, sua sponte, issued an order to show cause why the
Tex. 1978) (citing Jones v. Landry, 387 F.2d 102 (5th Cir. lawsuit should not be dismissed for failure to meet the amount
1967) (remarking that though defendant claimed offset, the in controversy requirement of 28 U.S.C. § 1332. (J.A. at 97-
amount in controversy should not consider the offset)); Bailey 100). Specifically, the District Court was leaning toward
v. Romney, 359 F. Supp. 596, 599 (D.D.C. 1972) (finding that finding that neither named plaintiffs nor unnamed class1
the amount in controversy is clearly satisfied where plaintiffs members could recover the statutorily set $50,000 minimum.
seek to rescind the purchase of their homes and homes are
worth a substantial sum). Thus, the District Court erred by Issuance of the show cause order was precipitated by
offsetting the amended complaint’s recission claim by the deposition testimony from one of the plaintiffs that he had
resale value of the Grand Cherokee. The amount in paid $800-$1000 more for his Grand Cherokee because it was
controversy is the full contract price paid by plaintiffs – equipped with Quadra-Trac. In light of this testimony, the
approximately $30,000. District Court concluded that each plaintiff’s individual
damages amounted to no more than $1000. (J.A. at 98). The
Second, the amended complaint requests that a constructive show cause order set a briefing schedule that granted
trust be imposed “upon monies obtained by defendant as a plaintiffs until November 20, 1998 to file a brief
result of” defendant’s wrongful conduct. (J.A. at 93). The demonstrating that they could meet the amount in
District Court did not consider this request for relief in controversy, and granted defendant until December 15, 1998
determining whether the amount in controversy totaled to file a reply. (Id.)
$50,000. (J.A. at 114-17).
On December 2, 1998 – after plaintiffs had filed their brief
Under New Jersey law, a constructive trust may be imposed but before the deadline for defendant’s reply – the District
when failure to do so will result in unjust enrichment. Court dismissed the case. In its order of dismissal, the
D’Ippolito v. Castro, 242 A.2d 617, 619 (N.J. 1968). District Court held that it appeared to a “legal certainty” that
“Generally all that is required to impose a constructive trust the amount in controversy did not total $50,000.
is a finding that there was some wrongful act, usually, though
not limited to, fraud, mistake, undue influence, or breach of Both plaintiffs and defendant disagree with the analysis of
a confidential relationship, which has resulted in a transfer of the District Court, and challenge its method of calculating the
property.” Id. Here, plaintiffs have made allegations of fraud
in their amended complaint, and thus the value of the
constructive trust – “all monies obtained by defendant” from 1
Plaintiffs’ complaint was filed at a time when the amount in
sales of Grand Cherokees – should have been counted by the controversy required under the diversity statute was $50,000. Although
District Court. The District Court did not do so, and thus that amount has since risen to $75,000, the amount in controversy is
erred. determined as of the time of filing. Klepper v. First American Bank, 916
F.2d 337, 340 (6th Cir. 1990).
4 Rosen, et al. v. Chrysler Corp. No. 99-1017 No. 99-1017 Rosen, et al. v. Chrysler Corp. 5
amount in controversy. Specifically, the parties argue that the combined with attorney’s fees and compensatory damages,
District Court: 1) improperly offset the value of plaintiffs’ likely give rise to an amount in controversy in excess of
recission claim, 2) failed to consider the value of a $50,000. We agree.
constructive trust in its calculations, and 3) overlooked the
statutory trebling of damages mandated by the New Jersey First, the amended complaint requests that plaintiffs be
Consumer Fraud Act. permitted to rescind their purchase or lease contracts with
defendant. (J.A. at 92). The District Court concluded that the
STANDARD OF REVIEW value of recission – the Grand Cherokee’s approximately
$30,000 price tag – would be offset by the return of the
In diversity cases, the general rule is that the amount vehicle to defendant, and thus was worth the difference
claimed by a plaintiff in his complaint determines the amount between the original contract price and the resale price. This
in controversy, unless it appears to a legal certainty that the difference “would not amount to the $30,000 damages
claim is for less than the jurisdictional amount. Saint Paul recovery as alleged,” according to the District Court. (J.A. at
Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89 116).
(1938); Sellers v. O’Connell, 701 F.2d 565, 578 (6th Cir.
1983). A claim is less than the jurisdictional amount where As the District Court correctly noted, a recission is the
the “applicable state law bar[s] the type of damages sought by annulment or undoing of a contract. Under New Jersey law,
plaintiff.” Wood v. Stark Tri-County Bldg. Trades Council, recission is available “where there is original invalidity, fraud,
473 F.2d 272, 274 (6th Cir. 1973). failure of consideration or a material breach.” Notch View
Assocs. v. Smith, 615 A.2d 676, 680 (N.J. Super. Ct. Law Div.
Here, the District Court determined that it was a legal 1992). Plaintiffs have alleged facts which, if taken as true,
certainty that plaintiffs, both named and unnamed, could not state a claim for recission. (J.A. at 89-92).
meet the jurisdictional amount of $50,000. (J.A. at 116). We
review the District Court’s decision de novo. American Contrary to the reasoning articulated by the District Court,
Landfill, Inc. v. Stark, et al., 166 F.3d 835, 837 (6th Cir. however, in cases where a plaintiff seeks to rescind a contract,
1999). the contract’s entire value, without offset, is the amount in
controversy. See, e.g., Jadair, Inc. v. Walt Keeler Co., 679
DISCUSSION F.2d 131, 133 n. 5 (7th Cir. 1982) (remarking that in a case of
contract recission, the amount in controversy is a net figure
The parties allege that the District Court erred in not fully
counting towards the amount in controversy the damages
potentially recoverable on three theories of liability under
New Jersey law: recission, constructive trust and treble U.S. 516, 523 (1990). In this case, plaintiffs originally filed in New
damages.2 According to the parties, these damages, when Jersey. Thus, the choice of law rules of New Jersey apply.
In New Jersey, local law governs a dispute unless the parties
demonstrate that the law of a foreign jurisdiction is conflicting. Gantes
2 v. Kason Corp., 679 A.2d 106, 108 (N.J. 1996) (“The initial prong of the
A federal court sitting in diversity must apply the choice of law rules governmental-interest analysis entails an inquiry into whether there is an
of the state in which it sits. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 actual conflict . . . .”). Here, the parties concede there is no conflict.
U.S. 487, 496 (1941). When a case is transferred, the transferee court (Defendant’s Brief at 18, n.10; Plaintiff’s Brief at 1). And no conflict
must apply the choice of law rules that the transferor court would have was noted by the District Court. Thus, in the absence of a conflict, New
applied had the case not been transferred. Ferens v. John Deere Co., 494 Jersey law is controlling.