Hernandez v. FCA US LLC ( 2022 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 ELIZZET HERNANDEZ, ) Case No.: 1:21-cv-0745 JLT HBK ) 12 Plaintiff, ) ORDER GRANTING PLAINTIFF’S MOTION TO ) REMAND 13 v. ) ) (Doc. 6) 14 FCA US LLC, ) ) 15 Defendant. ) ) 16 17 Elizzet Hernandez purchased a Jeep Cherokee that she asserts was defective and required 18 multiple repairs. Hernandez contends FCA US LLC breached express and implied warranties given at 19 the time of purchase and seeks to hold FCA liable under California’s Song-Beverly Consumer 20 Warranty Act. (See Doc. 1-2.) 21 Hernandez asserts the Court lacks jurisdiction and seeks to remand the matter to the state court. 22 (Doc. 6.) FCA opposes the motion, asserting the Court has diversity jurisdiction under 28 U.S.C. § 23 1332. (Doc. 8.) The Court finds the matter suitable for decision without oral arguments, and no 24 hearing date will be set pursuant to Local Rule 230(g) and General Order 618. For the reasons set forth 25 below, the motion to remand is GRANTED. 26 I. Background and Procedural History 27 Hernandez purchased a new Jeep Cherokee in California, “for her personal and family use,” on 28 December 19, 2015. (Doc. 1-2 at 4, ¶ 6.) Hernandez reports “[t]he total amount paid or payable for the 1 Vehicle including license and registration was $36,519.92.” (Id.) According to Hernandez, “FCA 2 provided Plaintiff multiple written, express warranties including… a 3-year/36,000-mile basic warranty 3 and a 5-year/60,000-mile powertrain warranty.” (Id., ¶ 7.) Hernandez also asserts “the sale of the 4 Vehicle was accompanied by FCA’s implied warranty that the Vehicle is merchantable.” (Id. at 7, ¶ 8.) 5 Hernandez asserts she “properly used, maintained and cared for the Vehicle, meeting all 6 obligations and conditions of the express warranty.” (Doc. 1-2 at 4, ¶ 9.) However, she alleges “[t]he 7 Vehicle contains multiple nonconformities or defects that substantially impair the use, value, or safety 8 of the vehicle, including, but not limited to: faulty shifter assembly, transmission issues, [and] electrical 9 issues….” (Id. at 5, ¶ 14 [emphasis omitted].) Hernandez asserts she “delivered the Vehicle to FCA or 10 its authorized agents in this State on at least six… separate occasions for warranty related repair of all 11 the nonconformities.” (Id., ¶ 16.) She contends, “FCA has been unable or unwilling to bring the 12 Vehicle into conformity with the express warranties it gave.” (Id., ¶ 17.) In addition, Hernandez 13 alleges that due to the nonconformities, “the Vehicle was not of the same quality as those generally 14 accepted” and FCA beached its implied warranty of merchantability. (Id. at 7, ¶ 45.) 15 On March 26, 2021, Hernandez filed a complaint in Stanislaus County Superior Court, Case No. 16 CV-21-001621. (Doc. 1-2.) Hernandez seeks to hold FCA liable for breach of express warranties and 17 breach of implied warranties under California’s Song-Beverly Act. (Id. at 5-8.) The prayer for relief 18 includes: (1) restitution “equal to the actual price paid or payable by Plaintiff, which exceeds 19 $36,519.92;” (2) restitution for collateral charges, including “tax, license fees, registration fees, and 20 other fees;” (3) incidental damages including “repair, towing, and rental car costs actually incurred;” 21 (4) costs and expenses; (5) “[a] civil penalty as called for Song Beverly, of no more than two times 22 actual damage;” (6) prejudgment interest; and (7) other relief the Court deems proper. (Id. at 8-9.) 23 On May 7, 2021, FCA filed a Notice of Removal, asserting this Court has diversity jurisdiction 24 pursuant to 28 U.S.C. § 1332. (Doc. 1.) FCA observed that Hernandez seeks restitution for the 25 $36,519.92 paid as well as civil penalties. (Id. at 5, ¶¶ 17, 20.) Based upon the prayer for relief, FCA 26 calculates the total “for actual damages and a civil penalty equals $109,559.76.” (Id., ¶ 20.) In 27 addition, FCA notes the Court may consider estimated attorney fees in calculating the amount in 28 controversy and contends the fee awards under the Song-Beverly Act commonly exceed $35,000. (Id., 1 ¶ 18.) Thus, FCA contends “the amount in controversy exceeds $75,000.00 exclusive of interest and 2 costs,” as required by Section 1332. (Id. at 8.) 3 Hernandez filed the motion to remand now pending before the Court on June 2, 2021, arguing 4 FCA erred in calculating the amount in controversy, and the Court lacks diversity jurisdiction. (Doc. 6.) 5 FCA filed its opposition to the motion on June 9, 2021 (Doc. 8), to which Hernandez filed a reply on 6 June 23, 2021 (Doc. 9.) 7 II. Jurisdiction 8 Removal of a case from state court to federal court is governed by 28 U.S.C. § 1441, which 9 provides in relevant part that “any civil action brought in a State court of which the district courts of the 10 United States have original jurisdiction, may be removed … to the district court of the United States for 11 the district and division embracing the place where such action is pending.” 28 U.S.C. § 1441. This 12 statute “is strictly construed against removal jurisdiction,” and the party seeking removal “bears the 13 burden of establishing federal jurisdiction.” Ethridge v. Harbor House Rest., 861 F.2d 1389, 1393 (9th 14 Cir. 1988) (citations omitted). 15 The district court has original diversity jurisdiction when all parties are diverse and the amount 16 in controversy exceed $75,000. 28 U.S.C. § 1332(a); see also Abrego Abrego v. Dow Chemical Co., 17 443 F.3d 676, 679 (9th Cir. 2006) (citations omitted). The presence of any single plaintiff from the 18 same state as any single defendant destroys “complete diversity” and strips the federal courts of original 19 jurisdiction over the matter. Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 553 (2005). 20 In addition, the amount in controversy is calculated based upon “the complaint operative at the time of 21 removal and encompasses all relief the court may grant on the complaint if the plaintiff is victorious.” 22 Chavez v. JPMorgan Chase & Co., 888 F.3d 413, 414-15 (9th Cir. 2018); see also Theis Research, Inc. 23 v. Brown & Bain, 400 F.3d 659, 662 (9th Cir. 2005) (“the amount at stake in the underlying litigation 24 … is the amount in controversy for purposes of diversity jurisdiction”). “[A]ny doubt about the right of 25 removal requires resolution in favor of remand.” Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 26 1241, 1244 (9th Cir. 2009) (citing Gaus, 980 F.2d at 566). 27 When, as here, a plaintiff does not specify the amount in controversy in the complaint, the 28 removing party bears the burden to establish the amount in controversy at removal. Rodriguez v. AT & 1 T Mobility Servs. LLC, 728 F.3d 975, 981 (9th Cir. 2013). A notice of removal must include “a 2 plausible allegation that the amount in controversy exceeds the jurisdictional threshold.” Dart 3 Cherokee Basin Operating Co., LLC v. Owens, 574 U.S. 81, 89 (2014). If the plaintiff does not contest 4 the amount, the defendant’s calculated amount should be accepted. Id. at 88. However, if a plaintiff 5 challenges the calculation, then “both sides submit proof and the court decides, by a preponderance of 6 the evidence, whether the amount-in-controversy requirement has been satisfied.” Id. This evidence 7 may include affidavits, declarations, or other “summary-judgment-type evidence relevant to the amount 8 in controversy at the time of removal.” Ibarra v. Manheim Investments, Inc., 775 F.3d 1193, 1197 (9th 9 Cir. 2015) (quoting Singer v. State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 377 (9th Cir. 1997)). The 10 party seeking to invoke the jurisdiction of the court bears the burden of supporting its jurisdictional 11 allegations with competent proof. See Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). “[A]ny 12 doubt about the right of removal requires resolution in favor of remand.” Moore-Thomas v. Alaska 13 Airlines, Inc., 553 F.3d 1241, 1244 (9th Cir. 2009) (citing Gaus, 980 F.2d at 566). 14 III. Discussion and Analysis 15 Hernandez asserts FCA failed to meet its burden of proof to establish diversity jurisdiction in 16 this action. (See generally Doc. 6-1.) FCA opposes remand, asserting it carried the burden to 17 establish diversity jurisdiction, including the amount in controversy requirement. (See Doc. 18.) 18 A. Diversity of Citizenship 19 As an initial matter, Section 1332 first requires complete diversity of citizenship, and the 20 presence “of a single plaintiff from the same State as a single defendant deprives the district court of 21 original diversity jurisdiction over the entire action.” Abrego Abrego, 443 F.3d at 679. For purposes of 22 diversity jurisdiction, a person is a citizen of the state in which she is domiciled and is presumptively 23 domiciled at her place of residence. Kantor v. Wellesley Galleries, Ltd., 704 F.2d 1088, 1090 (9th Cir. 24 1983). A limited liability company, such as FCA, is a citizen of all the states of which its owners or 25 members are citizens. Johnson v. Columbia Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006). 26 In its notice of removal, FCA details the citizenship of its owners and members, indicating that 27 FCA US LLC is a Delaware limited liability Company with its principal place of business in Michigan. 28 (Doc. 1 at 7, ¶ 27; see also Doc. 8 at 10.) Hernandez is a resident of California and does not dispute 1 that the citizenship of the parties is completely diverse. (See generally Doc. 6-1.) Accordingly, the 2 Court finds this requirement of Section 1332 is satisfied. 3 B. Amount in Controversy 4 According to Hernandez, “FCA’s amount in controversy calculus is faulty on at least three 5 grounds: the purchase price, the civil penalty and the attorney fees are far too speculative to meet 6 Defendant’s burden.” (Doc. 6-1 at 5-6.) Hernandez asserts FCA failed to account for “the statutory 7 offset for use of the vehicle” based upon mileage. (Id. at 6.) In addition, Hernandez argues the 8 identified civil penalties and attorneys’ fees were speculative and should not be included in the amount 9 in controversy calculation. (Id. at 7-13.) 10 1. Restitution and actual damages 11 Hernandez seeks damages under the Song-Beverly Act for violations of express and implied 12 warranties. (Doc. 1-2 at 8.) However, the parties disagree as to the maximum restitution that 13 Hernandez may recover and the total actual damages in dispute. 14 The Song-Beverly Act defines restitution as “the actual price paid by the buyer,” including 15 collateral charges such as tax and registration fees. Cal. Civ. Code § 1793.2(d)(2)(B). However, the 16 calculation of restitution excludes “nonmanufacturer items installed by a dealer or the buyer,” and is 17 reduced by the amount “directly attributable to use by the buyer” prior to delivery of the vehicle to the 18 dealer for correction of the problem that gave rise to the warranty nonconformity. Id. Thus, for 19 purposes of calculating the amount in controversy, the purchase price should be reduced by a “usage 20 offset.”1 See Schneider v. Ford Motor Co., 756 F. App’x 699, 700-01 (9th Cir. 2018). Similarly, 21 because a manufacturer’s rebate reduces “the actual price paid,” a rebate amount should be excluded 22 from the calculation. See, e.g., Degenhardt v. Ford Motor Co., 2022 WL 103723, at *5 (S.D. Cal. Jan. 23 10, 2022) (observing a manufacturer’s rebate was “properly excluded from the restitution calculation” 24 for purposes of determining the amount in controversy). 25 Following the filing of the motion to remand, FCA recalculated the actual damages to address 26 27 1 The offset amount is determined by multiplying the “actual price of the new motor vehicle paid or payable by the buyer … 28 by a fraction having its denominator 120,000 and having as its numerator the number of miles traveled by the new motor 1 the statutory set-off amount and deduct manufacturer’s rebates. (Doc. 8 at 5-6.) FCA noted Hernandez 2 did not identify the mileage deduction she believed was appropriate in the motion, but FCA anticipated 3 she would “allege the first complaint occurred on February 10, 2018 at 36,343 miles.” (Id. at 6, n.1.) 4 Because the vehicle had 15 miles at delivery, FCA determined the statutory offset resulted in a 5 deduction of $6,912.79. (Id. at 6.) In addition, FCA acknowledged $2,500 should be deducted for 6 manufacturer’s rebates. (Id.) With these deductions, FCA concluded Hernandez was “seeking 7 $27,107.13 in actual damages.” (Id.) 8 Hernandez agrees the price paid was subject to the mileage offset deduction of $6,812.79 and a 9 reduction of $2,500.00 for the manufacturer’s rebate. (See Doc. 9 at 3.) However, Hernandez “this is 10 not the end of the inquiry, as deductions for non-manufacturer installed items include deductions for 11 service contracts and gap contracts.” (Id., internal quotation marks omitted.) Hernandez notes that the 12 purchase contract indicates the total price included “four service contracts and one gap contract that 13 will reduce the price paid or payable . . .” (Id., citing Agyeman Decl. ¶ 2, Ex. A [Doc. 9-2].) 14 As Hernandez argues, because the Song-Beverly Act excludes restitution for “non-manufacturer 15 items installed by a dealer or buyer,” service contracts and gap contracts “must be excluded from the 16 purchase price of the vehicle for purposes of the restitution calculation.” See Carillo v. FCA USA, 17 LLC, 546 F.Supp.3d 995, 1002 (C.D. Cal. 2021) (citing Cal. Civ. Code § 1793.2(d)(2)(B)); see also 18 Velazquez v. Ford Motor Co., 2021 WL 2948649, at *2-3 (E.D. Cal. July 13, 2021) (agreeing a service 19 contract and gap insurance were “nonmanufacturer items installed by a dealer or buyer,” and deducting 20 the amounts paid for the identified service and gap contracts for purposes of calculating the amount in 21 controversy); Rupay v. Vokswagen Group of Am., 2012 WL 10634428, at *5 (C.D. Cal. Nov. 15, 2012) 22 (“neither GAP insurance nor a third party service contract are ‘manufacturer-installed items,” and they 23 are in fact ‘non-manufacturer items,’ as they are not manufactured by anyone, as they are both service 24 contracts”). The purchase contract indicates Hernandez paid for four optional service contracts in the 25 amounts of $2,326.00 to Fidelity VSC, $553.00 to Fidelity Car Care, $432.00 to Fidelity Road Hazard, 26 and $500.00 to Radiant Ride. (Doc. 9-2 at 2-3.) In addition, Hernandez paid $837.00 for an optional 27 gap contract to JMA. (Id. at 2.) Thus, a total of $4,648.00 shall be deducted from the price for 28 purposes of calculating the possible restitution and the amount in controversy. See Carillo, 546 1 F.Supp.3d at 1002; Velazquez, 2021 WL 2948649, at *2-3; see also Cal. Civ. Code § 1793.2(d)(2)(B). 2 With these deductions, the total actual damages that may be paid to Hernandez as restitution under the 3 Song-Beverly Act is $22,459.13.2 4 2. Civil penalties 5 The Song-Beverly Act provides that a buyer may recover “a civil penalty of up to two times 6 the amount of damages” if the manufacturer or seller “willfully” violated a warranty or provision of 7 the Act. Cal. Civ. Code § 1794(c); see also Ramos v. FCA US LLC, 385. F.Supp.3d 1056 (E.D. Cal. 8 2019) (explaining civil penalties may be imposed for the willful failure of “vehicle manufacturers to 9 promptly replace or pay restitution for their lemon vehicles” as required by Section 1793.2(d)(2) of the 10 Act). Generally, this civil penalty is properly included in determining the amount in controversy, as 11 “the civil penalty under the Song-Beverly Act is akin to punitive damages, because both have the dual 12 effect of punishment and deterrence for defendants.” Brady v. Mercedes-Benz USA, Inc., 243 F. Supp. 13 2d 1004, 1009 (N.D. Cal. 2002); see also Gonzales v. CarMax Auto Superstores, LLC, 840 F.3d 644, 14 648 (9th Cir. 2016) (affirming the district court’s calculation of amount in controversy, which included 15 penalties under the Song-Beverly Act). Moreover, “[c]ourts as a matter of law, calculate the amount 16 in controversy based upon the maximum amount of civil penalties available to [a] plaintiff.” Saulic v. 17 Symantec Corp., 2007 WL 5074883, at *4 (C.D. Cal. Dec. 26, 2007). 18 In the complaint, Hernandez alleges “FCA has breached its affirmative duty to promptly replace 19 a vehicle or make restitution by willfully failing and refusing to replace the Vehicle or make restitution 20 to Plaintiff of the monies paid or payable towards the purchase of the Vehicle and any incidental and 21 other damages, as required by Civil Code § 1793.2(d)(2).” (Doc. 1-2 at 5-6, ¶ 23.) In the prayer for 22 relief, Hernandez requests “[a] civil penalty as called for under Song Beverly, of no more than two 23 times actual damage, according to proof.” (Id. at 9.) Thus, FCA asserts the “statutory civil penalties … 24 are properly included in determining [the] amount in controversy.” (Doc. 8 at 6, emphasis omitted.) 25 On the other hand, Hernandez argues “the plain language of [her] complaint does not support an 26 27 2 This amount reflects the price paid of $36,519.92 reduced by $6,912.72 for the statutory use offset, as identified by FCA; $2,500.00 for manufacturer’s rebates; $3,811.00 for the optional service contracts; and $837.00 for the optional gap 28 1 automatic right to a civil penalty such that it should be considered when determining the amount in 2 controversy.” (Doc. 9 at 3, emphasis omitted.) 3 Notably, this Court and others previously determined that when—as here—a plaintiff alleges 4 the action was willful and the prayer for relief includes a request for civil penalties “as provided in 5 Song-Beverly, in an amount not to exceed two times the amount of Plaintiff’s actual damages,” 6 inclusion of the civil penalties in a calculation of the amount in controversy is appropriate. See, e.g., 7 Quinonez v. FCA US LLC, 2020 WL 3397565, at *3 (E.D. Cal. June 19, 2020) (addressing identical 8 language and including civil penalties in the calculation and observing “other courts, when analyzing a 9 complaint with the exact wording incorporated in plaintiff’s complaint here, have reached the same 10 conclusion”); Cortez Martinez v. Ford Motor Co., 2019 WL 1988398, at *7 (E.D. Cal. May 6, 2019) 11 (where the plaintiffs alleged the defendant’s failure to comply with the Song-Beverly Act was willful 12 and the prayer for civil penalty “in the amount of two times Plaintiff’s actual damages,” the civil 13 penalties were “expressly placed in controversy by the complaint”); Modiano v. BMW of N. Am LLC., 14 2021 (S.D. Cal. Mar. 16, 2021) (including civil penalties in the amount in controversy calculation 15 because the plaintiffs “allege[d] willfulness giving rise to penalties under the Song-Beverly Act”); 16 Elenes v. FCA US LLC, 2016 WL 6745424, at *5 (C.D. Cal. 2016) (“By specifically seeking the 17 maximum civil penalty [under the Song Beverly Act], plaintiffs placed that amount in controversy.”). 18 Because Hernandez clearly plead FCA acted willfully in failing to comply with the Song- 19 Beverly Act (Doc. 1 at 1-2 at 5-6, ¶¶ 23-24) and the prayer for relief seeks up to double the actual 20 damages (id. at 9), this specific amount was placed into controversy. See Quinonez, 2020 WL 21 3397565, at *3; Cortez Martinez, 2019 WL 1988398, at *7. As discussed above, the amount of actual 22 damages is $22,459.13; and twice that amount for civil penalties is $44,918.26. This amount shall be 23 added to the calculation of the amount in controversy. 24 3. Attorneys’ fees 25 The Ninth Circuit determined that future attorneys’ fees awards may be included in determining 26 the amount in controversy under fee-shifting statutes. Fritsch v. Swift Transp. Co. of Ariz., LLC, 899 27 F.3d 785, 795 (9th Cir. 2018); see also Martinez, 2019 WL 1988398, at *7 (“Attorneys’ fees are 28 available to Plaintiffs here under California Civil Code Section 1794(d).”). District courts may exclude 1 future fees if they are too speculative or if the defendant fails to show with a “reasonable probability 2 that the amount in controversy exceeds the minimum.” Fritsch, 899 F.3d at 795. “A district court may 3 reject the defendant's attempts to include future attorneys’ fees in the amount in controversy if the 4 defendant fails to satisfy this burden of proof.” Id. 5 In the Notice of Removal, FCA suggested the Court consider $35,000.00 in attorneys’ fees 6 when calculating the amount in controversy. (Doc. 1 at 5, ¶¶ 18, 20.) FCA noted fees may be included 7 in the amount in controversy calculation and asserted that attorneys’ fees under the Song-Beverly Act 8 “commonly exceed $35,000.” (Id., citing Gregg Decl. ¶¶ 11-13 [Doc. 1-1 at 2-3].) Specifically, 9 Michael Gregg, counsel for FCA, asserted that in his “experience litigating such cases, claims for 10 attorneys’ fees through litigation commonly exceed $35,000.00.” (Doc. 1-1 at 3, ¶ 12.) 11 Importantly, FCA did not meet its burden of proof to include the suggested attorneys’ fees in the 12 amount in controversy calculation. A single declaration stating a lump sum of future fees does not 13 estimate future fees with a reasonable probability. See Schneider, 441 F. Supp. 3d at 914 (finding a 14 declaration stating that “claims for attorneys’ fees in these cases regularly approach or exceed $50,000” 15 and that a recent fee demand by Plaintiff’s counsel exceeded $300,000 was not competent proof to 16 include fees in the calculation). The fee estimate lacks the evidentiary support that may allow for the 17 inclusion of fees in the calculation, such as fee petitions submitted in similar cases. See, e.g., Martinez, 18 2019 WL 1988398 at *7 (including attorneys’ fees in the amount in controversy where defendant 19 submitted “five petitions for attorneys’ fees filed in other similar cases by the same counsel who 20 represent Plaintiffs here”). Further, FCA does not identify the amount of time tasks may take or the 21 hourly billing rates, such that the Court may determine the fee estimate is not simply speculative. See 22 Conrad Assocs. v. Hartford Accident & Indemnity Co., 994 F. Supp. 1196, 1200 (N.D. Cal. 1998) 23 (finding that “[the] contention that attorney fees are likely to total at least $20,000 is too speculative” 24 because the defendant failed to estimate “the amount of time each major task will take” or appliable 25 hourly billing rates). Because the $35,000.00 appears purely speculative and lacks evidentiary support, 26 the Court declines to include the amount identified in its calculation of the amount in controversy. See 27 Fritsch, 899 F.3d at 795. 28 /// 1 4. Total in amount controversy 2 Based upon the foregoing, the amount in controversy totals $67,377.39, which includes actual 3 || damages in the amount of $22,459.13 and civil penalties in the amount of $44,918.26. Accordingly, 4 || FCA failed to carry the burden to establish by a preponderance of the evidence that the amount in 5 || controversy exceeds $75,000. See Gaus 980 F.2d at 566. 6 ||1V.__ Conclusion and Order 7 For the reasons set forth above, the Court finds it lacks diversity jurisdiction over the matter. 8 || Accordingly, the Court ORDERS: 9 1. Plaintiff's motion to remand (Doc. 6) is GRANTED; 10 2. The action REMANDED to the Superior Court of California, County of Stanislaus fo: 11 lack of jurisdiction; and 12 3. The Clerk of Court is directed to close this action. 13 14 IS SO ORDERED. 15 Dated: _March 18, 2022 ( LAW ph L. wary 16 TED STATES DISTRICT JUDGE 17 18 19 20 21 22 23 24 25 26 27 28 10