Pamella Montgomery v. Kraft Foods Global, Inc. , 822 F.3d 304 ( 2016 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 16a0116p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
PAMELLA MONTGOMERY, on behalf of herself and ┐
for the benefit of all with the common or general │
interest, any persons injured, and all others │
similarily situated, │
> No. 15-1283
Plaintiff-Appellant, │
│
│
v.
│
│
KRAFT FOODS GLOBAL, INC., a Delaware │
Corporation; STARBUCKS CORPORATION, a │
Washington Corporation, │
Defendants-Appellees. │
┘
Appeal from the United States District Court
for the Western District of Michigan at Grand Rapids.
No. 1:12-cv-00149—Gordon J. Quist, District Judge.
Argued: October 14, 2015
Decided and Filed: May 16, 2016
Before: BOGGS, SUTTON, and COOK, Circuit Judges.
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COUNSEL
ARGUED: Timothy H. McCarthy, Jr., Okemos, Michigan, for Appellant. Aaron M. Panner,
KELLOGG, HUBER, HANSEN, TODD, EVANS & FIGEL, Washington, D.C., for Appellees.
ON BRIEF: Timothy H. McCarthy, Jr., Okemos, Michigan, for Appellant. Aaron M. Panner,
Caitlin Hall, KELLOGG, HUBER, HANSEN, TODD, EVANS & FIGEL, Washington, D.C.,
Dean N. Panos, Thalia L. Myrianthopoulos, JENNER & BLOCK LLP, Chicago, Illinois, for
Appellees.
1
No. 15-1283 Montgomery v. Kraft Foods Global, et al. Page 2
_________________
OPINION
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COOK, Circuit Judge. Plaintiff Pamella Montgomery bought a Tassimo, a single-cup
coffee brewer manufactured by Kraft Foods, expecting it to brew Starbucks coffee. After the
purchase, however, she struggled to find Starbucks T-Discs—single-cup coffee pods compatible
with the brewer. In fact, the Starbucks T-Disc supply eventually disappeared as Kraft’s business
relationship with Starbucks soured. Disappointed with her purchase, Montgomery sued Kraft
and Starbucks (Defendants) on behalf of a class for violations of various Michigan laws. After
dismissing several claims and denying class certification on the rest, the district court entered
judgment in Montgomery’s favor when she accepted Defendants’ joint offer of judgment under
Federal Rule of Civil Procedure 68. Montgomery now appeals the dismissal of her claims for
breach of express and implied warranties, the denial of class certification on her consumer-
protection claims, and the attorney’s fees the district court awarded as part of the Rule 68
settlement. We AFFIRM the district court’s dismissal of the warranty claims, DISMISS the
class-certification appeal as moot, and AFFIRM the attorney’s-fees award.
I.
Montgomery purchased a Tassimo from her local grocery store that bore a sticker
reading: “Featuring Starbucks® Coffee.” But as Starbucks T-Discs became “increasingly
difficult and [later] impossible to find,” she learned that Starbucks had announced its plan to
terminate its distribution agreement with Kraft and that the two companies were embroiled in
arbitration over the contract. See Kraft Foods Global, Inc. v. Starbucks Corp., 411 F. App’x 428
(2d Cir. 2011). In response, Montgomery sued both companies on behalf of a class for violation
of the Michigan Consumer Protection Act (MCPA), innocent misrepresentation, breach of
express and implied warranties, and breach of contract.
Defendants each moved to dismiss the complaint for failure to state a claim, and the
district court, having first found the innocent misrepresentation claim abandoned, granted the
motions as to the claims for breach of express warranties, breach of implied warranty, and breach
No. 15-1283 Montgomery v. Kraft Foods Global, et al. Page 3
of contract, but denied the motion as to several MCPA claims. Montgomery then requested class
certification on those remaining claims, which the district court denied. Seeking a resolution—
encouraged by the district court—Defendants submitted a joint Rule 68 offer of judgment,
agreeing to pay MCPA statutory damages of $250, Mich. Comp. Laws § 445.911(2), plus
reasonable attorney’s fees and costs to be determined by the court. Montgomery accepted the
offer of judgment, and requested $174,786.50 in attorney’s fees plus $5,183.56 in costs.
Viewing that amount as unreasonable, the district court instead ordered Defendants to pay
Montgomery $6,767 in fees and costs. She appeals the dismissal of her warranty claims, the
denial of class certification, and the attorney’s-fees award.
II.
A. Jurisdiction over the Warranty-Claim Appeal
We first respond to Defendants’ position that Montgomery’s agreement to settle her
individual consumer-protection claims divests this court of jurisdiction to consider her challenge
to the interlocutory dismissal of her warranty claims. But a confession of judgment by
defendants on fewer than all claims moots only the claims resolved in the plaintiff’s favor by the
agreed judgment; other issues remaining in the case may be appealed. See Deposit Guar. Nat’l
Bank v. Roper, 445 U.S. 326, 333 (1980); see also UAW v. Dana Corp., 697 F.2d 718, 721 (6th
Cir. 1983) (en banc) (“[T]here are instances ‘in which one issue in a case has become moot, but
the case as a whole remains alive because other issues have not become moot.’” (quoting Univ.
of Texas v. Camenisch, 451 U.S. 390, 394 (1981))).
We read the record as showing that Montgomery settled only her individual consumer-
protection claims. Defendants’ Rule 68 offer of judgment reads:
[Defendants] offer to allow judgment to be taken against them under Plaintiff’s
First Amended Class Action Complaint and in favor of:
Plaintiff in the amount of $250.00, inclusive of all damages that may be
assessed against Defendants under the Michigan Consumer Protection
Act, M.C.L. § 445.911(2), plus reasonable attorneys’ fees and costs
actually incurred and attributable to the prosecution of Plaintiff’s
individual claims, as determined by the Court under applicable law.
No. 15-1283 Montgomery v. Kraft Foods Global, et al. Page 4
Though Defendants now argue that the settlement merged all of Montgomery’s claims,
when responding to her attorney’s-fees request at the district court, Defendants actually
distinguished among them, noting that “the great majority of Plaintiff’s claims were dismissed by
the Court” and that Montgomery “agreed to settle her remaining claims for $250.” Thus,
because both parties viewed the offer as extinguishing only Montgomery’s consumer-protection
claims, we maintain jurisdiction over her appeal of the warranty claims’ dismissal.
B. Dismissal of Warranty Claims
We review the district court’s dismissal of Montgomery’s warranty claims under Federal
Rule of Civil Procedure 12(b)(6) de novo, looking for a “short and plain statement . . . showing
that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2); see also Ctr. for Bio-Ethical
Reform, Inc. v. Napolitano, 648 F.3d 365, 369 (6th Cir. 2011) (citing City of Monroe Emps. Ret.
Sys. v. Bridgestone Corp., 399 F.3d 651, 664 (6th Cir. 2005)). The complaint “must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007)).
Montgomery alleges that Defendants breached express warranties and the implied
warranty of merchantability under the Michigan Uniform Commercial Code. Mich. Comp. Laws
§§ 440.2313, 2314. We examine each claim in turn.
1. Express Warranty
Montgomery claims that Defendants made and breached several express warranties:
(1) The Tassimo afforded customers the “present and continued availability” of compatible
Starbucks T-Discs, (2) the Tassimo was “designed for use” with the Starbucks T-Discs, and
(3) Starbucks T-Discs were “designed for use” with the Tassimo. Kraft moved to dismiss the
express-warranty claim because Montgomery failed to plead that she was in privity of contract
with Defendants, and Montgomery countered that, as a third-party beneficiary of the Kraft-
Starbucks distribution agreement, she met the privity requirement. The district court rejected
Montgomery’s assertion of third-party-beneficiary status and dismissed the express-warranty
claim against both Defendants on privity grounds.
No. 15-1283 Montgomery v. Kraft Foods Global, et al. Page 5
None of Montgomery’s arguments persuade us that the district court erred in its
dismissal. Though the Michigan Supreme Court has yet to rule on the privity issue regarding
express-warranty claims, a Michigan Court of Appeals concluded that, because an express
warranty constitutes a specific contract term, “privity of contract is necessary for a remote
purchaser to enforce a manufacturer’s express warranty.” Heritage Res., Inc. v. Caterpillar Fin.
Servs. Corp., 774 N.W.2d 332, 343 n.12 (Mich. Ct. App. 2009). “[D]ecisions by ‘the Michigan
Court of Appeals are binding authority where the Michigan Supreme Court has never addressed
the issue decided therein.’” Berrington v. Wal-Mart Stores, Inc., 696 F.3d 604, 608 (6th Cir.
2012) (quoting Morrison v. B. Braun Med. Inc., 663 F.3d 251, 257 n.1 (6th Cir. 2011)).
Montgomery insists, however, that no privity requirement exists for express-warranty
claims under Michigan law, relying on our statement in Pack v. Damon Corp., 434 F.3d 810, 814
(6th Cir. 2006), that the Michigan Uniform Commercial Code “does not limit the extension of
express warranties to direct sellers.” But Pack predated the Michigan Court of Appeals’
Heritage decision, and we follow Heritage “until the Michigan Supreme Court or another panel
of the Michigan Court of Appeals rules otherwise.” Wieczorek v. Volkswagenwerk, A.G.,
731 F.2d 309, 310 (6th Cir. 1984).
To properly plead a breach-of-express-warranty claim then, Montgomery needed to
allege that she was in privity with Defendants. She didn’t; her complaint acknowledged that she
bought her Tassimo from a Fred Meijer grocery store, not directly from Defendants. And
Montgomery’s appeal abandons the third-party-beneficiary theory she pressed before the district
court. See Dixon v. Ashcroft, 392 F.3d 212, 217 (6th Cir. 2004) (citing Boyd v. Ford Motor Co.,
948 F.2d 283, 284 (6th Cir. 1991)). Accordingly, we affirm the district court’s dismissal of
Montgomery’s express-warranty claim.
2. Implied Warranty of Merchantability
Montgomery also claims that Defendants breached the implied warranty of
merchantability. Under Michigan law, every seller warrants, among other things, that the sold
goods (1) “are fit for the ordinary purposes for which [the] goods are used” and (2) “conform to
the promises or affirmations of fact made on the container or label if any.” Mich. Comp. Laws
No. 15-1283 Montgomery v. Kraft Foods Global, et al. Page 6
§ 440.2314(2)(c), (f). The goods must have been “defective when they left the possession of the
manufacturer or seller” for a plaintiff to succeed on a breach-of-implied-warranty claim.
Guaranteed Constr. Co. v. Gold Bond Prods., 395 N.W.2d 332, 336 (Mich. Ct. App. 1986)
(citing Kupkowski v. Avis Ford, Inc., 235 N.W.2d 324, 330 (Mich. 1975)).
In Pack, we explained that “Michigan has abandoned the privity requirement for implied-
warranty claims,” 434 F.3d at 820, and Heritage left that proposition unchanged, 774 N.W.2d at
344 (noting confusion about whether the lack of contractual privity bars implied-warranty claims
and refusing to address the issue). Thus, Montgomery’s claim for breach of the implied warranty
of merchantability survives the otherwise-disqualifying lack of contractual privity.
Yet her claim falls short for other reasons. First, Montgomery’s complaint failed to
allege that the Tassimo was unfit for its ordinary purpose. “Merchantable is not a synonym for
perfect,” Guaranteed Constr. Co., 395 N.W.2d at 336, and the goods need only be of “average
quality within the industry,” Bosway Tube & Steel Corp. v. McKay Mach. Co., 237 N.W.2d 488,
490–91 (Mich. Ct. App. 1975) (“[T]he warranty of merchantability is that the goods are of
average quality within the industry, while the warranty of fitness is that the goods are fit for the
purposes for which they were intended.” (citing Ambassador Steel Co. v. Ewald Steel Co.,
190 N.W.2d 275 (Mich. Ct. App. 1971))).1 Montgomery’s complaint includes no allegation that
her Tassimo is unfit for its ordinary purpose—brewing coffee and other hot beverages.
Nor did she plausibly allege that the goods failed to conform to the promises or
affirmations of fact made on the Tassimo’s container or label. Montgomery directs us to the
photographs of the Tassimo packaging she attached to her response to Starbucks’s motion to
dismiss. The complaint referred to these packaging-label photos, making them a cognizable part
of the record. See Bassett v. Nat’l Collegiate Athletic Ass’n, 528 F.3d 426, 430 (6th Cir. 2008)
(citing Amini v. Oberlin Coll., 259 F.3d 493, 502 (6th Cir. 2001)). But these don’t help
Montgomery. The packaging promises that the Tassimo “Featur[es] Starbucks® Coffee,” and
invites customers to “[e]njoy the rich, full taste of Starbucks® coffee, one perfectly brewed cup
at a time.” Canvassing the complaint, we find no suggestion that the brewer failed to live up to
1
Montgomery brings no claim for breach of the warranty of fitness.
No. 15-1283 Montgomery v. Kraft Foods Global, et al. Page 7
these promises when Montgomery bought it. Instead, she alleged that “[a]fter the system was
purchased, with time it became increasingly difficult and impossible to find and purchase the
Starbucks [T-Discs].”
Montgomery now contends that she meant to say she was unable to brew Starbucks
coffee at the time of her purchase. But she neither sought to amend her complaint in that manner
nor did she make this argument below. We therefore decline to consider it. See Scottsdale Ins.
Co. v. Flowers, 513 F.3d 546, 552 (6th Cir. 2008). Because Montgomery’s Tassimo conformed
to the promises on its container when she purchased it, she cannot claim it was defective when it
left the Defendants’ possession. Guaranteed Constr. Co., 395 N.W.2d at 336. And though
Montgomery insists that the outer-box statements warrant the “continued availability” of
Starbucks T-Discs, (Am. Compl., R. 31, PID 250), we find no error by the district court in not
reading that promise into the box-labeling. The district court thus properly dismissed her
implied-warranty claim.
C. Jurisdiction over the Class-Certification Appeal
Montgomery also appeals the district court order denying class certification of her
consumer-protection claims. Defendants again claim that Montgomery’s acceptance of the Rule
68 offer of judgment foreclosed her appeal of this issue, and this time we agree.
Again, “[g]enerally speaking, settlement of a plaintiff’s claims moots an action,” Pettrey
v. Enter. Title Agency Inc., 584 F.3d 701, 703 (6th Cir. 2009) (brackets omitted) (quoting Brunet
v. City of Columbus, 1 F.3d 390, 399 (6th Cir. 1993)), because the plaintiff no longer possesses
“a personal stake—i.e., a legally cognizable interest—in the outcome of the litigation,” id. In the
class-action context, however, a plaintiff who prevails on her individual claims retains a personal
stake in the outcome of a denial-of-class-certification appeal if she could potentially “shift[] the
litigation costs to [her] fellow class members” upon obtaining class certification. Id. at 705; see
also Deposit Guar. Nat’l Bank v. Roper, 445 U.S. 326, 336–37 (1980).
In Roper, the district court denied the plaintiffs’ motion for class certification before the
defendants made a Rule 68 offer of judgment that the plaintiffs refused. 445 U.S. at 329. The
offer included legal costs but omitted attorney’s fees. Id. Based on the offer, the district court
No. 15-1283 Montgomery v. Kraft Foods Global, et al. Page 8
entered judgment in the plaintiffs’ favor over their objections, and plaintiffs then appealed the
denial of class certification. Id. at 330. The Supreme Court rejected the defendants’ mootness
argument because the plaintiffs maintained a personal stake in shifting the unawarded litigation
costs to the putative class if class certification proved successful on appeal. Id. at 336. The
Court also emphasized that “[a]t no time did the named plaintiffs accept the tender in settlement
of the case.” Id. at 332. Indeed, the Court in United States Parole Commission v. Geraghty—
decided the same day as Roper—left open the question of “whether a named plaintiff who settles
the individual claim after denial of class certification may, consistent with Art. III, appeal from
the adverse ruling on class certification.” 445 U.S. 388, 404 n.10 (1980) (emphasis added)
(citing United Airlines, Inc. v. McDonald, 432 U.S. 385, 393–94 & n.14 (1977)).2
After Roper and Geraghty, this court held in Pettrey that settlement of the plaintiffs’
individual claims foreclosed their class-certification appeal. 584 F.3d at 703–07. The Pettrey
procedural events mimicked this case’s. Following the district court’s denial of class
certification, the Pettrey parties entered into a settlement agreement that obligated the defendants
to pay plaintiffs’ costs and attorney’s fees. Id. at 703. The plaintiffs then appealed the denial of
class certification. Id. We found the appeal moot, distinguishing Roper in two ways. First, no
“live controversy” existed because the plaintiffs “voluntarily relinquished” their individual
claims, whereas the Roper plaintiffs’ claims were “involuntarily terminated” by the district court.
Id. at 705. Second, the plaintiffs lacked “personal stakes” in the outcome of the appeal because
the defendants, in the settlement, “agreed to pay all attorneys’ fees and costs.” Id. By contrast,
the district court’s judgment in Roper left the attorney’s-fee issue undecided, preserving
plaintiffs’ appellate fee-shifting interest. See Roper, 445 U.S. at 329.3
2
After Roper, the Supreme Court held that an “interest in attorney’s fees is . . . insufficient to create an
Article III case or controversy where none exists on the merits of the underlying claim.” Lewis v. Continental Bank
Corp., 494 U.S. 472, 480 (1990) (citing Diamond v. Charles, 476 U.S. 54, 70–71 (1986)). This appears to conflict
with Roper’s holding. See Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523, 1532 n.5 (2013) (“Because Roper
is distinguishable on the facts, we need not consider its continuing validity in light of our subsequent decision in
Lewis . . . .”). But because Lewis was not a class action and made no mention of Roper, we must continue to operate
within Roper’s fee-shifting framework. See Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477, 484
(1989).
3
The Supreme Court recently rejected a mootness challenge in the context of an unaccepted Rule 68 offer
of judgment because such an offer “is considered withdrawn” if not accepted within 14 days, providing plaintiff no
relief and leaving his personal stake in the litigation unchanged. Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663,
No. 15-1283 Montgomery v. Kraft Foods Global, et al. Page 9
Pettrey, not Roper, controls here. Montgomery accepted Defendants’ Rule 68 offer of
judgment—which included costs and attorney’s fees—thus eliminating any putative benefit from
class certification. Certification of the class would not have the potential to leave Montgomery
“in a better position with respect to attorneys’ fees and costs than would the [Rule 68 offer she
accepted].” Pettrey, 584 F.3d at 706.
Attempting to sidestep Pettrey, Montgomery points out that Defendants offered costs and
fees she incurred in pursuing only her individual claims, whereas the Pettrey settlement provided
costs and fees “incurred by the plaintiffs in pursuing both their individual and class claims.”
Pettrey, 584 F.3d at 705 (emphasis added). True, but Montgomery makes no argument that she
owes her lawyer these unawarded, class-related attorney’s fees. See Anderson v. CNH U.S.
Pension Plan, 515 F.3d 823, 827 (8th Cir. 2008) (holding the appeal moot because “[a]n
additional award of fees from the defendants would accrue to the benefit of plaintiffs’ counsel, to
be sure, but nothing in the record demonstrates that an additional award would relieve any
burden presently borne by the named plaintiffs themselves”).
Last, Montgomery presses her express reservation of her right to appeal the denial of
class certification. She also complains that Defendants have yet to pay the district court’s
judgment. Pettrey, as discussed above, answers this: Montgomery’s acceptance of the Rule 68
offer extinguished her continuing personal interest and rendered her class-certification appeal
moot. 584 F.3d at 706 & n.3.
D. Attorney’s Fees
Finally, Montgomery asks us to “reverse or vacate” the district court’s award of
attorney’s fees and costs because the district court awarded only 3% of the amount requested.
By positing only that the modest size of the award (as compared to the request) amounts to a
“non-award,” she presents the court with a gripe, unaccompanied by legal reasoning in support
of judicial relief. We therefore agree with Defendants that Montgomery forfeited this issue by
inadequately briefing it. See McPherson v. Kelsey, 125 F.3d 989, 995–96 (6th Cir. 1997)
671–72 (2016) (quoting Fed. R. Civ. P. 68(b)). Because Montgomery accepted the Rule 68 offer, Campbell-Ewald
provides little instruction. Moreover, the Court declined to discuss whether the plaintiff’s “claim for class relief
prevent[ed] th[e] case from becoming moot.” See id. at 679 n.1 (Roberts, C.J., dissenting).
No. 15-1283 Montgomery v. Kraft Foods Global, et al. Page 10
(“[I]ssues adverted to in a perfunctory manner, unaccompanied by some effort at developed
argumentation, are deemed waived. It is not sufficient for a party to mention a possible argument
in the most skeletal way, leaving the court to . . . put flesh on its bones.” (quoting Citizens
Awareness Network, Inc. v. United States Nuclear Regulatory Comm’n, 59 F.3d 284, 293–94 (1st
Cir. 1995))). Accordingly, we affirm the fees aspect of this appeal.
III.
We AFFIRM the district court’s dismissal of Montgomery’s claims for breach of express
and implied warranties, DISMISS the class-certification appeal as moot, and AFFIRM the
district court’s award of attorney’s fees.