Schimmer, Donald v. Jaguar Cars Inc ( 2004 )


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  •                              In the
    United States Court of Appeals
    For the Seventh Circuit
    ____________
    No. 03-3611
    DONALD SCHIMMER,
    Plaintiff-Appellant,
    v.
    JAGUAR CARS, INC.,
    Defendant-Appellee.
    ____________
    Appeal from the United States District Court
    for the Northern District of Illinois, Eastern Division.
    No. 03 C 1884—Amy J. St. Eve, Judge.
    ____________
    ARGUED APRIL 6, 2004—DECIDED SEPTEMBER 14, 2004
    ____________
    Before RIPPLE, KANNE and ROVNER, Circuit Judges.
    KANNE, Circuit Judge.
    I. History
    On January 15, 2000, Donald Schimmer bought a new
    2000 Jaguar XK8, manufactured by Jaguar Cars, Inc., from
    Towne & Countree Auto Sales, Inc. Schimmer paid the
    $69,513.00 purchase price in cash.
    Jaguar provided a limited written manufacturer’s war-
    ranty to repair or replace any nonconformities or defects in
    2                                               No. 03-3611
    material or workmanship for three years or thirty-six
    thousand miles. Schimmer encountered various problems
    with the XK8 and took the car to authorized Jaguar deal-
    erships for repairs under the manufacturer’s warranty on
    numerous occasions.
    After the dealers were unable to repair the XK8 to
    Schimmer’s satisfaction, Schimmer’s lawyer notified Jaguar,
    in a letter dated November 6, 2001, that Schimmer had re-
    voked his acceptance of the vehicle. Jaguar refused to accept
    Schimmer’s revocation. Subsequent to the purported revo-
    cation, the XK8 has remained in storage.
    On February 13, 2003, Schimmer filed a four-count com-
    plaint in Illinois state court, alleging violations of the
    Magnuson-Moss Warranty Act of 1975, 15 U.S.C. §§ 2301,
    et seq. (“Magnuson-Moss Act”) and the Illinois New Vehicle
    Buyer Protection Act, 815 Ill. Comp. Stat. 380/1, et seq.
    (“Illinois Lemon Law”). Counts I, II, and III alleged breach
    of written warranty, breach of implied warranty, and revo-
    cation of acceptance, respectively, pursuant to the Magnuson-
    Moss Act. Count IV alleged a violation of the Illinois Lemon
    Law. For each of the four counts, Schimmer’s complaint
    demanded the return of all money paid, reimbursement for
    diminution in value of the vehicle, incidental and con-
    sequential damages, attorneys’ fees, and any further relief
    that the court found appropriate. Schimmer also averred
    that to the best of his knowledge, the amount in controversy
    exceeded $50,000.00.
    Jaguar filed a timely notice of removal to federal district
    court on March 17, 2003, asserting that the court had
    federal subject-matter jurisdiction under the Magnuson-
    Moss Act. Once in federal court, Jaguar moved to dismiss
    Counts II and III of the complaint—Schimmer’s breach of
    implied warranty and revocation claims under the Magnuson-
    Moss Act—as well as Count IV, the state law claim. In its
    No. 03-3611                                                 3
    Memorandum Opinion and Order ruling on the motion to
    dismiss, the district court, without discussion, noted that
    because Schimmer’s complaint alleged damages in excess of
    $69,513.00 (the purchase price of the car) the Magnuson-Moss
    Act’s $50,000 amount in controversy requirement was
    satisfied and thus federal subject-matter jurisdiction ex-
    isted over the Magnuson-Moss Act claims. Schimmer v.
    Jaguar Cars, Inc., No. 03 C 1884, 
    2003 U.S. Dist. LEXIS 11226
    , at *6 (N.D. Ill. Jul. 1, 2003). The district court also
    found that it had supplemental jurisdiction under 28 U.S.C.
    § 1367 to hear Schimmer’s Illinois Lemon Law claim. 
    Id. The court
    then granted Jaguar’s motion on Counts II, 
    id. at *8-9,
    and IV, 
    id. at *13,
    but denied dismissal of Count III,
    
    id. at *10-11.
       A jury trial ensued on Schimmer’s remaining claims for
    breach of written warranty (Count I) and revocation of ac-
    ceptance (Count III). The jury returned a verdict in favor of
    Jaguar, and on September 17, 2003, final judgment was
    entered against Schimmer. Schimmer filed a timely notice
    of appeal on September 30, 2003. On appeal, Schimmer
    argues that the district court did not have jurisdiction over
    the Magnuson-Moss Act claims because the amount in
    controversy did not meet the $50,000 threshold required by
    the Act, rendering Jaguar’s removal improper and necessi-
    tating remand to the state court. In the alternative,
    Schimmer argues that the district court’s dismissal of his
    Illinois Lemon Law claim was in error.
    II. Analysis
    The first question presented on appeal is whether re-
    moval to federal court was appropriate. “Removal is proper
    over any action that could have originally been filed in fed-
    eral court.” Chase v. Shop ‘N Save Warehouse Foods, Inc.,
    
    110 F.3d 424
    , 427 (7th Cir. 1997) (citing 28 U.S.C. § 1441).
    Federal subject-matter jurisdiction exists when a claim arises
    4                                                No. 03-3611
    under federal law. See 28 U.S.C. § 1331. The Magnuson-
    Moss Act allows a plaintiff to sue in federal court for breach
    of warranty, 15 U.S.C. § 2310(d)(1), provided that certain
    jurisdictional thresholds are met. Among other jurisdic-
    tional restrictions not applicable here, claims under the
    Magnuson-Moss Act may only be brought in federal court if
    the amount in controversy reaches “the sum or value of
    $50,000 (exclusive of interests and costs) computed on the
    basis of all claims to be determined in this suit[.]”
    § 2310(d)(3)(B).
    When a defendant removes a case from state to federal
    court, the defendant must demonstrate to a “reasonable
    probability” that subject-matter jurisdiction exists. 
    Chase, 110 F.3d at 427
    ; Shaw v. Dow Brands, Inc., 
    994 F.2d 364
    ,
    366 (7th Cir. 1993) (citing Wilson v. Republic Iron & Steel
    Co., 
    257 U.S. 92
    , 97 (1921)). Hence, to justify removal under
    the Magnuson-Moss Act, Jaguar needed to show that, at the
    time the case was removed, it was reasonably probable that
    the amount in controversy exceeded $50,000. See Uhl v.
    Thoroughbred Tech. & Telecomms., Inc., 
    309 F.3d 978
    , 983
    (7th Cir. 2002) (the amount in controversy “is determined by
    an evaluation of the controversy described in the plaintiff’s
    complaint and the record as a whole”); BEM I, L.L.C. v.
    Anthropologie, Inc., 
    301 F.3d 548
    , 552 (7th Cir. 2002)
    (amount in controversy determined as of the date of re-
    moval). Based on the relief available under the Magnuson-
    Moss Act for the causes of action pled in Schimmer’s
    complaint, we conclude that no such showing is possible,
    and hence, removal was improper.
    Schimmer alleged three different counts under the
    Magnuson-Moss Act, all of which pray for the same broad
    relief, including a full refund of the $69,513.00 purchase
    price. Jaguar argues that, by itself, the $69,513.00 refund
    request satisfies the Magnuson-Moss Act’s amount in
    No. 03-3611                                                    5
    controversy requirement.1 Jaguar’s proposed analysis is too
    simplistic. Merely to accept the amount claimed in the
    complaint as the amount in controversy sidesteps the “rea-
    sonable probability” analysis.
    The Magnuson-Moss Act “allows a ‘consumer’ to bring a
    suit where he claims to be ‘damaged by the failure of a
    supplier, warrantor, or service contractor to comply with
    any obligation under this [Act] or under a written warranty,
    implied warranty, or service contract.” Voelker v. Porsche
    Cars N. Am., Inc., 
    353 F.3d 516
    , 525 (7th Cir. 2003) (quot-
    ing 15 U.S.C. § 2310(d)(1)). There are two types of written
    warranties under the Act: full warranties and limited
    warranties. See 15 U.S.C. § 2303(a).
    Section 2304 of the Act imposes minimum federal warranty
    standards for “full warranties” and provides remedies for
    their breach, including either a full refund of the purchase
    price or a replacement of the product if the warrantor
    cannot remedy defects or malfunctions after reasonable
    attempts to do so. 
    Id. Yet, as
    pled in the complaint, the
    XK8’s warranty is a “limited” one not subject to § 2304 and
    thus not subject to the Act’s substantive remedies, including
    a refund of the $69,513 purchase price. See 15 U.S.C.
    § 2303(a); Mackenzie v. Chrysler Corp., 
    607 F.2d 1162
    , 1166
    & n.7 (5th Cir. 1979).
    The Act also, however, allows consumers to enforce written
    and implied warranties in federal court, borrowing state
    law causes of action. Gardynski-Leschuck v. Ford Motor Co.,
    1
    We note that Schimmer’s complaint demanded attorneys’ fees,
    incidental and consequential damages, and any further relief that
    the court found necessary. Because Jaguar, carrying the burden
    of proof as the removing party, presented no evidence attempting
    to quantify these damages, nor even pressed that these damages
    should be included in the amount in controversy, we need not
    consider them.
    6                                               No. 03-3611
    
    142 F.3d 955
    , 956 (7th Cir. 1998). When the plaintiff relies
    on state law causes of action to bring a claim under the
    Magnuson-Moss Act, the $50,000 amount in controversy
    still must be met. 
    Id. In such
    a case, we then look to state
    law to determine the remedies available, which in turn
    informs the potential amount in controversy. Id.; see also
    Boyd v. Homes of Legend, Inc., 
    188 F.3d 1294
    , 1298 (11th
    Cir. 1999) (applying Alabama law to determine whether
    punitive damages were available for breach of warranty
    claim); 
    Mackenzie, 607 F.2d at 1166-67
    (for breach of
    limited written warranty, “resort to state law is proper in
    determining the applicable measure of damages under the
    Act”). We agree with the parties and the district judge that
    Illinois law applies in this case.
    Jaguar insists that the $50,000 amount in controversy
    requirement is met because Illinois law entitles Schimmer
    to revoke acceptance and thus claim entitlement to a refund
    of the purchase price of the car. See, e.g., 810 Ill. Comp.
    Stat. 5/2-608, 5/2-711(1). But even if Illinois law allows a
    refund of the $69,513.00 purchase price under the facts of
    this case, the amount in controversy, that is, Schimmer’s
    true damages, could not exceed $50,000.
    If the district court were to determine that Schimmer
    could revoke his acceptance of the car and receive a refund
    of the purchase price, then Jaguar would also be entitled to
    re-take possession of the car (now worth only $54,013.00, as
    explained below). In addition, Jaguar would also be entitled
    to a credit for the value Schimmer received from his use of
    the car while it was in his possession. Hence, Schimmer’s
    true money damages—and concomitantly, the true amount
    in controversy—would equal only the difference between
    the price of the new car and the worth of the allegedly
    defective car, reduced by his beneficial use of the defective
    car. Jaguar could not lose $69,513, any more than
    Schimmer could gain that amount. We so held in a similar
    Magnuson-Moss case and calculated damages using the
    No. 03-3611                                                    7
    following formula: the price of a replacement vehicle, minus
    both the present value of the allegedly defective car and the
    value that the plaintiff received from the use of the alleg-
    edly defective car. 
    Gardynski-Leschuck, 142 F.3d at 957
    ; see
    also 
    Voelker, 353 F.3d at 521
    . This formula also works to
    calculate cover damages, “[t]he standard remedy under state
    law for delivery of a defective and useless product[.]”
    
    Gardynski-Leschuck, 142 F.3d at 957
    (citing 810 Ill. Comp.
    Stat. 5/2-712(1)).
    Here, the complaint and the record before us are suffi-
    cient to determine that the amount in controversy could not
    have exceeded $50,000 at the time Jaguar removed the
    case. Jaguar argues that only information contained in the
    complaint may be used to determine the amount in contro-
    versy. Yet, as explained earlier, we are not bound to accept
    at face value Schimmer’s demand for a refund, or any af-
    fidavit asserting that damages claimed exceeded $50,000,
    when he is not entitled at law to recover such damages. The
    amount in controversy “is determined by an evaluation of the
    controversy described in the plaintiff’s complaint and the
    record as a whole, as of the time the case was filed.” 
    Uhl, 309 F.3d at 983
    .
    We know from Schimmer’s complaint that the purchase
    price of a replacement XK8 is $69,513.00 because that is
    what he paid for the allegedly defective vehicle. Prior to
    filing the present suit, Schimmer hired an expert to inspect
    the XK8 and opine as to its diminished value based on its
    alleged defects. According to the expert’s inspection of the
    XK8, the car was worth $54,013.00 when Jaguar removed
    the case.2 Applying the numbers to the Gardynski-
    2
    The expert conducted his inspection on December 10, 2001,
    which was after Schimmer placed the XK8 into storage and more
    than a year prior to the filing of this suit. Assuming that any
    (continued...)
    8                                                 No. 03-3611
    Leschuck formula, the cost of a replacement vehicle
    ($69,513.00) minus the present value of the defective car
    ($54,013.00) yields $15,500.00. To complete the formula,
    this $15,500.00 figure must be further reduced by the value
    that Schimmer obtained from his use of the XK8. Although
    we have no way of knowing what this figure might be, even
    if it is $0.00, the maximum Schimmer could recover (and
    the maximum loss to Jaguar) under Illinois law would be
    $15,500.00. As this figure is well below the $50,000 amount
    in controversy requirement necessary to establish subject-
    matter jurisdiction under the Magnuson-Moss Act, we find
    that this case was improperly removed from state court and
    must be dismissed for lack of subject-matter jurisdiction.
    III. Conclusion
    Because the amount in controversy cannot exceed $50,000
    to any legal probability, there is no federal subject-matter
    jurisdiction for Schimmer’s claims under the Magnuson-
    Moss Act. Without federal subject-matter jurisdiction, there
    can be no supplemental jurisdiction to consider the district
    court’s interpretation of the Illinois Lemon Law. We VACATE
    the district court’s decision and REMAND with instructions
    to dismiss for lack of subject-matter jurisdiction.
    2
    (...continued)
    further diminishment in value would not be due to any defect of
    the XK8, we can infer that the diminished value on the date of
    removal was the same.
    No. 03-3611                                          9
    A true Copy:
    Teste:
    ________________________________
    Clerk of the United States Court of
    Appeals for the Seventh Circuit
    USCA-02-C-0072—9-14-04