Court Opinion

ID: 4707477
Source: CourtListenerOpinion
Date Created: 2021-07-29 16:00:35.725303+00
Date Added: 2024-06-11T09:16:23.512370
License: Public Domain

In the

    United States Court of Appeals
                 For the Seventh Circuit
                     ____________________
No. 20‐1641
TAWANNA WARE and ANTHONY WARE,
                                                Plaintiffs‐Appellants,
                                 v.

BEST BUY STORES, L.P.,
                                                 Defendant‐Appellee.
                     ____________________

         Appeal from the United States District Court for the
           Northern District of Illinois, Eastern Division.
           No. 1:18‐cv‐00886 — Mary M. Rowland, Judge.
                     ____________________

     ARGUED JANUARY 19, 2021 — DECIDED JULY 29, 2021
                ____________________

   Before ROVNER, HAMILTON, and ST. EVE, Circuit Judges.
    HAMILTON, Circuit Judge. This appeal raises a question of
first impression about the definition of “written warranty”
provided in the Magnuson‐Moss Warranty Act, 15 U.S.C.
§ 2301 et seq., a consumer protection statute. But the federal
courts lack subject‐matter jurisdiction and therefore cannot
resolve the issue in this case.
2                                                      No. 20‐1641

    Because this appeal comes to us from the grant of a motion
to dismiss for failure to state a claim for relief, our discussion
of the merits accepts all facts alleged in the complaint. Thorn‐
ley v. Clearview AI, Inc., 984 F.3d 1241, 1242 (7th Cir. 2021); Silha
v. ACT, Inc., 807 F.3d 169, 173–74 (7th Cir. 2015). In 2013, Plain‐
tiﬀs Tawanna and Anthony Ware decided to buy a home‐the‐
ater system. In discussions with the manager of a Chicago
Best Buy store, they decided to buy the then‐cutting‐edge
technology of a large plasma‐screen, 3‐D television. The man‐
ager warned them that plasma‐screen televisions frequently
experienced longevity problems, and he encouraged them to
buy a five‐year extended warranty, the “Geek Squad Protec‐
tion Plan,” with the television. The plaintiﬀs ultimately
bought a Samsung 64‐inch plasma‐screen television for
$3,119.99 and the Plan for an additional $519.99. Accounting
for other television accessories and discounts applied at
checkout, the plaintiﬀs spent a total of $5,128.44 at Best Buy
on the home theater.
   The manager’s advice was prescient: the plaintiﬀs’ televi‐
sion broke down four years into the Plan’s five‐year coverage
period. They sought repair under the Plan, but Best Buy could
not repair the television. In the intervening years, plasma
technology had fallen out of favor, so replacement parts were
not readily available.
    The Plan provided that if the television could not be re‐
paired, Best Buy could elect either to replace the television or
to compensate the consumer with a gift card. Best Buy chose
to provide the plaintiﬀs with a gift card, the value of which
was keyed to the current market price of a new television of
similar quality to the one the plaintiﬀs had purchased in 2013.
For our purposes, suﬃce it to say that plaintiﬀs were not
No. 20‐1641                                                   3

satisfied with Best Buy’s inability to repair the television and
its subsequent remedial measures, though the complaint does
not allege that the gift card value was too low. The parties’
submissions in the district court and this court debate a host
of other factual issues related to the merits of these claims.
Those factual disputes do not aﬀect the merits issues that the
district court decided nor the jurisdictional questions that we
address.
    The plaintiﬀs filed this suit against Best Buy for violating
the Magnuson‐Moss Warranty Act of 1975, 15 U.S.C. § 2301 et
seq., and against Samsung for violating the Illinois Consumer
Fraud and Deceptive Business Practices Act, 815 ILCS 505/1.
The Magnuson‐Moss Warranty Act is a consumer protection
statute that requires transparency in warranties on consumer
products and establishes minimum criteria for diﬀerent types
of warranties and warranty‐like products.
    The Magnuson‐Moss Warranty Act requires that if a war‐
rantied consumer good cannot be repaired, the written war‐
ranty must give consumer a choice of remedy: either replace‐
ment or a refund of the purchase price, less reasonable depre‐
ciation based on actual use. §§ 2304(a)(4) & 2301(12). The
plaintiﬀs brought suit on behalf of a putative national class of
Best Buy customers, claiming that Best Buy violated the Act
on the theory that the Plan is a full “written warranty” and
that Best Buy’s unilateral decision to provide the gift card as
the remedy failed to provide consumers with the choice. The
district court dismissed the Best Buy claim for failure to state
a claim upon which relief can be granted, finding that the
Geek Squad Protection Plan did not count as a “written war‐
ranty” under the Act.
4                                                   No. 20‐1641

    Plaintiﬀs’ complaint also included claims under state law
against Samsung that are relevant to two jurisdictional theo‐
ries. Samsung manufactured the television they bought, and
plaintiﬀs sought to represent a putative class of Illinois resi‐
dents who bought Samsung plasma televisions that later
failed. They contended that Samsung violated the Illinois
Consumer Fraud and Deceptive Business Practices Act, 815
ILCS 505/1, either by selling televisions that eventually broke
down or by failing to stock replacement parts for plasma
screen televisions. The district court separately dismissed the
claims against Samsung for failure to state a claim. Plaintiﬀs
do not challenge that dismissal on appeal.
    The present appeal asks us to apply principles of adminis‐
trative law and statutory interpretation to the Magnuson‐
Moss Warranty Act’s term, “written warranty,” which it de‐
fines as, among other things:
       any undertaking in writing in connection with
       the sale by a supplier of a consumer product to
       refund, repair, replace, or take other remedial
       action with respect to such product in the event
       that such product fails to meet the specifications
       set forth in the undertaking, which … becomes
       part of the basis of the bargain between a sup‐
       plier and a buyer for purposes other than resale
       of such product.
15 U.S.C. § 2301(6).
   Plaintiﬀs contend that the Geek Squad Protection Plan fits
that definition neatly because it is an undertaking to repair,
replace, or refund if the television fails. They further assert
that the Plan formed “part of the basis of the bargain” for their
No. 20‐1641                                                    5

television because they relied on the benefits of the extended
warranty period in choosing to purchase this expensive and
unreliable product. In the alternative, they claim, the web of
bundled discounts they received on the Plan and the home
theater system intertwined these contemporaneous purchases
so that they were all part of the same bargain.
    Best Buy’s argument on the merits relies on a 1977 Federal
Trade Commission regulation interpreting the “part of the ba‐
sis of the bargain” language in the Act’s definition of a written
warranty. See generally 16 C.F.R. § 700.11; see also 42 Fed.
Reg. 36112 (July 13, 1977) (adding interpretations of statute in
16 C.F.R. Part 700 after notice and comment). According to the
Commission, this statutory phrase means that a “written war‐
ranty” “must be conveyed at the time of sale of the consumer
product and the consumer must not give any consideration be‐
yond the purchase price of the consumer product in order to
benefit from the agreement.” § 700.11(b) (emphasis added).
Thus, according to the regulation, if the consumer pays extra
for an extended warranty, then it does not form “part of the
basis of the bargain” for the product itself and is not a “writ‐
ten warranty” under the Act even if it meets the other statu‐
tory criteria. Id.
    Best Buy urges us to apply “a reasonably high degree of
deference” to the Commission’s expertise here and to uphold
this longstanding, well‐accepted, and easy‐to‐administer in‐
terpretation. See Miller v. Herman, 600 F.3d 726, 734 (7th Cir.
2010) (applying Skidmore deference and accepting another
FTC interpretation of Magnuson‐Moss Warranty Act); see
generally Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944)
(weight given to agency’s interpretation of statute “in a par‐
ticular case will depend upon the thoroughness evident in its
6                                                     No. 20‐1641

consideration, the validity of its reasoning, its consistency
with earlier and later pronouncements, and all those factors
which give it power to persuade, if lacking power to control”).
    The district court deferred to this regulation and dis‐
missed this case pursuant to Federal Rule of Civil Procedure
12(b)(6): since the Plan is not a “written warranty,” Best Buy’s
failure to provide plaintiﬀs with the option to elect their rem‐
edy is not actionable under the Act.
   On appeal, plaintiﬀs urge us to set this regulation aside.
They argue that the regulation is directly contrary to Con‐
gress’s intent, as the Act was specifically designed to close
counterintuitive and consumer‐unfriendly loopholes in war‐
ranties on consumer products. To plaintiﬀs, the FTC’s inter‐
pretation created exactly the kind of loophole the Act was
crafted to close. See generally Senate Report 93‐151 at 6–8
(general purposes of the Act; suggesting that warranties can
and should be sold separately for additional consideration);
40 Fed. Reg. 60168, 60168 (Dec. 31, 1975) (quoting same); cf.
House Report 93‐1107 at 28 (discussing criticisms of extended
warranties).
    According to plaintiﬀs, Congress used deliberately expan‐
sive language in the statutory text: “part of the basis of the bar‐
gain.” This standard, they posit, echoes the Uniform Commer‐
cial Code, where that phrase means, at the very least, that
promises upon which consumers rely become part of the basis
of the bargain. For sales of goods, the UCC provides in rele‐
vant part: “Any description of the goods which is made part
of the basis of the bargain creates an express warranty that the
goods shall conform to the description.” UCC § 2‐313(1)(b).
Comment 3 to § 2‐313 explains:
No. 20‐1641                                                   7

       The present section deals with aﬃrmations of
       fact by the seller, descriptions of the goods or
       exhibitions of samples, exactly as any other part
       of a negotiation which ends in a contract is dealt
       with. No specific intention to make a warranty
       is necessary if any of these factors is made part
       of the basis of the bargain. In actual practice af‐
       firmations of fact made by the seller about the
       goods during a bargain are regarded as part of
       the description of those goods; hence no partic‐
       ular reliance on such statements need be shown
       in order to weave them into the fabric of the
       agreement. Rather, any fact which is to take
       such aﬃrmations, once made, out of the agree‐
       ment requires clear aﬃrmative proof. The issue
       normally is one of fact.
    Courts have recognized the broad, pro‐buyer terms of the
key phrase, “part of the basis of the bargain.” E.g., Downie v.
Abex Corp., 741 F.2d 1235, 1240 (10th Cir. 1984) (reversing
judgment notwithstanding verdict; rational jury could con‐
clude that supplier’s post‐sale representations became part of
the basis of the bargain under any interpretation of that
phrase because purchaser relied on them); see also Liberty Lin‐
coln‐Mercury, Inc. v. Ford Motor Co., 171 F.3d 818, 826 (3d Cir.
1999) (outlining consumer‐friendly presumptions in UCC
definition of “part of the basis of the bargain” and vacating
summary judgment for supplier despite undisputed evidence
that additional consideration was paid for some extended
warranties). Plaintiﬀs here also cite another FTC regulation
telling sellers to refrain from describing warranty‐like prod‐
ucts that do not meet § 2301(6)’s definition of a “written
8                                                     No. 20‐1641

warranty” “in a manner that may deceive consumers as to
their enforceability under the Act.” 16 C.F.R. § 700.3(b).
    We cannot tackle these arguments today because the fed‐
eral courts lack subject‐matter jurisdiction over this case.
“Subject‐matter jurisdiction is the first issue in any case.” Mil‐
ler v. Southwest Airlines Co., 926 F.3d 898, 902 (7th Cir. 2019).
Though Best Buy did not move to dismiss for lack of subject‐
matter jurisdiction, “we have an independent obligation to
determine that jurisdictional requirements are satisfied.”
Knopick v. Jayco, Inc., 895 F.3d 525, 528 (7th Cir. 2018).
    Once jurisdiction has been called into doubt, the propo‐
nent of federal jurisdiction bears the risk of non‐persuasion.
Meridian Security Ins. Co. v. Sadowski, 441 F.3d 536, 540 (7th Cir.
2006), discussing McNutt v. General Motors Acceptance Corp.,
298 U.S. 178 (1936). “Federal courts are courts of limited juris‐
diction: ‘It is to be presumed that a cause lies outside this lim‐
ited jurisdiction, and the burden of establishing the contrary
rests upon the party asserting jurisdiction.’” Hart v. FedEx
Ground Package System, Inc., 457 F.3d 675, 679 (7th Cir. 2006),
quoting Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377
(1994).
    After argument, we questioned jurisdiction and invited
supplemental submissions. The parties have addressed three
possible statutes for the district court’s subject‐matter juris‐
diction over plaintiﬀs’ Magnuson‐Moss claim: the federal‐
question statute, 28 U.S.C. § 1331; the supplemental jurisdic‐
tion statute, § 1367; and the Class Action Fairness Act,
§ 1332(d). We address each in turn and conclude that we can‐
not find subject‐matter jurisdiction under any of them.
No. 20‐1641                                                       9

    The Wares originally cited the federal‐question jurisdic‐
tion statute, 28 U.S.C. § 1331, as the basis of the district court’s
subject‐matter jurisdiction over this claim. Since the Mag‐
nuson‐Moss Warranty Act is a federal statute, they seem to
have reasoned, this claim arises under federal law and the dis‐
trict court had original jurisdiction over it. See id.
    That reasoning works under most federal statutes, but
Magnuson‐Moss has additional jurisdictional criteria for fed‐
eral‐question jurisdiction. Gardynski‐Leschuck v. Ford Motor
Co., 142 F.3d 955, 956 (7th Cir. 1998). The Act provides that
federal courts do not have federal‐question jurisdiction over
breach‐of‐warranty actions under the Act:
       (A) if the amount in controversy of any individ‐
       ual claim is less than the sum or value of $25;
       (B) if the amount in controversy is less than 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; or
       (C) if the action is brought as a class action, and
       the number of named plaintiﬀs is less than one
       hundred.
15 U.S.C. § 2310(d)(3).
     The Wares’ damages are certainly less than $50,000. After
all, they paid only about $5,000 for the television and accesso‐
ries, and the value of a replacement television with four‐year‐
old technology would have been quite a bit less than they in‐
itially spent. See Schimmer v. Jaguar Cars, Inc., 384 F.3d 402, 406
(7th Cir. 2004) (vacating judgment for lack of jurisdiction;
even though purchase price of defective vehicle exceeded
10                                                 No. 20‐1641

$50,000, actual amount in controversy in warranty claim was
less than that threshold).
    To reach $50,000, then, the plaintiﬀs would need to aggre‐
gate the putative class members’ claims. But the Act requires
100 named plaintiﬀs in a putative class. See generally Abraham
v. Volkswagen of America, Inc., 795 F.2d 238, 243–46 (2d Cir.
1986) (discussing origins of named‐plaintiﬀ requirement).
The Wares have not named any plaintiﬀs besides themselves,
so they cannot satisfy the class‐action requirements in the Act.
Accordingly, we lack jurisdiction under the Magnuson‐Moss
Warranty Act and, by extension, § 1331. 15 U.S.C. § 2310(d)(3);
Gardynski‐Leschuck, 142 F.3d at 959; see also Floyd v. American
Honda Motor Co., 966 F.3d 1027, 1035 (9th Cir. 2020) (named‐
plaintiﬀ requirement is jurisdictional).
    Both sides agree that the district court did not have origi‐
nal subject‐matter jurisdiction under § 1331 because the plain‐
tiﬀs did not meet the named‐plaintiﬀ requirement. Best Buy
accordingly requests that we remand for dismissal for lack of
subject‐matter jurisdiction.
    The plaintiﬀs now argue that the district court had supple‐
mental or CAFA jurisdiction. These arguments fail because
plaintiﬀs have failed to plausibly allege an amount in contro‐
versy that would support jurisdiction under either theory. We
generally treat the amount‐in‐controversy threshold as a
“pleading requirement.” Blomberg v. Service Corp., Interna‐
tional, 639 F.3d 761, 763 (7th Cir. 2011) (reversing district
court’s remand order where defendant told a plausible story
about how the amount in controversy exceeded the statutory
minimum), quoting Spivey v. Vertrue, Inc., 528 F.3d 982, 986
(7th Cir. 2008). “Once the proponent of federal jurisdiction
has explained plausibly how the stakes exceed” the amount‐
No. 20‐1641                                                    11

in‐controversy threshold of a jurisdictional statute, “then the
case belongs in federal court unless it is legally impossible for
the plaintiﬀ to recover that much.” Spivey, 528 F.3d at 986.
Normally, a plaintiﬀ can meet this pleading requirement by
simply alleging a plausible amount in controversy. E.g., St.
Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 288
(1938) (“[U]nless the law gives a diﬀerent rule, the sum
claimed by the plaintiﬀ controls if the claim is apparently
made in good faith.”) (internal footnotes omitted); see also
Dart Cherokee Basin Operating Co. v. Owens, 574 U.S. 81, 89
(2014) (same for removal jurisdiction); Silha, 807 F.3d at 174
(“[W]hen evaluating a facial challenge to subject matter juris‐
diction under Rule 12(b)(1), a court should use Twombly–Iq‐
bal’s ‘plausibility’ requirement.”).
    First, the plaintiﬀs posit that the district court had supple‐
mental jurisdiction over this Magnuson‐Moss claim because
their complaint invoked diversity jurisdiction for their claims
against Samsung. See generally 28 U.S.C. § 1367; see also
Burzlaﬀ v. Thoroughbred Motorsports, Inc., 758 F.3d 841, 844–45
(7th Cir. 2014) (where federal court has diversity jurisdiction
over a state‐law claim, it may exercise supplemental jurisdic‐
tion over a Magnuson‐Moss claim that fails to meet the
$50,000 amount‐in‐controversy threshold). The plaintiﬀs
claim that the district court had diversity jurisdiction over
their putative Illinois class action claim against Samsung un‐
der 28 U.S.C. § 1332(a). If this putative state‐law class met the
criteria for diversity citizenship, then the district court could
have exercised supplemental jurisdiction over the Magnuson‐
Moss claims. Voelker v. Porsche Cars North America, Inc., 353
F.3d 516, 522 (7th Cir. 2003) (“Once we determine that the dis‐
trict court had the power to entertain, under its supplemental
jurisdiction, a claim that it actually reached on the merits, the
12                                                       No. 20‐1641

existence of federal jurisdiction over that claim is established
and our review is limited to whether the district court’s dis‐
cretion was abused.”).
    Under the diversity jurisdiction statute, a district court has
subject‐matter jurisdiction over “all civil actions where the
matter in controversy exceeds the sum or value of $75,000, ex‐
clusive of interest and costs, and is between citizens of diﬀer‐
ent States.” § 1332(a)(1). Plaintiﬀs argue that this putative
class met the $75,000 amount‐in‐controversy requirement be‐
cause they “alleged that the aggregate damages of class mem‐
bers exceeded $75,000.” That is not how amount in contro‐
versy is aggregated under 28 U.S.C. § 1332(a): “The general
rule is that the claims of multiple litigants cannot be aggre‐
gated to reach the jurisdictional amount in controversy.”
Travelers Property Casualty v. Good, 689 F.3d 714, 717–18 (7th
Cir. 2012). The plaintiﬀs’ troubles with a four‐year‐old $3,000
television could not possibly leave more than $75,000 in con‐
troversy between them and Samsung. Because the Wares have
not met the amount‐in‐controversy requirement, we need not
address whether diversity of citizenship existed.1
   Finally, the plaintiﬀs argue that we have jurisdiction un‐
der the Class Action Fairness Act, 28 U.S.C. § 1332(d). Federal
courts have jurisdiction over putative class actions under
CAFA where there are at least 100 plaintiﬀs, though, unlike
with Magnuson‐Moss, they need not be named.
§ 1332(d)(5)(B). For a court to exercise jurisdiction under
CAFA, the aggregated amount in controversy must exceed $5

     1The plaintiffs also sought injunctive relief against Samsung, but
when we expressed our concerns about jurisdiction, they did not invoke
that as a basis of reaching the amount‐in‐controversy threshold.
No. 20‐1641                                                              13

million and there must be minimal diversity, so that at least
one “member of a class of plaintiﬀs is a citizen of a State dif‐
ferent from any defendant.” § 1332(d)(2)(A). The plaintiﬀs did
not plead this case as implicating CAFA and did not invoke
that statute until their post‐argument memorandum on sub‐
ject‐matter jurisdiction.
    The plaintiﬀs’ invocation of CAFA cannot save jurisdic‐
tion here because any inference that the amount in contro‐
versy exceeds $5 million would be entirely speculative. In the
complaint, plaintiﬀs alleged that there are potentially thou‐
sands of class members and the aggregated amount in contro‐
versy across the putative Magnuson‐Moss class exceeded
$50,000. That allegation is not enough for us to plausibly infer
that the amount in controversy for the Magnuson‐Moss class
is actually greater than $5 million, especially given the tech‐
nical election‐of‐remedy theory that plaintiﬀs press here and
the lack of any allegations regarding the monetary insuﬃ‐
ciency of the gift‐card remedy. In their supplemental memo‐
randum, the plaintiﬀs imply that the amount in controversy
is greater than $5 million, but they do not actually make any
specific factual allegations or assertions on that point. See
Dancel v. Groupon, Inc., 940 F.3d 381, 385 (7th Cir. 2019) (con‐
clusory invocation of CAFA is insuﬃcient to establish subject‐
matter jurisdiction without specific factual allegations; re‐
manding for jurisdictional discovery).2

    2 The plaintiffs’ new argument implicates a split in authority about the

interaction between the class requirements under CAFA and the Mag‐
nuson‐Moss Warranty Act. The Ninth Circuit recently held that even if a
putative Magnuson‐Moss class action satisfies CAFA’s criteria (i.e., mini‐
mal diversity of citizenship and the amount in controversy exceeds $5 mil‐
lion), it must still independently meet Magnuson‐Moss’s named‐plaintiff
14                                                            No. 20‐1641

    Because the plaintiﬀs have not plausibly alleged subject‐
matter jurisdiction even after that jurisdiction was called into
doubt, we find that the district court lacked jurisdiction over
this case. Rather than seeking leave to amend their complaint
to shore up its jurisdictional defects, see 28 U.S.C. § 1653, the
Wares have requested that if we find jurisdiction lacking, we
vacate the district court’s opinion and judgment and remand
for dismissal. We agree that is the right remedy.
   The judgment of the district court is accordingly
VACATED and this case is REMANDED with instructions to
dismiss for lack of jurisdiction. Each side shall bear its own
costs on appeal.

requirement. Floyd, 966 F.3d at 1034–35. Other courts, however, view
CAFA as an alternative route to federal jurisdiction so that a putative Mag‐
nuson‐Moss class need not satisfy both statutes. E.g., Barclay v. ICON
Health and Fitness, Inc., 2020 WL 6083704, *7 (D. Minn. Oct. 15, 2020) (col‐
lecting cases on both sides of the split and rejecting reasoning of Ninth
Circuit). We need not take sides on this issue here because it does not affect
the outcome.