Court Opinion

ID: 2969342
Source: CourtListenerOpinion
Date Created: 2015-09-22 15:47:00.960311+00
Date Added: 2024-06-11T15:29:29.913926
License: Public Domain

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.