Court Opinion

ID: 2738657
Source: CourtListenerOpinion
Date Created: 2014-10-01 05:01:06.405084+00
Date Added: 2024-06-11T10:03:56.996019
License: Public Domain

Case: 13-20528      Document: 00512788014        Page: 1     Date Filed: 09/30/2014

          IN THE UNITED STATES COURT OF APPEALS
                   FOR THE FIFTH CIRCUIT   United States Court of Appeals
                                                    Fifth Circuit

                                                                              FILED
                                                                        September 30, 2014
                                     No. 13-20528
                                                                           Lyle W. Cayce
                                                                                Clerk
APRIL SCARLOTT,

                           Plaintiff - Appellant

WEISBERG & MEYERS, L.L.C.; NOAH D. RADBIL,

                           Appellants

v.

NISSAN NORTH AMERICA, INCORPORATED; HURRICANE GLASS;
HURRICANE AUTO CARE & ACCESSORIES, INCORPORATED,

                           Defendants - Appellees

                  Appeals from the United States District Court
                       for the Southern District of Texas

Before KING, GRAVES, and HIGGINSON, Circuit Judges.
HIGGINSON, Circuit Judge:
      Plaintiff-Appellant April Scarlott and Appellants Weisberg & Meyers,
L.L.C. and Noah Radbil appeal the district court’s denial of Scarlott’s motion
to remand, grant of summary judgment in favor of Defendants-Appellees
Nissan North American, Incorporated (“Nissan”) and Hurricane Auto Care &
Accessories, Incorporated (“Hurricane”), 1 as well as the district court’s final

      1  In Scarlott’s first amended complaint, she named “Hurricane Glass” as a defendant.
Scarlott later filed a second amended complaint correctly identifying “Hurricane Auto Care
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judgment and various management orders.                Appellants contend that the
district court lacked subject matter jurisdiction over this case. For the reasons
below, we REVERSE and REMAND for proceedings consistent with this
opinion.
                          FACTS AND PROCEEDINGS
      In December 2006, Scarlott purchased a 2006 Murano from a Nissan
dealership for $31,881, totaling $39,289 including all financing fees,
warranties, taxes, and costs. For safety reasons, Scarlott wanted to purchase
a car that had a HomeLink system built into the mirror, which would allow
her to sync her car with her home lights, alarm system, and garage door. The
salesman at the dealership assured Scarlott that the car she purchased had a
HomeLink mirror; however, when she attempted to program the mirror that
night, she realized that the car did not have the necessary system. The day
after she purchased the car, she went back to the dealership intending to
return the car. Instead, she agreed to bring the car to a local factory-authorized
installation center to have the HomeLink system and mirror installed. The
dealership arranged for Hurricane to perform this installation and gave
Scarlott a voucher so that she would not have to pay for it.
      Nine months later, in September 2007, the car began experiencing
electrical problems, including difficulty starting. Scarlott took the car to the
dealership, which replaced the car’s battery. The car continued to experience
intermittent electrical problems over the next two years, requiring Scarlott to
take her car to the dealership on seven occasions. The dealership replaced the
battery four times. In November 2009, the dealership monitored the car for

& Accessories, Inc.” as the proper defendant. Only Hurricane Auto Care & Accessories, Inc.
has been served and joined in this lawsuit. However, throughout the record, parties and
witnesses frequently refer to “Hurricane Glass.” For the purposes of this opinion, we will
refer to both entities as “Hurricane.”
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almost thirty days and then diagnosed the electrical problems as being caused
by the improper installation of the HomeLink mirror.               The dealership
contacted Hurricane, and Hurricane agreed to fix the problem.
      On October 19, 2009, Scarlott filed suit in Texas state court against
Nissan for breach of express warranty, breach of implied warranty, and
violation of the Texas Deceptive Trade Practices Act. Scarlott later amended
her complaint to add claims against the dealership, a Nissan distributor, and
Hurricane. On December 6, 2010, the defendants removed the suit to federal
court based on federal question and supplemental jurisdiction. The defendants
asserted federal question jurisdiction under the Magnuson-Moss Warranty
Act, 15 U.S.C. § 2301 et seq. (“MMWA”), which allows litigants to bring breach-
of-warranty claims in federal court if the amount in controversy is at least
$50,000. See 15 U.S.C. § 2310(d)(3)(B).
      Three months after removal, Scarlott raised the issue of subject matter
jurisdiction at a conference with the district court, expressing concern that the
amount in controversy did not meet the $50,000 threshold required by the
MMWA. The district court indicated that it would be disinclined to dismiss
the case for want of jurisdiction.
      Scarlott subsequently dismissed her claims against the dealership and
distributor, leaving only her claims against Nissan and Hurricane. On May 9,
2013, after the remaining parties had briefed a motion for summary judgment,
Scarlott filed a motion to remand the suit to state court for lack of subject
matter jurisdiction. Nissan and Hurricane opposed the remand. On August
28, 2013, the district court issued an order denying Scarlott’s motion to
remand, excluding Scarlott’s expert report, and granting summary judgment
in favor of Nissan and Hurricane.         Scarlott timely appealed.     On appeal,
Scarlott raises several issues. Because we find that the district court erred in

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its decision not to remand the case to state court, we will only address the
jurisdictional issue.
                                   STANDARD
      “Federal courts are courts of limited jurisdiction ‘hav[ing] only the
authority endowed by the Constitution and that conferred by Congress.’”
United States v. Hazlewood, 526 F.3d 862, 864 (5th Cir. 2008) (alteration in
original) (quoting Save the Bay, Inc. v. U.S. Army, 639 F.2d 1100, 1102 (5th
Cir. 1981)). “If at any time before final judgment it appears that the district
court lacks subject matter jurisdiction, the case shall be remanded.” 28 U.S.C.
§ 1447(c). “The party seeking to remove bears the burden of showing that
federal jurisdiction exists and that removal was proper.” Mumfrey v. CVS
Pharmacy, Inc., 719 F.3d 392, 397 (5th Cir. 2013).          “Any ambiguities are
construed against removal and in favor of remand to state court.” Id. “In
reviewing a district court’s denial of a plaintiff’s motion to remand a case from
federal court to state court, the Court of Appeals applies a de novo standard of
review.” Sherrod v. Am. Airlines, Inc., 132 F.3d 1112, 1117 (5th Cir. 1998).
                                   DISCUSSION
      I.    The Magnuson-Moss Warranty Act
      The MMWA grants federal courts jurisdiction to hear claims for breach
of express and implied warranty with the following limitation:
      No claim shall be cognizable in a suit brought [in federal court]. . .
      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 . . . .
15 U.S.C. § 2310(d)(3). Accordingly, federal question jurisdiction under the
MMWA is limited to breach-of-warranty claims for which the amount in
controversy is at least $50,000.
      Generally, courts look to state law to determine the applicable measure
of damages, which informs the amount in controversy under the MMWA. See
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Boelens v. Redman Homes, Inc., 748 F.2d 1058, 1069 (5th Cir. 1984) (applying
Texas law); see also MacKenzie v. Chrysler Corp., 607 F.2d 1162, 1166 (5th Cir.
1979) (“[T]he legislative history clearly implies that a resort to state law is
proper in determining the applicable measure of damages under the Act.”).
This court, however, has recognized several limitations in calculating the
amount in controversy under the MMWA. First, personal injury damages for
breach of warranty, which are not recoverable under the MMWA, may not be
counted to satisfy the jurisdictional amount. Boelens, 748 at 1069. Second,
attorneys fees may not be used to satisfy the jurisdictional amount, because
the MMWA requires that the amount in controversy be calculated “exclusive
of interests and costs.” Id.; see also Samuel-Bassett v. KIA Motors Am., Inc.,
357 F.3d 392, 402 (3d Cir. 2004) (“Nor may attorneys fees be considered in
calculating the jurisdictional amount.”). Last, damages for any pendant state-
law claims should not be included to satisfy the jurisdictional amount. Boelens,
748 F.2d at 1071 n.19. With those limitations in mind, we now look to the
substantive law governing Scarlott’s breach-of-warranty claims to guide our
calculation of the amount in controversy.
      II.   Damages for Breach of Warranty under Texas Law
      In the present case, the parties agree that Texas law applies to Scarlott’s
breach-of-warranty claims. Texas law allows recovery for the diminished value
of the good caused by the breach of warranty. In particular, Texas law states:
“The measure of damages for breach of warranty is the difference at the time
and place of acceptance between the value of the goods accepted and the value
they would have had if they had been as warranted, unless special
circumstances show proximate damages of a different amount.” Tex. Bus. &
Com. Code Ann. § 2.714(b).        Texas law additionally allows recovery of
“incidental and consequential damages.” §§ 2.714(c), 2.715; see also Boelens,
748 F.2d at 1069 (calculating damages for the lost investment in a mobile home
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plus the additional costs of alternative housing up to the time of trial). Texas
law does not, however, allow for punitive damages for breach-of-warranty
claims. Boelens, 748 F.2d at 1070-71. Accordingly, under Texas law, the
amount in controversy for Scarlott’s breach-of-warranty claims equals the
diminished value of the car plus incidental and consequential damages.
      III.   Scarlott’s Complaint and the Amount in Controversy
      The standard for determining the amount in controversy depends on
whether Scarlott demanded a specific amount of damages in her complaint. If
Scarlott did demand a specific amount, “[t]he amount stated in the complaint
is itself dispositive of jurisdiction if the claim is apparently made in good faith.”
Id. at 1069.   If Scarlott did not demand a specific amount, the removing
defendant has the burden of proving, by a preponderance of the evidence, that
the amount in controversy exceeds $50,000. See De Aguilar v. Boeing Co., 11
F.3d 55, 58 (5th Cir. 1993) (“When the plaintiff’s complaint does not allege a
specific amount of damages, the removing defendant must prove by a
preponderance of the evidence that the amount in controversy exceeds [the
jurisdictional requirement].”). There are two ways that this burden can be met.
“First, a court can determine that removal was proper if it is facially apparent
that the claims are likely above [the jurisdictional amount].” Allen v. R&H Oil
& Gas Co., 63 F.3d 1326, 1335 (5th Cir. 1995). Second, “[i]f it is not thus
apparent, the court may rely on ‘summary judgment-type’ evidence to
ascertain the amount in controversy.” White v. FCI USA, Inc., 319 F.3d 672,
675 (5th Cir. 2003) (quoting St. Paul Reinsurance Co. v. Greenberg, 134 F.3d
1250, 1253 (5th Cir. 1998)).
             a. Scarlott did not allege a specific amount of damages

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       Contrary to the district court’s reasoning, Scarlott did not demand a
specific amount of damages in her complaint. The first paragraph of Scarlott’s
first amended petition 2 states:
                            Discovery Control Plan
       1. Plaintiff intends that discovery in this case shall be conducted
       under Level One as set forth in Tex. R. Civ. P. Rule 190.1. This
       suit involves only monetary relief totaling $50,000 or less,
       excluding court costs, prejudgment interest and attorney’s fees.
This statement complies with Texas Rule of Civil Procedure 190.1, which
requires a plaintiff to select a discovery plan in the first paragraph of his or
her complaint. Tex. R. Civ. P. 190.1 (“A plaintiff must allege in the first
numbered paragraph of the original petition whether discovery is intended to
be conducted under Level 1, 2, or 3 of this Rule.”). The “Level 1” discovery plan,
which Scarlott selected, is available for certain “[e]xpedited [a]ctions and
[d]ivorces [i]nvolving $50,000 or [l]ess.” Tex. R. Civ. P. 190.2. Consistent with
Rule 190.1, the leading paragraph of Scarlott’s complaint served to select the
Level 1 discovery control plan, and her reference to “$50,000 or less” was
included to recite the terms of that discovery plan. Scarlott did not plead a
specific amount of damages in the first paragraph, or any subsequent
paragraph, of her complaint.
              b. Damages of $50,000 are not “facially apparent.”
       Examining the rest of the complaint, it is not “facially apparent” that
Scarlott’s breach-of-warranty claims meet the $50,000 threshold.                      Scarlott

       2  Scarlott’s original complaint contained an almost identical first paragraph.
However, because Scarlott amended her complaint before it was removed to federal court, we
will examine her amended complaint for the purposes of evaluating federal jurisdiction. See
Boelens v. Redman Homes, Inc., 759 F.2d 504, 507 (5th Cir. 1985) (“It is a fundamental
principle of law that whether subject matter jurisdiction exists is a question answered by
looking to the complaint as it existed at the time the petition for removal was filed.” (quoting
IMFC Professional Services of Florida, Inc. v. Latin American Home Health, Inc., 676 F.2d
152, 157 (5th Cir. 1982))).
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requested damages for the diminished value of her car due to the defects. In
her complaint, she alleged that the total purchase price for her car was
$39,289, including all financing fees, warranties, and other costs.                    The
complaint does not allege the value of Scarlott’s car in its defective condition,
and thus does not give a basis for estimating the car’s diminished value.
Scarlott also requested incidental and consequential damages. The complaint
reflected that she had to take her car to the dealership for repairs on several
occasions. Although it is reasonable to infer that she incurred some incidental
costs, such as costs for alternative transportation while her car was in the shop,
the face of the complaint gives no indication of how much these damages
equaled. Therefore, it is not facially apparent that her total damages—the
diminished value of her car, which cost less than $39,289, plus the cost she
incurred associated with the repair efforts—meet the $50,000 threshold.
               c. Defendants have not met their burden
        Nissan and Hurricane have not met their burden of establishing, by a
preponderance of the evidence, that Scarlott’s damages amount to $50,000 or
more.       Neither Nissan nor Hurricane supplied any evidence, or even an
allegation, as to the value of the car in its defective condition. 3 See Golden v.
Gorno Bros., Inc., 410 F.3d 879, 884 (6th Cir. 2005) (“[T]he party asserting
federal jurisdiction must allege the . . . value of the allegedly defective vehicle
. . . .” (quoting Samuel-Bassett, 357 F.3d at 402)). While the purchase price,
which was $31,881 for the car itself, provides evidence of what the car was

        3 While a court can rely on expert testimony to determine the value of an allegedly
defective vehicle, Messana v. Mercedes-Benz of N. Am., Inc., 5 F. App’x 522, 524 (7th Cir.
2001), neither Nissan nor Hurricane presented expert evidence regarding the car’s value.
Scarlott did put forth an expert, Stephen Weaver, who estimated that the value of the car in
its defective condition was $23,910. The resulting figure for diminished value, $7,970, is a
far cry from $50,000. The district court, however, excluded Weaver’s expert report on Nissan
and Hurricane’s motion as unreliable under Federal Rule of Evidence 702 and Daubert.
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worth as warranted, there is no evidence that allows us to determine the
diminished value of the car, which is the core of Scarlott’s requested damages.
Without evidence as to the diminished value of the car, the court is unable to
determine the amount in controversy. See Voelker v. Porsche Cars N. Am., Inc.,
353 F.3d 516, 521-22 (7th Cir. 2003) (“Unfortunately, no party has provided us
with the relevant numbers to plug into the [] formula, and we are thus in no
position to conclude that jurisdiction under § 2301(d)(1)(B) existed over the
Magnuson-Moss claims.”); Diamond v. Porsche Cars N. Am., Inc., 70 F. App’x
893, 895 (7th Cir. 2003) (“[W]e cannot possibly determine whether the amount
in controversy has been met without knowing the value of the car with the
alleged defects.”).
      Even if we were to assume that the car was worthless with the defect—
a counter-factual assumption in light of Scarlott’s continued use of the vehicle
with the defect—Nissan and Hurricane still have not met their burden of
proving that her damages meet the $50,000 threshold. Nissan and Hurricane
submitted some evidence as to incidental and consequential damages.
Specifically, they claim that Scarlott had to pay $1,600 for rental cars, $225 for
a wrecker service, $1,700 for repairs, and $120 for a battery charger. Adding
these values to the full purchase price, even including all financing charges,
warranties, and costs, results in a maximum damages calculation of $42,934,
still below the $50,000 threshold.
      Nissan and Hurricane contend that Scarlott’s damages could exceed the
$50,000 threshold if she recovers damages for lost profits in her real estate job
due to car troubles. Texas law does allow for recovery of foreseeable lost profits
where the lost profits are “reasonably certain,” rather than speculative. See
Tex. Instruments, Inc. v. Teletron Energy Mgmt. Inc., 877 S.W.2d 276, 279 (Tex.
1994). Nissan’s and Hurricane’s attempt to put lost profits “in controversy”
fails for two reasons.    First, Nissan and Hurricane did not produce any
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evidence that Scarlott is seeking damages for lost profits in this suit. Scarlott
did not allege that she lost any profits, nor does she request damages for lost
profits in her complaint. In fact, Scarlott’s complaint is devoid of reference to
her job. Second, even if Scarlott were seeking damages for lost profits, such
damages would be speculative and Nissan and Hurricane fail to provide a
realistic estimate as to their amount. Nissan and Hurricane point to Scarlott’s
deposition testimony to support their lost-profits theory, yet, contrary to their
assertion, Scarlott did not testify that she lost any clients or sales. When asked
if she lost any clients, Scarlott responded that she did not know, stating: “You
would have to ask them. . . . Some buyers flake, some buyers don’t. You know,
it’s not always – it’s not like every time you show a client a house, they buy
from you.” Nissan and Hurricane cannot identify a hypothetical source of
recovery that Scarlott does not seek, inconsistent with the facts of the case, in
order to raise the amount in controversy above the jurisdictional requirement.
See De Aguilar v. Boeing Co., 47 F.3d 1404, 1412 (5th Cir. 1995) (“The
preponderance burden forces the defendant to do more than point to a state
law that might allow the plaintiff to recover more than what is pled. The
defendant must produce evidence that establishes that the actual amount in
controversy exceeds $50,000.” (footnote omitted)).
                                CONCLUSION
      For the foregoing reasons, the district court erred by denying Scarlott’s
motion to remand. Consequently, we REVERSE the order granting summary
judgment in favor of Nissan and Hurricane and denying the motion to remand.
We REMAND the case to the district court with instructions to remand the
case to state court.

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