Opinion
01 Civ. 9410 (TPG)
May 31, 2002
OPINION
Plaintiff moves for remand of this proposed class action to New York Supreme Court, and for an award of attorneys' fees and costs, both pursuant to 28 U.S.C. § 1447(c). Plaintiff contends that the Court lacks jurisdiction over this removed action because of lack of the requisite amount in controversy. The motion to remand is granted. The motion for fees and costs is denied.
The Action
On September 13, 2001 plaintiff Chris Post, on behalf of himself and all others similarly situated, filed a proposed class action against GM in Supreme Court, New York County. Plaintiff alleges that GM failed to disclose the existence of severe problems in the brake systems of the Chevrolet Malibu, model years 1997-2000, and therefore committed fraud and violated New York General Business Law § 349. Plaintiff owns a 1999 Malibu. He alleges that he has had the rotors replaced once and the brake pads replaced on three occasions and that he incurred approximately $170.00 in out-of-pocket costs for these repairs. Plaintiff seeks the following relief on behalf of himself and the class:
Equitable and injunctive relief:
(i) enjoining GM from pursuing the policies, acts and practices described in this Complaint; and
(ii) enjoining GM from engaging in false and misleading advertising regarding the Malibus;
An order requiring disgorgement and/or imposing a constructive trust upon GM's excess profits from the sale of defective Malibus, and requiring GM to pay plaintiff and all members of the Class for any act or practice declared by this Court to be unlawful;
Damages in an amount to be determined at trial;
An award of punitive damages in an amount to be determined at trial;
Prejudgment and post-judgment interest at the maximum rate allowable at law; and
The costs and disbursements incurred by plaintiff in connection with this action, including reasonable attorneys' fees.
On the present motion GM has submitted a declaration of a person who collects automobile statistics, asserting that New York residents own more than 25, 000 of the Malibus, that a number own multiple vehicles of this type, and that at least one firm owns over 500 of the vehicles. Plaintiff uses the figure of $17,000 as the suggested retail price for the Malibus he is complaining about.
Discussion Motion for Remand
28 U.S.C. § 1332(a) provides:
The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between citizens of different States. . . .
It is undisputed that there is complete diversity of citizenship among the parties. GM is a Delaware corporation with its principal place of business in Michigan while the putative class is composed of New York citizens. Accordingly, the only question is whether the amount-in-controversy exceeds $75,000 as required for diversity jurisdiction.
The starting point in dealing with this question is the Supreme Court's decision in Zahn v. International Paper Co., 414 U.S. 291 (1973). There, the Court held that the claim of each class member must satisfy the amount-in-controvery requirement in order for there to be jurisdiction over the claims of the class. Class claims may not be aggregated to make up the amount in controversy.
However, GM argues that Zahn has, at least to some extent, been overruled by Congress in 28 U.S.C. § 1367, enacted in 1990. This statute provides in pertinent part:
§ 1367. Supplemental jurisdiction
(a) Except as provided in subsections (b) or (c) or as expressly provided otherwise by Federal statute, in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original controversy under Article III of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties.
(b) In any civil action of which the district courts have original jurisdiction founded solely on section 1332 of this title, the district courts shall not have supplemental jurisdiction under subsection (a) over claims by plaintiffs against persons and parties under Rule 14, 19, 20, or 24 of the Federal Rules of Civil Procedure, or over claims by persons proposed to be joined as plaintiffs under Rule 19 of such rules, or seeking to intervene as plaintiffs under Rule 24 of such rules, when exercising supplemental jurisdiction over such claims would be inconsistent with the jurisdictional requirements of section 1332.
GM argues that, under this statute, if there is at least one class claim which satisfies the jurisdictional amount, then a federal court has supplemental jurisdiction of all the other class claims. The issue raised by GM is a hotly debated one in the federal courts. There is a conflict in the circuits. The Second Circuit has not yet ruled, although district courts in this Circuit have held that Zahn is unaffected by § 1367. Judge Trager in the Eastern District has made a thorough analysis of the cases, and has also summarized the legislative history of § 1367. The judge declined to hold that Zahn was overruled by § 1367. In re Ciprofloxacin Hydrochloride Antitrust Litigation, 166 F. Supp.2d 740 (E.D.N.Y. 2001). This Court finds Judge Trager's reasoning persuasive, and reaches the same conclusion.
Even if the Court were to accept GM's argument about § 1367, there is nothing indicating that any class claim meets the jurisdictional requirement.
Plaintiffs own claim for compensatory damages would appear to be limited to the $170.00 cost of repairs. His theory that GM should be required to disgorge excess profits is of the most doubtful validity, but in any event would presumably be some fraction of the automobile price he mentions of $17,000. As to punitive damages, New York General Business Law § 349, relied on by plaintiff in one of his two causes of action, limits punitive damages to an amount "not to exceed three times the actual damages up to one thousand dollars." § 349(h). As for the common law fraud count, there is no possibility of a punitive damage award which would bring plaintiffs total recovery anywhere near $75,000.
Moreover, there is no basis whatever for finding the jurisdictional amount requirement satisfied because of other class members. GM asserts that New York residents own more than 25, 000 of the Malibu vehicles in question, that a number of such residents currently own multiple vehicles of this type, and at least one firm owns over 500 of the vehicles. The suggestion is that an owner of 500 vehicles might have a claim of over $75,000. As a matter of arithmetic, this is surely possible. However, the jurisdiction that is sought by plaintiff is over a class action on behalf of about 25, 000 people. There is no possible basis to uphold jurisdiction over such an action on the basis of a vague allegation that one, or possibly a few, parties who are not named and who may not have any interest in being part of the class action, might potentially have sufficient claims.
The conclusion is that there is no showing that the claims for damages or for any other form of monetary compensation satisfy the jurisdictional amount requirement.
GM argues that the request for injunctive relief provides a basis for satisfying the requirement. In the prayer for relief, plaintiff asks to have GM enjoined "from pursuing the policies, acts and practices described in this Complaint," and to have GM enjoined "from engaging in false and misleading advertising regarding the Malibus." GM interprets the injunctive relief request to include the redesign or modification of the Malibus, which would obviously cost more than $75,000. However, the claims in the complaint are for alleged fraud, and deceptive marketing practices. Injunctive relief relating to such claims would be directed to correction of those alleged wrongs. The complaint does not request redesign or modification of the automobiles. Indeed, plaintiff expressly states that such a remedy is not sought.
What remains is a claim for injunctive relief to remedy fraud and deceptive practices, which is not susceptible to any estimation whatever as to its monetary value to plaintiff or any member of the class, or susceptible to estimation as to its monetary impact on GM.
The conclusion is that the request for injunctive relief provides no basis for meeting the amount in controversy requirement.
GM asserts that the requirement is met by the claim for attorneys' fees. Such fees may be used in determining the jurisdictional amount in controversy only if they are "recoverable as a matter of right" pursuant to statute or contract. Givens v. W.T. Grant Co., 457 F.2d 612, 614 (2d Cir.), vacated on other grounds, 409 U.S. 56 (1972); see also ASI Sign Sys., Inc. v. Architectural Sys., Inc., 1999 WL 553825, at 2 (S.D.N.Y. July 29, 1999). Whether attorneys' fees are awarded as of right is a matter of state, rather than federal law. Plaintiffs claims for attorneys' fees are based on New York General Business Law § 349 and New York Civil Practice Law and Rules 909.
GBL § 349(h) provides that the court may award reasonable attorney's fees to a prevailing plaintiff. Rule 909 provides that the court in its discretion may award attorneys' fees.
Under these provisions an award of attorneys' fees is a matter of discretion, not a matter of right. Therefore, the claim for attorneys' fees will not meet the jurisdictional amount requirement.
Motion for Attorneys' Fees and Costs
The Court declines to award plaintiff attorneys' fees and costs. In view of the controversy over the current significance of Zahn, described earlier in this opinion, it cannot be said that GM was unreasonable in seeking to remove the case to the federal court.
Conclusion
The motion to remand to Supreme Court, New York County is granted. The motion for an award of attorneys' fees and costs is denied.
SO ORDERED.