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BRADY v. MERCEDES-BENZ USA

January 12, 2002

JOHN BRADY, PLAINTIFF,
V.
MERCEDES-BENZ USA, INC., DEFENDANT.



The opinion of the court was delivered by: Chen, United States Magistrate Judge

ORDER FINDING DIVERSITY JURISDICTION PROPERLY VESTS WITH THE COURT

Brady received with the Automobile, an express written warranty which provided, in relevant part, that in the event a defect developed with the Automobile during the warranty period, Brady could deliver the Automobile for repair to any MBUSA designated repair facility. Compl., ¶ 7.

According to Brady, within the warranty period, the "automobile developed several non-conformities, defects, and conditions affecting the safety, value, or use of this vehicle including, [a] defective transmission, gear shifting devises and apparatuses, [b] defective air conditioning, and [c] various other and related malfunctions and defects." Compl., ¶ 8. Brady brought the Automobile to MBUSA designated repair facilities, which were "unable to service or repair the Automobile to conform to the applicable express warranties after a reasonable number of attempts." Compl., ¶ 8.

The first repair order was dated July 22, 2000 and indicated mileage on that date to be 7,381 miles. July 2, 2002 Decl. of Darrel C. Horsted, Ex. A.

On October 29, 2001, plaintiff Brady filed a complaint in San Francisco Superior Court for, inter alia, violations of the Song-Beverly Consumer Warranty Act, Cal. Civ. Code § 1794, et seq., against defendant MBUSA. The Song-Beverly Consumer Warranty Act (hereinafter referred to as the "Song-Beverly Act") applies to warranties given for many types of consumer goods in addition to automobiles and is often referred to as California's "lemon law." Cal. Civ. Code § 1794, et seq. It also regulates express warranties, including service contracts, covering consumer goods. Cal. Civ. Code § 1794, et seq. Enacted in 1970 to improve the lot of consumers who purchase defective products, the Song-Beverly Act contains substantive regulations of warranty terms, disclosure requirements and strengthened consumer remedies. National R.V., Inc. v. Foreman, 34 Cal.App.4th 1072, 1077 (1995).

Brady alleged that MBUSA: [1] failed to repair defects within reasonable number of attempts; [2] failed to commence repairs within reasonable time and failed to repair defects within 30 days; [3] violated Cal. Civ. Code §§ 1793.2(a) and (b) (failure to maintain sufficient service and repair facilities), § 1794 (failure to provide service and repair facilities with sufficient literature and parts), and § 1791.2(b) (breach of express warranties created by sample or model); [4] breached the express written warranty; and [5] breached an implied warranty of merchantability.

Brady seeks: [i] general damages; [ii] a civil penalty of twice the amount of Brady's total damages pursuant to Cal. Civ. Code §§ 1794(c) and (e);*fn1 [iii] consequential and incidental damages; [iv] costs of suit, reasonable attorney's fees and prejudgment interest at the legal rate; and [v] such other relief as the Court may deem proper.

The Court, having reviewed the briefs, supporting documentation and record in this case, as well as having heard the argument of counsel on the June 26, 2002 hearing, finds that diversity jurisdiction properly vests in this Court.

The removal statute, 28 U.S.C. § 1441, provides in part, "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant . . . to the district court of the United States for the district and division embracing the place where such action is pending." 28 U.S.C. § 1441(a). District courts have diversity jurisdiction over all civil actions between citizens of different states where the amount in controversy exceeds $75,000, exclusive of interest and costs. 28 U.S.C. § 1332; see Gibson v. Chrysler Corp., 261 F.3d 927, 934 (9th Cir. 2001), cert. denied, 122 S.Ct. 903 (2002); Lee v. Am. Nat'l Ins. Co., 260 F.3d 997, 1004 (9th Cir. 2001), cert. denied, 122 S.Ct. 1299 (2002). While there is no dispute that the parties are from different states, an issue exists as to the amount in controversy in the case at bar.

1. Compensatory damages included in the amount in controversy

Brady seeks compensation as provided for in the Song-Beverly Act. Specifically, Cal. Civ. Code § 1793.2(d)(2)(B) provides that the measure damages in an action such as this one includes, inter alia, restitution "in an amount equal to the purchase price paid or payable by the buyer," reduced by that amount "directly attributable to use by the buyer" prior to delivery of the vehicle back to the dealer for correction of the problem that gave rise to the nonconformity with the warranty. The set-off amount is determined by multiplying the "actual price of the new motor vehicle paid or payable by the buyer . . . by a fraction having its denominator 120,000 and having as its numerator the number of miles traveled by the new motor vehicle prior to the time the buyer delivered the vehicle" for correction of the problem. Cal. Civ. Code § 1793.2(d)(2)(C). The Song-Beverly Act applies to leases as well as purchases of consumer goods. Cal. Civ. Code § 1794.4. The lessee is provided the same rights against the lessor (if the leased goods are from lessor's inventory) that the lessee would have had the goods been purchased by the lessee. Cal. Civ. Code § 1795.4(c). Thus, the Song-Beverly Act's provision that the consumer may obtain restitution of the "actual price paid" under § 1793.2(d)(2)(B) applies to auto leases as well as purchases.

However, the Act does not specifically explain how "actual price paid or payable by the buyer" is defined in the context of an automobile lease. Does the "actual price paid or payable" extend to only those payments made in fact by the lessee or to all payments which might be due for the remainder of the lease term? Should it include an early termination fee provided in the lease? Does it include the estimate of total title, license and registration fees and total sales tax ...


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