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Banga v. Midas International Corporations

August 11, 2009

KAMLESH BANGA, PLAINTIFF,
v.
MIDAS INTERNATIONAL CORPORATIONS, ET AL., DEFENDANTS.



ORDER AND FINDINGS AND RECOMMENDATIONS

This action was referred to the undersigned pursuant to Local Rule 72-302(c)(21). Defendant Midas International Corporation's motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(1) is presently calendared for hearing on August 13, 2009 . Pursuant to Local Rule 78-230(h), the court has determined that the matter will be submitted on the papers without oral argument. Upon review of the motion and the documents in support and opposition, and good cause appearing therefor, THE COURT MAKES THE FOLLOWING FINDINGS:

Defendant Midas seeks dismissal based on the grounds that the amended complaint fails to meet the minimum requirement for diversity jurisdiction because the amount in controversy does not exceed $75,000.00 as required under 28 U.S.C. § 1332(a). Plaintiff has filed an opposition.

Where the parties in an action are citizens of different states, a district court "shall have original jurisdiction . . . where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs." 28 U.S.C. § 1332(a). This amount includes claims for general and special damages (excluding costs and interests), attorneys fees if recoverable by statute or contract, and punitive damages, if recoverable as a matter of law. Conrad Assocs. v. Hartford Accident & Indem. Co., 994 F.Supp. 1196, 1198 (N.D.Cal.1998).

The amount is "determined at the time the action commences, and a federal court is not divested of jurisdiction . . . if the amount in controversy subsequently drops below the minimum jurisdictional level." Hill v. Blind Industries and Services of Maryland, 179 F.3d 754, 757 (9th Cir.1999).

The Supreme Court has stated that in diversity cases where the amount in controversy is in doubt, "[i]t must appear to a legal certainty that the [plaintiff's] claim is really for less than the jurisdictional amount to justify dismissal." St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289, 58 S.Ct. 586 (1938). Federal courts are courts of limited jurisdiction, and thus when faced with a motion to dismiss, the party seeking the federal court jurisdiction bears the burden of proving that jurisdiction is proper. McNutt v. General Motors Acceptance Corp. of Indiana, 298 U.S. 178, 189, 56 S.Ct. 780, 785 (1936).

The Ninth Circuit stated that such "legal certainty" exists "when a rule of law or limitation of damages would make it virtually impossible for a plaintiff to meet the amount-in-controversy requirement." Pachinger v. MGM Grand Hotel-Las Vegas, Inc., 802 F.2d 362, 364 (9th Cir.1986). "Only three situations clearly meet the legal certainty standard: (1) when the terms of a contract limit the plaintiff's possible recovery; (2) when a specific rule of law or measure of damages limits the amount of damages recoverable; and (3) when independent facts show that the amount of damages was claimed merely to obtain federal court jurisdiction." Id., 802 F.2d at 363.

"Unlike a Rule 12(b)(6) motion, a Rule 12(b)(1) motion can attack the substance of a complaint's jurisdictional allegations despite their formal sufficiency, and in doing so rely on affidavits or any other evidence properly before the court." St. Clair v. City of Chico, 880 F.2d 199, 201 (9th Cir.1989). Thus, the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims. Id.

The amended complaint alleges plaintiff paid a Midas shop located in Vallejo, California, $330.40 to have brake work done on her Acura RSX. (AC, ¶ 13.) Plaintiff alleges she incurred an extra expense of $1,110.46 to have Acura of Concord replace the rotors allegedly damaged by the Midas' shop work, have new rear brake pads installed, and for other mechanical repairs. (AC, ¶ 18.) She also alleges she demanded $30,000.00 from Midas to settle her claims based upon the defective work performed by the shop. (AC, ¶ 24.) The Vallejo shop is not a party to the instant action.

The amended complaint alleges three violations of the California Business & Practices Code (unfair business practice, fraudulent business practice and illegal business practice), and a violation of the California Consumers Legal Remedies Act.

Although plaintiff alleges a total damages claim exceeding $75,000.00, and seeks an award of damages in the amount of $100,000.00 (AC at 8), her actual damages, as set forth in the amended complaint, total $1,440.86. In her declaration, plaintiff now claims that she also had a solo auto accident caused by the defective brakes and sustained damage to her car's bumper in the amount of $1,300.00, as well as medical expenses based on her injuries, pain and suffering. (Opp'n. at 4.) She claims she incurred $790.00 in "expenses," during the period she was unable to use the car. (Id.) In addition, plaintiff claims she incurred $2,500.00 in attorney's fees prior to filing the instant action.

Plaintiff also claims punitive damages as a result of the alleged behavior by defendant. Defendant does not deny that plaintiff is entitled to seek punitive damages herein. Rather, defendant contends that the award sought by plaintiff would be 52 times the actual damages, an amount that is excessive as a matter of law. (Motion at 4, citing Cooper Indus. v. Leatherman Tool Group, 532 U.S. 42 (2001); BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996).)

In determining whether diversity jurisdiction exists, a court is obliged to consider claims for both actual and punitive damages in determining the jurisdictional amount. Kahal v. J.W. Wilson & Assocs., Inc., 673 F.2d 547, 548 (D.C.Cir.1982). "When a claim for punitive damages makes up the bulk of the amount in controversy, and may even have been colorably asserted solely to confer jurisdiction, [courts] should scrutinize that claim closely." Anthony v. Security Pac. Fin'l Services, Inc., 75 F.3d 311, 315 (7th Cir. 1996); State of Missouri v. Western Sur. Co., 51 F.3d 170, 173 (8th Cir. 1995).

The California Supreme Court has also set forth guidelines governing the award of punitive damages in California. In Simon, the plaintiff unsuccessfully attempted to buy an office building from the defendant and sued for promissory fraud when the transaction was not completed. Simon v. San Paolo U.S. Holding Co., Inc., 35 Cal.4th 1159, 1166, 29 Cal.Rptr.3d 379 (2005). The jury awarded the plaintiff $5,000.00 in compensatory damages and $1.7 million in punitive damages. (Id.) The California Supreme Court determined (1) the award of punitive damages exceeded the federal due process limitations set forth in BMW and State Farm, (2) appellate courts must conduct an independent review when assessing excessiveness under the federal due process clause, and (3) the maximum award constitutionally permissible was $50,000.00, which reflected a 10- to-1 ratio between punitive and compensatory damages. Simon, 35 Cal.4th at 1187-1188, 1189.

In Johnson v. Ford Motor Co., 35 Cal.4th 1191 (2005), the California Supreme Court reversed the reduction of a punitive damage award to three times the compensatory award based on its determination that the lower court may have misapplied two of the guideposts from BMW and State Farm and may have underweighted the state's interest in punishing and deterring wrongful corporate practice. Johnson, 35 Cal.4th at 1213. In Johnson, the manufacturer had fraudulently concealed material facts by failing to provide the vehicle's purchaser with a warranty buyback notice required by ...


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