Last month, a district court in Massachusetts ruled that a putative class action against Mercedes-Benz USA, LLC (“Mercedes-Benz” or “Defendant”) should remain in federal court. See Richard K. Garick v. Mercedes-Benz USA, LLC, No. 17-cv-12042-IT (D. Mass March 30, 2018). The United States District Court for the District of Massachusetts found that the putative class action alleging unfair and deceptive business practices, fraud and deceit, and breach of warranty claims arising out of Plaintiff’s purchase of an allegedly defective Mercedes-Benz vehicle satisfied the requirements for federal jurisdiction under the Class Action Fairness Act (“CAFA”). Id. at 1.
Plaintiff, Richard K. Garick, filed suit against Mercedes-Benz in Massachusetts state court, alleging that in 2005 he purchased a 2003 Mercedes-Benz 320C 4-matic wagon from a Mercedes-Benz authorized dealer. Id. at 2. Mr. Garick claimed that in 2006, Defendant issued a Dealer Technical Bulletin (“DTB”) to its authorized dealers that acknowledged, “[C]ertain Mercedes-Benz models equipped with a radiator manufactured and/or supplied by Valeo were defective.” Id. Alleging that his vehicle was equipped with a Valeo radiator, Plaintiff sought damages for the costs of repairing the defect and damages it causes. Id. at 3. Plaintiff filed his Complaint as a putative class action “on behalf of himself and on behalf of all others similarly situated who own or lease certain defective model year 2004 or earlier Mercedes-Benz C-Class and CLK Class vehicles (‘Class Vehicles’) designed, manufactured, distributed, sold and/or leased by defendant.” (Emphasis included opinion). Id.
Soon after the case was filed in Massachusetts state court, Defendant removed the action to federal court under CAFA. Id. By way of background, Congress enacted CAFA in 2005 to expand “the number of class actions that could be heard in federal court.” Id. at 1 (quoting Pazol v. Tough Mudder Inc., 819 F.3d 548, 552 (1st Cir. 2016). “Congress effectuated that purpose ‘by imposing only a minimal diversity requirement, eliminating the statutory one-year time limit for removal, and providing for interlocutory appeal of a federal district court’s remand order.’” Id. (quoting Amoche v. Guar. Trust Life Ins. Co., 556 F.3d 41, 47-48 (1st Cir. 2009)). CAFA permits federal courts to exercise jurisdiction over class actions where the aggregate amount in controversy exceeds $5 million, where the class comprises at least 100 plaintiffs, and where at least one plaintiff is diverse from at least one defendant. See 28 U.S.C. § 1332(d). The burden is on the defendant to establish that the amount-in-controversy requirement has been met. Garick at 1, (citing Pazol, 819 F.3d at 552). “To do so, they ‘must show a ‘reasonable probability’ that more than $5 million is in dispute.’” Id. (quoting Amoche, 556 F.3d at 50).
Here, Defendant asserted that CAFA’s amount-in-controversy requirement was satisfied because: “(1) the Complaint sought double or treble damages; (2) Plaintiff made a pre-litigation $50 million demand for settlement; (3) roughly 385,000 vehicles fit into the Complaint’s definition of “Class Vehicles,” meaning the $5 million threshold would be satisfied even if each putative class member is entitled to only $13; (4) the Complaint alleges “thousands of dollars” of damages per vehicle; (5) the requested injunctive relief would cause Defendant to suffer financial loss; and (6) the Complaint seeks attorneys’ fees and costs.” Id. at 3-4. After the case was removed, Plaintiff filed a Motion to Remand to State Court, arguing that the Defendant had failed to satisfy CAFA’s amount-in-controversy requirement. Id. at 4.
Finding that the class allegations were not clear on the face of the Complaint, at the hearing on the Motion to Remand, the Court asked Plaintiff’s counsel to clarify the scope of the allegations and the proposed class. Id. at 4 (explaining, “[M]ore specific and consistent statement of the contours of a putative class can be permissible if it represents a fleshing out of the vague language of the . . . complaint.”)(citation omitted)). Plaintiff’s counsel responded that: (a) he sought to represent a nationwide class; (b) all 2004 or earlier C Class and CLK Class vehicles with Vaelo radiators were part of his class allegation; and (c) there was no way of knowing the number of vehicles in this class, nor was it possible to say how many current and/or former owners were part of the class. Id. at 4-5. The Defendant provided that there were 6,789 model year 2003 and 2004 vehicles in the three categories included in the putative class with Valeo radiators subject to the DTB. Id. at 5.
Based upon each side’s submissions, the Court found that Mercedes-Benz had met its amount-in-controversy burden. Id. at 5. “When determining whether an amount-in-controversy requirement is satisfied so as to support federal jurisdiction, a court looks first to any specific damages alleged in the Complaint.” Id. at 5-6 (explaining that the Court may also look to the “entire record” if the Complaint is uncertain or ambiguous as to the amount in controversy). The Court concluded that even if the proposed class consisted of only the 6,789 vehicles “Defendant can definitively say were equipped with the allegedly defective Valeo radiators,” that would be enough to satisfy Defendant’s burden since “[m]ultiplying 6,789 by $8,000, the low-end of Plaintiff’s damages estimate of $8,000 to $10,000, yields an estimated damages amount of $54,312,000.” Id. at 7. Indeed, as the Court pointed out, the damages exceeded the $5 million threshold based only on the alleged compensatory damages, while “Plaintiff also seeks double or treble damages, injunctive relief, and attorneys’ fees and costs.” Id. Thus, the Court found the case was properly removed to federal court.
This case serves as an important reminder that, though the defendant bears the burden, determining the amount in controversy at the early stages of a lawsuit is “not an exact science.” Id. Rather, a defendant must only establish a “reasonable probability – that is, that it is more likely than not – that more than $5 million is in dispute.” Id. We will continue to monitor and report on other class action lawsuits, like this and others, as they arise.