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Abraham v. Volkswagen of America Inc.

decided: June 26, 1986.

IRWIN ABRAHAM; JOHN ANDERSON; THOMAS BAKER; ARTHUR BALMES; BANWELL, WHITE & ARNOLD, INC.; CHRISTOPHER & ELIZABETH BEIRNE; JOSEPH BLACKBURN; BRYAN BRAMES; JAMES A. BUNN; RICHARD & SIGRID BURNS; RICHARD BUTLER; ANN B. CAULFIELD; EDWIN F. & JOANNE CEDILOTTE; FREDERICK COHOLAN; HARRY COLE; KATHRYN COLEGROVE; HENRY & NORMA CRUZ; CHARLENE G. & ELKINS DAHLE; SUSAN DELANEY; LORETTA ANNE DENNIS; DOREEN FITZGERALD DEWALD; PATRICIA GUYER; WILLIAM DOYLE; THOMAS DUNN; KATHLEEN EISENHAUER; LOTHAR & CAROLE EISERLOH; CYNTHIA ESTRUCH; MARGARET FENLEY; REMY FENSTER; PAUL FISCHER; HENRY FRIEDMAN; DON FURNAS; HARRY GEWANTER; KAREN A. GLASOW; MITCHELL GOLDSTEIN; ROBERT GOODMAN; MICHAEL B. GROSS; FRANKLIN & BARBARA HAAS; PETER HARISSIS; ALBERT J. HAVRANEK; ELLEN HAWYER; TONY HENSON; TERRENCE D. HERNE; FRED HUNDHAUSEN; DIRK E. HUTTENBACH; WILLIAM & NANCY JONES; MARY JULIAN; SANDRA KESSLER; RICHARD V. KIRCHHOFF; JOAN KOVEN; RANDALL G. KRAUSE; JUERGEN KROOS; ROBERT KROPKOWSKI; JAMES DUBRICK; ANNE MARIE KUDER; JOAN LAWLOR; STEVEN LEVINE; PAUL LEVINSTEIN; G. SETH LEYMAN; ALVIN S. LEVY; WILLIAM J. LITTLE; C. DOUGLAS MCARTHUR; RAJ MANGLA; LOU ANN MARINELLO; J. DOUGLAS MARTIN; ELAINE MASON; PATRICK MATHEWS; CURT MATTHEWS; KATHERINE & DONALD MCCONNELL; JOSEPH W. MECHABER; EDWARD MICHAELS; MARCIA MILTON; STERLING MOFFAT; PETER MONALDI; ROBERT J. NEMES; DAVID NESSER; PAMELA HALL O'CONNOR; STUART H. ORKIN; ORVAL RADER; C. MICHAEL & KAREN REIMRINGER; ANN ROBERTS; MICHAEL ROBERTS; JOSE RODRIGUEZ; HENRY ROHRER, JR.; BARBARA & PHILIP RUBIN; MARI E. RYAN; SUSAN SCHLIFF; DENNIS SCHMIDT; JUDITH SCHMUCKER; BRIAN & CHERI SCHUSTER; THOMAS R. SHEVLIN; ALEXANDER SIMPSON; RITA SIMPSON; MARY SOLES; ANDREW STEWART; EDWARD TAYLOR; ARCHIE LOWELL THING; ERNESTINE S. THOMANN; WILLIAM TRAUTMAN; A. T. VALENCIA; ANNUNZIATA VETTER; JILL VORAN; JOHN & MARIA WILKINS; SUZANNE WILLIS; LOIS WINSLOW; RALPH ZIMELMAN; INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS-APPELLANTS,
v.
VOLKSWAGEN OF AMERICA, INC., DEFENDANT-APPELLEE; VOLKSWAGEN OF AMERICA, INC., THIRD-PARTY PLAINTIFF, V. JOHN F. SCHOENDHARDT D/B/A KINCANNON MOBIL GAS SERVICE, ET AL., THIRD-PARTY DEFENDANTS



Appeal from a judgment of the United States District Court for the Western District of New York (Michael A. Telesca, Judge), 103 F.R.D. 358 (1984), dismissing plaintiffs' class action claims for lack of subject matter jurisdiction because they did not satisfy the "100 named plaintiffs" jurisdictional threshold of the Magnuson-Moss Warranty Act, 15 U.S.C. § 2310(d)(3)(C) (1982). The remaining claims were then dismissed because they did not meet the test of Fed. R. Civ. P. 20(a) for joinder, and thus could not be aggregated toward satisfaction of the Act's $50,000 amount in controversy requirement, 15 U.S.C. § 2310(d)(3)(B). We hold that the district court used the wrong procedure in deciding the jurisdictional questions, but that 100 named plaintiffs with a claim sufficient to go to trial are necessary to carry on a class action in a federal court under the Magnuson-Moss Act. We also hold that joinder should have been allowed. With regard to other questions raised in this appeal that are certain to arise on remand, we hold that: (1) implied warranty claims asserted under the Magnuson-Moss Act are subject to state-law privity rules; (2) plaintiffs may not recover for damages incurred outside the time/mileage limits of their individual automobile warranties; and (3) joint owners of automobiles may be counted only once toward satisfaction of the 100 named plaintiffs requirement.

Meskill, Cardamone and Winter, Circuit Judges.

Author: Winter

WINTER, Circuit Judge:

This litigation originated as a class action suit brought under the Magnuson-Moss Warranty Act, 15 U.S.C. §§ 2301-2312 (1982) ("Magnuson-Moss," "the Act"), involving alleged defects in the oil systems of Volkswagen Rabbits. The district court dismissed the class action for lack of subject matter jurisdiction. It concluded that only 75 of the 119 named plaintiffs had viable claims for relief, and thus that the Act's unique jurisdictional provision requiring a minimum of 100 named plaintiffs to bring a class action in a federal court had not been satisfied. The remaining individual claims were dismissed on the ground that they did not meet the joinder requirements of Rule 20(a), Fed. R. Civ. P., and thus could not be aggregated to satisfy another of the Act's jurisdictional provisions requiring a total amount in controversy of at least $50,000. Abraham v. Volkswagen of America, Inc., 103 F.R.D. 358 (W.D.N.Y. 1984).

We hold that: (i) the district court used an improper procedure in resolving the 100 named plaintiffs jurisdictional question; (ii) implied warranty claims brought under the Magnuson-Moss Act are subject to state law privity rules; (iii) the express warranties in this case do not cover automobile defects manifesting themselves after expiration of the time/mileage limits of the relevant warranties; (iv) joint owners of automobiles may be counted only once toward satisfaction of the 100 named plaintiffs requirement; and (v) joinder of the remaining plaintiffs should have been allowed under Rule 20(a). We affirm in part, reverse in part, and remand.

BACKGROUND

The 119 plaintiffs are owners of Volkswagen Rabbits, model years 1975-79. They brought a class action lawsuit against the manufacturer, Volkswagen of America ("VWOA") alleging, inter alia, breach of the express warranty given in connection with the sale of each car and breach of the implied warranty of merchantability. Their claim, as originally stated, was that the oil system in the 1975-79 Rabbits was defective, causing excessive oil consumption, engine damage and failure, and decreased resale value of the cars. Not all plaintiffs claim to have suffered each form of damage, but all claim to have suffered at least one of the varieties specified. The complaint, as later amended, alleged that the damages claimed resulted from a single defective part, the valve stem seal, which is supposed to prevent oil from leaking into the engine's combustion chamber. The seal allegedly was made of an inferior material that caused it to harden and crack prematurely, which in turn led to oil leakage and the other types of damage claimed.

Federal jurisdiction was invoked under the Magnuson-Moss Act. 15 U.S.C. §§ 2301-2312 (1982). This Act applies to all sales of consumer products in which a written warranty is given.*fn1 Section 2310(d)(1) of the Act provides that "a consumer who is damaged by the failure of a supplier, warrantor, or service contractor to comply with any obligation under [the Act], or under a written warranty, implied warranty, or service contract, may bring suit for damages and other legal and equitable relief. . . ." 15 U.S.C. § 2310(d)(1). Federal and state courts have concurrent jurisdiction over Magnuson-Moss actions, id. § 2310(d)(1)(A), (B), but no claim is cognizable by a federal court if: (i) the amount in controversy of any individual claim is less than $25; (ii) the total amount in controversy is less than $50,000; or (iii) the action is brought as a class action by fewer than 100 named plaintiffs. 15 U.S.C. § 2310(d)(3)(A), (B), (C).

VWOA moved to dismiss the class action claims on the ground that the 100 named plaintiffs requirement was not satisfied and that the court thus lacked subject matter jurisdiction. It also moved to sever, and then dismiss for lack of subject matter jurisdiction, the individual damage claims on the ground that they did not satisfy the joinder requirements of Fed. R. Civ. P. 20(a) and thus could not be aggregated toward the $50,000 requirement.

VWOA sought discovery in connection with its motion to dismiss the class action for failing to comply with the 100 named plaintiffs requirement. The plaintiffs opposed discovery on the ground that it was a "merits inquiry" that was improper in determining a subject matter jurisdiction question. Following Walsh v. Ford Motor Co., 588 F. Supp. 1513, 1519-21 (D.D.C. 1984), the district court held, however, that the 100 named plaintiffs requirement could not be determined merely by examining the face of the complaint. 103 F.R.D. at 360-61. The district court stated that if individual claims could not be examined on the merits at the jurisdiction stage, "plaintiff could simply open up the local telephone directory and find 99 other individuals willing to place their names on a complaint and thereby defeat a motion to dismiss and permit the lone individual to proceed with discovery." Id. at 361. The district court thus required the 119 named plaintiffs to answer interrogatories and comply with document requests regarding the details of their individual damage claims, such as place of purchase and mileages at which breakdowns had occurred.

The district court then proceeded to determine which individual claims should be counted. Again following Walsh, 588 F. Supp. at 1521, it held that joint owners*fn2 named in the complaint as owners of Rabbits could be counted only once toward satisfaction of the 100 named plaintiffs threshold. 103 F.R.D. at 361-62. Thirteen pairs of plaintiffs fell into this category. The district court also ruled that express warranty claims for damage that occurred outside the time/mileage limits of the warranty were barred as a matter of law. 103 F.R.D. at 362. For 1975 Rabbits, the manufacturer's warranty covered the first 24 months or 24,000 miles, whichever came first. For 1976-79 Rabbits, the relevant coverage was 12 months or 20,000 miles. Evidence obtained during discovery revealed that 59 plaintiffs had claims for damage occurring after their respective express warranties had expired. Finally, the district court held that implied warranty claims were subject to the privity requirements of the law of the state in which the particular vehicle was purchased. The court determined that at least five relevant states -- New York, New Jersey, Illinois, Indiana, Wisconsin (and perhaps Ohio, see Note 12 infra) -- required privity as an element of a valid implied warranty claim. Thirty-one plaintiffs had purchased their Rabbits in these five states and were not in privity with VWOA.

The final step in the district court's jurisdictional inquiry was a compilation of the named plaintiffs who possessed no valid claim. The court read the Act as requiring 100 named plaintiffs with either a valid express or implied warranty claim. 103 F.R.D. at 361 (citing Walsh, 588 F. Supp. at 1538). This holding is not challenged on appeal.

The named plaintiff count was reduced from 119 to 106 after subtraction of 13 joint owners. Fifty-nine plaintiffs were also found to have invalid express warranty claims. Of these 59, 31 were not in privity with VWOA and had purchased Rabbits in states requiring privity. These 31 thus had neither a valid express nor implied warranty claim against VWOA. The further subtraction of 31 yielded a final named plaintiff count of 75. The district court thus dismissed the class action for failure to meet the 100 named plaintiffs jurisdictional threshold of Section 2310(d)(3)(C).

The court next addressed the second element of the motion to dismiss -- the motion to sever all remaining individual claims, and then to dismiss each one for lack of federal jurisdiction. This question turned on whether the $50,000 amount in controversy requirement of Section 2310(d)(3)(B) was satisfied. None of the 75 remaining plaintiffs claimed individual damage of that magnitude. However, individual claims may be aggregated toward satisfaction of the $50,000 requirement if the claims satisfy the requirements for joinder under Rule 20. 15 U.S.C. § 2310(d)(3)(B). Saval v. BL Ltd., 710 F.2d 1027 (4th Cir. 1983). The aggregate damage claims of the 75 remaining plaintiffs did exceed $50,000, but the court concluded that Rule 20 had not been satisfied. 103 F.R.D. at 363-64.

In denying joinder, the district court focused on Paragraph 22 of the First Amended Complaint, which alleged defects in a variety of components in the oil system, such as the oil pan, valve stem seals, and oil warning light. The answers to interrogatories revealed that some of the alleged defects had occurred on some cars but not others, and that some plaintiffs had needed repairs at 20,000 miles while others had not needed them until 80,000 miles. The court concluded that this disparity in timing of problems made the driving and maintenance history of each car vitally important to proof of each individual claim, 103 F.R.D. at 364, and thus held that the 75 plaintiffs had not satisfied the "same transaction or occurrence" test of Rule 20. It then dismissed all of the remaining individual claims.

Plaintiffs moved for reconsideration on the joinder issue, and for permission to amend the complaint to clarify the nature of the defect alleged. Permission to amend was granted. The substituted paragraphs of the complaint are set out in the margin.*fn3 They were designed to make clear that the same defect -- the faulty valve stem seal -- was alleged to be at fault in every case, and that the differences noted by the court, such as mileage disparities, went only to the amount of damage and not to the basis of liability. The district court was unpersuaded, however, and on June 25, 1985, again dismissed the action "for substantially the reasons set forth" in its earlier decision.

On appeal, the plaintiffs claim that the district court erred (i) in scrutinizing the merits of individual claims before ruling on the 100 named plaintiffs jurisdictional issue; (ii) in holding that state law privity rules apply to implied warranty claims under Magnuson-Moss; (iii) in holding that no valid written warranty claim can be made for damage occurring outside the applicable time/mileage limits of the warranty; (iv) in holding that joint owners of automobiles may only be counted as one plaintiff for jurisdictional purposes; and (v) in holding that the 75 remaining plaintiffs did not meet the Rule 20 requirement for joinder. For reasons stated infra, we address all these issues.

Discussion

1. The 100 Named Plaintiffs Jurisdictional ...


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