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COLON v. RENT-A-CENTER

August 3, 1998

TABITHA COLON, on Behalf of Herself and All Others Similarly Situated, Plaintiff, against RENT-A-CENTER, INC. and THORN AMERICAS, INC., Defendants.


The opinion of the court was delivered by: SAND

OPINION

 SAND, District Judge.

 The Plaintiff, Tabitha Colon, brought this proposed class action in New York State Supreme Court, Bronx County, against the Defendants, Rent-A-Center, Inc. and Thorn Americas, Inc. (collectively "Rent-A-Center"), seeking damages and injunctive relief for alleged violations of state statutes governing rent-to-own transactions and deceptive trade practices. The Defendants removed the action to federal court asserting diversity jurisdiction under 28 U.S.C. § 1332. The Plaintiff now moves for remand pursuant to 28 U.S.C. § 1447(c). For the reasons set forth below, the Plaintiff's Motion is granted.

 I. BACKGROUND

 1. History

 The Plaintiff filed suit in Supreme Court, Bronx County, on November 26, 1997. Her Complaint asserts both individual claims and claims on behalf of a putative statewide class, which would consist of all persons in the State of New York who rented merchandise from Rent-A-Center stores during the period from November 26, 1991 through November 26, 1997. (Compl. P 12.) These claims are brought under N.Y. Gen. Bus. Law §§ 349-50 and N.Y. Pers. Prop. Law §§ 500 et seq. (Compl. P 1.)

 Rent-A-Center, which has over seventy stores in New York, engages in the rent-to-own business. (Defs.' Mem. at 2.) It offers consumers the opportunity to acquire merchandise through a series of renewable weekly or monthly leases. As the Defendants explain: "At the end of each rental period, the consumer can terminate the lease without further obligation (thus distinguishing a rent-to-own transaction from an installment date). Alternatively, if the consumer renews the lease each week or month for the entire contractually stated term, he or she will acquire ownership of the goods." (Id.)

 The thrust of the Complaint is that Rent-A-Center engages in fraudulent business practices that coerce consumers to enter into contracts of adhesion that do not disclose the real economic costs of the rent-to-own transactions. (Compl. PP 2-6.) Among other allegations, the Plaintiff claims that: (1) Rent-A-Center misrepresents or conceals material information concerning the true cost of renting its merchandise; (2) consumers lack sufficient information to compare Rent-A-Center to other credit options and have therefore unknowingly found themselves paying inflated amounts for the goods they rent or rent-to-own; (3) customers who exercise an early purchase option for the goods they rent may pay more than the "total cost" of the merchandise; (4) Rent-A-Center offers goods for purchase at a "cash price" higher than the price charged by other retailers for comparable goods; (5) Rent-A-Center fails to disclose the "effective interest rate" applicable to rent-to-own transactions, which rates may be as high as 200% annually, or more; and (6) Rent-A-Center engages in a high-pressure sales scheme to coerce consumers--particularly low-income consumers--to enter into adhesion contracts. (Id.) Rent-A-Center denies any wrongdoing.

 As relief, the Plaintiff requests, among other things, the following items: (1) compensatory and punitive damages; (2) treble damages, reasonable attorneys' fees, filing fees and costs pursuant to Gen. Bus. Law §§ 349(h) and 350-d(3) and/or Pers. Prop. Law § 507; (3) rescission of the contracts of the Plaintiff and other putative class members; and (4) injunctive relief. (Compl. at 18-20.) The request for injunctive relief has three components; specifically, the Plaintiff seeks relief requiring the Defendants: (1) to cease from marketing the services of Rent-A-Center by means of listing a cash price for merchandise that is significantly higher than the price charged for the merchandise in the retail marketplace; (2) to cease from setting a cash price for merchandise that could cause the total cost of a rent-to-own contract to be higher than the total cost stated in the contract if a customer exercises an early purchase option; and (3) to inform customers of the effective economic interest rate on their rent-to-own transactions. (Id. at 18.)

 2. Motion

 The Defendants filed a Notice of Removal on December 31, 1997, asserting diversity jurisdiction pursuant to 28 U.S.C. § 1332. On March 4, 1998, the Plaintiff filed her Motion to Remand ("Motion") pursuant to 28 U.S.C. § 1447(c). After granting several adjournments, the Court heard oral argument on May 21, 1998. (See Tr. of 5/21/98, at 1-21.) At the close of argument, the Court reserved decision and the Motion became fully submitted. (Id. at 21.)

 II. DISCUSSION

 A. Legal Standard

 The district court may exercise diversity jurisdiction only where: (1) the parties are completely diverse; and (2) the amount in controversy exceeds $ 75,000, exclusive of interests and costs. 28 U.S.C. § 1332(a). The party seeking federal jurisdiction bears the burden of establishing these statutory requirements. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 80 L. Ed. 1135, 56 S. Ct. 780 (1936).

 In the Second Circuit, courts must "construe the removal statute narrowly, resolving any doubts against removability." Somlyo v. J. Lu-Rob Enters., Inc., 932 F.2d 1043, 1045-46 (2d Cir. 1991). This policy recognizes: (1) the well-documented intent of Congress to limit the jurisdiction of federal courts; and (2) the significance of "preserving the independence of state governments." Id.

 B. Complete Diversity

 No one disputes that the requirement of complete diversity is met here. Rent-A-Center is a Delaware corporation with its principal place of business in Wichita, Kansas, (Notice of Removal P 7), while the putative class is composed of New York citizens exclusively. (Compl. P 12.) Accordingly, the only question is whether the amount-in-controversy requirement is satisfied.

 C. Amount in Controversy

 1. General Rule

 In a diversity class action, the general rule is that members of the class are not permitted to aggregate their claims to reach the requisite amount in controversy. Snyder v. Harris, 394 U.S. 332, 338, 22 L. Ed. 2d 319, 89 S. Ct. 1053 (1969). Instead, each member of the putative class must be able to establish the minimum jurisdictional amount. Zahn v. International Paper Co., 414 U.S. 291, 294-95, 38 L. Ed. 2d 511, 94 S. Ct. 505 (1973). Aggregation may be appropriate, however, under certain limited circumstances, such as where several plaintiffs unite to enforce a single title or right in which they have a "common and undivided interest." Troy Bank v. G.A. Whitehead & Co., 222 U.S. 39, 40-41, 56 L. Ed. 81, 32 S. Ct. 9 (1911).

 2. Application of Law to Facts

 In this case, Rent-A-Center offers two principal theories upon which this Court might posit jurisdiction--one concerning injunctive relief, and the other concerning attorneys' fees. *fn1" Specifically, Rent-A-Center argues: (1) that the Plaintiff's claim for injunctive relief satisfies the amount in controversy requirement because the putative class has a "common and undivided interest" in such relief; and (2) that the Plaintiff's claim for attorneys' fees provides an independent basis for jurisdiction since, under New York law, such fees are awarded ...


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