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Pyskaty v. Wide World of Cars, LLC

United States Court of Appeals, Second Circuit

May 10, 2017

Maya Pyskaty, Plaintiff-Appellant,
v.
Wide World of Cars, LLC, d/b/a Wide World BMW, BMW Bank of North America, Defendants-Appellees.

          Argued: October 27, 2016

         The plaintiff-appellant, Maya Pyskaty, purchased a ''certified pre-owned'' BMW for $51, 195 from defendant-appellee Wide World of Cars, LLC, located in Spring Valley, New York. After the vehicle allegedly presented problems serious enough to prevent her from driving it regularly, Pyskaty brought this action in the United States District Court for the Southern District of New York alleging claims under the Magnuson-Moss Warranty-Federal Trade Commission Improvement Act, 15 U.S.C. § 2301 et seq., and New York State law. The primary issue on appeal is whether there is federal subject-matter jurisdiction over Pyskaty's claims under the Act, which requires an amount in controversy of at least $50, 000. See 15 U.S.C. § 2310(d)(3)(B). The district court (Judith C. McCarthy, Magistrate Judge) dismissed the action for lack of subject-matter jurisdiction on the grounds that Pyskaty's claims under the Act did not satisfy the amount-in-controversy requirement, and that Pyskaty could neither add punitive damages under the Act nor rely on the value of her state-law claims to meet the jurisdictional threshold. We conclude that the first of these determinations was erroneous because the value of Pyskaty's rescission claim under the Act exceeds $50, 000. The judgment of the district court is therefore:

          Daniel A. Schlanger, Kakalec & Schlanger, LLP, New York, NY, for Plaintiff-Appellant.

          Keith V. LaRose, LaRose & LaRose, Poughkeepsie, NY, for Defendant-Appellee Wide World of Cars, LLC.

          Before: Sack, Raggi, and Chin, Circuit Judges.

          SACK, CIRCUIT JUDGE.

         Plaintiff-appellant Maya Pyskaty appeals from the district court's dismissal of her amended complaint against defendants-appellees Wide World of Cars, LLC ("WWC") and BMW Bank of North America ("BMW Bank"), alleging violations of the Magnuson-Moss Warranty-Federal Trade Commission Act ("MMWA" or "the Act"), 15 U.S.C. § 2301 et seq, and New York State law. In October 2013, Pyskaty purchased a "certified pre-owned" BMW from WWC, which she financed in part through a loan from BMW Bank. When the vehicle allegedly proved to be incurably defective, Pyskaty brought this lawsuit in the United States District Court for the Southern District of New York, asserting claims for (1) breach of express and implied warranties under the MMWA; and (2) deceptive acts and practices, breach of express and implied warranties, and fraud under New York State law. In connection with her MMWA claims, Pyskaty principally sought actual damages or, in the alternative, cancellation and rescission of the purchase agreement. In connection with her state-law claims, Pyskaty sought, inter alia, actual damages, capped treble damages, and punitive damages.

         WWC moved to dismiss the amended complaint for lack of subject-matter jurisdiction, arguing that Pyskaty did not satisfy the MMWA's $50, 000 minimum-amount-in-controversy requirement. See 15 U.S.C. § 2310(d)(3)(B). The district court (Judith C. McCarthy, Magistrate Judge) granted the motion, agreeing with WWC that the value of Pyskaty's MMWA claims did not amount to $50, 000 and that Pyskaty could neither amend her complaint to add a claim for punitive damages under the MMWA, nor rely on the value of her state-law claims, to meet the jurisdictional threshold.

         Because we conclude that the value of Pyskaty's MMWA claims, as pled, exceeds $50, 000, we reverse the district court's decision and remand for further proceedings.

         BACKGROUND

         On October 31, 2013, Pyskaty visited WWC, an automobile dealership located in Spring Valley, New York, seeking to purchase a "certified pre-owned" ("CPO')[1] BMW for her personal use. Amended Complaint ("Compl.") ¶¶ 10, 13. She inquired about the history of a 2010 BMW 750LXI (the "Vehicle") tagged "CPO, " and asked specifically whether it had ever been in an accident. Id. ¶¶ 20-21. According to Pyskaty, the WWC salesman responded that the Vehicle had no accident history, was ''perfect, '' and had a ''clean'' CARFAX report. Id. ¶ 22.[2] The salesman then showed Pyskaty a purportedly clean CARFAX report dated October 31, 2013, and affirmed that the Vehicle had passed the mandatory inspection for CPO BMWs. Id. ¶¶ 24-25. Allegedly relying on these representations, Pyskaty agreed to purchase the Vehicle for $51, 195.[3] Id. ¶ 27. Pyskaty financed the purchase by putting down a $2, 000 deposit, trading in her 2010 BMW M5, and obtaining a loan from BMW Bank for the balance of the purchase price.[4] Id. ¶ 28; see also id. ¶ 12.

         Within a week after the purchase, Pyskaty allegedly began experiencing problems while driving the Vehicle. Specifically, she alleged that the Vehicle ''ran rough, '' ''vibrated while driving, '' and ''consumed large amounts of oil.'' Id. ¶¶ 29, 32-34. The Vehicle later presented additional, more worrisome issues, including intermittent loss of power steering, lack of power on acceleration, malfunctioning door locks, and engine sluggishness while in reverse. Id. ¶¶ 42, 50, 59, 81, 83. Between November 2013 and May 2014, Pyskaty visited multiple service centers and paid for several repairs in an attempt to fix the Vehicle. See id. ¶¶ 35, 40, 42-45, 48, 51, 53-54, 57, 59-62.[5] The problems persisted, however, and in June 2014, Pyskaty returned to WWC seeking to ''revoke [her] acceptance of the [V]ehicle and arrange for [a] return, rescission, and refund.'' Id. ¶¶ 73-74. WWC indicated that it would accept the Vehicle only as a trade-in on another automobile that Pyskaty would have to purchase, and that it would value the Vehicle at $35, 000 for that purpose. Id. ¶¶ 75-76. Pyskaty declined this offer because, she asserts, it would have left her with a substantial balance owed to BMW Bank pursuant to the retail installment contract by which she purchased her defective car. Id. ¶ 77.

         Shortly thereafter, Pyskaty began to suspect that the Vehicle had been damaged in an accident before she purchased it, contrary to the CARFAX report that she was shown in October 2013. Id. ¶ 78. On June 12, 2014, Pyskaty obtained an AutoCheck report, [6] which confirmed that the Vehicle had in fact sustained a rear-impact collision on August 24, 2012. Compl. ¶¶ 79-80. Allegedly ''[f]eeling both unsafe and uncomfortable driving the [V]ehicle given its numerous defects, [Pyskaty] took the Vehicle off the road'' and parked it in a garage where it has remained since. Id. ¶ 84.

         On March 4, 2015, Pyskaty filed this lawsuit against the defendants in the United States District Court for the Southern District of New York. The parties consented to have a magistrate judge conduct all proceedings in the litigation, including the entry of final judgment, in accordance with 28 U.S.C. § 636(c).[7]

         On July 30, 2015, Pyskaty filed an amended complaint alleging that the Vehicle she purchased for $51, 195 was in fact worth only $20, 478 at the time of sale "in light of [its] undisclosed defects and history." Id. ¶ 94. Pyskaty further alleged that the Vehicle, which was "unsafe to drive and inoperable on public streets, " had a current value of approximately $14, 865. Id. ¶¶ 93, 95. Finally, Pyskaty alleged that WWC must have known at the time of sale that its representations regarding the Vehicle's condition and history were "materially false, " id. ¶ 89, because "[t]he Vehicle exhibited] a plethora of traits that, although not apparent to the layperson, would unequivocally inform a BMW dealership . . . that the [V]ehicle had been in a major accident, " id. ¶ 86.

         Based on these allegations, Pyskaty asserted claims against the defendants for: (1) breach of express and implied warranties under the MMWA and New York Uniform Commercial Code ("N.Y. U.C.C.") §§ 2-313, 2-314; (2) common law fraud; and (3) false advertising and deceptive acts and practices under N.Y. Gen. Bus. Law §§ 349, 350. See id. ¶¶ 100-64. In connection with her MMWA claims, Pyskaty sought actual damages (or, alternatively, cancellation and rescission), attorney's fees, costs, and a declaratory judgment. Id. ¶ 165(a)-(b). In connection with her state-law claims, Pyskaty sought actual damages, capped treble damages, punitive damages, attorney's fees, costs, and injunctive and declaratory relief. Id. ¶ 165(c)-(g).

         On August 21, 2015, WWC moved to dismiss the complaint for lack of subject-matter jurisdiction, arguing, inter alia, that Pyskaty's claims did not meet the MMWA's $50, 000 amount-in-controversy requirement for federal jurisdiction. See Mem. of Law in Support of Mot. to Dismiss, Pyskaty v. Wide World of Cars, LLC, No. 15-cv-1600 (S.D.N.Y. Aug. 21, 2015), ECF No. 18, at 2-7.[8]In support, WWC argued that Pyskaty was not entitled to a refund under the MMWA because WWC had issued only "limited" warranties, which are "not subject to the Act's extensive remedies including a refund of the purchase price." Id. at 3. WWC further argued that the maximum actual damages Pyskaty could recover under the MMWA-calculated by subtracting the alleged true value of the Vehicle from the purchase price-amounted to only $30, 717. Id. at 4; see also Affirmation of Keith V. LaRose, Pyskaty v. Wide World of Cars, LLC, No. 15-cv-1600 (S.D.N.Y. Aug. 21, 2015), ECF No. 17, at 9.

         In opposition, Pyskaty argued, inter alia, that the amount in controversy under the MMWA is to be "computed on the basis of all claims to be determined in this suit, " including Pyskaty's state-law claims. Mem. of Law in Opposition to Mot. to Dismiss, ECF No. 30, at 11 (emphasis partially omitted) (quoting 15 U.S.C. § 2310(d)(3)(B); see also id. at 12-13. Viewed in the aggregate, Pyskaty contended, the value of all claims alleged in the amended complaint "far exceed[ed] the jurisdictional requirement of $50, 000." Id. at 13. Pyskaty also argued that she was entitled under the MMWA to elect a remedy of revocation or rescission-either of which, she asserted, would itself be worth more than $50, 000. Id. at 14-15. Finally, Pyskaty requested leave to amend her complaint to seek punitive damages under the MMWA, thereby augmenting the value of her MMWA claims. Id. at 16-17 & n4.

         On February 23, 2016, the district court issued a decision granting WWC's motion and closing the case. See Pyskaty v. Wide World of Cars, LLC, No. 15-cv-1600 (JCM), 2016 WL 828135, 2016 U.S. Dist. LEXIS 21945 (S.D.N.Y. Feb. 23, 2016).[9] The district court based its ruling on three principal conclusions. First, the value of Pyskaty's state-law claims could not be counted toward the jurisdictional amount in controversy. Id. at *5, 2016 U.S. Dist. LEXIS 21945, at *14-16. Second, Pyskaty's alleged actual damages under the MMWA amounted to only $30, 717, [10] and Pyskaty "could not use [the] proposed punitive damages to meet the MMWA minimum" because she was not entitled to recover such damages under New York State law. Id. at *7, 2016 U.S. Dist. LEXIS 21945, at *20-21. Third, even if Pyskaty were entitled to revocation or rescission under the MMWA, the value of those remedies, too, would fall below the requisite $50, 000 threshold. Id. at *7-9 & n.14, 2016 U.S. Dist. LEXIS 21945, at *23-28 & n.14.

         Pyskaty appealed.

         DISCUSSION

         The MMWA, also known as the federal ''lemon law, ''[11] is a remedial statute designed ''to improve the adequacy of information available to consumers, prevent deception, and improve competition in the marketing of consumer products.'' Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. Abrams, 899 F.2d 1315, 1317 (2d Cir. 1990) (quoting 15 U.S.C. § 2302(a)). To achieve these goals, the Act permits ''a consumer who is damaged by the failure of a supplier, warrantor, or service contractor to comply with . . . a written warranty [or] implied warranty . . . [to] bring suit for damages and other legal and equitable relief.'' 15 U.S.C. § 2310(d)(1). The Act provides for federal jurisdiction, however, only where specified requirements are satisfied. Relevant here, the Act states that MMWA claims may be brought in federal ...


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