Magnuson-Moss Claims in Federal Court: An Uphill Battle

Most product manufacturers and their defense attorneys will tell you that they prefer to litigate breach of warranty and other types of product liability claims in a federal forumThere are many sound reasons for this sentimentBut the Magnuson-Moss Act’s $50,000 amount-in-controversy requirement for federal jurisdiction makes having a breach of warranty action heard in a federal court particularly challenging.

While retail cost is the starting point in the MMWMA amount-in-controversy calculation, the courts looks at more than just the product’s price tag.  For example, in Gardynski-Leschuck v. Ford Motor Co., 142 F.3d 955 (1998), the Seventh Circuit devised a three-factor formula for assessing case value:

Purchase price of defective (or replacement) vehicle Present value of defective vehicle Value received from plaintiff’s use of vehicle = Amount-in-controversy

While purchase price can be gleaned from the sales agreement, the formula’s other two components are generally the subject of expert opinion.

In Schimmer v. Jaguar Cars, Inc., 384 F.3d 402 (2004), the court applied the formula in a case involving a $70,000 Jaguar automobile. Viewing a full refund as plaintiff’s maximum potential recovery, the court determined that the amount-in-controversy could not reach the $50,000 required to support federal jurisdiction because, even if the plaintiff received a full refund, Jaguar would still be entitled to return of the car, which it found had a current value of $54,000.

Courts in the Sixth Circuit have embraced the Seventh Circuit approach to calculating the amount-in controversy.  See e.g., Golden v. Gorno Bros., Inc., 410 F.3d 879, 882 (6th Cir. 2005); Goodwin v. Nissan North America, Inc., 2013 WL 6827929 (M.D. Tenn. Dec. 20, 2013) (vehicle purchase price of $25,658.85 less trade-in value of $14,400.00 resulted in maximum amount-in-controversy of $11,258.85). Furthermore, most courts agree that the following categories of damages are excluded from the calculation of the $50,000 amount-in-controversy:

Another hurdle the party asserting federal jurisdiction faces is the requirement that it show that at the time the case was filed or removed, it was reasonably probable that the amount-in-controversy exceeded $50,000. See BEM I, L.L.C. v. Anthropologie, Inc., 301 F.3d 548, 552 (7th Cir. 2002).

It is, generally speaking, difficult to establish federal jurisdiction over Magnuson-Moss claims.  But it’s not impossible.

A future post will explore circumstances under which a warrantor-defendant may be able to satisfy the Magnuson-Moss amount-in-controversy requirement.

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