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Smith v. Vanguard Dealer Services

July 14, 2009


The opinion of the court was delivered by: Hillman, District Judge


This matter has come before the Court on plaintiff's motion to remand his putative class action concerning an alleged illegal tying arrangement between certain car dealerships and a "theft protection etch" warranty. For the reasons expressed below, plaintiff's motion will be granted.


Plaintiff, Robert E. Smith, proceeding on his behalf and all others similarly situated, filed a putative class action against defendants, Vanguard Dealership Services, LLC and Royal Guard, LLC in New Jersey state court. Defendants sell the product "Royal Guard Vehicle Theft Protection Etch Warranty Registration" ("RG Etch"), which is an aftermarket product sold to consumers typically in conjunction with a vehicle purchase. The RG Etch is comprised of two components: (1) the etching of an arbitrary number into the windows of the vehicle to purportedly deter theft, and (2) an undeclared warranty for the etch that provides the consumer a credit ranging from $2,000 to $5,000 at the original selling dealer to be used toward a replacement vehicle in the event the consumer's vehicle is stolen and declared a total loss. Plaintiff claims that defendants have violated New Jersey state law because the RG Etch warranty benefit constitutes a tying arrangement in violation of the Magnuson-Moss Warranty Act (MMWA), 15 U.S.C. § 2302(c).

Defendants removed the case to this Court pursuant to federal question jurisdiction, 28 U.S.C. § 1331, claiming that under the well-pleaded complaint rule, plaintiff has asserted a federal question. Plaintiff has filed the instant motion for remand, arguing that the MMWA expressly prohibits jurisdiction of his claims in federal court. Plaintiff is also seeking attorney's fees and costs associated with the motion to remand because he claims that defendants did not have an objectively reasonable basis for removal. Defendants have opposed plaintiff's motion.*fn2


Removal of a case from state to federal court is governed by 28 U.S.C. § 1441. Section 1441 is to be strictly construed against removal, so that the Congressional intent to restrict federal diversity jurisdiction is honored. Samuel-Bassett v. KIA Motors America, Inc., 357 F.3d 392, 396 (3d Cir. 2004) (citing Boyer v. Snap-On Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990)). This policy "'has always been rigorously enforced by the courts.'" Id. (quoting St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288 (1938)). Parties may not confer subject matter jurisdiction by consent, Samuel-Bassett, 357 F.3d at 396, and "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded," 28 U.S.C. § 1447(c).

Defendants removed plaintiff's state law complaint to this Court based on the well-pleaded complaint rule - i.e., the complaint raises a substantial federal question. Specifically, defendants contend that plaintiff's state law claims - for violations of the New Jersey Consumer Fraud Act (Count I) and New Jersey Truth-In-Consumer Contract, Warranty and Notice Act (Count II), and for unjust enrichment (Count III) and rescission (Count IV) - are all based on plaintiff's claims that the RG Etch constitutes an illegal tying arrangement in violation of the MMWA. According to the defendants, because a federal question -the MMWA - is presented by plaintiff's complaint, jurisdiction in this Court is proper.

In contrast, plaintiff argues that subject matter jurisdiction is lacking because the MMWA prohibits jurisdiction in the federal court when there are less than 100 class action plaintiffs named in a complaint. Defendants counter that the jurisdictional provision of the MMWA is inapplicable because plaintiff has not actually asserted a claim under the MMWA itself.

A federal question case is one "'arising under the Constitution, laws, or treatises of the United States.'" Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63 (1987) (quoting 28 U.S.C. § 1331). "The presence or absence of federal-question jurisdiction is governed by the 'well-pleaded complaint rule,' which provides that federal question jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint." Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). "The rule makes the plaintiff the master of the claim; he or she may avoid federal jurisdiction by exclusive reliance on state law." Id.

In Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1 (1983), the Supreme Court "referred to two situations where federal jurisdiction could be available even though plaintiff based its claim in state court on state law: (1) when it appears that some substantial, disputed question of federal law is a necessary element of one of the well-pleaded state claims or (2) when it appears that plaintiff's claim is 'really' one of federal law." Goepel v. National Postal Mail Handlers Union, a Div. of LIUNA, 36 F.3d 306, 310 (3d Cir. 1994) (quoting Franchise Tax Bd., 463 U.S. at 13) (other citations omitted). This doctrine "captures the commonsense notion that a federal court ought to be able to hear claims recognized under state law that nonetheless turn on substantial questions of federal law, and thus justify resort to the experience, solicitude, and hope of uniformity that a federal forum offers on federal issues." Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U.S. 308, 312 (2005).

A federal issue is not "a password opening federal courts to any state action embracing a point of federal law," however.

Id. at 314. The federal issue will ultimately qualify for a federal forum "only if federal jurisdiction is consistent with congressional judgment about the sound division of labor between state and federal courts governing the application of § 1331." Id. at 313-14. Thus, the question to be asked is "does a state-law claim necessarily raise a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities." Id.

Here, the answer to that question is "no." Defendants removed plaintiff's case on the basis that each of his state claims depends on the determination of whether the RG Etch warranty program constitutes an illegal tying arrangement under the federal MMWA. Without looking deeper, it would appear that plaintiff's complaint, on its face, raises a substantial federal issue. Plaintiff, however, has shown ...

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