McMahon v. Advance Stores Co., Inc., No. 5:11CV34, 2011 WL 2038596 (N.D.W. Va. May 24, 2011).

It sucks when your car has a dead battery, doesn’t it? It only makes it worse when you find out the warranty on your old battery will not cover the cost of the new one. Well, the plaintiffs in this case, weren’t going to stand for that, but they just didn’t want to make a federal case out of it.

In this case, a District Court in West Virginia remanded the action to state court because the defendants’ estimates concerning potential damages encompassed putative claims that fell beyond the plaintiffs’ class complaint.

In this state law class action, the controversy concerned a warranty on a battery which the plaintiff, Scott McMahon, purchased from Advance Auto Parts (“APP”) in West Virginia, and which he subsequently sold to the plaintiff, Karen John. The plaintiffs alleged that within the warranty period, the battery failed, and when John invoked the warranty and attempted to obtain a refund or replacement thereunder, the defendant, Don Free, acting as AAP’s agent, refused to honor it because AAP policy was to limit warranties to original purchasers. Free claimed that John, as a subsequent purchaser, was not eligible to benefit from the warranty.

In 2006, the plaintiffs filed the original complaint alleging claims for breach of express and implied warranties, violations of West Virginia consumer protection laws, fraud, and unjust enrichment. 

After the plaintiffs amended the complaint to include a class action claim, the defendants removed the action, invoking the federal court’s jurisdiction under CAFA. 

The District Court, however, remanded the action to state court finding that the defendants failed to show that the jurisdictional amount in controversy had been met.

On January 31, 2011, the plaintiffs amended their complaint again in order to add a claim under the Magnusson Moss Warranty Act (“MMWA”), 15 U.S.C. § 2301, et seq. After the defendants were served with the third amended complaint (“TAC”), they once again filed a notice of removal.

The plaintiffs, accordingly, filed a second motion to remand, arguing that the defendants’ removal was untimely and that the amount in controversy did not meet CAFA’s statutory minimum. 

The Court granted the plaintiffs’ motion.

First, regarding the timelines of removal, the Court found that the defendants first removed the case based upon the class action claims included in the plaintiffs’ second amended complaint. Prior to the filing of the TAC, the defendants were not on notice of a MMWA claim and would, therefore, be prejudiced in maintaining a defense on the merits if this claim was viewed as relating back to the original complaint. Thus, the Court concluded that the MMWA claim did not relate back. Because the TAC set forth a new cause of action for class relief under the MMWA, the defendants’ notice of removal was timely under 28 U.S.C. § 1446(b) as it was filed within thirty days of the filing of the third amended complaint.

Second, the plaintiffs argued that because the defendants inaccurately defined the putative class, the defendants failed to establish the required amount in controversy. Correcting the defendants, the plaintiffs reiterated that the class remained “those improperly denied warranty rights for a defective product.” In response, the defendants argued that the MMWA claim supported a class comprised of all consumers who had been issued a sales receipt by the defendants referring the consumer to warranty information available on Advance’s website or elsewhere. 

The Court observed that the remand decision hinged upon how the class was defined. The TAC did not specify damages. The defendants calculated damages by first concluding that the putative class consisted of “all persons who received a sales receipt referring the consumer to warranty information available on Advance’s website or elsewhere, with a purchase from Advance.” Because approximately 19,857,409 sales transactions took place in West Virginia Advance stores over the course of the past four years, the defendants contended that this was the number of people in the putative class. Then, because a consumer may seek relief for violations of the West Virginia Consumer Protection Act (“CPPA”), W. Va. Code. § 46A-6-106, in the amount of actual damages or $200.00, the defendants multiplied these numbers and concluded that the damages in this case exceeded $3 billion.

The Court, however, found that the defendants’ definition of the class was overly broad. The TAC described the putative class as “others similarly situated and other West Virginia consumers who have been denied the protections of the warranties for products purchased in violation of West Virginia law.” 

A common sense reading revealed that the class did not include all consumers who made a purchase from Advance and received a receipt referencing the warranty, as the defendants suggested, but instead was limited to those consumers who purchased defective products from Advance and were then denied the protection of the warranty, the Court remarked. The Court further stated that if it was to adopt the defendants’ definition, the class would arguably include consumers who purchased defective products from Advance and never took advantage of the warranty, or who successfully took advantage of the warranty. Under the TAC, however, the putative class included those consumers who were improperly denied warranty claims on a defective product purchased from Advance. As in the defendants’ first notice of removal, their estimates concerning potential damages encompassed putative claims that fell beyond the plaintiffs’ class complaint.

In support of their calculations, of the amount in controversy, the defendants offered only the affidavit of Jeffrey Fralin, who approximated the total sales transactions for West Virginia Advance Auto Parts stores and confirmed that these transactions were accompanied by sales receipts that refer to the warranty. The Court observed that Fralin did not discuss, however, the number of consumers who were improperly denied warranty claims on a defective product purchased from Advance.

The Court accordingly held that the defendants’ calculations, based as they were upon unfounded assumptions and ill-defined estimates for a class that they incorrectly defined, could not be deemed reliable bases for calculating the amount in controversy in this case. Consequently, the defendants have not demonstrated by a preponderance of the evidence that the pecuniary result to either party which a judgment would produce exceeds $5 million, exclusive of interests and costs. 

Accordingly, the Court granted the plaintiffs’ motion to remand and remanded the action to the Circuit Court of Ohio County, West Virginia.