Alicea v. Circuit City Stores, Inc., 2008 WL 344695 (S.D.N.Y.)
So you “buy” a high-def TV to watch the Masters and return it on Monday claiming it did not fit in your living room, and Circuit City hits you with a whopping 15% restocking fee. Ouch. No matter how much you beg and plead, Circuit City will not refund the fee. Well, Ada Alicea of New York showed Circuit City. She filed a class action in the Supreme Court of the State of New York, Bronx County. Hey, there are golf fans in the Bronx, apparently.
Ada’s complaint alleged that Circuit City’s restocking fee violated New York General Business Law § 349. Ada also sued for unjust enrichment, breach of contract, and injunctive relief.
Not to be trifled with, Circuit City removed the case to the Southern District of New York under CAFA. Ada moved to remand on the sole ground that Circuit City failed to satisfy CAFA’s $5,000,000 amount in controversy requirement.
In order to meet the $5,000,000 amount in controversy, Circuit City disclosed, under seal, the amount it had collected in restocking fees between June 2004 and June 2007. This undisclosed amount constituted the compensatory damages. To get to the $5,000,000 Circuit City made the following calculation: 1) It trebled compensatory damages because the New York consumer law at issue allowed trebling for knowing or willful violations; 2) it anticipated attorney’s fees would amount to $500,000 to $1,000,000 (optimistic, weren’t they); and 3) the costs of compliance with an injunction over a 5-year period would be $1,875,000. Circuit City alleged that the grand total of these costs add up to $5.74 to $6.24 million.
After reading District Court Judge Denny Chin’s orders remanding the case and granting attorney’s fees to the plaintiff (we will get to that shortly), I wonder if Judge Chin ever had to pay one of these restocking fees. Not that I am accusing Judge Chin of buying a flat screen T.V. and returning it the next day. Let’s just say that Judge Chin was not predisposed to Circuit City’s argument. To paraphrase Judge Chin’s order, “ Talk to the hand, Circuit City.”
Judge Chin found that treble damages were not available in this case. First, the plaintiffs did not plead treble damages. Second, treble damages are not available for class claims under the New York law at issue. Without the treble damages, the plaintiffs’ damages at most amounted to $4,000,000. Case remanded.
A couple of weeks later, the parties returned to Judge Chin for him to rule on plaintiffs’ motion for attorneys fees.
Under 28 USC §1447(c), a court can award attorney’s fees incurred as a result of an unsuccessful removal. The standard governing attorney’s fees is whether the removing party “lacked an objectively reasonable basis for seeking removal.” (citing the Supremes’ (the Court, not the girl group) decision in Martin v. Franklin Capital Group., 546 U.S. 132 (2005)).
In his order granting attorney’s fees, Judge Chin “suggested” that Circuit City read the law prior to removing a case to federal court. The treble damages upon which Circuit City based its calculation of damages were not plead or available under New York law. Note to self: READ pleadings and law before appearing in New York federal court.
Circuit City was not ready to give up. Being pummeled by Best Buy all these years has made them tough. Circuit City attempted to argue that the plaintiff alleged a nationwide class that would involve damages in excess of CAFA’s jurisdictional limits. Again, Judge Chin invited Circuit City to read the plaintiff’s complaint. The plaintiff alleged that Circuit City violated New York consumer laws, which apply only to “New Yawkers.” (That is a Texas girl’s rendition of a New York accent, ya’ll).
Circuit City made one more attempt to avoid attorney’s fees arguing that the costs of compliance over a 5-year period would exceed $5,000,000. The problem with this argument, however, was that it was not the basis for Circuit City’s removal. In its removal pleadings, Circuit City argued compliance would cost $1.8 million.
This is where I imagine the sparks flew in the court room. Judge Chin was not amused that after Circuit City presented a sworn affidavit that compliance would cost $1.8 million, and lost the remand motion, it investigated the matter and came up with evidence that compliance would actually cost $5,000,000. Judge Chin stated, “This investigation should have been conducted before Circuit City sought removal-and before Circuit City made false, factual representations in its removal petition. . .” These are the kind of statements plaintiff’s attorneys dreams are made of.
Judge Chin awarded attorney’s fees finding that the removal was not objectively reasonable and Circuit City would have known that had they “conducted a reasonable investigation of the facts.” The Judge ordered the plaintiff to submit a fee application.
A review of the docket reveals that shortly after Judge Chin awarded attorney’s fees, Circuit City and the plaintiffs reached an agreement regarding the reasonable amount of attorney’s fees stating that there was no need to submit the matter of attorney’s fees to the Court.
What do you want to bet those fees exceeded the amount of the restocking fee?