Holland v. Cole National Corp., 2005 WL 1242349 (W.D. Va. May 24, 2005).
Letha Holland and other representatives of a putative class brought suit in federal district court for the Western District of Virginia against Cole National Corp., the owner of the Sears Optical retail stores. Plaintiffs alleged fraudulent conduct by employees related to the sale of extended warranties and kits for eyeglasses, including RICO and Magnusson-Moss claims.
Cole filed motions to dismiss for lack of personal jurisdiction and failure to state a claim, citing lack of federal jurisdiction to hear the case. Cole maintained that there were no valid federal questions and an insufficient amount in controversy to meet the $75,000 minimum amount requirements under 28 U.S.C. Section 1332. The opinion (actually a Report and Recommendation from the Magistrate Judge) recommends that the district court grant the motion to dismiss for failure to state a claim and dismiss the suit.
Much of the opinion is devoted to the court’s determination that the RICO and Magnusson-Moss warranty claims were meritless and should be dismissed, but the Magistrate Judge does consider the federal court’s subject matter jurisdiction under CAFA. Although the class had far more than 100 members and the diversity requirements of CAFA were clearly met, the court determined that the plaintiffs did not allege more than $5 million in actual damages, so there was no federal jurisdiction, even under CAFA.
Plaintiffs argued that potential damages for the class could be greater than $5 million in view of Cole’s gross sales and the potentially thousands of class members, but they failed to specifically allege damages in excess of $5 million in their complaint, which they could have easily done as the “masters of their claims.” This failure was found to preclude federal jurisdiction under CAFA, since the $5,000,000 minimum amount in controversy requirement was not met. The Magistrate Judge included an extensive analysis of pre-CAFA case law prohibiting aggregation of claims to meet the jurisdictional minimum amount in controversy threshold, and seemed to ignore CAFA’s express allowance of claims aggregation. The plaintiffs presumably could have survived the motion to dismiss by alleging that there was more than $5,000,000 in controversy, which would have supported original federal jurisdiction under CAFA.