The District Court Refused To Play Guitar

Collins v. Guitar Center, Inc., No. 10CV755-LAB (POR), 2010 WL 2682760 (S.D. Cal. July 02, 2010).

Given the plaintiff’s disclaimer of damages less than the jurisdictional amount, a District Court in California remanded the action to state court finding that when the disclaimer is not ambiguous, then the “legal certainty” standard and not the “preponderance” standard should be applied.

The plaintiff brought a class action in state court alleging that the defendant’s inflated price of the electric guitar he bought was in violation of Tennessee Trade Practices Act.

The defendants removed the action to the federal court under diversity provisions of CAFA, 28 U.S.C. §1332(d). Although the parties are diverse, the plaintiff specifically and unambiguously disclaimed in the complaint any recovery in excess of $74,999 per class member, and any class recovery in excess of $4,999,999 for all claims. The defendants, however, argued that the amount in controversy was in fact met.

The Court remarked a plaintiff may sue for less than the amount he is entitled to in order to avoid federal jurisdiction and remain in state court. Because the plaintiff sought less than the jurisdictional amount, the Court stated that Lowdermilk v. U.S. Bank Nat’l Ass’n, 479 F.3d 994, 998 (9th Cir. 2007) would ordinarily require the defendants to demonstrate to a “legal certainty” that the jurisdictional threshold is met. (Editors’ Note: See the CAFA Law Blog analysis of Lowdermilk posted on July 30, 2007).

The defendants, however, claimed that the complaint’s allegations were ambiguous, and cited Guglielmino v. McKee Foods Corp., 506 F.3d 696 (9th Cir. 2007) arguing that the “legal certainty” standard was not applied when allegations in the complaint appeared to conflict with a disclaimer. (Editors’ Note: See the CAFA Law Blog analysis of Guglielmino posted on November 6, 2007). The defendants argued the disclaimer was therefore ineffective, and urged the Court to apply the “preponderance of evidence” standard.

The defendants also pointed out that, as in Guglielmino, the disclaimer did not appear in the prayer for relief. The Court, however, remarked that Guglielmino does not stand for the proposition that a disclaimer to be effective must appear in the prayer for relief. Rather, it merely requires the complaint to be unambiguous as to the value of relief sought before the “legal certainty” standard will be applied. In Guglielmino, the complaint disclaimed most types of relief in excess of the jurisdictional amount but was silent as to other relief including attorney’s fees and back pay and taxes, which the plaintiff expressly sought. Because the Guglielmino court found the amount of relief sought ambiguous, it applied the “preponderance” standard.

The Court observed that here, the plaintiff’s disclaimer applied to all relief sought, of all types (“or other relief”). The disclaimer implicitly recognized that the plaintiff and the class members might be entitled to a greater recovery than they were in fact seeking, but intentionally gave up such relief, as they were entitled to do. Thus, the Court concluded that there was no genuine conflict between the disclaimer and other allegations in the complaint.

Further, the Court found that as the Tennessee Trade Practices Act does not provide for attorney’s fees, the class claims could not be pushed above the jurisdictional minimum. And in any event an award of attorney’s fees fell within the category of “other relief” in the disclaimer.

The Court remarked that the plaintiff had not only alleged the amount in controversy was less than the jurisdictional amount; he had actually disclaimed recovery at or above the jurisdictional amount. Even if the plaintiff could show he and other class members would ordinarily be entitled to recover more, the complaint specifically avoided seeking such relief. Thus, the Court opined that this case was distinguishable to Guglielmino, where the disclaimer was tacked on additional requests for relief that might have pushed the recovery above the threshold.

Therefore, the Court, applying the “legal certainty” standard, concluded that it was legally certain that the plaintiff and the class would not recover any more than they had requested.