A recent court decision may alter a product manufacturer’s chance to have a federal court decide certain warranty claims brought against it. Federal laws do not always guarantee that a party may pursue a claim arising under that law in federal court. The Magnuson-Moss Warranty Act (the “MMWA”), which governs written warranties of consumer products, is one of those laws. Under the MMWA, a consumer may seek relief for a violation of the statute in a federal court only if the amount at issue for “all claims to be determined in [the] suit” is at least $50,000. That value does not include any “interests [or] costs." But the statute does not define what a “cost” is for purposes of assessing jurisdiction. Until recently, all but one federal circuit court held that a consumer’s demand for attorneys’ fees was a “cost” under the statute and could not help a party over the jurisdictional line.
This past April, the Ninth Circuit Court of Appeals deepened the split between federal circuit courts in Shoner v. Carrier Corporation when it found that attorneys’ fees “may be included in the amount in controversy if they are available to prevailing plaintiffs [under] state fee-shifting statutes." In Shoner, a consumer sued a home appliance manufacturer under various state warranty laws and the MMWA alleging that his air conditioner was defective. However, because the consumer paid less than $1,500 for the product, the federal court had jurisdiction to hear his MMWA claim only if he could enlarge the amount at issue for that claim based on his demand for attorneys’ fees. The Shoner court reasoned that the MMWA’s use of the phrase “exclusive of interests and costs” was like other federal laws governing federal jurisdiction, so the MMWA should be no different. Now, in the Ninth Circuit, “[i]f an underlying state statute authorizes attorneys’ fees to a successful litigant, these fees become part of the amount ‘put in controversy’ through an MMWA lawsuit."
The dissent characterized this holding as premature and “unnecessary” because the parties had not “fully addressed this issue." In assessing whether the MMWA authorized use of attorneys’ fees to get a claim over the $50,000 line, the dissent “doubt[ed] that attorneys’ fees were meant to be included in . . . [the] calculation under the MMWA,” because doing so would “render [another provision of the law] superfluous."
Manufacturers faced with warranty lawsuits in the Ninth Circuit that arise under the MMWA must now consider the implications of a demand for attorneys’ fees on a federal court’s jurisdiction. It is now possible that cases which begin in state court and include a demand for attorneys’ fees under the MMWA may be removable to the federal court. But not every demand for attorneys’ fees can be included as part of the calculation. Because “MMWA claims ‘stand or fall with . . . express and implied warranty claims under state law,” a demand for attorneys’ fees will impact the $50,000 claim minimum only where the state law underlying the warranty claims entitles a prevailing plaintiff to its attorneys’ fees. Manufacturers defending warranty lawsuits that involve the MMWA should consult with counsel to determine whether they may take advantage of this new ruling and whether removal is advisable in the warranty case.
For more information and to read the decision, click here.
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