Phillips v. Whirlpool Corp.

Citations: 351 F. Supp. 2d 458; 2005 U.S. Dist. LEXIS 353; 2005 WL 53883Docket: Civ.A. 2:04-22342-18

Court: District Court, D. South Carolina; January 5, 2005; Federal District Court

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Maryanne Phillips filed a class action lawsuit against Whirlpool Corporation and Sears and Roebuck and Co. in the Colleton County Court of Common Pleas on August 23, 2004, alleging breach of warranties and violations of the South Carolina Unfair Trade Practices Act. She seeks treble damages, costs, and attorneys' fees, with individual damages capped at $74,999. The defendants removed the case to federal court on diversity grounds. Phillips then moved to remand the case back to state court, arguing that the amount in controversy did not exceed $75,000, the threshold for federal jurisdiction. The defendants contended that, when considering potential treble damages and attorneys' fees, the amount in controversy exceeded $75,000. The court noted that the burden of proof for subject matter jurisdiction lies with the defendants and emphasized that the removal statute should be strictly construed in favor of remand. The court's analysis focused on whether the amount in controversy exceeds the jurisdictional limit, as the parties acknowledged diversity of citizenship.

The Fourth Circuit has not established a clear standard for determining if the amount in controversy exceeds $75,000 in motions for remand based on diversity jurisdiction. In cases where the plaintiff does not specify a damage claim, courts have identified four potential standards: 1) legal certainty, 2) preponderance of the evidence, 3) reasonable probability, and 4) inverse legal certainty. The court in Spann rejected the inverse legal certainty standard, noting it improperly shifts the burden of proof from the defendant to the plaintiff. It found that the defendants failed to demonstrate that any plaintiff's claim exceeded $75,000 under the remaining three standards. The court also implicitly rejected the preponderance of evidence standard by not adopting the ruling from De Aguilar v. Boeing Co., which allowed ignoring a claim below the jurisdictional minimum if a defendant could prove otherwise. The court emphasized that typically, the amount claimed by a plaintiff in their complaint dictates the jurisdictional amount, allowing plaintiffs to plead below the jurisdictional threshold to avoid federal jurisdiction. The plaintiff's complaint explicitly states that no individual class member claims damages exceeding $74,999 and seeks recovery not exceeding that amount. The plaintiff argues that the washing machines in question cost between $800-$900, with damages unlikely to exceed three times that amount, and asserts that any attorneys' fees would not bring the total damages close to the jurisdictional threshold. Thus, the plaintiff contends that the defendants cannot satisfy the jurisdictional amount under any applicable standard.

Defendants do not dispute the washing machine's price but contest the plaintiff's ability to define damages post-removal, arguing that this limits damages to avoid jurisdiction. They claim the plaintiff seeks damages up to $74,999 and intends to treble them, but the court clarifies that the Complaint states the Class seeks damages not exceeding $74,999 per member, including treble damages, indicating the total will not reach that threshold. The court finds that the plaintiff's language serves only to inform the court of the limits on damages, thus not meeting the jurisdictional minimum for diversity. The defendants bear the burden of proving otherwise but fail to do so. Their references to damages relating to class members’ clothing, repairs, and inconvenience do not strengthen their position. The court concludes that the plaintiff does not believe the amount in controversy exceeds $75,000, and thus, diversity jurisdiction is not applicable. 

Regarding attorney's fees, it is established that such fees can be included in the amount in controversy if statutory provisions allow for recovery. Defendants argue that any amount over $1 in fees would exceed the jurisdictional minimum, but the court maintains that the language in the Complaint indicates the plaintiff does not believe her recovery will surpass this threshold, reiterating that defendants have not proven otherwise. Furthermore, the court favors a pro rata distribution of attorney's fees among all class members, aligning with precedents that require each class member to meet the "matter in controversy" requirement for jurisdiction, as established in Zahn v. International Paper Co.

The excerpt addresses the application of attorneys' fees in class action cases under the South Carolina Unfair Trade Practices Act. While other circuits have recognized exceptions allowing for attorneys' fees to be included in the amount in controversy, this has only occurred when statutory language explicitly states that such fees are designated for class representatives. In this case, the South Carolina statute specifies that reasonable attorney's fees and costs shall be awarded to the party bringing the action, without mentioning "representatives" or indicating that fees are limited to the named plaintiff. Thus, the court concludes that a pro rata distribution of attorneys' fees among class members is appropriate. As the determination of damages and an equal division of fees were found insufficient for jurisdiction, the court grants the plaintiff's motion to remand the case to the Colleton County Court of Common Pleas. The excerpt also notes that jurisdiction over the class is established if at least one named plaintiff's claim exceeds $75,000, as interpreted by the Fourth Circuit.