Hightman v. Fiat Chrysler US LLC

• Court: District Court, S.D. New York
• Decided: August 12, 2019
• Docket: 1:19-cv-07681
• Status: Unknown

Opinion

ED 7 AUG 12 2019 CLERK, U.S. DISTRICT ¢ ; By MERN DISTRICT OF caLiRoR, 4 BERUTY 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 || WENDY HIGHTMAN, Case No.: 3:18-cv-02205-BEN-KSC 12 Plaintiff, ORDER: 13 || vs. 14 (1) DENYING WITHOUT FCA US LLC, PREJUDICE DEFENDANT’S 15 | Defendant.| MOTION TO DISMISS FOR LACK 16 OF PERSONAL JURISDICTION 17 (2) GRANTING DEFENDANT’S 18 MOTION TO TRANSFER TO THE SOUTHERN DISTRICT OF NEW 19 YORK 20 (3) DENYING WITHOUT 21 PREJUDICE DEFENDANT’S 09 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 23 [Doc. Nos. 15, 16 and 17.] 25 Before the Court is Defendant FCA US LLC’s (“FCA” or “Defendant”) Motion to 26 ||Dismiss for Lack of Personal Jurisdiction, Motion to Dismiss for Failure to State a Claim, 27 Motion to Transfer pursuant to 28 U.S.C. section 1412 to the Southern District of 28 || New York for referral to the Bankruptcy Court. Pursuant to civil local rule 7.1.d.1, the

1 ||Court finds the Motions to be fully briefed and suitable for determination without oral 2 ||argument. Having considered the briefing and governing law, the Court GRANTS 3 ||Defendant’s Motion to Transfer, and DENIES without prejudice Defendant’s Motion to 4 Dismiss for Lack of Personal Jurisdiction, and Motion to Dismiss for Failure to State a 5 Claim. 6 I. BACKGROUND! 7 PLAINTIFF’S ALLEGATIONS. | 8 On September 24, 2018, Plaintiff Wendy Hightman (“Hightman” or “Plaintiff”) 9 || brought this civil class action against FCA US LLC (“FCA” or “Defendant” asserting 10 |/six causes of action. (See Doc. No. 1, Complaint.) Thereafter, on October 5, 2018, 11 Plaintiff filed a First Amended Complaint (“FAC”), asserting causes of action for: (1) 12 || Violation of Magnuson-Moss Warranty Act (15 U.S.C. § 2301, et seq.); (2) Breach of 13 {| Contract/Common Law Warranty (Based on California Law); (3) Breach of the Duty of 14 Good Faith and Fair Dealing (Based on Califomia Law); (4) Violations of California 15 || False Advertising Law (Cal. Bus. & Prof. Code §§ 17500, et seg.); (5) Violation of 16 California Consumer Legal Remedies Act (Cal. Civil Code § 1750 et seg.); and (6) 17 || Violation of California Unfair Competition Law (Cal. Bus. & Prof. Code §§ 17200, e¢ 18 || seq.). (See Doc. No. 3, FAC”) 19 Plaintiffs claims relate to a new 2007 Jeep Patriot (hereinafter “the Jeep”) she 20 || purchased from a Chrysler dealership in Guam. (Doc. No. 3 { 26.) “Plaintiff was 21 ||informed by a Chrysler dealership employee that the vehicle was covered by Chrysler’s 22 Lifetime Powertrain Warranty,” but she “was not provided the terms and conditions of 23 ||the warranty until after she had completed the purchase of her class vehicle.” Jd. □ 27. 24 ||‘“None of FCA’s advertisements or warranty booklets stated that the Lifetime Warranty 25

27 The following overview of the facts is drawn from the relevant allegations of the 28 ||FAC and related briefing for resolving the pending motions. The Court is not making findings of fact.

| || was subject to complete cancellation.” Jd. 28. 2 “On March 13, 2017, Plaintiff—now living in San Diego, California—brought her 3 || Jeep into Carl Burger’s Chrysler Jeep Dodge and RAM World (hereinafter ‘Burger’s 4 || Chrysler’) because of a ‘whining sound’ coming from the transmission. The technician 5 || determined the sound stemmed from a transmission fuel leak in the right-axle, repaired it, 6 confirmed the Jeep had ‘received a 16-point multi-inspection according to the 7 {|maintenance interval.’ No other mechanical issues were discovered by the technician. 8 || These repairs were covered by FCA under the Lifetime Powertrain Warranty.” Jd. J 29. 9 “On July 6, 2018, Plaintiff brought the Jeep to Burger’s Chrysler because the check 10 |/engine light was on. Following the inspection, the technician determined that the engine 11 || gasket needed to be replaced. Plaintiff reasonably expected this to be covered under her 12 || Lifetime Powertrain Warranty but FCA denied coverage for the claim. As justification, 13 asserted that Plaintiff failed to adhere to the maintenance inspection terms.”” Jd. J 14 15 According to Defendant, although the Jeep admittedly underwent a second 16 || powertrain inspection, such inspection did not occur within 60-days of the second 5-year 17 || purchase anniversary, but rather, seven months prior to the 10-year purchase date 18 |/anniversary. Solely on this basis, Defendant declined to replace or repair the engine 19 |! gasket and voided the Jeep’s Lifetime Warranty. (Doc. No. 22 at 3.) 20 Plaintiff subsequently brought the instant suit now pending before this Court. 21 BANKRUPTCY PROCEEDINGS. 22 Chrysler, LLC (subsequently known as Old Carco LLC) and several of its 23 24 2 “As justification, FCA asserted that Plaintiff failed to adhere to the maintenance 25 inspection terms, which in relevant part provides: To maintain the Lifetime Powertrain 26 || Limited Warranty, the person ... covered by this Power-train Limited Warranty must have a powertrain inspection performed by an authorized Chrysler, Dodge, or Jeep dealer 27 once every 5 years.... The inspection must be made within sixty (60) days of each 5-year 28 || anniversary of the in-service date of the vehicle. You must have the inspection performed to continue this coverage. {Id.) (hereinafter ‘the Inspection Clause’).”

1 || subsidiaries filed for bankruptcy protection in the United States Bankruptcy Court for the 2 ||Southern District of New York, on April 30, 2009.7 Old Carco LLC and Defendant 3 j|entered into a Master Transaction Agreement (“MTA”) under which Defendant 4 || purchased substantially all of Old Carco LLCs’ assets and assumed certain liabilities. 5 || The United States Bankruptcy Court for the Southern District of New York entered an 6 order approving an asset sale to Defendant (“Sale Order”) under the terms of the MTA on 7 || June 1, 2009. 8 PENDING MOTIONS 9 On December 13, 2018, the Defendant filed the following three Motions: 10 1. FCA’s Motion to Dismiss for Lack of Personal Jurisdiction. (Doc. No. 15.) 11 Defendant seeks dismissal of the FAC without prejudice contending it is not at 12 ||“home” in California, and the claims pleaded by the Plaintiff do not arise out of or relate 13 its forum-related activities. /d. at 1. Thus, since the Plaintiff has failed to plead any 14 || facts supporting this Court’s exercise of personal jurisdiction over the Defendant, 15 dismissal is mandated. See, e.g., Sullivan v. Ford Motor Co., 2016 WL 6520174, *3 16 Cal. 2016); Cahen v. Toyota Motor Corp., 147 F. Supp. 3d 955, 961-62 & fn.1 17 ||(N.D. Cal. 2015). Jd. at 4. 18 Plaintiff opposes the Motion arguing the suit stems from a breach of 19 || contract/warranty in which Defendant’s “refusal to repair Plaintiff’s vehicle under FCA’s 20 || Lifetime Powertrain Warranty” is alleged to have caused Plaintiff's harm. (Doc. No. 22 21 2.) Specifically, since Defendant availed itself of the privileges of conducting 22 substantial business throughout the State of California, the states exercise of jurisdiction 23 || over the Defendant is appropriate.* Furthermore, Plaintiff contends that this Court 24 si 96 ||) | See Inre Old Carco LLC (f/k/a Chrysler LLC), Case No. 09-50002 (Bankr. S.D.N.Y.) (“the Bankruptcy Proceeding”). 27 “This includes, but is not limited to, vehicle sales to its dealership partners located 28 || within the state and use of those dealers to conduct automotive service repairs to fulfill contractual warranty obligations.” (Doc. No. 22 at 2.)

1 properly assert pendent personal jurisdiction over Plaintiff's consumer protection 2 ||claims since they arise out of a common nucleus of operative facts. Id. 3 2. FCA’s Motion to Dismiss for Failure to State a Claim. (Doc. No. 17.) 4 Defendant seeks dismissal of the FAC without prejudice contending all of 5 || Plaintiffs claims “arise out of the alleged issuance of a Lifetime Limited Powertrain 6 || Warranty (‘the Warranty’) by Defendant.” /d. at 1. As a result, “Plaintiff's own 7 admissions prove that her claims are not legally viable.” Jd. 8 Plaintiff opposes the Motion arguing the Defendant “violated California’s common 9 || law and the Magnusson-Moss-Warranty Act by voiding the Lifetime Warranty and 10 ||refusing to repair her Jeep’s transmission” in this putative class action for breach of 11 contract/warranty. (Doc. No. 21 at 1.) Furthermore, Plaintiff alleges the Defendant 12 |}“violated California’s consumer protection statutes by misrepresenting the terms of the 13 || Warranty through a nationally integrated advertising campaign.” Jd. 14 3. FCA’s Motion to Transfer to Bankruptcy Court. (Doc. No. 16.) 15 Defendant seeks to transfer this case to the United States District Court for the 16 ||Southern District of New York, for referral to the Bankruptcy Court. Defendant believes 17 ||the Bankruptcy Court sits in the best position to interpret and enforce the meaning of the 18 ||Sale Order. (Doc. No. 16 at 1.) Defendant further contends that it would serve the 19 |; interest of Justice to allow the bankruptcy court to interpret its own order. 20 Plaintiff opposes the Motion arguing transfer will simply result in a lengthy delay, 21 |} only to have a New York judge who is a stranger to the original bankruptcy proceeding 22 ||interpret the previous judge’s order and interpret California law.® (Doc. No. 20 at 1.) 23 24 | 25 | Defendants conduct allegedly included “an unconscionable provision within the 26 ||terms of the Warranty and cancelling the Lifetime Warranty.” (Doc. No. 21 at 1.) 6 “*,,. the judge who crafted the order in question has been reassigned and is no 27 longer involved in the bankruptcy case. It cannot reasonably be argued that this 28 || Honorable Court is less able to interpret the bankruptcy order than another judge who was not involved in the drafting of that order.” (Doc. No. 20 at 8.)

1 || Moreover, because Plaintiff's “action is brought pursuant to the product warranties, this 2 || Honorable Court can simply apply the interpretation already made by the bankruptcy 3 || court in Burton’, taking into consideration this Honorable Court’s interpretation of 4 || California law.” Jd. at 1-2. Finally, a transfer is unnecessary since the Defendant’s 5 || liability arises from Defendant’s own conduct, e.g. breaching the warranty, and would 6 clearly not be encompassed by the bankruptcy order and would not justify a transfer. Id. 7 |) at 2. 8 II. DISCUSSION 9 1. FCA’s Motion to Transfer to Bankruptcy Court. 10 Section 1412 permits a district court to transfer “a case or proceeding under title 11 11 |}to a district court for another district in the interest of justice or for the convenience of the 12 || parties.” 28 U.S.C. § 1412. Furthermore, because § 1412 is “phrased in the disjunctive,” 13 transfer may be appropriate even where one factor or the other is not present, or even 14 ||“weigh[s} somewhat against transfer.” Jackson v. Fenway Partners, LLC, 2013 WL 15 1411223, *4 (N.D. Cal. Apr. 8, 2013); see also Creekridge Capital, LLC v. Louisiana 16 || Hosp. Center, LLC, 410 B.R. 623, 629 (D. N.J. 1994) (“transfer under § 1412 requires a 17 sufficient showing that granting the transfer either will be in the interest of justice or for 18 convenience of the parties”); RFF Family P’ship, LP v. Wasserman, 2010 WL 19 || 420014, *4 (N.D. Ohio 2010) (“the ‘interest of justice’ and ‘convenience of the parties’ 20 standards in § 1412 are disjunctive and separate, and transfer is appropriate even if only 21 is met”). Notably, the procedural counterpart to § 1412, Federal Rule of Bankruptcy 22 || Procedure 1014(a) holds the same.® 23 24 | 29 ||7 Burton v. Chrysler Group, LLC (In re Old Carco LLC), 492 B.R. 392 (Bankr. 26 ||S.D.N.Y. 2013). 8 The 2007 Amendments to Bankruptcy Rule 1014(a)(1) and (2) expressly authorize 27 court, on its own motion, to transfer a case filed in a proper district and to dismiss or 2g ||transfer a case filed in an improper district respectively, either in the interest of justice or for the convenience of the parties. Fed. R. Bankr. P. 1014(a). Thus, as noted above, GG

1 With respect to whether this district is the appropriate forum for the adjudication of 2 case, Plaintiff argues transfer is inappropriate and against judicial economy. (Doc. 3 || No. 20 at 5-8). Defendant, on the other hand, does not contest remanding any claims that 4 j/arise from the Southern District of New York Bankruptcy Court’s review of the case, 5 || back to this District for trial before this Court. (Doc. No. 24 at 1.) As noted above, under 6 ||§ 1412 of the Federal Rules of Civil Procedure or subsection (A)(1) of Bankruptcy Rule 7 1/1014, even if'a case is properly venued, it may still be transferred. In short, whether 8 || venue in this district is proper or not, the Court has the authority to transfer this case sua 9 || sponte to the Southern District of New York either in the interest of justice or for the 10 ||convenience of the parties. 11 In this case, the interests of justice strongly favor transferring the case to the 12 || district where the bankruptcy proceedings continue. Factors to be considered include 13 || whether transferring venue would promote the efficient administration of the bankruptcy 14 || estate, judicial economy, timeliness, and fairness. (See Doc. No. 16 at 9.) In particular, 15 ||courts have considered: (1) whether transfer would promote the economic and efficient 16 administration of the bankruptcy estate; (2) whether the interests of judicial economy 17 || would be served by the transfer; (3) whether the parties would receive a fair trial; (4) the 18 || willingness and ability of the parties to participate in the case; (5) the plaintiff's choice of 19 || forum; (6) the effect of a transfer on the enforceability of a judgment; and (7) whether 20 || either forum has an interest in having the controversies resolved within its borders. (See 21 ||Jn re Enron Corp, 317 B.R. 629, (Bankr. 8.D.N.Y. 2004); In re Enron Corp., No. 01- 22 ||3626, 2002 WL 32153911, at * 3-4 (Bankr. $.D.N.Y. Apr. 12, 2002); In re Gurley, 215 23 ||B.R. 703, 709 (Bankr. W.D. Tenn. 1997) (internal citations omitted). Of these many 24 || factors, the most important consideration is whether the transfer would promote the 25 ||“economic and efficient administration of the estate.” (Doc. No. 16 at 10.) 26 27 28 subsection (a)(1) of the Bankruptcy Rule 1014 provides that even if a case is properly venued, it may still be transferred.

1 On balance, these factors support the conclusion that a transfer would be in the 2 ||interests of justice. As a threshold matter, the bankruptcy court expressly retained 3 {|furisdiction over all matters relating to the implementation, enforcement, and 4 interpretation of its sale order. Failing to transfer this case to the bankruptcy court that 5 approved that order would run the risk of inconsistent interpretations that could unravel 6 order’s “free and clear” transfer of assets to Defendant FCA. Transfer of an action 7 |/requiring the interpretation of the sale order, even after the final decree is entered, as 8 ||many courts have found, will permit the bankruptcy court to resolve issues pertaining to 9 || the interpretation and enforcement of its sale order, including the validity of claims 10 ||alleged by Plaintiff. (See Wolffv. Chrysler Grp., No. 5:10-CV-34-PA-DTB (C.D. Cal. IL || Feb. 22, 2010), ECF No. 17; Shatzki v. Abrams, No. 1:09-CV-02046-LJO-DLB, 2010 12 || WL 148183, at *3 (E.D. Cal. Jan. 12, 2010); Doss v. Chrysler Grp, LLC, No. 09-2130, 13 WL 4730932 (D. Ariz. Dec. 7, 2009) (transferring a similar action against Chrysler 14 ||Group under § 1404 in the interests of justice and for the convenience of the parties). 15 As for the remaining factors, the Court finds that, on balance, they do not weigh 16 against a transfer. Because the bankruptcy court is in the best position to interpret and 17 ||enforce the sale order, judicial economy weighs in favor of transfer. Moreover, there is 18 reason to believe that either party will be prejudiced by the transfer because in the 19 the Bankruptcy Court finds Defendant assumed any liabilities associated with any 20 |/claim made by Plaintiff, such claims may be transferred back to this Court. Finally, 21 |{although California has an interest in having this case decided here, such concern may be 22 || later addressed should any viable claims be transferred back to this Court for 23 |j adjudication. 24 The bankruptcy court that oversees the Chrysler bankruptcy preceeding has 25 |}expressly retained jurisdiction over the sale order in the sale order itself and in its final 26 decree and continues to exercise that jurisdiction. See, e.g., Jn re Old Carco LLC, 538 27 ||B.R. 674, 677 (Bankr. S.D.N.Y. 2015) (the sale order bars Indiana and Illinois from using 28 Chrysler’s Experience Rating to compute New Chrysler’s unemployment insurance

1 }| tax rate; interests in property cut off by sale order not limited to in rem interests); In re 2 || Old Carco LLC, 492 B.R. 392, 395 (Bankr. 8.D.N.Y. 2013) (sale order does not bar 3 |{claims concerning vehicles manufactured or sold by New Chrysler after the closing or 4 injuries resulting from the breach of any duties that arose under non-bankruptcy law after 5 ||the closing); Wolff, 2010 Bankr. LEXIS 6320 (dismissing claims against Chrysler Group 6 || because Chrysler Group did not assume such liabilities in the sale order). 7 A court has special expertise regarding the meaning of its own order, and therefore 8 interpretation is entitled to deference. See Travelers Indem. Co. v. Bailey, 557 U.S. 9 151 n. 4 (2009). Moreover, it is well-established that a court has jurisdiction to 10 enforce its own orders. Jd. at 151 (“the Bankruptcy Court plainly had jurisdiction to 11 |/interpret and enforce its own prior orders.”); see also Local Loan Co. v. Hunt, 292 U.S. 12 239 (1934) (“That a federal court of equity has jurisdiction of a bill ancillary to an 13 || original case or proceeding in the same court, whether at law or in equity, to secure or 14 || preserve the fruits and advantages of a judgment or decree rendered therein is well 15 || settled.”). 16 Although the Court recognizes that a decision to transfer a case is not to be taken 17 |! lightly, the threshold question in this matter is one best left to the bankruptcy court that 18 |/issued the sale order. This is especially apparent considering the parties provided no 19 ||compelling reason as to why this Court is in a better position to interpret and enforce the 20 ||sale order than the bankruptcy court that issued it. 21 Accordingly, in the interest of justice, the Court, therefore, GRANTS Defendant’s 22 Motion to Transfer. The Clerk shall transfer this matter to the Southern District of New 23 || York. 24 il. CONCLUSION 25 For the reasons stated above, Defendants Motion to Transfer is GRANTED, this 26 || case is hereby ordered TRANSFERRED pursuant to 28 U.S.C. § 1412 to the United 27 || States District Court for the Southern District of New York for referral to the Bankruptcy 28 ||Court. The Clerk of Court is directed to take the appropriate steps to affect the transfer. Qo

] Consequently, Defendants Motion to Dismiss for Lack of Personal Jurisdiction and 2 || Motion to Dismiss for Failure to State a Claim are hereby DENIED without prejudice 3 || with leave to refile after the Southern District of New York Bankruptcy Court has had an 4 || opportunity to interpret and enforce the June 2009 Sale Order entered in the Chrysler 5 ||Motors bankruptcy proceeding in conjunction with Plaintiff's alleged claims. 6 IT IS SO ORDERED.

8 || Dated: asus , 2019 Méua VL □□□ 9 / HON.ROGER T. BENITEZ Anited States District Judge 10 1] 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 WwW