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Foley & Lardner LLP: A Jurisdictional Twist: 7th Cir. Holds That District Court Had Supplemental Jurisdiction Over Federal Claim and Original Jurisdiction Over State Claim

By Eric G. Pearson

There’s nothing inherently unique about the substantive issues in Burzlaff v. Thoroughbred Motorsports, Inc., No. 13-2520 (July 10, 2014), a decision released [July 10] by the Seventh Circuit [enhanced opinion available to subscribers]. The plaintiff, Ronald Burzlaff, purchased what he alleged was a defective “Stallion” motorized tricycle from Thoroughbred Motorsports and then brought claims against Thoroughbred under the federal Magnuson-Moss Warranty Act, 15 U.S.C. § 2301 et seq., and Wisconsin’s Lemon Law, Wis. Stat. § 218.0171. A jury found for him on both claims.

But the case contains a unique jurisdictional twist—one that the Seventh Circuit (in an opinion written by Judge Hamilton) described as “turn[ing] the usual pattern of supplemental jurisdiction on its head.” Slip Op. 5. Oddly enough, given the facts of the case, the district court did not have original jurisdiction for the federal claim under the Magnuson-Moss Warranty Act, but did have original jurisdiction over the state-law claim under Wisconsin’s Lemon Law. It then exercised its supplemental jurisdiction—appropriately, the Seventh Circuit held—over the federal claim.

How could this happen? The key was the amount in controversy. The Magnuson-Moss Warranty Act requires that the amount in controversy equal or exceed “the sum or value of $50,000 (exclusive of interest and costs) computed on the basis of all claims to be determined in this suit.” 15 U.S.C. § 2310(d)(3)(B). Burzlaff’s compensatory damages under the Act amounted to his purchase price, $35,633.23. His attorneys’ fees couldn’t make up the roughly $15,000 difference.

But Wisconsin’s Lemon Law (at the time, it has been modified since) allowed for damages of twice Burzlaff’s pecuniary loss, which permitted Thoroughbred to avail itself of diversity jurisdiction under 28 U.S.C. § 1332. Two times Burzlaff’s pecuniary loss (again, the purchase price) was $71,266.46. That’s still short of exceeding $75,000, § 1332′s amount-in-controversy requirement, but the Lemon Law permits a plaintiff to recover attorneys’ fees, and the Seventh Circuit believed that “[i]t was not unreasonable to think that Burzlaff and his attorney had invested at least $3,733.55 in fees at that time.” Slip Op. 7. That would bring Burzlaff’s claim to $75,000.01.

The district court thus had original jurisdiction over the state-law claim based on diversity of citizenship and could exercise supplemental jurisdiction over the federal claim. The court of appeals expressed its relief with the result in a footnote, noting that it would otherwise have had to send Burzlaff and Thoroughbred back to state court for the case to be retried. Slip Op. 7 n.2.

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