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Laurens v. Volvo Cars of North America, LLC

United States Court of Appeals, Seventh Circuit

August 22, 2017

Xavier Laurens and Khadija Laurens, Plaintiffs-Appellants,
Volvo Cars of North America, LLC, and Volvo Car USA, LLC, Defendants-Appellees.

          Argued April 4, 2017

         Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 16 C 4507 - Harry D. Leinenweber, Judge.

          Before WOOD, Chief Judge, and Kanne and ROVNER, Circuit Judges.

          WOOD, Chief Judge.

         The idea of a theme and variations is a common one in music. It should be in law, too. Here we return to the familiar theme of a defense effort to pretermit a proposed class action by picking off the named plaintiff's claim. Several variations on that theme have been tried and have failed. See Campbell-Ewald Co. v. Gomez, 136 S.Ct. 663 (2016) (Rule 68 offers of judgment); Fulton Dental, LLC v. Bisco, Inc., 860 F.3d 541 (7th Cir. 2017) (Rule 67 payments to court registry).

         Undeterred, the defendant in the case now before us asserts that an unaccepted offer of relief before a putative plaintiff files a lawsuit deprives that plaintiff of standing. We see no reason why the timing of the offer has such a powerful effect. Black-letter contract law states that offers do not bind recipients until they are accepted. See, e.g., ALI Restatement (Second) of Contracts § 17 (1981). Hence while the legal effect of every variation on the strategic-mooting theme has not yet been explored, we are satisfied that an unaccepted pre-litiga-tion offer does not deprive a plaintiff of her day in court.


         This case, at base, is about a car purchaser's disappointed expectations. The cars are Volvos, and the dispute centers on the difference between the model XC90 and the XC90 T8 ("the T8"). Both are luxury SUVs, but the XC90 runs on gas, whereas the T8 is a plug-in hybrid. The latter feature comes at a premium; the 2016 T8 retailed for around $20, 000 more than its gas-only sibling. Plaintiffs Xavier and Khadija Laurens overcame the sticker shock and paid $83, 475 for a new T8. They also purchased, for an additional $2, 700, a charging station that was installed in their garage.

         The Laurenses quickly realized that the car they bought fell short of the car the ads had promised. Volvo's advertisements had claimed that the T8's battery range was 25 miles, and the Laurenses had relied on this representation when deciding to purchase that model for a premium price. In practice their T8 averaged a puny eight to ten miles of battery-only driving, far below the promised distance. On April 21, 2016, Xavier filed this action, both on his own behalf and for a class of others similarly situated. He relied on the Class Action Fairness Act (CAFA), 28 U.S.C. § 1332(d), for subject-matter jurisdiction, because he was a citizen of Illinois, whereas Volvo Cars USA is a Delaware limited liability company controlled by Volvo Cars of North America (another Delaware LLC), which is itself wholly owned by its Swedish parent (a publicly traded, share-based limited liability company, or AB, with its principal place of business in Gothenburg, Sweden), and the aggregate amount in controversy exceeds (he asserted) $5, 000, 000. For himself, Xavier sought damages equal to the premium he paid for the hybrid model ($20, 000), the cost of the charging station ($2, 700), injunctive relief, punitive damages, and attorney's fees.

         The complaint's core theory was that Volvo's misleading advertising caused Xavier to pay the extra money for the hybrid version of the car. A wrinkle arose when it turned out that Xavier was not listed on either the car's purchase agreement or the title; only Khadija was. On June 8, 2016, the Laurenses received a letter from Volvo that offered "immediately" to give Khadija (but not Xavier) "a full refund upon return of the vehicle if you are not satisfied with it for any reason" and to "arrange to pick up your vehicle at your home." The next day Volvo moved to dismiss Xavier's suit on the theory that he lacked standing; it argued that Khadija, the titleholder, was the only person with any possible injury, and she was not at that moment a party. Before the district court ruled on the motion, the Laurenses added Khadija to the complaint. Volvo responded with a motion to dismiss under Federal Rule of Civil Procedure 12(b)(1); its motion contended that Khadija also lacked standing because its letter had offered complete relief for her before she filed suit. The district judge agreed with Volvo, finding that Xavier had never suffered an Article III injury and that Volvo's offer had redressed Khadija's injury before she became a party. The court dismissed the action, and this appeal followed.


         While the Constitution does not define the precise extent of "[t]he judicial Power of the United States/' it does say that this power is limited to "Cases" and "Controversies, " U.S. CONST, art. Ill. §§ 1, 2. This requires federal courts to police their own authority, so that they do not entertain matters outside the scope of these terms. Of the several doctrines that perform the policing task, the one with which we are concerned is standing. The Supreme Court has said that "the irreducible constitutional minimum of standing contains three elements." Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992). In the Court's words, "[t]he plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision." Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547 (2016).

         At the pleading stage, it is normally not difficult to pass the standing bar. Plaintiffs need only "'clearly ... allege facts demonstrating' each element." Id. (quoting Worth v. Seldin, 422 U.S. 490, 518 (1975)). Things get more complicated when the defendant challenges a plaintiff's standing in a motion to dismiss for want of Article III jurisdiction, pursuant to Rule 12(b)(1). District courts deciding such motions "must accept as true all material allegations of the complaint, drawing all reasonable inferences therefrom in the plaintiff's favor, unless standing is challenged as a factual matter." Remijas v. Neiman Marcus Grip., LLC, 794 F.3d 688, 691 (7th Cir. 2015) (emphasis added) (quoting Reid L. v. III. State Bd. of Educ, 358 F.3d 511, 515 (7th Cir. 2004)). If a defendant raises a factual challenge to standing, the plaintiff bears the burden of proving standing by a preponderance of the evidence. Kathrein v. City of Evanston, III., 636 F.3d 906, 914 (7th Cir. 2011). We review the district court's standing decision de novo, accepting any underlying factual findings unless they are clearly erroneous. Winkler v. Gates, 481 F.3d 977, 982 (7th Cir. 2007).

         Causation and redressability are not in question here. The Laurenses maintain that Volvo caused their injury by misleading them, and they seek damages that would redress the financial harms that flowed from the misrepresentation. Their complaint also includes a request for injunctive relief, but it is premature for us to say whether they do or do not have standing for this part of the case. On the one hand, even an individual plaintiff "bears the burden of showing that he has standing for each type of relief sought." Summers v. Earth Island Inst,555 U.S. 488, 493 (2009). That means that either Xavier or Khadija had to demonstrate a stake in injunctive relief in particular. In Summers, the plaintiffs failed to meet that burden, because the parties had settled their dispute with respect to the only national forest in which they had a personal stake, and Volvo suggests that the Laurenses' claim for injunctive relief should fail for similar reasons. Once burned, twice shy, it argues: how will either Xavier or Khadija ever be fooled again by its advertising? But there is another side to this argument. First, unlike the plaintiffs in Summers, as we discuss below, the question whether the underlying dispute has been settled is a live one. Second, the fact that the Laurenses are seeking to serve as class representatives complicates matters. The Supreme Court held in United States Parole Comm'n v.Geraghty, 445 U.S. 388 (1980), that "an action brought on behalf of a class does not become moot upon expiration of the named plaintiff's substantive claim, even though class certification has been denied." Id. at 404. "When the claim on the merits is 'capable of repetition, yet evading review, ' the named plaintiff may litigate the class certification issue despite loss of his personal stake ...

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