United States District Court, D. New Jersey
June 27, 2005.
HORN & HARDART SYSTEMS, LLC, Plaintiff,
CATHERINE HUNTER, Defendant.
The opinion of the court was delivered by: JEROME SIMANDLE, District Judge
This matter comes before the Court upon an Order to Show Cause,
filed October 29, 2004, ordering Plaintiff, Horn & Hardart
Systems, LLC ("Horn"), to show cause why this case should not be
dismissed for lack of subject matter jurisdiction. [Docket Item
2.] For the reasons discussed herein, this Court has subject
matter jurisdiction under 28 U.S.C. § 1332.
Defendant Catherine Hunter entered into a franchise agreement
with Plaintiff Horn on February 15, 2003 for the right to establish and operate Horn & Hardart Bakery Stores. (Pl. Br.
Ex. A. Franchise Agreement ¶¶ 2, 4-5.) The first bakery was to be
opened by Defendant within 360 days of approval of the agreement.
(Pl. Br. Ex. A Site Addendum ¶ 1.) Pursuant to the agreement,
Defendant paid Plaintiff $59,500 which was refundable if neither
party was able to locate three sites within 8 months of the
signing of the agreement. (Pl. Br. Ex. A Agreement Addendum ¶ 3.)
Defendant never opened a bakery, yet allegedly never received a
refund of her money. (Def. Cert. Ex. A-B.) On March 18, 2004,
Defendant instituted arbitration proceedings to recover the full
refund. (Def. Cert. Ex. E.)
Plaintiff then filed a two-count complaint in this Court on
October 20, 2004 seeking: (1) damages for breach of contract; and
(2) injunctive relief to enjoin the arbitration proceedings.
(Compl. ¶¶ 21, 31.) On October 29, 2004, this Court ordered, sua
sponte, Plaintiff to show cause why the complaint should not be
dismissed for failing to meet the $75,000 amount in controversy
requirement under 28 U.S.C. § 1332. [Docket Item 2.] The parties
timely filed written submissions which the Court has considered.
In establishing federal diversity jurisdiction under
28 U.S.C. § 1332, a plaintiff must show not only diversity of citizenship,*fn1 but also that the amount in controversy
exceeds $75,000 exclusive of interests and costs.
28 U.S.C. § 1332(a). Jurisdiction is a preliminary issue that may be raised
by a district court to ensure that a case properly belongs in
federal court. Meritcare v. St. Paul Mercury Insurance,
166 F.3d 214, 217 (3d Cir. 1999).
The Supreme Court has determined the standard for deciding
whether a plaintiff's claims satisfy the amount in controversy
requirement as follows:
The rule governing dismissal for want of jurisdiction
in cases brought in the federal court is that, unless
the law gives a different rule, the sum claimed by
the plaintiff controls if the claim is apparently
made in good faith. It must appear to a legal
certainty that the claim is really for less than the
jurisdictional amount to justify dismissal.
St. Paul Mercury Indemnity v. Red Cab Co., 303 U.S. 283
(1938) (footnotes omitted). This test requires only minimal
scrutiny by the Court and the sole inquiry is whether the
plaintiff can recover more than $75,000. Suber v. Chrysler
Corp., 104 F.3d 578
(3d Cir. 1997). The legal sufficiency of the
claims and the soundness of the plaintiff's legal theory are not
relevant to the jurisdictional question. Id. at 583. In other
words, "[i]n diversity cases, [courts] generally accept a party's good faith allegation of the amount in controversy." Columbia
Gas Transmission, 62 F.3d 538
, 541 (3d Cir. 1995).
However, when the amount is challenged, a plaintiff must
produce sufficient evidence to show that the actual damages
exceeded $75,000 at the time the complaint was filed. Id. When
the total amount of actual damages cannot be verified,
speculative evidence may be used to estimate an amount. Suber v.
Chrysler Corp., 104 F.3d 578 (3d Cir. 1997).
Plaintiff here meets the amount in controversy requirement. The
first count of Plaintiff's complaint is a claim for breach of
contract. (Compl. ¶ 21.) Since the total value of the contract
cannot be exactly measured because the contract was not fully
performed, Plaintiff has submitted projections of the estimated
royalties that would have been gained if the contract had been
fulfilled. (Pl. Ex. B.) The projections show that the contract
had a potential value of $475,384, well over the amount in
controversy requirement. (Id.)
Defendant argues that the projections are not made in "good
faith" and not based upon fact. (Def. Br. at 6.) Such assertions
are unfounded. The instant case is similar to Suber, where the
plaintiff brought suit against a car dealership claiming that he
was sold a "lemon." 104 F.3d at 581. The plaintiff there included
the projected finance charges in his total damages to meet the
required amount in controversy. Id. at 585. The court accepted the projections as a reasonable means of
measuring the amount in controversy since the contract was not
fulfilled and the charges were not yet accrued. Id. at 586.
Here, the estimations were projected by a certified public
accountant who based them on the average monthly sales of an
operating Horn Bakery in Atlantic City. (Pl. Ex. B.) The
calculations strictly followed the terms of the license agreement
by projecting one bakery to open each year. (Id.) As those
numbers demonstrate, the amount in controversy requirement is
satisfied because such a claim is colorable.*fn2
This Court also has supplemental jurisdiction over the claim
for injunctive relief in Count Two. Courts may exercise
supplemental jurisdiction "over all other claims that are so
related to claims in the action within such original jurisdiction
that they form part of the same case or controversy."
28 U.S.C. § 1367(a). It is well-settled that the aggregation of claims for
purposes of meeting the amount in controversy requirement is
permitted for claims brought by a single plaintiff against a
single defendant. Snyder v. Harris, 394 U.S. 332, 335 (1969). Here, Plaintiff has two separate claims against
Defendant.*fn3 (Compl. ¶¶ 21, 31.) The second count is for
injunctive relief enjoining the arbitration proceedings in which
Defendant is seeking to collect the $59,500 refund based on the
failure to procure a suitable location to open a Horn bakery.
(Def. Ex. E.) The amount at issue in the arbitration obviously
does not exceed $75,000, but that claim is so related to the
breach of contract claim over which this Court has jurisdiction,
see infra, that the two form part of the same case and
controversy for purposes of § 1367(a). Therefore, the Court will
aggregate the claims and exercise supplemental jurisdiction over
the claim for injunctive relief.
For the above stated reasons, this Court has subject matter
jurisdiction pursuant to 28 U.S.C. § 1332. The accompanying Order
will be entered. ORDER
This matter having come before the Court, upon an Order to Show
Cause, ordering Plaintiff, Horn & Hardart Systems, LLC, to show
cause why this case should not be dismissed for lack of subject
matter jurisdiction under 28 U.S.C. § 1332 [Docket Item 2]; and
The Court having considered the submissions of Plaintiff and of
Defendant Catherine Hunter; and for the reasons set forth in the
Opinion of today's date;
IT IS this 27th day of June, 2005, hereby
ORDERED that this Court has subject matter jurisdiction
pursuant to 28 U.S.C. § 1332.