United States District Court, D. New Jersey
August 11, 2005.
Re: Professional Cleaning and Innovative Building Services, Inc.
Kennedy Funding, Inc.
The opinion of the court was delivered by: WILLIAM J. MARTINI, District Judge
This matter is before the Court on defendant's motion to
dismiss. For the reasons stated below, this motion is GRANTED.
Plaintiff Professional Cleaning and Building Services
("Professional") became interested in purchasing a commercial
property located in Kansas (the "Property"), and sought funding
from defendant Kennedy Funding ("Kennedy") in the amount of
$1,800,000. (Complaint at ¶¶ 1-2.) Kennedy agreed to provide a
loan commitment in return for a $54,000 commitment fee. (Id. at
¶¶ 2-3.) The commitment fee is non-refundable, unless Kennedy
fails to perform its obligations under the terms of the
agreement. (Id. at Exh. B.) The commitment form limits
Kennedy's liability to the amount of the commitment fee, and
states that Professional agrees that the limitation is reasonable and they will not pursue any claim in
excess of that sum. (Id.) The form explains that "the basis for
the Loan is the as is market value of the real estate Collateral
in its present condition," and that "Borrower understands that
[Kennedy] cannot and will not lend more than Sixty Percent (60%)
of the as is market value of the real estate Collateral." (Id.)
The Property was valued by one of Kennedy's appraisers at
$2,088,000, and on Professional's objection, the property was
appraised again by a third party at $2,430,000. (Compl. at ¶¶
22-25.) Using the sixty percent formula as called for by the
commitment form, both values caused the loan to fall short of the
$1,800,000 necessary for Professional to close on the Property.
(Id. at 26.) In order to obtain the full loan amount, the
property would have to be valued at $3,000,000.
Professional was forced to seek funding elsewhere, and now
seeks the return of the fees paid, in addition to treble damages,
based on Kennedy's allegedly unconscionable conduct in violation
of the New Jersey Consumer Fraud Act (the "CFA"). (Id. at
B. Standard of Review
A motion to dismiss for lack of subject matter jurisdiction
pursuant to Fed.R.Civ.P. 12(b)(1) may be treated as a facial
or a factual challenge. Gould Electronics Inc. v. United
States, 220 F.3d 169, 176 (3d Cir. 2000). In reviewing a facial
attack, the court may only consider the allegations in the
complaint, in addition to documents referenced therein and
attached thereto, in the light most favorable to the plaintiff.
Mortensen v. First. Fed. Sav. and Loan Ass'n, 549 F.2d 884, 891
(3d Cir. 1977). However, when the court is considering factual
attacks, the court may review evidence outside of the complaint.
Gotha v. United States, 115 F.3d 176, 178-179 (3d Cir. 1997).
Thus, the court entertaining a factual attack to subject matter
jurisdiction has some leeway to weigh the evidence and satisfy
itself as to the existence of its power to hear the case. See
Mortensen, 549 F.2d at 891. Dismissal pursuant to 12(b)(1) is
proper only when the claim "clearly appears to be immaterial and
made solely for the purpose of obtaining jurisdiction or . . . is
wholly insubstantial and frivolous." Kehr Packages, Inc. v.
Fidecolor, Inc., 926 F.2d 1406, 1409 (3d Cir. 1991). When
subject matter jurisdiction is challenged, the plaintiff bears
the burden of proving that the jurisdictional requirements have
been met. Id.
This complaint was filed pursuant to diversity jurisdiction. At
issue in the motion to dismiss is the amount in controversy. In
order for this Court to have jurisdiction over a diversity
matter, the amount in controversy must exceed $75,000, exclusive
of interest and costs. See 28 U.S.C. § 1332(a). Defendant
maintains that the contract prohibits any recovery beyond
$54,000, thus this Court does not have jurisdiction. Plaintiff
argues that defendant's practices are in violation of the CFA,
therefore the limitation on damages clause is ineffective and
treble damages may be awarded.
Where both actual and punitive damages are recoverable under a
complaint, each must be considered in analyzing the amount in
controversy. Bell v. Preferred Life Assurance Soc'y., 320 U.S. 238, 240 (1943). In determining whether the jurisdictional
amount is satisfied, the sum claimed by the plaintiff controls if
the claim is apparently made in good faith. St. Paul Mercury
Indem. Co. v. Red Cab Co., 303 U.S. 283, 288 (1938). To justify
dismissal, it must appear to a legal certainty that the claim is
really for less than the jurisdictional amount. Id. at 289.
In New Jersey, contractual limitations of liability have
traditionally been upheld so long as they do not violate public
policy. Marbro, Inc. v. Borough of Tinton Falls, 66 A.2d 159,
162 (N.J.Super.Ct. App. Div. 1996). However, contractual
limitations on liability cannot shield a party from liability for
their own fraudulent acts. Turkish v. Kasenetz, 27 F.3d 23, 28
(2d Cir. 1994). If plaintiff successfully asserts a CFA claim,
plaintiff may be entitled to treble damages under the mandate of
the act. N.J.S.A. § 56:8-19. See also Skeer v. EMK Motors,
455 A.2d 508, 511 (N.J.Super.Ct. App. Div. 1982). In order for
plaintiff to sustain such an action, it must allege (1) unlawful
conduct by the defendant; (2) an ascertainable loss on the part
of the plaintiff; and (3) a causal relationship between the
conduct and the loss. Dabush v. Mercedes Benz, 874 A.2d 1110,
1116 (N.J.Super.Ct. App. Div. 2005). Unlawful conduct is
defined under the CFA as "the use or employment by any person of
any unconscionable commercial practice, deception, fraud, false
pretense, false promise, misrepresentation, or the knowing,
concealment, suppression, or omission of any material fact with
intent that others rely upon such concealment, suppression or
omission, in connection with the sale or advertisement of any
merchandise." N.J.S.A. § 56:8-2.
Plaintiff has not made a sufficient showing of any unlawful
conduct on the part of the defendant, as is required to sustain
an action under the CFA. See Skeer, 455 A.2d at 511. The
contract is between two commercial entities, and is clear and
unambiguous. The loan document itself, excluding schedules, is a
mere seven pages long. The clauses plaintiff finds objectionable
are not buried in fine print in the middle of a lengthy document.
Rather, the document states clearly and repeatedly on page three
in normal sized type that the loan amount is based on sixty
percent of the as is market value of the property, not to exceed
$1,800,000. It is also made abundantly clear on page three that
the commitment fee is non-refundable, most notably by a sentence
in the middle of the page separate from any other paragraph that
notes "[s]aid fee is not refundable under any circumstances."
Likewise, the limitation of damages clause is conspicuously
presented in the contract. The clause appears at the bottom of
page five in a separate paragraph entitled "Limitation of
Damages." The title and the paragraph itself state in plain
language that defendant will have no liability to plaintiff under
any circumstances for any amount in excess of the commitment fee.
This section of the agreement is presented in all capital letters
and bold typeface. Finally, Brenda Wood, President of
Professional, initialed at the bottom of each page of the
agreement to indicate that she had read and accepted the terms.
(Compl. at Exh. B.) Therefore, this Court cannot conclude that
defendant engaged in fraudulent behavior as defined by the CFA.
Since plaintiff has insufficiently pled a cause of action under
the CFA, the limitation on damages clause remains in effect and
it appears to a legal certainty that no recovery in excess of the
jurisdictional amount is possible. Thus, the motion to dismiss is
GRANTED and the complaint is dismissed. D. Conclusion
In conclusion, defendant's motion to dismiss is granted and
plaintiff's complaint is DISMISSED for lack of subject matter
A separate order will be entered consistent with this letter
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