Shields et al v. Gardner

Filing 19

ORDER denying 7 Motion to Dismiss for Lack of Jurisdiction. Signed by Judge David G Campbell on 6/21/2013.(NVO)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Richard Shields and Bess Shields,

No. CV-13-08074-PHX-DGC

Plaintiffs,

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ORDER

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v.

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William G. Gardner III,
Defendant.

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Defendant has filed a motion to dismiss for lack of subject matter jurisdiction

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pursuant to Federal Rule of Civil Procedure 12(b)(1). Doc. 7. Defendant alleges that

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Plaintiffs’ claim of damages in excess of $75,000 is not made in good faith. Id. at 1. The

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court disagrees, and will deny the motion.

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I.

Background.

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Plaintiffs Richard and Bess Shields, and Defendant William Gardner, are co-

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owners of the mining claims Purple Passion I (“PPI”) and Purple Passion II (“PPII”).

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Doc. 1, ¶ 1; Doc 7 at 4-5. Defendant owns a 50% interest in both mining claims, and

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Plaintiffs jointly own the other 50% in both claims.

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agreement existed between the two parties that all material from the mine would be

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divided equally. Id., ¶ 2. Any revenue from material sold was also to be divided equally.

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Id., ¶ 13.

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from the partnership for $1.00 per pound. Id. Defendant claims that the agreement

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stipulated that only material they extracted jointly would be divided equally, and that a

Id.

Plaintiffs claim that an

Alternatively, either party could, with the other’s permission, buy material

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party solely owned any material it extracted independently. Doc. 7 at 4-5.

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In 2009, the parties agreed to a joint venture to extract approximately 160,000

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pounds of material from PPI. Doc. 1, ¶ 2. The parties sold approximately 26,000 pounds

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to a third party for $1.00 per pound. Id. ¶ 16. Plaintiffs purchased approximately four

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tons of material from the partnership, also for $1.00 per pound. Id. ¶ 19. In March 2011,

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Plaintiffs accepted an offer to buy their interest in PPI and the material extracted from the

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joint venture for $30,000. Doc. 7 at 7. The sale did not materialize, and in March 2011,

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Plaintiffs received an offer to buy their interest in both mines for $65,000. Doc. 11 at 7.

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Plaintiffs rejected the offer and counteroffered, asking for $130,000. Id.

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Plaintiffs allege that in August 2011, Defendant moved 29 tons of the jointly

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owned material to an undisclosed location in Tucson, Arizona, without Plaintiffs’

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permission, and without compensating them. Id. ¶¶ 24-28. Plaintiffs further allege that

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Defendant continues to unilaterally extract material in violation of their agreement. Id.

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¶ 29. Plaintiffs filed suit alleging (1) conversion, (2) breach of contract, (3) breach of

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implied covenant of good faith and fair dealing, (4) unjust enrichment, and (5) breach of

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fiduciary duty. Doc. 1, ¶¶ 32-55.

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II.

Legal Standard.

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“The district courts shall have original jurisdiction of all civil actions where the

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matter in controversy exceeds the sum or value of $75,000, exclusive of interest and

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costs, and is between citizens of different states.” 28 U.S.C. § 1332(a)(1). To determine

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whether the jurisdictional amount is met, the sum alleged by Plaintiff controls if it is

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alleged in good faith. St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288

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(1938). “In deciding the question of good faith . . . ‘it must appear to a legal certainty

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that the claim is really for less than the jurisdictional amount to justify dismissal.’”

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Horton v. Liberty Mut. Ins. Co., 367 U.S. 348, 353 (1961) (citation omitted); see also

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Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 402 (9th Cir. 1996). The legal

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certainty standard applies to cases originally “brought in the federal court in which the

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plaintiff has filed a good faith complaint alleging damages in excess of the required
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jurisdictional minimum.” Sanchez, 102 F.3d at 402. The court must not attempt to

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resolve factual issues that go to the merits of the case. See Augustine v. U.S., 704 F.2d

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1074, 1077 (9th Cir. 1983).

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III.

Analysis.

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Defendant alleges that Plaintiffs’ claim for damages in excess of $75,000 is not

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made in good faith. Doc. 7 at 1. In support, Defendant argues (1) that the value of the

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extracted material is $0.50 per pound, (2) that in 2011, Plaintiffs valued their interest in

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PPI, plus all extracted material, at $30,000, (3) that the material extracted in the joint

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venture is evenly distributed between the parties, and (4) that Plaintiffs have complete

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access to all of the extracted material. Id. at 6-7. These claims do not establish to a legal

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certainty that the amount in controversy is less than $75,000.

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A.

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Defendant claims that, based on the agreement between the parties, the extracted

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material is worth $0.50 per pound. Doc. 7 at 7. At that price, even if Defendant did

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possess 14.5 tons that belonged to Plaintiffs, the claim would amount to only $14,500.

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Plaintiffs claim, however, that the material is worth between $3.00 and $6.00 per pound.

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Doc. 11 at 6. Plaintiffs have provided sales invoices showing that they have sold some

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material for $5.00 per pound. Id. at 7; see also Doc. 12-5. At $3.00 per pound, the

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amount in the conversion claim would be for $87,000. Given these factual issues, the

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Court cannot conclude to a legal certainty that the claim is worth less than $75,000.

Value of the Extracted Material.

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B.

Value of Plaintiffs’ Interest in PPI and the Extracted Material.

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In March 2011, Plaintiffs agreed to sell their interest in PPI and the jointly

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extracted material for $30,000. Doc. 7 at 2. Given this valuation, Defendant argues, the

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legal claim cannot exceed $30,000. Id. at 2-3. Plaintiffs claim that much has changed

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since the failed sale, and that in 2012 they rejected an offer of $65,000 for their interest in

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both mines. Doc. 12 ¶ 26. Plaintiffs counteroffered for $130,000. Id. The evidence

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does not create a legal certainty that the value of the claim is less than $75,000.

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C.

Distribution of Material and Access to Material in Tucson.

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Defendant claims that both parties possess approximately the same amount of the

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jointly extracted material. Doc. 7 at 6. Additionally, Defendant claims that Plaintiffs

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know where the material in Tucson is located and can elect to take possession of it.

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Doc. 7 at 7. These arguments do not address the amount of the claim directly. They are

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defenses that attempt to show that Defendant has not converted the material. These are

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questions of fact that go directly to the merits of the case and must be left to the trier of

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fact. See Augustine, 704 F.2d at 1077. Neither argument establishes to a legal certainty

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that the value of the claim is less than the jurisdictional minimum.

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IT IS ORDERED that the motion to dismiss (Doc. 7) is denied.

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Dated this 21st day of June, 2013.

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