AO Ventures, LLC v. Gutierrez et al

Filing 44

ORDER by Judge Joseph C. Spero granting 22 Motion to Dismiss for Lack of Jurisdiction (jcslc1, COURT STAFF) (Filed on 12/17/2012)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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AO VENTURES, LLC,

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Plaintiff,

ARMANDO GUTIERREZ, et al.,
Defendants.

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United States District Court
Northern District of California

ORDER RE MOTIONS TO DISMISS
[Docket Nos. 15, 22]

v.

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Case No. 12-04625 JCS

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I.

INTRODUCTION
Plaintiff AO Ventures, LLC (“AO Ventures”) alleges in its complaint that it entered into an

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agreement with Defendant Armando Gutierrez for the purchase of the domain name

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StudyingAbroad.com (“the Domain Name”) for the amount of $14,500. Complaint, ¶ 14. Instead

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of transferring the Domain Name to AO Ventures, Plaintiff alleges, Gutierrez transferred it to

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Defendant CEA Global Education (“CEA”). On the basis of these allegations, AO ventures

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asserts claims for breach of contract, specific performance and fraud against Gutierrez and for

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intentional interference with contract against CEA. Plaintiff alleges that there is federal subject

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matter jurisdiction under 28 U.S.C. § 1332(a) on the basis that there is complete diversity of

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citizenship and the amount in controversy exceeds $75,000.

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Gutierrez brings a motion to dismiss (“Gutierrez Motion ”) asserting that: 1) there is no

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personal jurisdiction over Gutierrez, who is a resident of Florida; 2) there is no subject matter

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jurisdiction because it is apparent to a legal certainty that the amount-in-controversy requirement

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is not met; and 3) a forum selection clause in the registration agreement makes clear that litigation

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must be conducted in Broward County, Florida.

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CEA brings a motion to dismiss (“CEA Motion”) asserting that the allegations of

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intentional interference with contract are too conclusory to state a claim under Rule 12(b)(6).

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CEA further asserts that AO Ventures cannot cure this deficiency because CEA did not, in fact,

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know anything about the agreement between Gutierrez and AO Ventures for the purchase of the

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domain name -- a required element to state a claim for intentional interference with contract.

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CEA also asserts, in a footnote, that there is no subject matter jurisdiction because it is clear that

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the amount is controversy requirement is not satisfied.
The parties have consented to the jurisdiction of a United States Magistrate Judge pursuant

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to 28 U.S.C. § 636(c). The Court finds that the Motions are suitable for determination without
oral argument, pursuant to Civil Local Rule 7-1(b), and therefore vacates the December 21,

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United States District Court
Northern District of California

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2012 hearing. The Court concludes that the amount-in-controversy requirement is not met and

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therefore GRANTS the Gutierrez Motion on that basis and dismisses Plaintiff’s complaint in its

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entirety.1

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II.

ANALYSIS

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A. Legal Standard

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Gutierrez seeks dismissal of this action pursuant to Rule 12(b)(1) of the Federal Rules of Civil

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Procedure, which permits a defendant to seek dismissal on the basis of lack of subject matter

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jurisdiction. The Complaint in this action asserts that there is federal diversity jurisdiction

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pursuant to 28 U.S.C. § 1332(a)(1). Under that provision, “[t]he district courts shall have original

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jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of

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$75,000, exclusive of interest and costs, and is between . . . citizens of different States.” It is

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undisputed that the parties to this action are citizens of different states. Therefore, diversity

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jurisdiction exists if Plaintiff has met the amount-in-controversy requirement.
To determine whether the amount-in-controversy requirement is met, courts apply the “legal

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certainty” test: “[I]f, from the face of the pleadings, it is apparent, to a legal certainty, that the

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plaintiff cannot recover the amount claimed or if, from the proofs, the court is satisfied to a like

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Because the court finds there is no subject matter jurisdiction over this action, the Court need
not rule on the CEA Motion.
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certainty that the plaintiff never was entitled to recover that amount, and that his claim was

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therefore colorable for the purpose of conferring jurisdiction, the suit will be dismissed.” St. Paul

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Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289 (1938). “[T]he legal impossibility of

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recovery must be so certain as virtually to negative the plaintiff's good faith in asserting the claim.

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If the right of recovery is uncertain, the doubt should be resolved, for jurisdictional purposes, in

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favor of the subjective good faith of the plaintiff.” McDonald v. Patton, 240 F.2d 424, 426 (4th

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Cir. 1957).

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A motion to dismiss based on lack of subject matter jurisdiction can be either “facial” or

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“factual.” See, e.g., White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000). Where a defendant brings
a facial challenge, that is, a challenge to the court’s subject matter jurisdiction based on the

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United States District Court
Northern District of California

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allegations in the complaint, the court conducts an inquiry that is “analogous to a 12(b)(6)

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motion.” Roberts v. Corrothers, 812 F.2d 1173, 1178 (9th Cir. 1987). On the other hand, “[i]f

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the moving party converts ‘the motion to dismiss into a factual motion by presenting affidavits or

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other evidence properly brought before the court, the party opposing the motion must furnish

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affidavits or other evidence necessary to satisfy its burden of establishing subject matter

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jurisdiction.’” Wolfe v. Strankman, 392 F.3d 358, 362 (9th Cir. 2004) (quoting Safe Air for

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Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir.2004) (quoting Savage v. Glendale Union High

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Sch., 343 F.3d 1036, 1039 n. 2 (9th Cir.2003), cert. denied, 541 U.S. 1009, 124 S.Ct. 2067, 158

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L.Ed.2d 618 (2004))). The district court may review this evidence without converting the motion

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to dismiss into a motion for summary judgment. Safe Air for Everyone, 373 F.3d at 1039.

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Where a party brings a factual challenge to subject matter jurisdiction, the court does not presume

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that the factual allegations in the complaint are true. Id. However, a court may not resolve

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genuinely disputed facts where the question of jurisdiction is dependent on the resolution of

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factual issues going to the merits. Id.

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B. Summary of Evidence Submitted on Amount in Controversy

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Gutierrez brings a factual challenge to the existence of subject matter jurisdiction, citing not

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only the amount Plaintiff agreed to pay for the Domain Name, that is $14,500, but also emails

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from the individual who negotiated the agreement on behalf of Plaintiff stating that the Domain
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Name was worth less than $15,000. See Declaration of Armando Gutierrez, Jr. in Support of his

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Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(1), 12(b)(2), and 12(b)(3)

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(“Gutierrez Decl.), ¶ 4 & Ex. 1(emails).

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Plaintiff, in turn, cites evidence that a similar domain name, onlineeduction.com, sold for

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$100,000 in 2009, in support of the contention that the Domain Name “can be valued in excess of

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$75,000.” Declaration of Alex Alexander in Support of Opposition to Armando Gutierrez, Jr.’s

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Motion to Dismiss (“Alexander Decl.”), ¶ 13. In addition, Plaintiff presents evidence that “[f]rom

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approximately two months before May 2, 2012 when escrow was initiated [in connection with

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Plaintiff’s agreement to purchase the Domain Name] until today, AO ventures has invested over
eight months of design, programming and business development efforts in building out the

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United States District Court
Northern District of California

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studying abroad business.” Id, ¶ 11. Mr. Alexander estimates that the value of these efforts is

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approximately $5,000 per month, for a total of $40,000. Id. He further states that AO Ventures

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has retained an expert in the studying abroad market and that the cost of the expert over the last

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eight months to date was $40,000. Id., ¶ 12.

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C. Application of the Law to the Facts

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Because Defendant Gutierrez presented evidence going to the amount in controversy, Plaintiff

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was required to come forth with evidence demonstrating that the legal certainty test is not met.

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Plaintiff failed to do so.

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First, Plaintiff’s vague statement that the Domain Name “can be valued in excess of

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$75,000” based on another Domain Name that was sold in 2009 is not credible. Plaintiff offers no

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explanation for its dramatic change in position in comparison to the opinion stated by Mr.

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Alexander in early 2012, when he was negotiating to purchase the Domain Name on behalf of AO

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Ventures, that the Domain Name was not worth even $15,000. Rather, it is apparent to the Court

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that this new-found opinion is simply an attempt to manufacture subject matter jurisdiction and is

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not made in good faith.

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Second, Plaintiff offers no basis from which to conclude that either the development costs

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or the costs of retaining an expert were incurred as a result of Defendant’s failure to transfer the

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Domain Name to Plaintiff. Indeed, all but two months of the development expenditures
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(approximately $10,000 ba
y
ased on Plain
ntiff’s estima of $5,000 a month) w incurred after
ate
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were
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Gut
tierrez allege
edly cancelled the transa
action, on M 17, 2012 See Comp
May
2.
plaint, ¶ 19. Similarly,

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the Alexander Declaration does not stat that any o the costs to retain the e
D
te
of
o
expert were incurred

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bef
fore the alleg breach. Because con
ged
nsequential d
damages resulting from a breach of c
contract

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mu be reasonably foresee
ust
eable at the ti the cont
ime
tract was ent
tered, see 99 v. CIT Co
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orp., 776

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F.2 866, 872 (9th Cir. 198 this evid
2d
(
85),
dence is not s
sufficient to counter the evidence pr
resented by

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Gut
tierrez as to the amount in controver
rsy.

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United States District Court
Northern District of California

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Based on the eviden presented by the part
o
nce
rties, it is app
parent to a le certainty that the
egal
y
$75
5,000 amoun
nt-in-controv
versy require
ement is not met in this c
case.
III. CONCLU
.
USION
For the re
easons stated above, the Gutierrez M
d
Motion is GR
RANTED. The Court dis
smisses this
acti in its en
ion,
ntirety, with prejudice.
p

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IT IS SO ORDERED

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Dat Decemb 17, 2012
ted:
ber

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___
__________
___________
___
Jos
seph C. Sper
ro
Un
nited States M
Magistrate Ju
udge

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