CSNK Working Capital Finance Corp. v. Next Creation Holdings

Filing 48

Order denying 43 Motion to Dismiss for Lack of Jurisdiction. Signed by Magistrate Judge Howard R. Lloyd on 11/21/2017. (hrllc3S, COURT STAFF) (Filed on 11/21/2017)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 CSNK WORKING CAPITAL FINANCE CORP., 7 8 Plaintiff, 9 v. 10 NEXT CREATION HOLDINGS, United States District Court Northern District of California 11 Case No.17-cv-00305-HRL ORDER RE: DEFENDANT’S MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION Dkt. No. 43 Defendant. 12 13 Defendant Next Creations Holding, LLC (“Next”) moves to dismiss for lack of subject 14 matter jurisdiction. Dkt. No. 43. Next argues that federal diversity jurisdiction does not exist 15 because the amount in controversy does not exceed $75,000. Plaintiff CSNK Working Capital 16 Finance Corp, d/b/a Bay View Funding (“Bay View”) opposes the motion. Dkt. No. 46. The 17 matter is deemed submitted without oral argument. Civil L.R. 7-1(b). Upon consideration of the 18 moving and responding papers, and for the reasons set forth below, the Court denies the motion. Both parties consented to magistrate judge jurisdiction. Dkt. Nos. 8, 13. 19 20 I. BACKGROUND Bay View alleges that it executed a factoring agreement with a non-party, Shell Home 21 22 Fashions LLC (“Shell”), acquiring the rights to some of Shell’s accounts receivable. Dkt. No. 1 ¶ 23 6. Shell then entered an agreement to sell goods to Next. Id. ¶ 8. The total value of the goods 24 sold by Shell to Next was $93,542.30. Id. Ex. D. 25 Next sold the goods purchased from Shell to Macy’s Inc., which alleged that some of the 26 goods were defective. Id. ¶¶ 13-15. According to the complaint, Next “issued a Debit memo1 in 27 1 28 Next refers to this transaction as an “initial partial credit,” Dkt. No. 43 at 2:25. For the sake of consistency, the Court will refer to the transaction as the “debit memo.” 1 the amount of $32,379.00 to [Shell], and informed [Bay View] that [Next] would commit” to pay 2 the remainder of the Shell-Next invoice ($61,163.30). Id. ¶ 16. Next allegedly never paid Bay 3 View, id. ¶ 20, and Bay View sued for breach of contract and other claims. Bay View moved for summary judgment. Dkt. No. 38. In the summary judgment motion, 4 5 Bay View “accept[ed], for the purposes of this motion only, that the Debit Memo for $32,379.00 6 issued by SHELL to [Next] is binding. For purposes of this motion, [BAY VIEW] asserts the 7 remaining $61,630.30 plus interest at the legal rate is due and owing.” Dkt. No. 38 at 3:14-16. 8 Next then moved to dismiss the case under Federal Rule of Civil Procedure 12(b)(1). Dkt. No. 43. Next argues that Bay View’s concession as to the debit memo proves that Bay View’s 9 claim is for less than the jurisdictional minimum. Bay View asserts that it conceded the validity of 11 United States District Court Northern District of California 10 the debit memo only for the purpose of its summary judgment motion. If the motion is 12 unsuccessful, Bay View says, it will seek the full $93,542.30. 13 II. DISCUSSION 14 Federal district courts have original jurisdiction over civil actions where there is complete 15 diversity between the parties, and where the matter in controversy exceeds $75,000, exclusive of 16 interest and costs. 28 U.S.C. § 1332. The test for determining whether a plaintiff has met the 17 jurisdictional amount is found in St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 238 18 (1938), where the Supreme Court stated that: 19 20 21 22 23 “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. The inability of plaintiff to recover an amount adequate to give the court jurisdiction does not show his bad faith or oust the jurisdiction.” 24 St. Paul, 303 U.S. at 288–89. In light of St. Paul, a court will dismiss a case where, for example, 25 reaching the jurisdictional threshold depends on the plaintiff obtaining punitive damages for 26 breach of contract, Czechowski v. Tandy Corp., 731 F. Supp. 406, 409-10 (N.D. Cal. 1990), or 27 where an accounting error causes the plaintiff to overvalue its claim, Flournoy v. U.S. Aviation 28 Underwriters, Inc., 206 F. Supp. 237, 238 (W.D. Tex. 1962). “[T]he fact that the complaint 2 1 discloses the existence of a valid defense to the claim,” does not deprive the court of jurisdiction. 2 St. Paul, 303 U.S. at 289. 3 Here, Bay View claimed entitlement to more than $75,000 in its complaint. Bay View’s 4 claim to the full value of the invoice seems to be at least “colorable for the purpose of conferring 5 jurisdiction[.]” St. Paul, 303 U.S. at 289-90. Therefore, unless it appears to a legal certainty that 6 the claim is really for less than the jurisdictional minimum, the Court is not deprived of subject 7 matter jurisdiction. 8 9 10 United States District Court Northern District of California 11 12 13 14 Next directs the Court to Tongkook America, Inc. v. Shipton Sportswear Co., 14 F.3d 781 (2d Cir. 1994), but the case is distinguishable. In Tongkook an apparel company (Shipton) agreed to purchase goods from a manufacturer (Tongkook) for an agreed price of $306,762.16. “Shipton paid $189,141.11 against the sum due, leaving an unpaid balance of $117,621.05. Shipton's bank also issued a letter of credit for Tongkook's benefit. On February 5, 1990, Tongkook drew $80,760.00 on the letter of credit, but apparently both Tongkook and Shipton neglected to credit this amount to the outstanding balance of $117,621.05. Thus, when the suit was commenced, the balance due was actually $36,861.05, not $117,621.05.” 15 Tongkook, 14 F.3d at 782–83. The Second Circuit determined that the plaintiff’s claim was for 16 less than the jurisdictional minimum, and that the court therefore lacked subject matter jurisdiction 17 over the suit. Id. at 786. 18 Next argues that the letter of credit in Tongkook is analogous to the debit memo in this 19 case. In Tongkook, however, neither side disputed that, after taking into account the letter of 20 credit, the defendant had paid the plaintiff all but approximately $36,000 under the contract. The 21 only question for the Second Circuit was whether, once the parties’ oversight was discovered, it 22 was otherwise clear to a legal certainty that the plaintiff would never have been entitled to at least 23 the jurisdictional minimum. There is no such legal certainty in this case. Bay View alleges that it 24 has not received any of the funds owed to it under the Shell-Next invoice. Further, Bay View 25 disputes the validity of Next’s debit memo to Shell. Although Next may have valid defenses to 26 Bay View’s claims, the Court cannot identify a hornbook-style rule, such as the unavailability of 27 punitive damages for breach of contract, Czechowski, 731 F. Supp. at 409-10, that would preclude 28 Bay View from collecting the full value of the invoice. See St. Paul, 303 U.S. at 289. In the 3 1 absence of legal certainty that Bay View’s claim is for less than the jurisdictional minimum, the 2 Court retains subject matter jurisdiction over the suit. Next’s motion is denied. 3 4 5 IT IS SO ORDERED. Dated: November 21, 2017 6 7 HOWARD R. LLOYD United States Magistrate Judge 8 9 10 United States District Court Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4

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