Ellis v. Goldberg:
MEMORANDUM, OPINION and ORDER: Denying 9 Pro Se Motion to Dismiss: See text of Order for further information. Signed by Judge Mark W Bennett on 03/06/17. (Copy w/NEF mailed to Pro Se Defendant) (kfs)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
MEMORANDUM OPINION AND
DEFENDANT’S PRO SE MOTION TO
DISMISS FOR LACK OF SUBJECT
TABLE OF CONTENTS
INTRODUCTION AND BACKGROUND ............................................................. 2
Factual Background..................................................................................... 2
Procedural Background ............................................................................... 4
LEGAL ANALYSIS ................................................................................................. 4
Amount in Controversy Standards............................................................... 4
Analysis ......................................................................................................... 8
CONCLUSION ........................................................................................................ 9
Title 28 U.S.C. § 1332(a)(1) provides: “The district courts shall have original
jurisdiction over all civil actions where the matter in controversy exceeds the sum or value
of $75,000, exclusive of interest and costs, and is between - (1) citizens of different
States[.]” 28 U.S.C. § 1332(a)(1). Therefore, to establish this court's subject matter
jurisdiction pursuant to 28 U.S.C. § 1332, the defendant must demonstrate: (1) complete
diversity, and (2) that the amount in controversy exceeds $75,000. Defendant has filed a
pro se pre-answer motion to dismiss for lack of subject matter jurisdiction pursuant to Rule
12(b)(1) of the Federal Rules of Civil Procedure, contending that the amount in controversy
is insufficient for diversity jurisdiction pursuant to 28 U.S.C. § 1332. Thus, the dispositive
question I must answer here is whether the amount in controversy exceeds the jurisdictional
INTRODUCTION AND BACKGROUND
Plaintiff Alan Ellis’s Complaint and attached exhibits and the pending motion to
dismiss and attached exhibits reveal the following factual background.
Ellis is a resident of Novato, California. He is an attorney, specializing in federal
criminal sentencing, with offices in San Francisco and New York. Defendant Ronald
Goldberg is a resident of Arnolds Park, Iowa. Goldberg was a criminal defendant in a case
in the United States District Court for South Dakota, United States v. Goldberg, No. 4:11cr- 40111-KES.
Goldberg was the sole trustee of the Rae Witz Trust (“the Trust”). The Trust, in
turn, was the owner of Alliance Capital Corporation (“ACC”). The ACC’s sole assets were
a mortgage and liens on real property in Fisher Island, Florida.
On February 2, 2016, Goldberg contacted Ellis seeking to retain Ellis’s legal
services in United States v. Goldberg, No. 4:11-cr- 40111-KES. Goldberg’s civil attorney
was Gary Mason of Garland & Mason. Also on February 2, 2016, Goldberg executed an
“Irrevocable Payoff Confirmation” concerning the sale of real estate in Fischer Island,
Florida. The Irrevocable Payoff Confirmation “authorized and directed” the closing agent
to wire “the payoff amount of [two hundred and two thousand dollars] $202,000 to Alliance
Capital Corp. or its designee.”
The next day, on February 3, 2016, Goldberg directed Mason to forward a copy of
the Irrevocable Payoff Confirmation to Ellis as evidence of Goldberg’s impending receipt
of $202,000. Also on February 3, 2016, Ellis emailed Mason, inquiring whether it would
be better to have the funds wired directly to Ellis, or whether the funds should be wired to
Mason, who would in turn wire payment to Ellis. Mason expressed a preference for the
latter alternative. Mason then assured Ellis that Mason would wire Ellis proceeds from the
sale of the property.
On February 5, 2016, Goldberg entered into a contract with Ellis for Ellis’s
representation in United States v. Goldberg, No. 4:11-cr- 40111-KES. The contract called
for Goldberg to pay a fixed fee of $65,000 for Ellis’s representation. Ellis subsequently
performed legal work on Goldberg’s behalf. On February 8, 2016, Mason signed the
contract, acknowledging his obligation to forward $65,000 of Goldberg’s proceeds from
the sale of the Fisher Island property to Ellis.
On February 16, 2016, Mason executed a “declaration” notifying the United States
District Court for the District of South Dakota that Goldberg’s proceeds from the sale of
the Fisher Island property would be used to satisfy Goldberg’s restitution obligation. On
February 24, 2016, Ellis filed a Sealed Sentencing Memorandum on behalf of Goldberg,
attaching Mason’s declaration.
On February 29, 2016, the South Dakota District Court entered judgment against
Goldberg on two counts of Bank Fraud, in violation of 18 U.S.C. § 1344, and 18 U.S.C. §§
1343 and 1349. The district court sentenced Goldberg to “time served.” Also, as a
condition of Goldberg’s sentence, Goldberg was ordered to pay $34,636.18 in restitution.
On the same day, Goldberg, without the knowledge of Ellis, executed a “Release
of Notice of Affidavit of Interest in Real Estate” and a “Release of Claim of Liens.” These
releases discharged Goldberg’s interest in the property that Ellis had relied upon for
payment. Goldberg never alerted Ellis to the fact that he had released his interest in the
Fisher Island property.
Ellis did not receive payment for his services as promised. On March 16, 2016,
Goldberg forwarded an email to Ellis from Mason announcing that judgments totaling
$500,000 had been entered against Goldberg, but that Attorney Mason was working on
vacating those judgments. Goldberg stated: “[I]t looks like nobody will get anything until
I can get this matter cleared up.” Complaint at ¶ 28. 33. Applying his usual hourly rate,
Ellis’s services to Goldberg had a fair market value of $88,000.
Ellis has filed a Complaint asserting claims for breach of contract, fraud, and unjust
enrichment against Goldberg. Ellis asserts diversity jurisdiction and sufficient amount in
controversy pursuant to 28 U.S.C. § 1332. In response, Goldberg filed a pro se pre-answer
Motion To Dismiss (docket no. 9), pursuant to Rule 12(b)(1) of the Federal Rules of Civil
Procedure. Goldberg asserts that this court lacks subject matter jurisdiction over Ellis’s
Complaint, because Ellis cannot demonstrate that the amount in controversy exceeds the
sum or value of $75,000. Ellis filed a Resistance to the Motion To Dismiss. In essence,
Ellis argues that the amount in controversy is in excess of the jurisdictional minimum,
because his unjust enrichment claim meets the minimum amount in controversy
requirement on its face. Ellis further argues that his fraud claim would permit the jury to
award him consequential and punitive damages in addition to his $65,000 fee, so that the
amount in controversy requirement is met. Goldberg has not filed a reply to Ellis’s
Amount in Controversy Standards
In this case, subject matter jurisdiction is premised on diversity jurisdiction pursuant
to 28 U.S.C. § 1332. Section 1332(a) provides, in pertinent part, as follows:
(1) The district courts shall have original jurisdiction of all civil
actions where the matter in controversy exceeds the sum or
value of $75,000, exclusive of interest and costs, and is
(1) citizens of different states. . . .
28 U.S.C. § 1332(a)(1). In other words, “‘[w]hen the two parties to an action are citizens
of different states, as they are here, a federal district court’s jurisdiction extends to “all civil
actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of
interest and costs.”’” Scottsdale Ins. Co. v. Universal Crop Protection Alliance, L.L.C.,
620 F.3d 926, 930 (8th Cir. 2010) (quoting Kopp v. Kopp, 280 F.3d 883, 884 (8th Cir.
2002), in turn quoting 28 U.S.C. § 1332(a)).
The parties here do not dispute that there is complete diversity between Ellis and
Goldberg. See Junk v. Terminix Int'l Co., 628 F.3d 439, 445 (8th Cir. 2010) (“Subject
matter jurisdiction asserted under 28 U.S.C. § 1332 may be maintained only where there is
complete diversity, that is ‘where no defendant holds citizenship in the same state where
any plaintiff holds citizenship.’” (quoting In re Prempro Prods. Liab. Litig., 591 F.3d 613,
620 (8th Cir. 2010)). Thus, the critical question is whether the amount in controversy
requirement of § 1332 is met. Clark v. Matthews Int'l Corp., 639 F.3d 391, 399 (8th Cir.
2011) (“To invoke the jurisdiction of a federal court under 28 U.S.C. § 1332, a plaintiff
must allege that the amount in controversy exceeds $75,000.”); 28 U.S.C. § 1332.
Rule 12(b)(1) of the Federal Rules of Civil Procedure provides for a pre-answer
motion to dismiss for lack of subject matter jurisdiction. FED. R. CIV. P. 12(b)(1). Such a
motion to dismiss may be based on insufficient amount in controversy.
Solutions, L.L. C. v. Borchert, 486 F.3d 342, 347 (8th Cir. 2007). Even on a Rule 12(b)(1)
motion to dismiss by the opposing party, “the party invoking federal jurisdiction has the
burden of proving the requisite amount [in controversy] by a preponderance of the
evidence.” Id.; accord Scottsdale Ins. Co., 620 F.3d at 930 (if the defendant challenges the
plaintiff’s allegations of the amount in controversy, “then the plaintiff must establish
jurisdiction by a preponderance of the evidence.” (internal quotation marks and citations
More specifically, the Eighth Circuit Court of Appeals has explained “the basics”
of assessing amount in controversy, as follows:
As a party invoking the court’s jurisdiction, [the plaintiff] has
an obligation to show, by a preponderance of the evidence,
facts supporting jurisdiction. McNutt v. Gen. Motors
Acceptance Corp., 298 U.S. 178, 189, 56 S. Ct. 780, 80 L. Ed.
1135 (1936). In this case, [the plaintiff] has to show the amount
in controversy in both counts exceeds the sum or value of
$75,000, exclusive of interest and costs. See 28 U.S.C.
§ 1332(a). Although the sum claimed by the plaintiff in good
faith is usually dispositive, it does not control where it appears
to a legal certainty the plaintiff’s claim is actually for less than
the jurisdictional amount. St. Paul Mercury Indem. Co. v. Red
Cab Co., 303 U.S. 283, 289, 58 S. Ct. 586, 82 L. Ed. 845
(1938); Zunamon v. Brown, 418 F.2d 883, 886 (8th Cir. 1969).
The legal certainty standard is met where the “legal
impossibility of recovery [is] so certain as virtually to negative
the plaintiff’s good faith in asserting the claim.” JTH Tax, Inc.
v. Frashier, 624 F.3d 635, 638 (4th Cir. 2010) (internal
quotation marks and citation omitted); see also Horton v.
Liberty Mut. Ins. Co., 367 U.S. 348, 353, 81 S. Ct. 1570, 6 L.
Ed.2d 890 (1961) (“The general federal rule has long been to
decide what the amount in controversy is from the complaint
itself, unless it appears or is in some way shown that the
amount stated in the complaint is not claimed ‘in good faith.’”).
In other words, whether the plaintiff makes his allegations in
good faith is “but a linguistic variance” of the legal-certainty
test. Zunamon, 418 F.2d at 886 n. 3.
It is axiomatic the court’s jurisdiction is measured either at the
time the action is commenced or . . . at the time of removal.
McLain v. Andersen Corp., 567 F.3d 956, 965 (8th Cir. 2009);
Kansas Pub. Employees Ret. Sys. v. Reimer & Kroger Assocs.,
Inc., 77 F.3d 1063, 1067–68 (8th Cir. 1996). “The inability of
plaintiff to recover an amount adequate to give the court
jurisdiction does not show his bad faith or oust the
jurisdiction.” St. Paul Mercury, 303 U.S. at 289, 58 S. Ct. 586,
82 L. Ed. 845. Neither the existence of a valid defense nor
subsequent events reducing the amount in controversy divest
the court of jurisdiction. See Zacharia v. Harbor Island Spa,
Inc., 684 F.2d 199, 202 (2d Cir. 1982) (holding existence of a
valid defense limiting plaintiff’s recovery to $1,000 did not
divest the court of jurisdiction to hear the case); Klepper v.
First Am. Bank, 916 F.2d 337, 340 (6th Cir. 1990) (holding
dismissal of the plaintiff’s key claims on summary judgment
did not affect the amount in controversy); Griffin v. Red Run
Lodge, Inc., 610 F.2d 1198, 1204 (4th Cir. 1979)
(determination that one of the aggregated claims, which was
necessary to reach the jurisdictional threshold, was without
merit did not destroy jurisdiction).
This is not to say subsequent events are entirely irrelevant.
“Subsequent events may ... be relevant to prove the existence
or nonexistence of diversity jurisdiction at the time of filing,”
Scottsdale Ins. Co. v. Universal Crop Prot. Alliance, Inc., 620
F.3d 926, 931 (8th Cir. 2010), and a “distinction must be made
... between subsequent events that change the amount in
controversy and subsequent revelations that, in fact, the
required amount was or was not in controversy at the
commencement of the action.” Powell, 87 F.3d at 97 (internal
quotation marks, citation and emphasis omitted). In
considering the types of materials which can contain such
“revelations,” courts have mentioned the “face of the
pleadings,” St. Paul Mercury, 303 U.S. at 289, 58 S. Ct. 586,
82 L. Ed. 845, and the “proof adduced to the court before trial,”
Kopp v. Kopp, 280 F.3d 883, 885 (8th Cir. 2002).
There is admittedly certain tension between the principle that
post-removal events do not affect jurisdiction and that pre-trial
proofs can be used to assess the amount in controversy as it
existed at the time of removal. It is resolved, however, by
deferring to the plaintiff’s estimate with respect to the amount
in controversy whenever the impossibility of recovery is not
apparent from the face of the pleadings but emerges from
adjudication of the merits. See McDonald v. Patton, 240 F.2d
424, 426 (4th Cir. 1957). Further, resort to materials developed
in discovery is allowed merely to “amplify the meaning of the
complaint allegations.” Zacharia, 684 F.2d at 202.
Schubert v. Auto Owners Ins. Co., 649 F.3d 817, 822–23 (8th Cir. 2011).
Goldberg argues that Ellis’s claim is limited to the $65,000 that Ellis asserts was
due under their contract. Goldberg argues that this establishes to a legal certainty that the
amount in controversy does not exceed $75,000. Goldberg’s argument is not persuasive,
because it completely fails to take Ellis’s claims for unjust enrichment and fraud into
Unjust enrichment, an equitable doctrine “based on the concept of an implied
contract,” Iowa Network Servs., Inc. v. Qwest Corp., 363 F.3d 683, 694 (8th Cir. 2004)
(applying Iowa law), is rooted in “the principle that a party should not be permitted to be
unjustly enriched at the expense of another or receive property or benefits without paying
just compensation.” State ex rel. Palmer v. Unisys Corp., 637 N.W.2d 142, 154 (Iowa
2001). The Eighth Circuit Court of Appeals has explained, “To recover for unjust
enrichment [under Iowa law], [the plaintiff] must show: ‘(1) [the defendant] was enriched
by the receipt of a benefit; (2) the enrichment was at the expense of [the plaintiff]; and (3)
it is unjust to allow the defendant to retain the benefit under the circumstances.’” Lakeside
Feeders, Inc. v. Producers Livestock Mktg. Ass’n, 666 F.3d 1099, 1112 (8th Cir. 2012)
(quoting State ex rel. Palmer v. Unisys Corp., 637 N.W.2d 142, 149 (Iowa 2001)). Ellis
alleges that he performed $88,000 in legal services for Goldberg based on promises made
by Goldberg and that Goldberg has benefitted from those legal services. Goldberg,
however, has not paid Ellis for these services. Thus, Ellis’s unjust enrichment claim, on
its face, is for more than $75,000. Accordingly, I find that Ellis, the party asserting federal
diversity jurisdiction, has demonstrated by a preponderance of the evidence that the amount
in controversy, as between Ellis and Goldberg, exceeded $75,000 at the time that Ellis filed
Ellis also claims punitive damages as a result of Goldberg’s alleged fraudulent
behavior. In determining whether diversity jurisdiction exists, a court is obligated to
consider claims for both actual and punitive damages in determining the jurisdictional
amount. See Bell v. Preferred Life Assurance Society, 320 U.S. 238, 242 (1943); Miera v.
Dairyland Ins. Co., 143 F.3d 1337, 1340 (10th Cir. 1998); A.F.A. Tours Inc. v. Whitchurch,
937 F.2d 82, 87 (2d Cir. 1991); Kahal v. J.W. Wilson & Assocs., Inc., 673 F.2d 547, 548
(D.C. Cir. 1982). Where federal jurisdiction depends on a claim for punitive damages, the
court should “scrutinize the punitive damage claim to ensure that it has at least a colorable
basis in law and fact. . . . liberal pleading rules are not a license for plaintiffs to shoehorn
essentially local actions into federal court through extravagant or invalid punitive damage
claims.” Kahal, 673 F.2d at 548. Here, if I apply even a single figure damages multiplier
in evaluating the amount in controversy, see Rosen v. Chrysler Corp., 205 F.3d 918, 922
(6th Cir. 2000); Chabner v. United of Omaha Life Ins. Co., 225 F.3d 1042, 1046 (9th Cir.
2000); Miera v. Dairyland Ins. Co., 143 F.3d 1337, 1340 (10th Cir. 1998), Ellis has alleged
a sufficient amount in controversy.
Thus, I conclude that Ellis has met his burden to show by a preponderance of the
evidence that the amount in controversy exceeds $75,000 and that this court has diversity
subject matter jurisdiction over this case. Accordingly, Goldberg’s pro se Motion to
Dismiss is denied.
In summary, I conclude that Ellis met his burden to show by a preponderance of the
evidence that the amount in controversy exceeds $75,000. I am satisfied that this court has
diversity subject matter jurisdiction over this case. Accordingly, Goldberg’s pro se Motion
to Dismiss is denied.
IT IS SO ORDERED.
DATED this 6th day of March, 2017.
MARK W. BENNETT
U.S. DISTRICT COURT JUDGE
NORTHERN DISTRICT OF IOWA
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