Brand Energy Solutions, LLC v. Rakocy

Filing 13

ORDER and REASONS re 11 Motion to Dismiss for Lack of Subject Matter Jurisdiction. IT IS ORDERED that "Defendant's Rule 12(b)(1) Motion to Dismiss for Lack of Subject Matter Jurisdiction" (Rec. Doc. 11) is GRANTED, and Plaintiff's claims are hereby DISMISSED WITHOUT PREJUDICE, as stated within document. Signed by Chief Judge Kurt D. Engelhardt on 12/29/2016. (cbs)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

BRAND ENERGY SOLUTIONS, LLC

CIVIL ACTION

VERSUS

NO. 16-13990

ANDY RAKOCY

SECTION “N” (5)

ORDER AND REASONS
Presently before the Court is “Defendant’s Rule 12(b)(1) Motion to Dismiss for Lack of
Subject Matter Jurisdiction” (Rec. Doc. 11) filed by Defendant Andy Rakocy (“Rakocy”), which
is opposed (Rec. Doc. 20) by Plaintiff Brand Energy Solutions, LLC (“Brand”). Having carefully
considered the parties’ supporting and opposing submissions and applicable law, IT IS
ORDERED that Rakocy’s motion to dismiss is GRANTED.
I.

BACKGROUND

The instant suit arises out of Rakocy’s alleged breach of a “Confidentiality, Non-Competition,
Non-Solicitation, and Invention Assignment Agreement” (“Agreement”) and failure to pay a
promissory note 1 following his resignation from Brand on May 17, 2016. On August 19, 2016,
Brand filed a Verified Complaint, supported by an attached “Declaration of Bernard Maise,”
seeking “damages and injunctive relief based on Rakocy’s breach of contract including of the noncompetition and non-solicitation provisions of the Agreement between Rakocy and Brand, and of

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The amount to be paid on the promissory note is also included in this Court’s evaluation of whether the
amount in controversy requirement has been met. The principal amount of the promissory note was $3,648.54;
however, after two payments were made, the outstanding balance is currently $2,432.36, plus applicable interest.
Since this is a definitive amount of money, the remainder of this Order will discuss the amount in controversy in
regards to the alleged breach of the Agreement.

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the Promissory Note.” (Rec. Doc. 1). In its complaint, Brand alleges that at the outset of Rakocy’s
employment as Regional Manager, Rakocy signed the Agreement, which stipulated that he would
not compete with Brand for “one year after separation from employment in a limited geographical
area.” Id. Brand further alleges that after Rakocy left his employment with Brand, he immediately
began employment with one of Brand’s direct competitors and “attempted to solicit at least three
Brand customers on behalf of his new employer.” Id. Furthermore, Brand argues that this Court
has jurisdiction over the matter pursuant to 28 U.S.C. § 1332(a), as the parties are citizens of
different states and the amount in controversy exceeds $75,000. Id.
Subsequently, Rakocy filed a motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(1), alleging that this Court lacks subject matter jurisdiction over the matter. (Rec. Doc. 11).
Specifically, Rakocy alleges that Brand “has failed to satisfy the jurisdictional amount required at
minimum under 28 U.S.C. § 1332, because its allegations of jurisdiction are not supported by
competent evidence that would be admissible at trial.” Id. Rakocy argues that while Brand alleges
that “the total business revenue earned from these three customers over the last 12 months was
well in excess of $500,000.00,” Brand only supports this assertion with the “Declaration of
Bernard Maise.” Id. Specifically, Rakocy attacks the declaration because “there is no indication of
the underlying facts, the source of the knowledge, or the means by which Mr. Maise learned of
these assertions or any factual proof beyond the Declaration.” Id. Therefore, Rakocy argues that it
is facially apparent from Brand’s complaint that the “amount in controversy standard” has not been
satisfied, and the Court must “look to summary judgment evidence” to determine whether the
requisite jurisdictional amount in controversy is present. Id.
Brand opposed the motion, arguing that Rakocy does not allege that the amount in controversy
is less than $75,000, “much less establish to a legal certainty that the amount does not exceed
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$75,000.” (Rec. Doc. 20). Brand argues that Rakocy has not made a proper “factual attack” on the
allegations that support this Court having subject matter jurisdiction. Id. Consequently, the Court
need not consider any evidence in ruling on the motion, since the allegations regarding jurisdiction
establish an amount in controversy that exceeds $75,000. Id. However, Brand argues that, even if
the Court did consider extrinsic evidence regarding the amount in controversy, Bernard Maise’s
declaration would be admissible evidence to establish that the amount in controversy exceeds
$75,000. Id.
II.

LAW AND ANALYSIS

Pursuant to 28 U.S.C. § 1332, the United States district courts possess subject matter
jurisdiction over actions involving citizens of different states when the amount in controversy
exceeds $75,000. In an action in which a party seeks declaratory or injunctive relief, the Court is
to measure the amount in controversy by the “value of the object of the litigation.” Hunt v.
Washington State Apple Advertising Com’n, 432 U.S. 333, 347, 97 S.Ct. 2434, 53 L.Ed.2d 383
(1977). In other words, in an action involving declaratory or injunctive relief, the amount in
controversy is “the value of the right to be protected or the extent of the injury to be prevented.”
Farkas v. GMAC Mortg., LLC, 737 F.3d 338, 341 (5th Cir. 2013) (citing Leininger v. Leininger,
705 F.2d 727, 729 (5th Cir. 1983)).
For a Rule 12(b)(1) motion to dismiss, the party asserting federal jurisdiction (Brand, in this
case) bears the burden of proof. Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001)
(citing McDaniel v. United States, 899 F.Supp. 305, 307 (E.D.Tex. Sept. 18, 1995)). Therefore,
“the plaintiff constantly bears the burden of proof that jurisdiction does in fact exist.” Id. (citing
Menchaca v. Chrysler Credit Corp., 613 F.2d 507, 511 (5th Cir.1980)). For a Rule 12(b)(1) motion
to dismiss, the Court may base its resolution of the motion “on any one of three separate bases: (1)
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the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record;
or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts.”
Voluntary Purchasing Groups, Inc. v. Reilly, 889 F.2d 1380, 1384 (5th Cir.1989) (quoting
Williamson v. Tucker, 645 F.2d 404, 413 (5th Cir.), cert. denied, 454 U.S. 897, 102 S.Ct. 396, 70
L.Ed.2d 212 (1981)).
Generally, it must appear to a legal certainty that a claim is really for less than the jurisdictional
amount in order for a federal court to decline jurisdiction. De Aguilar v. Boeing Co., 47 F.3d 1404,
1409 (5th Cir. 1995). With regards to this “legal certainty” test, the Fifth Circuit has held that this
test only applies in the “typical diversity situation” in which a “plaintiff expressly alleges damages
that exceed the jurisdictional amount.” Edinburgh v. American Sec. Ins. Co., Civil Action No. 10613, 2010 WL 3923292, at *2 (E.D.La. Sept. 28, 2010) (citing De Aguilar, 47 F.3d at 1409).
Moreover, when a plaintiff does allege a specific amount of damages, then the sum claimed by
plaintiff will control if that claim is apparently made in good faith. Id. (citing St. Paul Mercury
Indem. Co. v. Red Cab Co., 303 U.S. 283, 288 (1938)).
However,
The inquiry is different “when a complaint does not allege a specific amount of
damages.” St. Paul Reinsurance, 134 F.3d at 1253. In such a case, “the party
invoking federal jurisdiction must prove by a preponderance of the evidence that
the amount in controversy exceeds the jurisdictional amount.” Id. (citing Allen v. R
& H Oil & Gas Co., 63 F.3d 1326, 1335 (5th Cir.1995)). “The district court must
first examine the complaint to determine whether it is ‘facially apparent’ that the
claims exceed the jurisdictional amount.” Id. (quoting Allen, 63 F.3d at 1336). If it
is not facially apparent from the complaint that the claims exceed $75,000, the court
will look to “‘summary judgment-type’ evidence to ascertain the amount in
controversy.” Id. at 1253 (quoting Allen, 63 F.3d at 1336).
Edinburgh, 2010 WL 3923292, at *2. In the instant case, Brand alleges that the “value of the
future effect of Rakocy’s breach of the Agreement exceeds $500,000 and thus this matter is
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properly before this Court pursuant to 28 U.S.C. § 1332(a).” (Rec. Doc. 1). In support of this,
Brand submitted an affidavit of Bernard Maise, the Branch Manager of the Morgan City, Louisiana
branch of Brand, which stated that he learned that Rakocy had contacted and attempted to solicit
three Brand customers on behalf of his new employer within the area restricted by the Agreement.
See Rec. Doc. 1-1. Furthermore, the complaint as well as the affidavit stated that Brand’s total
business revenue earned from those three customers over the preceding twelve months was well
in excess of $500,000.
Here, Brand does not allege a specific amount of damages; rather, Brand alleges what it
believes to be the value of the potential future effect of the alleged breach of the Agreement. “When
a business is threatened . . . by breach of a covenant not to compete—the stated rule is that the
amount in controversy in an action for injunctive or declaratory relief is the difference between the
value of the business. . . with the covenant, and its value. . . subject to the breach of the covenant.”
14AA Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 3708 (4th ed.
2016); see also Zep Mfg. Corp. v. Haber, 202 F.Supp. 847 (S.D. Tex. 1962) (the measure of the
jurisdictional amount is the profit that will be lost by the employer as a result of the employee’s
breach of contract in an action seeking to restrain or enjoin the alleged violation of a covenant not
to compete) (emphasis added). Furthermore, past harm as well as potential harm to the business
may be considered by the court. Id. Specifically, with regards to a “suit brought by an employer
against a former employee to enforce a covenant not to compete, the court will usually look to the
profits earned by the employer or business generated by the employee during the period
immediately preceding his termination.” Id. (emphasis added).
Based upon Brand’s allegations within its complaint, this Court finds that it is not facially
apparent that the jurisdictional amount in controversy has been met in this case. In its complaint,
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Brand alleges that as the Regional Sales Manager in Louisiana, Texas, and Gulf of Mexico region,
Rakocy maintained the customer accounts for fifty-two customers, listed within the complaint. See
Rec. Doc. 1. Brand further alleges that following Rakocy’s termination of employment, he
accepted employment with a direct competitor, Apache Industrial Services (“Apache”), in
violation of the Agreement. Id. Following his acceptance of employment with Apache, Brand
alleges that Rakocy has attempted to solicit at least three Brand customers with whom he worked
as Regional Sales Manager of Brand, including Chevron (Lafayette and Plaquemines Parishes and
Harris County, TX), Freeport-McMoRan, Inc. (Orleans Parish), and Ankor Energy (Orleans
Parish). Id. Brand then alleges that the total business revenue earned from these three customers
over the last twelve months was well in excess of $500,000. Id.
The Court finds that Brand’s allegations are not sufficient to establish that the amount in
controversy exceeds $75,000. “The Fifth Circuit has found where the object of the litigation is to
protect one’s business affairs free from the interference of others, ‘[t]he value of that right is
measured by the losses that will follow’ from such interference.” Birk v. Hub Inter. Southwest
Agency, Ltd., No. EP-08-CA-259-FM, 2008 WL 4372694, at *3 (W.D. Tex. Sept. 11, 2008) (citing
Aladdin’s Castle, Inc. v. City of Mesquite, 630 F.2d 1029, 1035-36 (5th Cir. 1980)). As previously
mentioned, in evaluating the value of the particular right to be protected in cases involving a breach
of a non-competition agreement, many courts only look to lost profits or potential lost profits as
the analogous basis for determining the amount in controversy. See Haber, 202 F.Supp. at 848-49
(“At best, the estimated profit . . . derived from defendant’s 1961 sales is only an analogous basis
for determining the value to plaintiff of an injunction prohibiting defendant’s competition with
plaintiff during a year of uncertain business activity.”); Puckett Machinery Co. v. United Rentals,
Inc., 342 F.Supp.2d 610, 616 (S.D. Miss. Oct. 29, 2004) (“Nevertheless, the Defendant has not

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carried its burden…All of the information Defendant has supplied this Court deals with revenues,
and not profits.”). Here, Brand does not make any reference to profits or potential lost profits;
rather, Brand only alleges that the revenue generated from three customers from the preceding
twelve months “is well in excess of $500,000.00.” (Rec. Doc. 1).
However, courts have also considered revenues or other bases for determining the value of the
right of a business to be free from interference by others, i.e. a breach of a non-compete/nonsolicitation agreement by a former employee. See Premier Indus. Corp. v. Texas Indus. Fastener
Co., 450 F.2d 444 (5th Cir. 1971) (“The court below could have found the presence of the requisite
amount in controversy . . . upon each of a number of approaches: . . . (b) the value of Premier’s
lost sales revenue because of the employment of Roos by TIFCO . . . ; (c) the value of the future
effect of TIFCO’s breach and intervention by Roos upon all of Premier’s other contracts . . .”);
Redi-Mix Solutions, Ltd. v. Express Chipping, Inc., Civil Action No. 6:16-cv-298-MHS-KNM,
2016 WL 3406254 at *3 (E.D. Tex. May 3, 2016) (“Overall, the evidence submitted by Defendants
demonstrates the value of the right Plaintiffs seek to protect—their existing business relationships
and revenue derived therefrom—is in the range of several hundred thousand, to potentially
millions of dollars.”). In the instant matter, the losses that would result from the solicitation or
breach of the Agreement would be Brand’s business relationships as well as the revenue derived
therefrom. The record is void of such evidence. Brand’s conclusory statement that the revenue
derived from three customers was well in excess of $500,000 and the affidavit of Bernard Maise
that reiterates the same statement fail to address this, and thus do not prove by a preponderance of
the evidence that the amount in controversy exceeds $75,000.
Besides these statements, Brand has not provided any other information indicating the potential
amount in controversy in this matter. In the aforementioned cases, the courts were able to evaluate
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records that consisted of more than conclusory statements. Therefore, based upon the allegations
within the complaint and the exhibits, Plaintiff has failed to prove by a preponderance of the
evidence that the amount in controversy requirement is met in this matter.
III.

CONCLUSION

Accordingly, for the reasons stated herein,
IT IS ORDERED that “Defendant’s Rule 12(b)(1) Motion to Dismiss for Lack of Subject
Matter Jurisdiction” (Rec. Doc. 11) is GRANTED, and Plaintiff’s claims are hereby DISMISSED
WITHOUT PREJUDICE.
New Orleans, Louisiana, this 29th day of December, 2016.

__________________________________
KURT D. ENGELHARDT
UNITED STATES DISTRICT JUDGE

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