ITNAMERICA v. NUTMEG SENIOR RIDES INC
Filing
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ORDER denying 11 Motion to Dismiss By JUDGE NANCY TORRESEN. (rmb)
UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
ITNAMERICA,
)
)
Plaintiff,
)
)
v.
) Docket No. 2:15-cv-96-NT
)
NUTMEG SENIOR RIDES, INC. f/k/a
)
ITNNORTHCENTRALCONNECTICUT, )
)
Defendant.
)
)
)
ORDER ON DEFENDANT’S MOTION TO DISMISS
Before the Court is the Defendant’s motion to dismiss (ECF No. 11) the
Plaintiff’s Complaint pursuant to Federal Rule of Civil Procedure 12(b)(1). For the
reasons stated below, the motion is DENIED.
BACKGROUND
This matter arises out of a contract dispute between ITNAmerica (the
“Plaintiff”) and ITNNorthCentralConnecticut, which now operates under the name
Nutmeg Senior Rides, Inc. (the “Defendant”). Compl. ¶¶ 1, 35, 38, 52 (ECF No. 1).
According to the allegations in the Complaint, the Plaintiff is a Maine nonprofit
corporation that provides transportation services for seniors by working with local
affiliates in different areas across the country. Compl. ¶ 2. The Defendant is a
nonprofit corporation that offers “rides for seniors and adults with visual[]
impairments in ten towns in North Central Connecticut.” Compl. ¶¶ 3, 10, 38.
In September of 2007, the parties entered into an Affiliate Community
Agreement (the “Agreement”) with a five year term. Compl. ¶¶ 9, 16.1 The
Agreement gave the Defendant access to the Plaintiff’s “proprietary software and
programs,” including the Plaintiff’s ITNRides software that “serve[d] both as a
research database and as an operational support system.” Compl. ¶¶ 12, 13. The
Agreement required the Defendant to use this proprietary software “solely in
connection with the provision of ITNA Programs and Services.” Compl. ¶ 14.
The Defendant agreed to pay the Plaintiff annual affiliate fees, which included
an annual base fee and an adjusted fee based on the number of members and rides
provided. Compl. ¶ 15. The Agreement also contained a non-compete provision
preventing the Defendant from operating a community-based transportation service
for seniors in North Central Connecticut for a period of one year following the
termination or expiration of the Agreement. Compl. ¶ 20.
In March of 2012, the relationship between the parties began to deteriorate
when they began discussions on the terms of a new agreement. Compl. ¶ 27. At this
time, the Defendant began to express reservations concerning the Plaintiff’s
“strategic vision and overall financial well-being.” Compl. ¶ 28. On September 25,
2012, the Plaintiff notified the Defendant that its affiliate fees would increase
The term of the Agreement was initially 5 years “but renewed automatically for successive one
year terms” until either party gave the other written notice of non-renewal. Compl. ¶ 16. To avoid
automatic renewal, notice of non-renewal needed to be sent by certified mail least 180 days before the
expiration date. Compl. ¶¶ 16-17. If the Defendant wanted to terminate the agreement to pursue
affiliation with another organization while continuing operations, the Agreement required 12 months
prior written notice. Compl. ¶¶ 18, 19. If the Defendant simply ceased operations, the Agreement
required 90 days’ notice prior to termination. Compl. ¶ 19.
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beginning October 1, 2013. Compl. ¶ 29. The parties continued discussions over the
course of the next year. Compl. ¶ 30.
On September 20, 2013, the Defendant notified the Plaintiff that it was
“suspend[ing] payment of affiliate fees to [the Plaintiff] until further notice” and that
it intended “to continue providing rides to individuals in the community.” Compl. ¶
31. Thereafter, the Defendant ceased paying affiliate fees to the Plaintiff. Compl. ¶¶
32, 34. From the fall of 2013 to December of 2014, the parties unsuccessfully
attempted to resolve their dispute. Compl. ¶¶ 32-33. On December 12, 2014, the
Defendant sent a letter to the Plaintiff stating that the Plaintiff had elected not to
renew the “original affiliation agreement” with the Defendant a “few years ago” and
that the Defendant planned to “move forward independently” and continue operating
in North Central Connecticut. Compl. ¶ 35. The Plaintiff states that it never elected
not to renew the Agreement. Compl. ¶ 36. Rather, the Plaintiff claims that the
Agreement was in fact still binding on the parties in December of 2014—and remains
so today—because neither party effectively terminated the Agreement. Compl. ¶¶ 3637.
PROCEDURAL HISTORY
On March 11, 2015, the Plaintiff filed a Complaint against the Defendant in
this Court. In lieu of filing an answer, the Defendant moved pursuant to Federal Rule
of Civil Procedure 12(b)(1) to dismiss all of the counts against it, alleging that this
Court lacks subject matter jurisdiction because the Plaintiff’s action does not satisfy
the amount in controversy requirement under 28 U.S.C. § 1332. Def.’s Mot. to Dismiss
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1. The Plaintiff filed a response in opposition, Pl.’s Opp’n to Def.’s Mot. to Dismiss 8
(“Pl.’s Opp’n”) (ECF No. 12), and an affidavit from Plaintiff’s President Katherine
Freund. June 3, 2015 Aff. of Katherine Freund ¶ 1 (ECF No. 12-1). In its reply, the
Defendant argues that the Plaintiff has still failed to meet its burden of establishing
the requisite amount in controversy. Def.’s Reply 1 (ECF No. 13).
LEGAL STANDARD
“Federal courts are courts of limited jurisdiction,” restricted to hear matters
“authorized by Constitution and statute.” Kokkonen v. Guardian Life Ins. Co. of Am.,
511 U.S. 375, 377 (1994). Federal Rule of Civil Procedure 12(b)(1) permits a party to
move to dismiss a complaint on the grounds that the court lacks subject matter
jurisdiction. It is the plaintiff’s burden to establish that federal jurisdiction is proper.
Abdel-Aleem v. OPK Biotech LLC, 665 F.3d 38, 41 (1st Cir. 2012).
DISCUSSION
Under 28 U.S.C. § 1332, federal “district courts . . . 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 diversity of citizenship exists. 28 U.S.C.
§ 1332(a). The well-established rule for determining whether the amount in
controversy requirement has been met is that:
[U]nless 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.
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St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89 (1938) (footnotes
omitted). Thus, under this rule, “a plaintiff’s general allegation that the dispute
exceeds the jurisdictional minimum is sufficient to support jurisdiction.” Dep't of
Recreation & Sports v. World Boxing Ass'n, 942 F.2d 84, 88 (1st Cir. 1991).
If, however, this allegation of damages is challenged, “the party seeking to
invoke jurisdiction has the burden of alleging with sufficient particularity facts
indicating that it is not a legal certainty that the claim involves less than the
jurisdictional amount.” Stewart v. Tupperware Corp., 356 F.3d 335, 338 (1st Cir.
2004) (citation and internal quotation marks omitted). Commentators have
interpreted the legal certainty concept as demanding the “conclusion that as a matter
of law, the jurisdictional amount cannot be recovered or, stated differently, no
reasonable jury could award that amount.” 14AA Charles Alan Wright, Arthur R.
Miller, Edward H. Cooper, Federal Practice & Procedure § 3702 (4th ed.). This burden
can be met “by amending the pleadings or by submitting affidavits.” Dep't of
Recreation & Sports, 942 F.2d at 88.
Although there is no dispute that the parties are diverse, the Defendant
contends that the Complaint does not meet § 1332’s $75,000 amount in controversy
requirement because “[t]he total amount of damages appearing on the face of the
Complaint . . . is $23,881.71.” Def.’s Mot. to Dismiss. 4. Thus, the Plaintiff must
“allege with sufficient particularity facts that in some way support the contention
that there is more than $75,000 at stake.” Abdel-Aleem, 665 F.3d 38 at 42 (citation
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and internal quotation marks omitted). For the reasons discussed below, the Plaintiff
has met its burden and the Defendant’s jurisdictional challenge fails.
I.
Calculating the Amount in Controversy in Cases Seeking Injunctive
Relief
In addition to a claim for breach of contract damages amounting to $23,881.71,
Compl. ¶¶ 48-49, the Plaintiff seeks, inter alia, injunctive relief based on the
Defendant’s alleged breach of the non-compete provision in the Agreement preventing
the Defendant from operating a community-based transportation system for seniors
in North Central Connecticut. Compl. ¶¶ 50-56. The Plaintiff contends that the value
of enjoining the Defendant, coupled with $23,881.71 in contract damages, satisfies
the amount in controversy requirement. Pl.’s Opp’n 6. Because the Plaintiff may
aggregate two or more of its claims against the Defendant, see Snyder v. Harris, 394
U.S. 332, 335 (1969), the Plaintiff need only establish that its claim for injunctive
relief is worth at least $51,118.30.
“In actions seeking declaratory or injunctive relief, it is well established that
the amount in controversy is measured by the value of the object of the litigation.”
Hunt v. Wash. State Apple Adver. Comm'n, 432 U.S. 333, 347 (1977). In other words,
“the value of the matter in controversy is measured not by the monetary judgment
which the plaintiff may recover but by the judgment’s pecuniary consequences to
those involved in the litigation.” Richard C. Young & Co. v. Leventhal, 389 F.3d 1, 3
(1st Cir. 2004); see also 14AA Charles A. Wright, Arthur R. Miller, Edward H. Cooper,
Federal Practice & Procedure § 3708, 143-44 (4th ed.) (noting that the amount in
controversy is based on the “value to the plaintiff to enjoy the property[,] business, or
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personal affairs that constitute the subject of the action free from the activity sought
to be enjoined”). Normally, this value determination is assessed from the viewpoint
of the plaintiff.2 CE Design Ltd. v. Am. Econ. Ins. Co., 755 F.3d 39, 43 (1st Cir. 2014);
see also Bedard v. Mortgage Elec. Registration Sys., Inc., No. 11-CV-117-JL, 2011 WL
1792738, at *2 (D.N.H. May 11, 2011) (quoting Dep't of Recreation & Sports of P.R. v.
World, 942 F.2d 84, 89 (1st Cir. 1991)) (“One (if not necessarily the only) way to take
that measure is to assess ‘the value of the right [the plaintiff] seeks to vindicate.’ ”).
II.
Calculating the Amount in Controversy in the Case at Hand
Here, the Freund affidavit states that the Defendant’s “operation of a
community-based transportation service in the North Central Connecticut area
makes it virtually impossible for [the Plaintiff] to attract” a new affiliate for that area.
June 3, 2015 Aff. of Katherine Freund ¶ 5. The Plaintiff alleges that, if a new affiliate
could be found in the area, a standard Affiliate Agreement “would require payment
of” $82,5003 over “the five years of the agreement’s term” in addition to a yearly fee
of $1.00 for each member of the new affiliate and $.01 per ride. June 3, 2015 Aff. of
Katherine Freund ¶ 6. Thus, according to the Plaintiff, “[t]his amount, when added
The Plaintiff correctly points out that the First Circuit has noted that, in some cases “the right
sought to be gained by a plaintiff is not always quantifiable” and that “[i]t is logical and more feasible
in these cases that the amount in controversy be assessed from the defendant’s perspective . . . .” CE
Design Ltd., 755 F.3d at 48. However, “[w]hile the value of injunctive relief is difficult to quantify,
federal courts have not had difficulty ‘find[ing] the requisite jurisdictional amount in actions brought
to enforce covenants not to compete.’ ” Info. Strategies, Inc. v. Dumosch, 13 F. Supp. 3d 135, 142 (D.D.C.
2014) (quoting Premier Indus. Corp. v. Tex. Indus. Fastener Co., 450 F.2d 444, 446 (5th Cir. 1971)).
Here, because the value of the claim can be readily determined from the Plaintiff’s perspective, I do
not need to address the value of the litigation from the Defendant’s viewpoint.
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According to the Plaintiff, a new affiliate would be required to pay the following fees: $30,000
in year one, $15,000 in year two, $15,000 in year three, $15,000 in year four, and $7,500 in year five.
June 3, 2015 Aff. of Katherine Freund ¶ 6.
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to the affiliate fees owed by [the Defendant] . . . easily exceeds the jurisdictional
minimum.” Pl.’s Opp’n 8.
The Plaintiff points to Novus Franchising, Inc. v. Livengood, No. CIV. 11-1651
MJD/TNL, 2012 WL 38580, at *5 (D. Minn. Jan. 9, 2012), a case involving an amountin-controversy challenge to a claim to enforce a non-compete agreement. Noting that
“[i]t is difficult to attract a new franchisee when a former franchisee is improperly
competing within the same area,” the court accepted the plaintiff’s evidence showing
that the value of a new franchise in the area would exceed the amount in controversy
requirement over time. Id. The court reasoned that, “[a]t this point in the litigation,
the Court cannot say that it is a legal certainty that [plaintiff] cannot prove that the
injunction is worth” enough to satisfy § 1332’s amount in controversy requirement.
Id. at *6. Other courts have reached similar conclusions. See, e.g., JTH Tax, Inc. v.
Frashier, 624 F.3d 635, 640 (4th Cir. 2010) (“For our purposes, all that matters is that
we cannot say with legal certainty that [Plaintiff’s] injunction [to enforce a noncompete] is worth less than the requisite amount.”).
The Defendant contends that the Plaintiff “has not provided the Court with
any support for the proposition that it would even be able to secure a new affiliate if
[the Defendant] were compelled to cease operation.” Def.’s Reply 5. The Defendant
notes that the Plaintiff has approached other affiliates in the area but that “none
have been willing to take over [the Defendant’s] operations in the event [the
Defendant] were to cease providing rides.” Def.’s Reply 5; see also June 22, 2015 Decl.
of Margaret Smith Hale ¶ 7 (“I am aware that [the Plaintiff] has approached other . .
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. affiliates in Connecticut to identify a possible successor to [the Defendant] . . . but
those affiliates have declined to take over operations in the North Central
Connecticut area because of the cost of operation and their limited resources.”).
According to the Defendant, the lack of evidence of new affiliates in the area makes
this case “easily distinguishable from Novus Franchising” because the Novus plaintiff
provided evidence of “potential franchisees.” Def.’s Reply 5.
The Defendant’s argument regarding the insufficiency of Plaintiff’s evidence is
misplaced. At this stage, the Plaintiff need only “set forth facts which, if true, would
prevent [the] court from concluding to a legal certainty that [Plaintiff] could not
recover more than $75,000.” King v. York Golf & Tennis Club, 230 F. Supp. 2d 123,
125 (D. Me. 2002). Although the Defendant attempts to challenge the veracity of the
Freund affidavit by claiming that no one is willing to affiliate with the Plaintiff in
North Central Connecticut, “this is not the time to resolve the merits of the dispute,
only to determine whether it is apparent to a legal certainty that [the Plaintiff] cannot
recover the amount claimed.” Allstate Ins. Co. v. Chretien, No. 12-cv-38-DBH, 2012
WL 6645697, at *2 (D. Me. Dec. 20, 2012). Because the Plaintiff has claimed that the
Defendant’s alleged on-going breach of the non-compete provision has made it
impossible to find a new affiliate, and because it is plausible that finding a new
affiliate could potentially be worth $82,500 to the Plaintiff, it is not legally certain
that the Plaintiff’s claim is worth less than $75,000. See Zacharia v. Harbor Island
Spa, Inc., 684 F.2d 199, 202 (2d Cir. 1982) (“The jurisdictional determination is to be
made on the basis of the plaintiff's allegations, not on a decision on the merits.
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Moreover, even where those allegations leave grave doubt about the likelihood of a
recovery of the requisite amount, dismissal is not warranted.”).
The Defendant unpersuasively argues that even if the Plaintiff had provided
competent evidence that it would suffer lost affiliate fees, the “the value of enforcing
a one-year noncompete provision certainly should not be measured by fees paid by a
new affiliate over five years.” Def.’s Reply 6 n. 2. But “the value of the matter in
controversy is measured . . . by the judgment’s pecuniary consequences to those
involved in the litigation.” Richard C. Young & Co., 389 F.3d at 3. Although the noncompete is limited to a one-year period the value of an injunction from the Plaintiff’s
perspective need not be limited to one year when it stands to gain financially past the
expiration of the non-compete. The Plaintiff’s potential agreement with a new affiliate
in North Central Connecticut would not automatically terminate once the noncompetition provision expired, rather the Plaintiff would continue to benefit
financially for the remaining balance of the agreement.4 See Novus Franchising, 2012
WL 38580, at **2, 6 (calculating the value of enforcing a two-year non-compete
agreement over the course of a 10-year term required by franchise agreement); Grow
Even if I were to accept this argument, it still would not necessarily mean that the value of
the injunction is less than $75,000. Under the Plaintiff’s new standard Agreement, the base fee for
year one is $30,000 and the Plaintiff is also entitled to $1.00 per member and $.01 for every ride. See
June 3, 2015 Aff. of Katherine Freund ¶ 6 (“In addition to the base fees, the affiliate would be required
to pay, on an annual basis $1.00 for each member and $.01 for each ride.”). Thus, even if I were to limit
my inquiry to the $30,000 due for year one—as opposed to including the remaining base fees spread
out over the next four years—it is still not legally certain that the Plaintiff would not satisfy the
amount in controversy requirement based on the $23,881.71 in contract damages and the additional
fees generated by new members and rides provided. The Plaintiff also argues that I should consider
its claims for unjust enrichment, misappropriation of trade secrets, interest, and attorney’s fees, in
determining the amount in controversy. I do not address these arguments because I am satisfied that
the value of enforcing the non-compete agreement is sufficient to meet the requisite jurisdictional
amount.
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Biz Int'l, Inc. v. MNO, Inc., No. CIV. NO. 01-1805-DWF, 2002 WL 113849, at *2 (D.
Minn. Jan. 25, 2002) (calculating the value of enforcing a non-compete over the course
of a ten-year franchise agreement for purposes of determining the amount in
controversy).
“[A]ll the plaintiff must do to carry [its] burden in the face of a motion to
dismiss is to set forth facts, which, if true, would prevent the trier from concluding to
a legal certainty that the potential recovery is capped at a figure below” $75,000.
Barrett v. Lombardi, 239 F.3d 23, 30-31 (1st Cir. 2001). The Plaintiff has met this
burden. Based on the facts alleged by the Plaintiff, taken as true, I cannot say that it
is legally certain that Plaintiff’s claim is worth less than the jurisdictional amount.
CONCLUSION
For the reasons stated above, the Court DENIES the Defendant’s motion to
dismiss (ECF No. 11).
SO ORDERED
/s/ Nancy Torresen
United States Chief District Judge
Dated this 8th day of September, 2015.
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