Joy Family Limited Partnership v. United Financial Banking Companies, Inc.

Filing 20

MEMORANDUM OPINION Signed by Judge Ellen L. Hollander on 8/28/13. (cags, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
JOY FAMILY LIMITED
PARTNERSHIP,
Plaintiff,
v.

Civil Action No. ELH-12-3741

UNITED FINANCIAL BANKING
COMPANIES, INC., trading as
THE BUSINESS BANK,
Defendant.
MEMORANDUM OPINION
The Joy Family Limited Partnership (the “Partnership”), plaintiff, has sued United
Financial Banking Companies, Inc. (“United Financial”), “trading as The Business Bank,”
defendant, for injurious falsehood (Count I); fraud (Count II); violation of the Maryland
Consumer Debt Collection Act (“MCDCA”), Md. Code (2005 Repl. Vol., 2012 Supp.), §§ 14201 et seq. of the Commercial Law Article (“C.L.”) (Count III); violation of the Maryland
Consumer Protection Act (“CPA”), C.L. §§ 13-201 et seq. (Count IV); and abuse of process
(Count V). In sum, the Partnership accuses defendant of intentionally clouding the title to a
condominium in Ocean City, Maryland, of which the Partnership is the equitable title holder, in
order to coerce the Partnership to pay a debt owed by the holder of legal title to the property.
Plaintiff seeks damages in an unspecified amount, along with attorneys’ fees and costs, and
asserts subject matter jurisdiction founded on diversity of citizenship. See 28 U.S.C. § 1332(a).
Two motions are now pending. United Financial has filed a Motion to Dismiss (ECF 12),
asserting that plaintiff has sued the wrong defendant, that diversity jurisdiction is lacking, and

that plaintiff’s complaint fails to state claims upon which relief can be granted. The Partnership
has filed a Motion for Leave to File Amended Complaint (“Motion to Amend”) (ECF 16),
seeking to substitute the proper defendant. Both motions have been fully briefed and can be
resolved without a hearing. See Local Rule 105.6.1 For the reasons that follow, I will grant the
Motion to Amend. With the identity of the proper parties thereby established, I conclude that
diversity jurisdiction is lacking.

Accordingly, I will grant the Motion to Dismiss on

jurisdictional grounds, and dismiss the suit for lack of subject matter jurisdiction, without
reaching the merits.
Factual Background
The property at issue is a condominium located at 1203 Edgewater Avenue, Unit B, in
Ocean City, Worcester County, Maryland (“Unit B”). Richard Joyeusaz, who is not a party to
this case, purchased Unit B in 2004 for $211,800. Members of the Partnership own Unit A,
which is adjacent to Unit B. Although the precise composition of the Partnership is not disclosed
in the record, it is apparent that Richard Joyeusaz’s father, Edward Joyeusaz, has a position of
authority in the Partnership.2
Richard’s friend, John Simmonds, contributed some money toward Richard’s purchase of
Unit B in 2004.3 Richard also procured financing for the purchase of Unit B through a mortgage

1

I have reviewed the Motion to Dismiss (ECF 12), the Partnership’s Opposition (ECF
13), defendant’s Reply (ECF 15), the Partnership’s Motion to Amend (ECF 16), and defendant’s
Opposition to the Motion to Amend (“Amend Opp.”) (ECF 17). The Partnership did not file a
reply in support of the Motion to Amend, and the time for it to do so has elapsed. See Local
Rule 105.2(a); Fed. R. Civ. P. 6.
2

To avoid confusion, I will hereafter refer to the father and son by their first names.

3

Although Mr. Simmonds was not listed on the purchase deed to Unit B, plaintiff alleges
that Richard considered Simmonds a “partial owner” of the condominium. Complaint ¶ 7.
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loan in the amount of $158,850 from The Business Bank, a Virginia financial institution.4 He
also incurred a second mortgage on Unit B, in the amount of $48,000, with another lending
institution. Id. ¶ 8.
Three years later, in late spring 2007, Richard decided to sell Unit B. Id. ¶ 9. Because
the members of the Partnership who own Unit A “desired to exercise some degree of control
over the use” of Unit B, the Partnership offered to purchase Unit B from Richard. On June 1,
2007, Richard and the Partnership executed a Sales Contract for Unit B. See Sales Contract, Ex.
A to Complaint (ECF 1-1). Edward signed the Sales Contract on behalf of the Partnership,
purporting to act as its “General Partner.” See Sales Contract at 5-6.5 The Sales Contract
provided for a deposit of $35,000 and a total sales price of $225,000. According to “Addendum
#1” to the Sales Contract, see Sales Contract at 6, the parties agreed that, although not listed on
the title, Mr. Simmonds was an “equal Owner” of Unit B with Richard; that the Partnership
would “take over” the monthly payments on The Business Bank mortgage and pay off the
second mortgage; and that settlement of the Sales Contract would occur within five years of the
date of ratification.
Edward had a longstanding business relationship with The Business Bank. Complaint
¶ 10. In June 2007, Edward visited The Business Bank’s office in Tyson’s Corner, Virginia to
discuss with The Business Bank’s management the Partnership’s intended purchase of Unit B.
Id. Edward met with the branch manager, Larry Baker, and his assistant, Danny Sisowath, and
4

The relationship between United Financial and The Business Bank is discussed, infra.

5

As I will discuss, infra, plaintiff states in the complaint that its general partner is a
Maryland limited liability company named JFP, LLC. Complaint ¶ 2. It is not clear whether this
discrepancy is a result of a change in the membership of the Partnership between the events at
issue and the filing of the complaint, or an inaccuracy in either the complaint or the Sales
Contract.
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explained that the Partnership “would not purchase the Condominium without the Bank’s board
of director’s approval of the transaction.” Id. ¶ 11. Edward sought assurances that the purchase
would not result in a default of The Business Bank’s loan to Richard. According to plaintiff,
Baker and Sisowath confirmed that the sale would not trigger a default, and approved the
transaction. Id.
Edward then directed The Business Bank to withdraw $100,000 from the Partnership’s
accounts at The Business Bank and to pay that amount toward The Business Bank mortgage on
Unit B, reducing the outstanding $147,000 principal obligation on the mortgage to a balance of
$47,000. Id. ¶ 12. In addition, the Partnership paid the $35,000 deposit due under the Sales
Contract to Richard and Mr. Simmonds in two equal shares of $17,500, in the following manner:
the Partnership paid Mr. Simmonds $15,200, after deducting $2,300 for repair costs from
Simmonds’ $17,500 share, and applied Richard’s $17,500 share to other debts that Richard owed
the Partnership. Id. ¶ 13. The Partnership fully paid off the second mortgage on Unit B on
September 4, 2008, after Edward negotiated a reduced prepayment with the mortgage lender. Id.
¶ 15. And, the Partnership paid all of the successive monthly payments on the mortgage owed to
The Business Bank, and paid off The Business Bank mortgage in September 2010. Id. ¶ 14.
Thus, in total, the Partnership paid $221,850 to various entities in connection with its purchase of
Unit B.
In the meantime, Richard and his wife had borrowed money from The Business Bank to
establish a nail salon in Virginia (the “Virginia Loan”). Id. ¶ 17. Unit B was not collateral for
the Virginia Loan. The Virginia Loan went into default at the end of 2009 or the beginning of
2010, and on February 4, 2010, The Business Bank obtained a judgment against Richard and his
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wife in Loudoun County, Virginia, where they lived, in the outstanding amount on the Virginia
Loan of $45,567.40, plus interest (the “Virginia Judgment”). See id. ¶ 18; Ex.A to Motion to
Dismiss (ECF 10-2). The Business Bank tried and failed to collect on the Virginia Judgment,
and Richard initiated a personal bankruptcy proceeding. Id. ¶ 19. Subsequently, on an occasion
when Edward visited the Bank, either Mr. Baker or Mr. Sisowath, the bank officials, requested
that Edward pay the Virginia Judgment. Edward refused on the ground that neither he nor the
Partnership had incurred or benefited from the Virginia Loan. Id. ¶ 20.
Richard did not disclose Unit B as an asset in his bankruptcy proceeding. According to
plaintiff, this was because Richard had sold Unit B to the Partnership in the transaction discussed
above. Id. ¶ 21. However, plaintiff asserts, on information and belief, that The Business Bank
learned during the bankruptcy proceeding that Richard also owed the Internal Revenue Service
approximately $1 million, and that the IRS would likely file a notice of tax lien against Richard
in Worcester County, Maryland, where Unit B is located. Id. ¶ 23. On March 24, 2010, The
Business Bank recorded the Virginia Judgment against Richard in the Circuit Court for
Worcester County, thereby placing a lien on Unit B. Id. ¶ 24.6 A month later, on April 26, 2010,
the IRS filed a notice of tax lien against Richard in the Circuit Court for Worcester County in an
amount in excess of $1 million. Id. ¶ 25.7
6

Under Maryland law, “[i]f indexed and recorded as prescribed by the Maryland Rules, a
money judgment of a court constitutes a lien to the amount and from the date of the judgment on
the judgment debtor’s interest in land located in the county in which the judgment was rendered
. . . .” Md. Code (2013 Repl. Vol.), § 11-402 of the Courts & Judicial Proceedings Article
(“C.J.”). The Maryland Uniform Enforcement of Foreign Judgments Act, C.J. §§ 11-801 et seq.,
permits a creditor holding a judgment issued by a court of another state to file the judgment in a
Maryland circuit court, whereupon the “filed foreign judgment has the same effect . . . as a
judgment of the court in which it is filed.” C.J. § 11-802(b).
7

The Partnership states that it “will seek to vacate this tax lien as it applies to the
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The Partnership claims that The Business Bank’s lien should not attach to Unit B because
the Partnership became the equitable owner of Unit B upon execution of the Sales Contract. Id.
¶ 26.8 It contends that The Business Bank recorded the Virginia Judgment in Worcester County
and encumbered Unit B with the intent to pressure the Partnership or Edward to pay off
Richard’s obligation under the Virginia Loan and the Virginia Judgment. Plaintiff posits that
this could be the only reason that The Business Bank recorded the Virginia Judgment in
Worcester County. It reasons that The Business Bank knew that Richard had no property in
Worcester County, other than bare legal title in Unit B, and knew that the Partnership was the
equitable owner of Unit B. Id. ¶ 27. As the Partnership sees it, by recording the Virginia
Judgment in Worcester County, The Business Bank hoped to “coerc[e] the Joy Family and/or
[Edward] to pay the debt owed by [Richard] despite the Bank’s actual knowledge that neither
was in any way responsible for [Richard’s] debt, or to attempt to sell the Condominium to collect
[Richard’s] debt to the bank.” Id.
Additional facts are included in the Discussion.
Discussion
A. Proper Defendant and Motion to Amend
The first ground for dismissal asserted in the Motion to Dismiss is intertwined with the
Motion to Amend. In the Motion to Dismiss, United Financial claims that “The Business Bank”
Condominium.” Complaint ¶ 25.
8

In Maryland, under the doctrine of equitable conversion, “‘the contract purchaser of
realty becomes the equitable owner of the property, while the vendor retains a bare legal title.’”
Knight v. Princess Builders, Inc., 393 Md. 31, 49, 899 A.2d 156 (2006) (quoting Watson v.
Watson, 304 Md. 48, 60, 497 A.2d 794 (1985)). “One result of the doctrine is that a judgment
entered against the vendor after the contract has been made does not become a lien on the
realty.” Watson, 304 Md. at 60, 497 A.2d 794.
-6-

is a separate business entity in its own right, rather than a mere trade name for United Financial.
Therefore, United Financial asserts that plaintiff has sued the wrong party, and that all of the
Partnership’s claims should be dismissed on that basis. Further, although United Financial did
not file a separate motion for sanctions, it asked the Court to impose monetary sanctions on
plaintiff’s counsel, pursuant to Fed. R. Civ. P. 11, in the form of the reasonable attorneys’ fees
and costs incurred in defending the suit, because it sent a letter to plaintiff’s counsel after suit
was filed, asserting that plaintiff had sued the wrong defendant, and claimed “Plaintiff’s attorney
did not respond.” Motion to Dismiss at 11; see Letter of Feb. 5, 2013, from Lash to Astrachan,
Ex.B to Motion to Dismiss (ECF 10-3).
In its Opposition to the Motion to Dismiss, plaintiff states that “The Business Bank” is
listed in the records of the Virginia State Corporation Commission (“SCC”) as a fictitious name
and as a trade name for an entity that is a predecessor in interest of United Financial. See
Opposition at 6-7. Plaintiff submitted with its Opposition electronic printouts from Virginia state
business records supporting its contentions. See Ex.A & B to Opposition (ECF 13-1 & 13-2).
And, plaintiff provided a printout from The Business Bank’s website stating that United
Financial is the “parent company of The Business Bank.” Ex.C to Opposition (ECF 13-3).
Moreover, plaintiff correctly observed that United Financial did not “submit any documentation
or statement under oath supporting its assertion that ‘The Business Bank’ is not a trade name
under which it operates.” Opposition at 7.
Finally, the Partnership has refuted United Financial’s assertion that plaintiff’s counsel
did not respond to the letter from defendant’s counsel. It submitted a copy of a letter from
plaintiff’s counsel to defense counsel dated February 6, 2013, one day after the letter sent by
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defendant’s counsel. See Letter of Feb. 6, 2013, from Doty to Lash, Ex.D to Opposition (ECF
13-4).

In that letter, plaintiff’s counsel stated that United Financial’s counsel had “not

identif[ied] the entity that [United Financial] contends should be named as a defendant in this
case,” and asked defense counsel to “provide the name and state of incorporation of the entity
that [United Financial] contends should be named as a defendant . . . , together with supporting
documentation . . . .” Id. According to plaintiff, defendant’s counsel never responded.
Along with its Reply, United Financial submitted a Certificate of Good Standing from the
Virginia SCC, dated March 12, 2013, issued under the seal of the SCC and the signature of its
clerk, stating that The Business Bank was incorporated under Virginia law in 1982 and is in good
standing. See Ex.A to Reply. It explained that the printouts from electronic records submitted
by plaintiff’s counsel “refer[red] to a third and completely unrelated corporation with a similar
but distinguishable name.” Reply at 2.
Thereafter, plaintiff filed its Motion to Amend, observing that, in its Reply, United
Financial had “for the first time provided documentation that [The Business Bank] is in fact a
separate legal entity and not a trade name, contrary to the SCC records the [Partnership] found
online during its pre-filing investigation.” Motion to Amend ¶ 3. Based on that documentation,
plaintiff sought leave to amend its complaint, pursuant to Fed. R. Civ. P. 15(a)(2), to substitute
The Business Bank as the sole defendant, in lieu of United Financial. That is the only change in
plaintiff’s proposed Amended Complaint (ECF 16-1).
In its Opposition to the Motion to Amend, United Financial assented to the amendment of
the complaint, but asserted that “a diligent inquiry would have discovered that [The Business
Bank] and United Financial are separate and distinct legal entities.”
-8-

Amend Opp. ¶ 12.

Therefore, as a condition of granting leave to amend, it has asked the Court to award attorneys’
fees and expenses “incurred by United Financial as a result of Plaintiff’s failure to dismiss
United Financial from this case upon being informed that [The Business Bank] is a separate legal
entity.” Id.
Under Fed. R. Civ. P. 15(a)(2), a court should “freely give leave” to amend a pleading
“when justice so requires.” Given that all parties are now apparently in agreement that The
Business Bank, as a separate legal entity, is the proper defendant to this suit, there is no basis to
withhold leave to amend. Therefore, the Motion to Amend will be granted.
However, I see no merit whatsoever in defendant’s request for sanctions. 9 Plaintiff filed
suit against United Financial after its investigation reasonably indicated that “The Business
Bank” was a trade name for United Financial. Indeed, the two companies are apparently related.
First, The Business Bank is listed as a corporate affiliate of United Financial in United
Financial’s corporate interest disclosure statement, filed pursuant to Local Rule 103.3 (ECF 11).
Second, the two companies share the same address.

Although United Financial informed

plaintiff’s counsel that it is a separate legal entity from The Business Bank, it provided no
documentation in support of that assertion, despite the request for such information from
plaintiff’s counsel, until it filed its Reply in support of its Motion to Dismiss.
Ordinarily, where an amended complaint is filed that substitutes the defendant, it might
be appropriate to consider as moot any substantive defenses asserted in a motion to dismiss
previously filed by the improperly named defendant. Nevertheless, a defendant is not always
“required to file a new motion to dismiss simply because an amended pleading was introduced
9

Indeed, it is defendant’s counsel who veered close to sanctionable conduct by
misrepresenting to the Court that plaintiff’s counsel had not responded to his initial letter.
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while [its] motion was pending. If some of the defects raised in the original motion remain in the
new pleading, the court simply may consider the motion as being addressed to the amended
pleading.” 6 WRIGHT, MILLER & KANE, FEDERAL PRACTICE & PROCEDURE § 1476 (3d ed. 2010,
2012 Supp.); accord Slumber Parties, Inc. v. Cooper, Civ. No. RDB-12-791, 2012 WL 2915110,
at *4 (D. Md. July 16, 2012).
Although The Business Bank is a separate legal entity from United Financial, it is clear
that the two companies are related, as noted. Moreover, the Motion to Dismiss has been fully
briefed, and the Amended Complaint contains precisely the same allegations as the original
complaint. Therefore, there is no reason not to consider on behalf of The Business Bank the
grounds asserted by its corporate affiliate, United Financial, in its Motion to Dismiss.
This view is sound for yet another reason. The Motion to Dismiss asserts, in part, a lack
of subject matter jurisdiction. Because the Court has an independent obligation to be assured of
its own jurisdiction, Hertz Corp. v. Friend, 559 U.S. 77, 94 (2010), it is appropriate to consider
the possible absence of subject matter jurisdiction at the earliest feasible opportunity.
Accordingly, I will construe the remaining contentions in the Motion to Dismiss as if asserted by
the proper defendant, The Business Bank, and addressed to the Amended Complaint.10
B. Subject Matter Jurisdiction
Federal district courts are courts of limited jurisdiction and “may not exercise jurisdiction
absent a statutory basis.” Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 552
(2005). In this case, plaintiff asserts that the Court possesses subject matter jurisdiction on the

10

Hereafter, references to “the complaint” refer to the Amended Complaint (ECF 16-1).
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basis of diversity of citizenship, pursuant to 28 U.S.C. § 1332(a). The Motion to Dismiss
challenges the existence of diversity jurisdiction.
Diversity jurisdiction is satisfied “where the matter in controversy exceeds the sum or
value of $75,000, exclusive of interest and costs,” and the litigation is between “citizens of
different States.” 28 U.S.C. § 1332(a)(1). The Motion to Dismiss challenges only whether
plaintiff has satisfied the amount-in-controversy threshold of $75,000.
For the reasons explained below, I agree with defendant that plaintiff has failed to
establish diversity jurisdiction, based on the amount-in-controversy requirement. Pursuant to the
Court’s “independent obligation to determine whether subject-matter jurisdiction exists, even
when no party challenges it,” Hertz Corp., 559 U.S. at 94, I also conclude that plaintiff fails
adequately to plead that the suit involves citizens of different states. Accordingly, I will grant
the Motion to Dismiss on jurisdictional grounds and will not resolve defendant’s substantive
challenges to plaintiff’s causes of action.11
A challenge to subject matter jurisdiction may proceed “in one of two ways”: either a
facial challenge, asserting that the allegations pleaded in the complaint are insufficient to
establish subject matter jurisdiction, or a factual challenge, asserting “‘that the jurisdictional

11

As noted, some counts of plaintiff’s complaint assert violations of Maryland state
statutes. The parties are in agreement that, pursuant to the choice of law principles of Maryland,
as the forum state, the tort claims in plaintiff’s other causes of action are also governed by the
substantive law of Maryland, pursuant to the doctrine of lex loci delicto. See, e.g., Francis v.
Allstate Ins. Co., 709 F.3d 362, 369 (4th Cir. 2013) (“A federal court sitting in diversity is
required to apply the substantive law of the forum state, including its choice-of-law rules.”)
(citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941), and Erie R.R. Co. v.
Tompkins, 304 U.S. 64, 79 (1938)); Proctor v. Wash. Metro. Area Transit Auth., 412 Md. 691,
726, 990 A.2d 1048, 1068 (2010) (stating that, under Maryland choice of law principles, tort
claims are governed by lex loci delicto, i.e., the law of the state where the alleged harm
occurred).
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allegations of the complaint [are] not true,’” or that other facts, outside the four corners of the
complaint, preclude the exercise of subject matter jurisdiction. Kerns v. United States, 585 F.3d
187, 192 (4th Cir. 2009) (citation omitted); see also Buchanan v. Consol. Stores Corp., 125 F.
Supp. 2d 730, 736 (D. Md. 2001). The Motion to Dismiss presents a hybrid challenge: defendant
contends that the allegations of the complaint fail to establish diversity jurisdiction and that the
underlying facts do not support diversity jurisdiction.
1. Amount in Controversy
“‘It is elementary that the burden is on the party asserting jurisdiction to demonstrate that
jurisdiction does, in fact, exist.’” McBurney v. Cuccinelli, 616 F.3d 393, 408 (4th Cir. 2010)
(citation omitted), aff’d sub nom. McBurney v. Young, ___ U.S. ___, 133 S. Ct. 1709 (2013).
Ordinarily, this means that “‘[t]he burden of proving subject matter jurisdiction on a motion to
dismiss is on the plaintiff, the party asserting jurisdiction.’” Id. (citation omitted). Thus, when
“a defendant challenges the existence of subject matter jurisdiction in fact, the plaintiff bears the
burden of proving the truth of such facts by a preponderance of the evidence.” United States ex
rel. Vuyyuru v. Jadhav, 555 F.3d 337, 347 (4th Cir.), cert. denied, 558 U.S. 875 (2009).
With respect to the amount-in-controversy requirement of the diversity jurisdiction
statute, the Supreme Court has issued two edicts that are seemingly in tension. On the one hand,
in Saint Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283 (1938), the Court said: “The
rule governing dismissal for want of jurisdiction . . . is that . . . 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.” Id. at 288-89
(emphasis added) (internal footnotes omitted).

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In other words, “if, from the face of the

pleadings, it is apparent, to a legal certainty, that the plaintiff cannot recover the amount claimed
. . . , the suit will be dismissed.” Id. at 289 (emphasis added).
On the other hand, in McNutt v. General Motors Acceptance Corp. of Indiana, 298 U.S.
178 (1936), the Supreme Court confronted a complaint that was “destitute of any appropriate
allegation as to jurisdictional amount save the general allegation that the matter in controversy
exceeds $3,000,” which was then the statutory amount-in-controversy threshold, and the
“particular allegations” of the complaint shed no further “light upon that subject.” Id. at 181. In
that circumstance, the Court said that the plaintiff “must allege in his pleading the facts essential
to show jurisdiction.” Id. at 189 (emphasis added). The Court continued: “The authority which
the statute vests in the court to enforce the limitations of its jurisdiction precludes the idea that
jurisdiction may be maintained by mere averment . . . .

If [the plaintiff’s] allegations of

jurisdictional facts are challenged by his adversary in any appropriate manner, he must support
them by competent proof.” Id. (emphasis added).
In Momin v. Maggiemoo’s International, LLC, 205 F. Supp. 2d 506 (D. Md. 2002), Judge
Catherine Blake of this court observed that, “[i]n determining whether an amount in controversy
is sufficient to confer jurisdiction,” courts have applied “one of two legal standards depending on
whether the damages are specified or unspecified in the complaint,” id. at 509, thereby
harmonizing the teachings of McNutt and Saint Paul Mercury.12

12

Momin arose in the context of removal, and thus the burdens were reversed: the
defendant, as the party asserting diversity jurisdiction, bore the burden to establish jurisdiction,
and so the defendant sought to controvert the plaintiff’s claim that the amount in controversy was
lower than the jurisdictional threshold. However, there is no reason to conclude that Judge
Blake’s analysis is any less valid in a situation in which the plaintiff’s assertion of jurisdiction is
challenged by the defendant.
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Under the first standard, “[w]here a plaintiff claims a specific amount in damages”
greater than the $75,000 threshold, the opponent of jurisdiction must controvert the plaintiff’s
assertion to a “‘legal certainty.’” Id. (emphasis added) (citation omitted). As the Fourth Circuit
stated in JTH Tax, Inc. v. Frashier, 624 F.3d 635 (4th Cir. 2010): “If the plaintiff claims a sum
sufficient to satisfy the statutory requirement, a federal court may dismiss only if ‘it is apparent,
to a legal certainty, that the plaintiff cannot recover the amount claimed.’” Id. at 638 (emphasis
in JTH Tax) (citation omitted). In other words, a jurisdictional challenge to a specifically alleged
amount in controversy will fail if “a fact finder could legally conclude, from the pleadings and
proof adduced to the court before trial, that the damages that the plaintiff suffered are greater
than $75,000.” Kopp v. Kopp, 280 F.3d 883, 885 (8th Cir. 2002) (emphasis added). In that
circumstance, a defendant “seeking dismissal of [a] diversity action[ ] for lack of a sufficient
amount in controversy, must . . . shoulder a heavy burden”; the opponent of jurisdiction “must
show ‘the legal impossibility of recovery’ to be ‘so certain as virtually to negative the plaintiff’s
good faith in asserting the claim.’” JTH Tax, 624 F.3d at 638 (citation omitted).
However, where “a plaintiff’s complaint does not allege a specific amount in damages,” a
different standard applies: the proponent of jurisdiction must “prove by a preponderance of the
evidence that the amount in controversy exceeds the jurisdictional minimum.” Momin, 205 F.
Supp. 2d at 509-10. As Judge Blake explained, “[i]n such cases, ‘[a] lower burden of proof is
warranted because there is simply no estimate of damages to which a court may defer.’” Id. at
510 (citation omitted). This is consistent with the “well-pleaded complaint” rule, under which
the facts showing the existence of subject matter jurisdiction “must be affirmatively alleged in
the complaint.” Pinkley, Inc. v. City of Frederick, 191 F.3d 394, 399 (4th Cir. 1999) (citing
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McNutt); accord El v. AmeriCredit Fin. Servs., Inc., 710 F.3d 748, 752 (7th Cir. 2013) (“The fact
that the plaintiff alleged an amount in controversy in excess of $75,000 . . . does not establish
that this is the amount in controversy.”) (emphasis in original).
In this case, the only allegation contained in the complaint that addresses the amount in
controversy is a conclusory statement, tracking the language of 28 U.S.C. § 1332(a), i.e., that
“the amount in controversy exceeds $75,000, exclusive of interest and costs.” Complaint ¶ 4.
The complaint contains no allegations of fact to support this assertion, however. Thus, this case
is governed by the second standard identified in Momin: in the face of defendant’s challenge,
plaintiff must establish by a preponderance of the evidence that the amount in controversy
exceeds the jurisdictional threshold of $75,000.13
Notably, although the Partnership alleges that it “paid approximately $221,850 to
purchase” Unit B from Richard, Complaint ¶ 16, and that Richard purchased Unit B for
$211,800 in 2004, id. ¶ 7, the value of the condominium is not the measure of the amount in
controversy in this action. Rather, as defendant points out, a venerable line of Supreme Court
precedent indicates that, in a challenge regarding the existence or validity of a lien or other
encumbrance on real property, the amount in controversy is measured by the value of the lien,
not the value of the real property that the lien encumbers. See, e.g., Lion Bonding & Sur. Co. v.
Karatz, 262 U.S. 77, 85-86 (1923) (holding that jurisdiction was lacking where plaintiff sought
to have defendant’s “debt [to plaintiff] declared a first lien on [plaintiff’s] assets,” and the value
13

Notably, plaintiff does not have to prove that it has actually sustained damages in
excess of the jurisdictional threshold; it need only show that damages potentially in excess of the
threshold are in controversy. As the Eighth Circuit explained in Kopp, supra, 280 F.3d at 885,
the “jurisdictional fact . . . is not whether the damages are greater than the requisite amount, but
whether a fact finder might legally conclude that they are: In other words, an amount that a
plaintiff claims is not ‘in controversy’ if no fact finder could legally award it.”
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of the debt was less than the jurisdictional threshold; stating that the “case is not of that class
where the amount in controversy is measured by the value of the property involved in the
litigation”); Ross v. Prentis, 44 U.S. (3 How.) 771 (1845) (holding that jurisdiction was lacking
in suit seeking to enjoin marshal’s sale of real property in execution of judgment against property
owner, where “only matter in controversy between the parties is the amount claimed on the
execution,” which was below the jurisdictional threshold, regardless of the fact that the “property
is worth much more than the sum required to give jurisdiction”); Farmer’s Bank of Alexandria v.
Hooff, 32 U.S. (7 Pet.) 168 (1833) (dismissing, for want of jurisdiction, a suit for decree of sale
of lot pursuant to deed of trust securing loan in amount below jurisdictional threshold, and
stating that, although the lot “is worth more” than the jurisdictional minimum, the “real matter in
controversy is the debt claimed in the bill; and though the title of the lot may be inquired into
incidentally, it does not constitute the object of the suit”).
More recent decisions of the federal appellate courts are in accord. See, e.g., McKenna v.
Wells Fargo Bank, N.A., 693 F.3d 207, 212-13 (1st Cir. 2012) (stating that, “‘where a complaint
seeks to invalidate a loan secured by a deed of trust, the amount in controversy is the loan
amount,’” and holding that jurisdiction was satisfied regardless of whether the loan amount was
calculated by the face value of the loan or the outstanding balance, where “both the face value
and the amount still due exceed the $75,000 threshold”) (citation omitted); RTC Commercial
Assets Trust 1995-NP3-1 v. Phoenix Bond & Indem. Co., 169 F.3d 448, 451-52 (7th Cir. 1999)
(stating that diversity jurisdiction was satisfied, in challenge to enforceability of mortgage liens,
where “the value of the two mortgage interests at issue, each . . . was substantially in excess of
the jurisdictional minimum”).

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Nowhere in the complaint does plaintiff allege the amount of the Virginia Judgment,
which establishes the value of the putative lien on Unit B that is at issue. However, defendant
states, and plaintiff does not dispute, that the value of the Virginia Judgment is $45,567.40.
Obviously, this falls far short of the jurisdictional minimum of $75,000.

The Partnership

contends, however, that the amount in controversy includes not only the value of the lien on Unit
B, but also “both actual and punitive damages caused by the Bank’s wrongful imposition of a
lien, knowing that it had no right to so do.” Opposition at 8. The problem with plaintiff’s
position is that the Partnership has not alleged any facts to suggest that it is entitled to punitive
damages or, indeed, that it has suffered recoverable damages at all, in any amount, from
defendant’s alleged course of conduct.
To put the insufficiency of plaintiff’s allegations as to damages in perspective, I pause to
discuss the law with respect to eligibility for punitive damages generally, as well as the elements
of each of the five state law causes of action that plaintiff asserts, with particular attention to the
requirements for damages under each cause of action.14
It is well established that “punitive damages may be aggregated with other damages to
satisfy the amount-in-controversy requirement.” Charvat v. EchoStar Satellite, LLC, 630 F.3d
459, 462 (6th Cir. 2010); Frederico v. Home Depot, 507 F.3d 188, 199 (3d Cir. 2007) (stating
that punitive damages must be considered in calculating the amount in controversy). However, a
proponent of diversity jurisdiction “must do more than ‘point to the theoretical availability of
certain categories of damages’” to satisfy the amount-in-controversy requirement. McMillian v.

14

My conclusions with respect to the availability of damages might seem to suggest that
plaintiff’s claims are flawed on the merits. However, I do not reach the merits of plaintiff’s
claims in this opinion.
- 17 -

Sheraton Chicago Hotel & Towers, 567 F.3d 839, 844 (7th Cir. 2009) (citation omitted). Indeed,
the Fourth Circuit has counseled that “claims for punitive damages proffered for the purpose of
achieving the jurisdictional amount should be carefully examined.” Saval v. BL Ltd., 710 F.2d
1027, 1033 (4th Cir. 1983).
In Saval, a 1983 case involving a tort claim under Maryland law, the Fourth Circuit
recognized that “no matter what the theory of recovery, punitive damages cannot be recovered
absent malice.” Id. at 1033; see, e.g., Darcars Motors of Silver Spring, Inc. v. Borzym, 379 Md.
249, 265, 841 A.2d 828, 837 (2004); Scott v. Jenkins, 345 Md. 21, 29, 690 A.2d 1000, 1003-04
(1997); Montgomery Ward v. Wilson, 339 Md. 701, 733, 664 A.2d 916, 932 (1995); OwensIllinois, Inc. v. Zenobia, 325 Md. 420, 601 A.2d 633 (1992); French v. Hines, 182 Md. App. 201,
248-50, 957 A.2d 1000, 1026-28 (2008).

The Saval Court ruled that, when a plaintiff’s

complaint demands punitive damages but asserts claims upon which punitive damages cannot be
awarded as a matter of law, the claim for punitive damages cannot be aggregated to satisfy the
jurisdictional threshold. See Saval, 710 F.2d at 1033-35. The Fourth Circuit relied upon the law
of Maryland, which then permitted an award of punitive damages only if either actual malice or
implied malice was shown. Saval, 710 F.2d at 1033. Since Saval, the Maryland Court of
Appeals has restricted the availability of punitive damages still further, and punitive damages can
now be awarded under Maryland law only in cases of “actual malice,” which means “ill will,
fraud, intent to injure, or other mens rea exhibiting an evil motive or purpose.” Scott, supra, 345
Md. at 29 n.3, 690 A.2d at 1004 n.3. Accord Tierco Md., Inc. v. Williams, 381 Md. 378, 414
n.29, 849 A.2d 504, 526 n.29 (2004); George Wasserman & Janice Wasserman Goldsten Family

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LLC v. Kay, 197 Md. App. 586, 636-37, 14 A.3d 1193, 1222-23 (2011); see generally French,
supra, 182 Md. App. at 248-50, 957 A.2d at 1026-28.
Turning to the individual counts of plaintiff’s complaint, Count I asserts a claim for
“injurious falsehood.” “It is firmly established that . . . injurious falsehood (sometimes known as
disparagement or slander of title)” is an “actionable tort[ ] . . . long . . . recognized in Maryland.”
Rite Aid Corp. v. Lake Shore Investors, 298 Md. 611, 617, 471 A.2d 735, 738 (1984) (citing
Gent v. Lynch, 23 Md. 58, 63 (1865)). The Maryland Court of Appeals discussed the elements of
the tort in Beane v. McMullen, 265 Md. 585, 291 A.2d 37 (1972), drawing heavily on the
description of the tort in PROSSER, LAW OF TORTS (4th ed. 1971). From the discussion in Beane,
265 Md. at 607-09, 291 A.2d at 49 (quoting PROSSER), the following elements of the tort, as it
respects real property, can be distilled: (1) that the defendant published a statement or other
“matter derogatory to the plaintiff’s title to his property, or its quality”; (2) that the “‘disparaging
statement [or other matter was] false’”; (3) that the falsehood was “communicated to a third
person”; (4) that the defendant acted with “‘malice,’” which the Beane Court stated would be
satisfied if the defendant acts (a) “‘for a spite motive, and out of a desire to do harm for its own
sake,’” (b) “‘for the purpose of doing harm to the interests of the plaintiff in a manner in which
he is not privileged so to interfere,’” or (c) “‘when the defendant knows that what he says is
false, regardless of whether he has an ill motive or intends to affect the plaintiff at all’”; and (5)
“‘that the publication has played a material and substantial part in inducing others not to deal
with [the plaintiff], and that as a result [the plaintiff] has suffered special damage.”
In Rite Aid, the Maryland Court of Appeals further elucidated the required element of
“special damage,” stating, 298 Md. at 625-26, 471 A.2d at 742:
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Special damages are those which result in a pecuniary loss directly or
immediately from the conduct of third persons. As a general principle, pecuniary
loss in this context includes that from the impairment of vendibility or value by
the disparagement and the expense of measures reasonably necessary to
counteract the publication, including litigation to remove the doubt cast upon
vendibility or value by the disparagement. Whether other various losses qualify
as special damages depends upon the character of the defamation and the
evidence adduced in each case. Pecuniary loss may be established by proof of the
conduct of specific persons, or proof that the loss has resulted from the conduct of
a number of persons whom it is impossible to identify. Emotional distress and
bodily harm resulting from the disparagement are strictly excluded. Exemplary or
punitive damages are recoverable in appropriate circumstances.
The Rite Aid Court also discussed the “appropriate circumstances,” id. at 626, 471 A.2d
at 742, that would support an award of punitive damages. “The first condition for recovery of
punitive damages is that there be an award of compensatory damages.” Id. at 626, 471 A.2d at
743. And, because “the existence of special damages . . . is an element of the cause of action,”
an “award of nominal damages will not suffice to permit an assessment of punitive damages.”
Id. “The second condition necessary to support punitive damages is that the tortious act be
committed with actual malice.” Id. at 627, 471 A.2d at 743.15
Under Maryland law, “‘[f]raud encompasses, among other things, theories of fraudulent
misrepresentation, fraudulent concealment, and fraudulent inducement.’” Sass v. Andrew, 152
Md. App. 406, 432, 832 A.2d 247, 261 (2003) (citation omitted). Regardless of the particular
theory, the plaintiff must establish the elements of fraud “by clear and convincing evidence.”
Md. Envir. Trust v. Gaynor, 370 Md. 89, 97, 803 A.2d 512, 516 (2002).

15

It is not entirely clear what distinction there is, if any, between the “malice” that is an
element of the tort of injurious falsehood and the “actual malice” that is a prerequisite to an
award of punitive damages. None of the three alternative definitions of the “malice” element
discussed in Beane would appear to constitute mere “implied malice” (i.e., gross negligence), as
opposed to “actual malice,” under the punitive damages standard established in Owens-Illinois,
Inc. v. Zenobia, supra, 325 Md. 420, 601 A.2d 633.
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The fraudulent misrepresentation theory of the tort (which is the garden variety of fraud
and often is described simply as “fraud”) is relevant here. In an action for fraudulent
misrepresentation, the plaintiff ordinarily must show:
1) that the defendant made a false representation to the plaintiff;
2) that its falsity was either known to the defendant or that the representation was
made with reckless indifference as to its truth;
3) that the misrepresentation was made for the purpose of defrauding the plaintiff;
4) that the plaintiff relied on the misrepresentation and had the right to rely on it;
and
5) that the plaintiff suffered compensable injury resulting from the
misrepresentation.
Nails v. S & R, Inc., 334 Md. 398, 415, 639 A.2d 660, 668 (1994); accord Thomas v. Nadel, 427
Md. 441, 451 n.18, 48 A.3d 276, 282 n.18 (2012); Sass, 152 Md. App. at 429, 832 A.2d at 260.
To be actionable, a false representation “must be of a material fact.” Gross v. Sussex,
Inc., 332 Md. 247, 258, 630 A.2d 1156, 1161 (1993). “A ‘material’ fact is one on which a
reasonable person would rely in making a decision,” Sass, 152 Md. App. at 430, 832 A.2d at
260, or a fact that “‘the maker of the misrepresentation knows . . . [the] recipient is likely to
regard . . . as important.’” Gross, 332 Md. at 258, 630 A.2d at 1161 (citation omitted). The
“misrepresentation must be made with the deliberate intent to deceive,” Sass, 152 Md. App. at
430, 832 A.2d at 260 (citing VF Corp. v. Wrexham Aviation Corp., 350 Md. 693, 704, 715 A.2d
188 (1998)), and the defendant must “know[ ] that his representation is false” or be “recklessly
indifferent in the sense that he knows that he lacks knowledge as to its truth or falsity.” Ellerin
v. Fairfax Savings, F.S.B., 337 Md. 216, 232, 652 A.2d 1117 (1995).
In Ellerin, the Maryland Court of Appeals addressed the availability of punitive damages
in an action for fraud, holding that “the elements of the tort of fraud or deceit in Maryland, where
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the tort is committed by a defendant who knows that his representation is false, include the type
of deliberate wrongdoing and evil motive that has traditionally justified the award of punitive
damages.” Ellerin, 337 Md. at 235, 652 A.2d at 1126 (emphasis added). In other words, “a
person’s actual knowledge that his statement is false, coupled with his intent to deceive another
by means of that statement, constitute the ‘actual malice’ required for the availability of punitive
damages.” Id. at 240, 652 A.2d at 1129. Thus, “a plaintiff satisfies the element of ‘actual
malice’ and supports a punitive damage award when the evidence shows that the defendant
committed fraud with ‘actual knowledge of falsity, coupled with [an] intent to deceive.’”
Darcars Motors of Silver Spring, Inc. v. Borzym, 379 Md. 249, 265, 841 A.2d 828, 837 (2004)
(quoting Ellerin, supra). But, “[n]egligence or misjudgment, ‘however gross,’ does not satisfy
the knowledge element.” VF Corp., 350 Md. at 704, 715 A.2d at 193.
Counts III and IV of the complaint allege, respectively, violations of the MCDCA and the
CPA.

The MCDCA prohibits certain enumerated actions by a debt collector in “collecting or

attempting to collect” an “alleged debt arising out of a consumer transaction.” C.L. §§ 14201(b), 14-202; see also C.L. § 14-202(1)-(9) (enumerating prohibited actions). It authorizes a
civil action against a collector “for any damages proximately caused by” a violation of the
MCDCA, “including damages for emotional distress or mental anguish suffered with or without
accompanying physical injury.” C.L. § 14-203. The CPA prohibits certain “unfair or deceptive
trade practices.” C.L. § 13-301. It contains a private right of action allowing a plaintiff “to
recover for injury or loss sustained by him as the result of a practice prohibited by” the CPA.
C.L. § 13-408(a). “One of the “unfair or deceptive trade practices” specifically enumerated and
prohibited by the CPA is a violation of the MCDCA. See C.L. § 13-301(14)(iii). Plaintiff’s
- 22 -

CPA claim is expressly predicated only on the alleged violation of the MCDCA. See Complaint
¶ 43. Thus, Counts III and IV stand or fall together.
In Citaramanis v. Hallowell, 328 Md. 142, 151, 613 A.2d 964, 968 (1992), the Maryland
Court of Appeals held that, because the CPA’s private right of action is limited to recovery of
“injury or loss sustained,” C.L. § 13-408, a “plaintiff pursuing a private action under the CPA
[must] prove actual ‘injury or loss sustained’” in order to prevail.

Accord McDaniel v.

Baranowski, 419 Md. 560, 587-88, 19 A.3d 927, 943 (2011). Because the MCDCA’s private
right of action is similarly predicated on recovery of “damages proximately caused by” a
violation of the statute, C.L. § 14-203, there is no reason to conclude that the Maryland courts
would reach a different interpretation of the MCDCA. Thus, actual damages are a necessary
element of a claim under either statute. Moreover, punitive damages are categorically not
available as relief under either the MCDCA or the CPA. See Hoffman v. Stamper, 385 Md. 1,
49, 867 A.2d 276, 304 (2005) (stating that “[p]unitive damages may not be awarded in an action
brought under [C.L.] § 13-408,” the provision for private enforcement of the CPA); Spence v.
Hendersen-Webb, Inc., 81 F. Supp. 2d 582, 595 (D. Md. 1995) (“[P]unitive damages are not
available for violations of the [MCDCA].”); Cilento v. B.T. Credit Co., 424 F. Supp. 1, 1-2 (D.
Md. 1977) (same).
Count V of the complaint alleges the tort of abuse of process. To establish a claim for
abuse of process, the plaintiff must prove (1) willful use of process for an illegal purpose, after
process has been issued; (2) with an underlying ulterior motive; and (3) resulting damages.
Humphrey v. Herridge, 103 Md. App. 238, 653 A.2d 491 (1995); see also Allen v. Bethlehem
Steel Corp., 76 Md. App. 642, 650, 547 A.2d 1105, cert. denied sub nom. Green and Vernon
- 23 -

Green Assocs. v. Allen, 314 Md. 458, 550 A.2d 1168 (1988). The tort occurs only when a person
uses criminal or civil process for an illegal purpose after process has issued. Palmer Ford, Inc.
v. Wood, 298 Md. 484, 511, 471 A.2d 297 (1984); Allen, 76 Md. App. at 650, 547 A.2d 1105.
“The mere issuance of the process itself, however, is not actionable, even if it is done with an
‘ulterior motive’ or ‘bad intention.’ Rather, ‘[s]ome definite act or threat not authorized by the
process, or aimed at an objective not legitimate in the use of the process is required . . . .’”
Campbell v. Lake Hallowell Homeowners Ass’n, 157 Md. App. 504, 530, 852 A.2d 1029, 1044
(2004). Moreover, with respect to the element of damages, “the injuries contemplated by this
particular tort (and an indispensable element of it) are limited to an improper arrest of the person
or an improper seizure of property.” Herring v. Citizens Bank and Trust Co., 21 Md. App. 517,
536, 321 A.2d 182 (1974); accord One Thousand Fleet Ltd. P’ship v. Guerriero, 346 Md. 29,
45-46, 694 A.2d 952 (1997) (“The plaintiff [must] establish that an arrest of the person or a
seizure of property of the plaintiff resulted from the abuse of process.”).
However, “[m]alice, actual or implied, is not an element of the tort of abuse of process.”
Palmer Ford, Inc., 65 Md. App. 390, 401, 500 A.2d 1055, 1061 (1985). Therefore, in order to
be eligible for an award of punitive damages with respect to an abuse of process claim, a plaintiff
must go beyond the elements of the tort and prove, additionally, that the defendant acted with
actual malice. See id. (reversing jury award of punitive damages on abuse of process claim
where there was no evidence of malice).
Plaintiff’s complaint fails to allege facts showing that the Partnership incurred special
damages (i.e., pecuniary damages), or any other category of actual damages (such as damages for
emotional distress, assuming that a business entity could experience such damages). Notably,
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the complaint is devoid of any factual allegation that the Partnership sought to sell Unit B to a
third party or to consummate the Sales Contract with Richard, and that the recordation of the
Virginia Judgment in Worcester County prevented such a transaction from occurring. Nor does
the Partnership allege that it actually paid Richard’s debt to The Business Bank, in satisfaction of
the Virginia Judgment, as it contends defendant sought to coerce it to do. Moreover, in its
Opposition, plaintiff does not identify any facts suggesting that it has been damaged, other than
an assertion with respect to its entitlement to attorneys’ fees.
In connection with the recoverability of “special damages” in an action for injurious
falsehood, the Maryland Court of Appeals said in Rite Aid, supra, 298 Md. at 625, 471 A.2d at
742, that such damages include damages “from the impairment of vendibility or value by the
disparagement and the expense of measures reasonably necessary to counteract the publication,
including litigation to remove the doubt cast upon vendibility or value by the disparagement.”
(Emphasis added.) Plaintiff seizes on the emphasized language to argue that it is entitled to
recover its attorneys’ fees in this action as special damages. However, in none of plaintiff’s
causes of action does it seek declaratory or injunctive relief, or assert an action to quiet title to
Unit B, so as to actually remove the cloud on the title to Unit B allegedly created by the
recordation in Worcester County of the Virginia Judgment. Rather, the causes of action that
plaintiff asserts generally call for damages remedies, and the ad damnum clauses in each of the
counts of plaintiff’s complaint seek only damages in unspecified amounts, attorneys’ fees, and
costs. Thus, this action is not one that could “remove the doubt cast upon vendibility or value by
the disparagement.” Rite Aid, 298 Md. at 625, 471 A.2d at 742. If plaintiff had asserted a
declaratory or quiet title claim in this case, in addition to its injurious falsehood claim, perhaps
- 25 -

success on the injurious falsehood claim would entitle it to fee shifting in this action. Or, if
plaintiff had brought a declaratory or quiet title action in another forum, perhaps plaintiff could
recover its attorneys’ fees from that proceeding by way of an injurious falsehood claim in this
action. But, neither the complaint nor plaintiff’s Opposition alleges that such a proceeding has
been instituted.
Moreover, plaintiff has failed to establish any entitlement to punitive damages because,
for each of plaintiff’s causes of action, punitive damages either are not available or are
foreclosed by plaintiff’s failure to allege facts suggesting an entitlement to actual damages. As
discussed, punitive damages cannot be awarded on a CPA claim or a MCDCA claim. Thus,
punitive damages could only be aggregated to satisfy the amount-in-controversy requirement if
they were available for one of plaintiff’s tort causes of action. But, certain types of actual
damages are necessary elements of each of the three tort causes of action, and so plaintiff’s
failure to allege facts suggesting that it has incurred the types of damages at issue (or, indeed,
any damages) is fatal to its punitive damages claim.
With respect to the injurious falsehood claim, I have already reviewed plaintiff’s failure
to plead special damages. Because the “first condition for recovery of punitive damages” in a
suit for injurious falsehood “is that there be an award of compensatory damages,” Rite Aid, 298
Md. at 626, 471 A.2d at 743, punitive damages are not available, as a matter of law, with respect
to Count I. As to Count II, the fraud claim, the Maryland Court of Appeals had recently said, in
connection with a claim of fraud: “In general, there must be an underlying compensatory
damages award with respect to a particular injury in order for a fact-finder to award punitive
damages for that injury.” Frazier v. Castle Ford, Ltd., 430 Md. 144, 162 59 A.3d 1016, 1026
- 26 -

(2013) (citing Caldor, Inc. v. Bowden, 330 Md. 632, 662, 625 A.2d 959 (1993)).16 With respect
to the third tort claim, Count V, alleging abuse of process, plaintiff’s compensatory damages
claim (and hence, its punitive damages claim) is weaker still, because plaintiff clearly does not
allege “an improper arrest of the person or an improper seizure of property,” which are the only
“injuries contemplated by this particular tort.” Herring, supra, 21 Md. App. at 536, 321 A.2d
182.
In sum, plaintiff has failed to establish that the amount in controversy in this action
exceeds the jurisdictional threshold of $75,000.17
2. Diversity of Citizenship
In addition, I conclude, sua sponte, that plaintiff had failed to satisfy the other prong of
diversity jurisdiction, i.e., that the action is one between “citizens of different States.” 28 U.S.C.
§ 1332(a)(1). This is because the Partnership has failed to allege facts sufficient to establish its
state citizenship. This is yet another basis to conclude that the Court lacks diversity jurisdiction
over this action.18 I explain below.

16

An award of nominal damages can, in some circumstances, serve as an award of
compensatory damages on which to found a punitive damages award. See, e.g., Edgewood
Mgmt. Corp. v. Jackson, 212 Md. App. 177, 226, 66 A.3d 1152, 1181 (2013). However, the
Maryland Court of Special Appeals has stated that, because actual compensatory damages are an
element of a fraud claim, “nominal damages are not available in an action for fraud.” Frazier v.
Castle Ford, Ltd., 200 Md. App. 285, 296 27 A.3d 583, 589 (2011), aff’d in part, rev’d in part
on other grounds, 430 Md. 144, 59 A.3d 1016 (2013).
17

Although, as a formal matter, I do not reach the substantive merits of plaintiff’s causes
of action, it follows almost inescapably from plaintiff’s failure to allege facts supporting any
recoverable compensatory damages that, if I were to reach the merits, I would conclude that the
complaint fails to state a claim upon which relief can be granted, because compensable damage
is a required element of each of plaintiff’s causes of action.
18

“Ordinarily, when faced with . . . ambiguous pleading of diversity jurisdiction, the
Court would alert the parties to the apparent jurisdictional defect and give them an opportunity to
- 27 -

According to the complaint, plaintiff is organized under Maryland law as a limited
partnership. See Complaint ¶ 2. For purposes of diversity jurisdiction, courts look through the
form of such a business entity to the citizenship of all of the members of the partnership. Carden
v. Arkoma Assocs., 494 U.S. 185, 187-96 (1990).

Moreover, “‘[t]he citizenship of

unincorporated associations must be traced through however many layers of partners or members
there may be.’” Hart v. Terminex Int’l, 336 F.3d 541, 543 (7th Cir. 2003) (citation omitted).
The complaint asserts that its “general partner, JFP, LLC, is a Maryland limited liability
company, comprised of ALJ, LLC and ELJ, LLC, each a Maryland limited liability company.”
Complaint ¶ 2. Notably, the state citizenship of limited liability companies (LLCs) is governed
by the same rule that applies to partnerships: the citizenship of an LLC “is determined by the
citizenship of all of its members.” Cent. W. Va. Energy Co. v. Mountain State Carbon, LLC, 636
F.3d 101, 103 (4th Cir. 2011) (citing Gen. Tech. Applications, Inc. v. Exro Ltda, 388 F.3d 114,
120 (4th Cir. 2004)). However, the Partnership provides no information as to its other partners,
nor does it provide any information as to the membership of ALJ, LLC and ELJ, LLC, except to
say that “the constituent partners and members of these entities are citizens of the State of
Maryland.” Complaint ¶ 2. This conclusory statement is insufficient to establish plaintiff’s
citizenship.
As to the Partnership itself, although it has identified its general partner, the Supreme
Court in Carden “reject[ed] the contention that to determine, for diversity purposes, the
citizenship of an artificial entity, the court may consult the citizenship of less than all of the
cure it before dismissing the case.” Allstate Ins. Co. v. Cherry, Civ. No. ELH-11-2898, 2012
WL 1425158, at *4 (D. Md. Apr. 23, 2012). I do not do so here with respect to plaintiff’s
defective pleading of its citizenship only because plaintiff has failed, after a full opportunity to
litigate the issue, to establish satisfaction of the amount-in-controversy requirement.
- 28 -

entity’s members,” 494 U.S. at 195, and held specifically that a limited partnership’s citizenship
cannot be determined “solely by reference to the citizenship of its general partners, without
regard to the citizenship of its limited partners.” Id. at 192.
Plaintiff’s bare assertion that “the constituent partners and members of [its member]
entities are citizens of the State of Maryland,” Complaint ¶ 2, is also insufficient to establish its
citizenship. “A party’s mere allegation of diversity cannot satisfy its burden of establishing the
district court’s jurisdiction.” Roche v. Lincoln Prop. Co., 373 F.3d 610, 616 (4th Cir. 2004),
rev’d on other grounds, 546 U.S. 81 (2005). “When jurisdiction is challenged, courts generally
do not accept the carte blanche naked allegations of diverse citizenship or bald assertions of
jurisdictional facts.” Id. at 617; accord Thomas v. Guardsmark, LLC, 487 F.3d 531, 533-34 (7th
Cir. 2007) (“We hope to make it clear once and for all . . . that [a party’s] naked declaration that
there is diversity of citizenship is never sufficient. . . . [A]n LLC’s jurisdictional statement must
identify the citizenship of each of its members as of the date the complaint or notice of removal
was filed, and, if those members have members, the citizenship of those members as well. . . .
[T]he court [cannot] take on faith the lawyer’s blanket declaration that the partners are citizens of
another state.”).
Conclusion
For the foregoing reasons, I will dismiss this action, without prejudice, for lack of subject
matter jurisdiction.19 An Order implementing my rulings follows.

19

The Court does not address (indeed, it lacks jurisdiction to resolve) defendant’s
challenges to the sufficiency of plaintiff’s substantive pleading, including the asserted defenses
that plaintiff’s injurious falsehood claim is time-barred; that, with respect to plaintiff’s fraud
claim, defendant’s alleged representations were not false and plaintiff’s reliance on them was
unreasonable; that the transactions at issue were not “consumer transactions” within the ambit of
- 29 -

Date: August 28, 2013

/s/
Ellen Lipton Hollander
United States District Judge

the MCDCA and CPA; and that plaintiff has failed to allege that process was actually issued or
that it was misused following its issuance.
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