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District Court Granted in Part Defendants’ Motion to Dismiss for Failure to Satisfy the Amount in Controversy Requirement Where Defendants Met “Legal Certainty” Standard

Due Forni LLC v. Euro Rest. Solutions. Inc., et al.
No. PWG—13—3861, 2014 WL 2916873, at *1 (D. Md. June 25, 2014)

by Sarah M. Grago, Summer Associate
Semmes, Bowen & Semmes (www.semmes.com)

Available at http://docs.justia.com/cases/federal/districtcourts/maryland/mddce/
8:2013cv03861/263683/16

In Due Forni LLC v. Euro Rest. Solutions. Inc., et al., the United States District Court for the District of Maryland denied Plaintiff’s Motion for Default Judgment and granted in part and denied in part Defendants’ Motion to Dismiss for Lack of Jurisdiction for failure to satisfy the Amount in Controversy requirement. Plaintiff, a Las Vegas pizza restaurant, contracted with Defendants, Euro Restaurant Solutions, Inc., (d/b/a Marra Forni (“ERS”)), and Francesco Marra, to purchase pizza ovens manufactured by Cirigliano Forni. After purchasing the ovens, Plaintiff experienced many electrical problems which it reported to Defendants.

Upon attending the 29th Annual International Pizza Expo, Plaintiff learned that the ovens he purchased from Defendants had been manufactured by Morello Forni, not Cirigliano Forni. Plaintiff alleged that Defendants misrepresentation caused Plaintiff to incur additional costs. After Defendants refused to remedy the reported problems or issue a refund, Plaintiff brought a lawsuit against Defendants for fraud in the inducement, fraud, breach of contract, and conversion.

Defendants argued that Plaintiff had not pled sufficient facts to satisfy the requisite amount in controversy needed to establish subject matter jurisdiction pursuant to 28 U.S.C.§1332 (a) and moved to dismiss Plaintiff’s claims. In response, Plaintiff filed an amended complaint adding an unjust enrichment claim. When Defendants failed to respond to the amended complaint, or renew their Motion to Dismiss, Plaintiff moved for default judgment. However, the court found that Defendants intended their Motion to Dismiss to apply to Plaintiff’s Amended Complaint and thus denied Plaintiff’s Motion for Default Judgment. The court also denied Defendants’ Motion to Dismiss as to Plaintiff’s fraud claims and unjust enrichment claim; it granted Defendants’ Motion to Dismiss as to Plaintiff’s breach of contract and conversion claim.

The court dedicated the bulk of its analysis to Defendants’ amount in controversy argument. Pursuant to U.S.C§1332 (a), a party must allege an amount in controversy that exceeds seventy-five thousand dollars ($75,000.00) at the time the action is filed. The amount cannot include interests and must reflect an allegation made in good faith. Further, a plaintiff cannot meet the required amount by amending its complaint to increase the amount in controversy. Instead, should a defendant move to dismiss, the plaintiff may submit an affidavit supporting its jurisdictional allegations. A defendant may only divest the court of jurisdiction in such a scenario by showing to a “legal certainty” that the plaintiff’s claim is for less than the jurisdictional amount required.

Although the court diverged from the general rule by considering the facts in Plaintiff’s amended complaint to assess whether Plaintiff satisfied the amount in controversy, it held that Plaintiff failed to meet the requisite minimum as to its breach of contract claim. In response to Defendants’ Motion to Dismiss, Plaintiff failed an amended complaint and did not file an affidavit in support of the amount in controversy or an opposition. However, the court declined to put form over substance and instead considered the facts in the amended complaint to discern whether the Plaintiff could substantiate that its claims satisfied the amount in controversy.

Defendants argued that they could show with “legal certainty” that Plaintiff was not entitled to recover as to the breach of contract claim based on the terms of the contract. The contract set forth that Plaintiff waived all claims for defective or nonconforming products by failing to make objections within twenty-four (24) hours of delivery by Defendants. The contract also described that all sales were final and any claim for breach of contract must be filed within one (1) year after the date of the product delivery. The last relevant provision stated that all purchasers relinquish their deposits for any order cancelled after twenty-one (21) days. Here, Plaintiff brought a claim years after the contract and failed to cancel its second order for ovens within the allotted time period. The contract terms in conjunction with Plaintiff’s failure to object to the applicability of the contract’s clauses limiting Plaintiff’s ability to recover moved the court to grant Defendants’ Motion to Dismiss as to Plaintiff’s breach of contract claim. Thus, the court found that the Defendants met the “heavy burden” of showing the legal impossibility of recovery as to Plaintiff’s breach of contract claim.

In contrast, the court denied Defendants’ Motion to Dismiss as to Plaintiff’s fraud claims.

First the court noted that the contract could not limit Plaintiff’s fraud claims as a contractual waiver of liability for fraud was ineffective. See Bank of Montreal v. Signet Bank, 193 F.3d 818, 829( 4th Cir. 1999). Defendants argue that Plaintiff failed to allege specific damages suffered because of Defendants’ misrepresentation. In response, Plaintiff detailed specific damages in its amended complaint to include costs of replacing and repairing a non-conforming oven that was smaller than represented and cooked at lower temperatures; and loss profits due to the inability to cook more pizza at a faster rate. Here, the court found that in light of the specific damages Plaintiff set forth, the Defendants could not meet the “legal certainty” standard. As such, the court denied Defendants’ Motion to Dismiss as to Plaintiff’s fraud claims.

The court briefly addressed the Plaintiff’s conversion and unjust enrichment claims; dismissing the former, yet not the latter. The court noted that the general rule for bringing an actionable conversion claim precludes a party from bringing a conversion claim for money unless the plaintiff can demonstrate the funds were “segregated or identifiable.” Here, the court found that the Plaintiff failed to allege such facts. In regard to the unjust enrichment claim, the court refrains from addressing it because the Defendants did not move to dismiss it. However, the court notes that when an express contract is enforceable, a plaintiff cannot recover for unjust enrichment.

The court concluded that the Defendants met the “heavy burden” and high standard required to controvert a Plaintiff’s amount of controversy as to the breach of contract claims, but not as to the fraud claims.


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