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Mace v. Domash

May 8, 2008

PETER M. MACE, PLAINTIFF,
v.
LARRY A. DOMASH, DEFENDANT.



The opinion of the court was delivered by: Henry H. Kennedy, Jr. United States District Judge

MEMORANDUM OPINION AND ORDER

Invoking this court's diversity jurisdiction, Peter Mace brings this action against Larry Domash alleging fraud and unjust enrichment arising out of Domash's alleged breach of an oral contract. Before the court is Domash's motion to dismiss for lack of subject matter jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1) [#36]. Upon consideration of the motion, the opposition thereto, and the record of the case, the court concludes that Domash's motion must be denied.

I. FACTUAL BACKGROUND

Mace asserts that he and Domash entered into an oral contract pursuant to which Mace worked full time for Domash assisting Domash with his divorce litigation, providing emotional support, and attempting to start up an insurance company. According to Mace, Domash promised to reimburse him for three categories of expenses: (1) expenses made on behalf of Domash; (2) expenses incurred while Mace supported himself and Mace's niece; and (3) expenses Mace incurred on behalf of the insurance business Mace was trying to start up. Mace contends that Domash was aware that these expenses would be incurred through credit card debt and that Domash also agreed to reimburse Mace for the interest that Mace incurred on these charges. The alleged contract terminated after Domash allegedly told Mace that he would not reimburse Mace for any of the above-mentioned expenses.

Mace contends that, after entering into the contract, he incurred $277,523.59*fn1 in three categories of credit card debt and seeks a recovery in this amount. The first category consists of credit card charges totaling $108,209.46, which Mace alleges were made pursuant to the three categories of expenses covered under the alleged contract with Domash. Mace contends that he made $8,727.05 in charges on behalf of Domash; $10,975 in charges on behalf of Mace's niece; and $26,755.02 in charges for Mace's personal expenses. He does not identify any charges made on behalf of the insurance start-up. He incurred an additional $61,752.39 in charges but, because of missing credit card statements, he is unable to specifically identify the charges. Nonetheless, Mace contends that all of the $108,209.46, including the $61,752.39, are attributable to one of the three categories of expenses covered under the alleged contract. The second category of credit card debt consists of finance and/or interest charges (hereinafter "interest") that Mace incurred after the termination of the alleged contract. This interest totals $116,809.44. The third category of credit card debt consists of interest charges that Mace incurred during the alleged contract. These interest charges total $52,504.69.*fn2

II. ANALYSIS

Domash moves to dismiss this diversity action pursuant to Fed. R. Civ. P 12(b)(1), asserting that this court does not have subject matter jurisdiction because this action is not one wherein the amount in controversy exceeds the sum or value of $75,000.*fn3 Domash's position cannot be sustained.

A. Legal Standards

Federal courts are courts of limited jurisdiction. Pursuant to 28 U.S.C. § 1332(a), federal courts have diversity jurisdiction only if the parties are diverse and the amount in controversy exceeds $75,000.*fn4 The amount in controversy is determined as of the time the action is commenced. King v. Morton, 520 F.3d 1140, 1145 (D.C. Cir. 1965). The test for determining whether the amount in controversy meets the statutory threshold is as follows:

[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. The inability of plaintiff to recover an amount adequate to give the court jurisdiction does not show his bad faith or ousts jurisdiction. . . . But if, from the face of the pleadings, it is apparent, to a legal certainty, that the plaintiff cannot recover the amount claimed or if, from the proofs, the court is satisfied to a like certainty that the plaintiff never was entitled to recover that amount, and that his claim was therefore colorable for the purpose of conferring jurisdiction, the suit will be dismissed.

St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288 (1938).*fn5

The plaintiff bears the burden of establishing subject-matter jurisdiction. Watkins v. Pepco Energy Servs., Inc., 2005 WL 1903329, *2 (D.D.C. July 20, 2005) ("In this Circuit, the plaintiff bears the burden of establishing the amount in controversy once it has been put in question."). When the defendant challenges the jurisdictional amount, plaintiff must come forward with some facts in support of her assertion that the jurisdictional amount has been met. James v. Lusby, 499 F.2d 488, 493 (D.C. Cir. 1974) ("where the allegations as to the amount in controversy are challenged by the defendant in an appropriate manner the pleading must support them by competent proof"); Gomez v. Wilson,477 F.2d 411, 420 (D.C. Cir. 1973) ("when, as here, a formal allegation of jurisdictional amount . . . is controverted, a factual issue emerges and the burden of establishing jurisdictional amount is thrust upon the claimant").

Interest must be excluded when determining the amount in controversy. 28 U.S.C. § 1332(b) (the amount in controversy must be determined "exclusive of interest and costs"). Under this rule, interest that accrues solely due to a party's delay in paying the principal does not count towards the amount in controversy. Principal Mut. Life Ins. Co. v. Juntunen, 838 F.2d 942, 943 (7th Cir. 1988); Regan v. Marshall, 309 F.2d 677, 678 (1st Cir. 1962). However, when interest is an "essential ingredient of the principal claim," then interest is counted towards the amount in controversy. Grunblatt v. UnumProvident Corp., 270 F. Supp. 2d 347, 349 (E.D.N.Y. 2003) (citing Brown v. Webster, 156 U.S. 328, 330 (1895)); see also Transaero, Inc. v. LaFuerza Area ...


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