Opinion
Civil Action No. 04-2384-CM.
November 12, 2004
MEMORANDUM AND ORDER
This matter comes before the court on plaintiff's Motion to Remand (Doc. 2).
I. Background
Plaintiff is a Kansas corporation, with its principal place of business in Lenexa, Kansas. Defendant Caicos Corporation is a Washington corporation, with its principal place of business in Washington. Defendant Insurance Company of the West is a California insurance company, with its principal place of business in California.
On July 14, 2004, plaintiff filed suit against defendants in the District Court of Johnson County, Kansas, alleging that defendant Caicos Corporation breached a July 15, 2004 sales agreement through which defendant Caicos Corporation purchased from plaintiff two Smith Loveless, Inc.'s Model 4B2B rotator assembly pumps, but failed to pay for the same. Plaintiff alleges that the balance of the contract price owed plaintiff for the two pumps is $53,022 and that the $53,022 has been owed since December 26, 2002. In its state court petition, plaintiff alleges breach of contract, quantum meriut and action on labor and material bond, seeking damages in the amount of $53,022, exclusive of interest and attorney fees.
On August 16, 2004, defendants filed their answer and counterclaim in the state court case. Defendant Caicos Corporation has alleged a delay/backcharge counterclaim against plaintiff in the amount of $77,000, alleging plaintiff failed to timely deliver the pumps.
On August 18, 2004, defendants filed their Notice of Removal with this court. In their Notice of Removal, defendants claim federal jurisdiction exists pursuant to 28 U.S.C. § 1332, alleging that plaintiff and defendants are citizens of different states and that the amount in controversy exceeds $75,000.00.
Plaintiff claims that defendants' removal of the state court case to federal court was improper because the amount in controversy is less than the statutory threshold of $75,000. Plaintiff alleges that its state court petition seeks damages in the amount of $53,022, exclusive of interest and costs, and that under applicable law, this court is not to consider the monetary damages sought in the counterclaim in determining whether the $75,000 statutory threshold is satisfied.
II. Standard for Removal
A civil action is removable only if a plaintiff could have originally brought the action in federal court. 28 U.S.C. § 1441(a). The court is required to remand "if at any time before final judgment it appears that the district court lacks subject matter jurisdiction." 28 U.S.C. § 1447(c). Because federal courts are courts of limited jurisdiction, the law imposes a presumption against federal jurisdiction, Frederick Warinner v. Lundgren, 962 F. Supp. 1580, 1582 (D. Kan. 1997) (citing Basso v. Utah Power Light Co., 495 F.2d 906, 909 (10th Cir. 1974)), and requires a court to deny its jurisdiction in all cases where such jurisdiction does not affirmatively appear in the record. Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 (1982). The burden is on the party requesting removal to demonstrate that the court has jurisdiction. Laughlin v. Kmart Corp., 50 F.3d 871, 873 (10th Cir. 1995). Moreover, in establishing diversity jurisdiction, "[b]oth the requisite amount in controversy and the existence of diversity must be affirmatively established on the face of either the petition or the removal notice." Id. The court must resolve any doubts concerning removability in favor of remand. J.W. Petroleum, Inc. v. Lange, 787 F. Supp. 975, 977 (D. Kan. 1992).
III. Discussion
Defendants cited diversity jurisdiction under 28 U.S.C. § 1332, as the mechanism for removal of the case to federal court. Exercise of diversity jurisdiction requires complete diversity between the parties and an amount in controversy in excess of $75,000. Because defendants are alleging that federal jurisdiction exists, they have the burden of proving facts supporting jurisdiction by a preponderance of the evidence. Amundson Assoc. Art Studio, Ltd. v. Nat'l Council on Comp. Ins., Inc., 977 F. Supp. 1116, 1122 (D. Kan. 1997). Defendants must prove both elements of this claim — complete diversity of the parties and the requisite amount in controversy. Moreover, in establishing diversity jurisdiction, "[b]oth the requisite amount in controversy and the existence of diversity must be affirmatively established on the face of either the petition or the removal notice." Laughlin, 50 F.3d at 873.
It is undisputed that the parties have diverse citizenship. Thus, the only issue before the court is whether the matter in controversy exceeds $75,000.
Plaintiff claims that its state court petition seeks damages in the amount of $53,022, exclusive of interest and costs. Plaintiff contends that, under applicable law, this court is not to consider interest and costs to the plaintiff, nor the monetary damages sought in the counterclaim in determining whether the $75,000 statutory threshold is satisfied.
Defendants contend that, while 28 U.S.C. § 1332 excludes consideration of interests and costs in determining whether a claim has satisfied the jurisdictional amount, attorney's fees are included in the determination. Defendants argue that since plaintiff has alleged it is entitled to attorney's fees, those fees should be added to the value of plaintiff's claims. Defendants also contend that plaintiff's breach of contract claim intends to enforce a term and condition of the contract between the parties that imposes a 2% delinquency charge for past due payments, which would add approximately $22,000 to plaintiff's claimed damages. Defendants also point out that plaintiff seeks to impose a 1.7% monthly interest on the alleged $53,022 debt, accruing since December 2002. Defendants claim that such interest would add thousands of dollars to the value of plaintiff's claims. Defendant thus contends that, considering plaintiff's breach of contract claim, including the claimed interest, and plaintiff's request for attorney's fees, the value of plaintiff's claims easily exceeds the $75,000 threshold required for federal diversity jurisdiction.
In the Tenth Circuit, "[t]he amount in controversy is ordinarily determined by the allegations of the complaint, or, where they are not dispositive, by the allegations in the notice of removal." Laughlin, 50 F.3d at 873 (citations omitted). "The burden is on the party requesting removal to set forth, in the notice of removal itself, the `underlying facts supporting [the] assertion that the amount in controversy exceeds [$75,000].'" Id., (quoting Gaus v. Miles, Inc., 980 F.2d 564, 567 (9th Cir. 1992)).
Because "jurisdiction is determined at the time of the notice of removal, the movant must meet its burden in the notice of removal." Coca-Cola Bottling of Emporia, Inc. v. South Beach Beverage Co., Inc., 198 F. Supp. 2d 1280, 1283 (D. Kan. 2002). Therefore, in the notice of removal, defendants must prove the requisite amount in controversy by a preponderance of the evidence. See City of Atchison v. Maczuk Indus., Inc., 2002 WL 1900493, at *2 (D. Kan. Aug. 14, 2002).
In this case, defendants stated in the Notice of Removal that plaintiff's claims exceeded $75,000, and attached plaintiff's state court petition, the contract at issue, invoices for the pumps, and its answer and counterclaims to the Notice.
Interest that accrues as a result of a delay in payment is normally not included when determining the amount in controversy. Frederick, 962 F. Supp. at 1584. Rather, only when the prejudgment interest represents a contractually-agreed upon penalty or a statutory penalty will that interest apply toward the amount in controversy requirement. Id. However, it is clear from plaintiff's state court petition and the contract documents at issue that plaintiff is claiming a contractual right to interest at the rate of 1.7% per month since December 2002 on the $53,022. The court thus includes the interest in determining the amount in controversy. In a simple calculation, the monthly interest that plaintiff is claiming on the $53,022 totals approximately $901 per month at the 1.7% interest rate. At this point, the onset of the litigation, the accrued interest plaintiff is claiming totals, at a minimum, $20,723, and will only increase as the litigation continues.
Plaintiff's state court petition also seeks reasonable attorney fees. "[W]here a litigant has a right, based on contract, statute, or other legal authority, to an award of attorney's fees if he prevails in the litigation, a reasonable estimate of those fees may be included in determining whether the jurisdiction minimum is satisfied." Gerig v. Krause Publ'ns, Inc., 58 F. Supp. 2d 1261, 1264 (D. Kan. 1999) (quoting Sarnoff v. Am. Home Prod. Corp., 798 F.2d 1075, 1078 (7th Cir. 1986)). The contract at issue provides for reimbursement of all damages, costs and expenses, including reasonable attorney's fees in case of breach. Therefore, for purposes of this motion, the court assumes that plaintiff has a right to recover reasonable attorney's fees if it prevails in this litigation.
Accordingly, having considered the base amount of plaintiff's claim, $53,022, the estimated interest, and attorney's fees, the court finds that the amount in controversy easily exceeds the $75,000 threshold required to establish diversity jurisdiction.
IT IS THEREFORE ORDERED that plaintiff's Motion to Remand (Doc. 2) is denied.