Meritor Heavy Vehicle Systems v. Ikerd's Inc.

Full title: MERITOR HEAVY VEHICLE SYSTEMS, LLC, Plaintiff, v. IKERD'S INC., formerly…

Court: United States District Court, S.D. Indiana, Indianapolis Division

Date published: Jun 15, 2004

1:02-cv-1095-LJM-VSS (S.D. Ind. Jun. 15, 2004)

Opinion

1:02-cv-1095-LJM-VSS.

June 15, 2004

ORDER ON DEFENDANTS' MOTION TO DISMISS

LARRY McKINNEY, Chief Judge, District

This cause is now before the Court on the defendants', Ikerd's, Inc. and Patrick F. Ikerd (collectively, "Ikerd's"), Motion to Dismiss for Lack of Subject Matter Jurisdiction, the claims brought against them by the plaintiff, Meritor Heavy Vehicle Systems, LLC ("Meritor"). Ikerd's asserts that the amount in controversy on Meritor's claims is less than the $75,000.00 jurisdictional minimum. Meritor contends that the evidence supports a finding that the jurisdictional amount is met.

The Court finds that Ikerd's motion should be GRANTED.

I. BACKGROUND

Meritor filed this action to recover certain tooling (the "tooling") used to manufacture Corvette trailing arms. The trailing arms were manufactured for General Motors, Inc. ("GM"). The manufacture of the trailing arms was subcontracted from Meritor to third-party defendant Pentaflex, Inc., and the GM tooling required to make the trailing arms was entrusted to Pentaflex for the sole purpose of manufacturing the trailing arms.

In its complaint Meritor alleges that third-party defendant Chris Highfield ("Highfield"), a Pentaflex employee, clandestinely "sold" the tooling to Ikerd's without authorization from either Meritor or GM. The Complaint alleges that Ikerd's committed common law conversion when it purchased the tooling with knowledge that it belonged to GM and then refused to return it to GM. The Complaint alleges that the alleged conversion took place in October 2001. Meritor seeks recovery of the tooling and damages relating to the alleged conversion.

Specifically, with respect to the amount in controversy, the Complaint provides:

4. The amount of controversy is greater than $75,000 exclusive of interest, costs, and attorneys' fees.

5. This Court has subject matter jurisdiction over this matter pursuant to 28 U.S.C. § 1332.

Paragraph 18 of the Complaint provides that "[t]he value of the [tooling] is in excess of $75,000."

In their Answer to the Complaint, Ikerd's admitted that "as a result of the substantial investment by Ikerd's in restoring the tooling, the present value of the tooling exceeds $75,000." Ans. w/Affirm. Other Defs., Counterlcaim Third-Party Compl. ¶¶ 4 18. In its counterclaim, Ikerd's asserted that it was entitled to set-off for the amount it expended to refurbish the tool. Ikerd's also asserted a third-party complaint to recover additional amounts. In response to Ikerd's counterclaim, Meritor averred that this Court lacks subject matter jurisdiction over Ikerd's counterclaim because the amount in controversy "is insufficient." Ans. to Counterclaim, at First Defense.

In the Case Management Plan ("CMP") entered in this lawsuit, Meritor represented that "[t]he amount in controversy is greater than $75,000 exclusive of interest, costs, and attorneys' fees." CMP, at III, ¶ 2.

On October 22, 2003, Meritor filed its Statement of Special Damages and Confidential Settlement Demand With respect to its Statement of Special Damages, Meritor stated:

Meritor Heavy Vehicle Systems, LLC currently has not calculated special damages and currently is unsure as to the extent of any special damages.

Meritor has neither supplemented its Statement of Special Damages nor provided to Ikerd's information with respect to the alleged damages it seeks to collect through this lawsuit.

On March 19, 2004, Meritor produced Kevin Belling ("Belling") in response to Ikerd's Federal Rule of Civil Procedure 30(b)(6) ("30(b)(6)") deposition notice. Meritor designated Belling to testify to the investigation conducted by Meritor with respect to the allegations contained in the Complaint, including the jurisdictional allegations. Belling's testimony about the value of the tooling was:

Q. Okay. Could you turn to page 4, paragraph 18 [of the Complaint]. It says: The value of the Subject Tooling is in excess of $75,000. Do you know what that's based on?

A. No, I don't have knowledge of where that value came from.

Q. Do you have any opinion on what the value of the Subject Tooling is?

A. Well, it has some value, but I don't know the specific value that it has.

Q. How would you determine that value?

A. Well, I mean it has value in the context of it can make product. There's also a value in the context of it's functional and it works, you don't have to replace it. If you replace it, it has a rather large value if you have to buy new tooling, but specifically to your question, I don't have nor did I have specific input into what the value of the tooling was at that time.

Q. Do you know who would know the answer to that question?

A. It could have been — that assessment could have come from a tooling engineer one of our — at our Osh Kosh facility or it could have been provided by General Motors.

Q. Assuming that General Motors is no longer going to carry the trailing arms as a service part, knowing that, would the value of the Subject Tooling be more or less or no change at all?

* * *

A. I can't answer whether or not the value is 75, 25, 105. It definitely would have — I think it would be the value they've assessed on it irrespective of whether we're going to use it any more, but you'd have to ask General Motors that question.

Belling Dep. at 112-114.

William Lutz ("Lutz") was produced by GM in response to Ikerd's 30(b)(6) deposition notice. Lutz testified to the following:

Q. Do you have an idea about what the value of the subject tooling is, dollar-wise?

A. When it was first made?

Q. Well, let's start when it was first made.

A. I don't know. My guess in the hundreds of thousands of dollars.

Q. What do you base that guess on?

A. Experience on other similar type products and the value of that tooling.

Q. Okay. Now do you have an idea what the value of the same tooling would be in 2001?

A. Considerably less being that it would need repair to be functional.

Q. Okay. What would be your estimate? You said hundreds of thousands brand new.

A. Quite possibly only scrap value.

Q. How much is scrap value?

A. A typical response is pennies on the dollar. I don't know specifically what a pound of iron is worth.

Lutz Depo. at 59-60 (emphasis added).

Ms. Janet Stanton ("Stanton"), another employee produced by GM, was able to fill in the information about the scrap value of the Subject Tooling that Mr. Lutz could not. Stanton testified as follows:

Q. Do you have an idea what the [tooling] is worth dollar-wise?

A. Only from the engineering perspective of what it would be for replacement value I think when we talked about when this first came into being, and it's probably between 75 and $100,000, if not more.

Q. Okay. Do you have an idea what it would be worth in scrap condition?

A. I think that was discussed even at this time frame back then. I don't know what it would be at today's price, but it would have been worth from scrap metal pricing standpoint about $600.

Stanton Dep. at 72-73.

The GM representatives made it clear in their depositions that GM has no intention of putting the tooling to use again, at Meritor or elsewhere. Lutz Dep. at 62, 66, 95, 97-99; Lutz Dep. Exh. 58.

After completing the deposition of Meritor, counsel for Ikerd's inquired whether counsel for Meritor had any other witnesses available to testify about the categories of the 30(b)(6) notice that Belling could not. Meritor's counsel advised Ikerd's counsel that Meritor had no other witness who possessed information responsive to Ikerd's 30(b)(6) deposition notice. Further, Meritor's counsel advised Ikerd's counsel that Meritor would not produce any additional witnesses. Defs.' Exh., Letter, Apr. 26, 2004.

However, Highfield testified during his deposition that he offered to sell the tooling to Ikerd's for $75,000.00. Highfield Dep. at 186. Moreover, Ed Anderson ("Anderson"), a person with knowledge about tooling, and the owner of Metal Stampings Unlimited ("MSU") where Highfield stored the tooling, testified that the tooling was not in "scrap" condition, but it was in "production" condition. Anderson Dep. at 110-11. Anderson also testified that the tooling was capable of producing trailing arms even before Ikerd's refurbished it. Id. at 116-17.

II. STANDARD

This suit is based on diversity jurisdiction where the parties are citizens of different states and the amount in controversy exceeds $75,000.00. 28 U.S.C. § 1332. The Court must apply the "legal certainty" test to assess whether the amount in controversy in a given case satisfies the requirements of § 1332. "Under the legal certainty test, [the Court] will find federal jurisdiction on the basis of the plaintiff's complaint unless it appears `to a legal certainty that the claim is really for less than the jurisdictional amount.'" Smith v. Am. Gen'l Life Acc. Ins. Co., 337 F.3d 888, 892 (7^th Cir. 2003) (quoting St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 287 n. 10 (1938)). See also Freeman v. Sports Car Club of Am., Inc., 51 F.3d 1358, 1362 (7^th Cir. 1995).

"Whether § 1332 supplies subject-matter jurisdiction must be ascertained at the outset; events after the suit begins do not affect the diversity jurisdiction." Johnson v. Wattenbarger, 361 F.3d 991, 993 (7^th Cir. 2004). Legal shortcomings of the plaintiff's case do "not equate to a jurisdictional shortfall. . . ." Id.

III. DISCUSSION

Meritor cites Spectacor Management Group v. Brown, 131 F.3d 120, 126 (3d Cir. 1997), and Motorists Mutual Insurance Co. v. Simpson, 404 F.2d 511 (7^th Cir. 1968), for the proposition that the Court should include the amount of Ikerd's counterclaim to determine the amount in controversy. Pl.'s Opp'n to Def.'s Mot. to Dismiss, at 4. However, the law in the Seventh Circuit, as recently espoused in Johnson v. Wattenbarger, 361 F.3d 991, 993 (7^th Cir. 2004), is that the amount in controversy is determined from the plaintiff's perspective at the outset of the suit. The alternative rule discussed in Simpson is dicta. In light of the clear directive in Johnson, the Court will follow the general rule that the amount in controversy is determined by looking at the plaintiff's perspective at the outset of the suit.

Meritor contends that Ikerd's admitted that the amount in controversy exceeds $75,000.00 because Ikerd's said that the present value of the tool exceeds $75,000.00. In addition, Meritor avers that replacement value is higher than $75,000.00, therefore, the amount in controversy is clearly greater than the jurisdictional minimum. Moreover, Meritor contends that a person with knowledge of tooling, Anderson, testified that the tooling was not in "scrap" condition when it was sold, it was in "production" condition, which supports an inference that the value of the tooling at the time of conversion exceeded $75,000.00. Meritor argues that these facts defeat the requirement that the Court find to a "legal certainty" that the jurisdictional amount is not met.

Ikerd's counters that Meritor has presented no evidence that the tool was worth more than the $28,000.00 that Ikerd's paid Highfield for it in October 2001. The testimony of the GM employees supports this position because they testified that "scrap" is worth much less than the original or replacement value of the tooling as a working unit. Moreover, Ikerd's asserts that Anderson's testimony does not prove the value of the tooling at the time it was converted, it is merely his opinion about whether or not the tooling could make parts.

In Indiana, "the measure of damages in an action for conversion [is] the fair market value of the property at the time of conversion." Lafayette Prod. Credit Ass'n v. Wilson Foods Corp., 687 F. Supp. 1267, 1278 (N.D. Ind. 1987) (citing Plymouth Fertilizer Co. v. Balmer, 488 N.E.2d 1129, 1140 (Ind.Ct.App. 1986); Coffel v. Perry, 452 N.E.2d 1066, 1069 (Ind.Ct.App. 1983)). "[D]amages are restricted to the amount of actual losses sustained as a proximate result of the conversion." Coffel, 452 N.E.2d at 1069. If the converted property is returned, the measure of damages is "the fair rental value for the period of conversion." Id. at 1069 (citing Oceana Oil Producers, Inc. v. Portland Silo Co., 229 Ind. 656, 100 N.E.2d 895 (1951); Jay Clutter Custom Diggin v. English, 393 N.E.2d 230 (Ind.Ct.App. 1979)).

The Court finds that it appears to a legal certainty that the value of the tooling at issue in this case at the time of conversion was less than the $75,000.00 jurisdictional minimum. Although Meritor asserts in its complaint that the amount in controversy exceeds $75,000.00, the facts underlying that allegation do not support a finding of that amount. Meritor's and GM's 30(b)(6) witnesses could not testify that the tooling was worth $75,000.00 at the time it was converted. In fact, Lutz testified that the value of the tooling in 2001 was "[q]uite possibly only scrap value." Lutz Dep. at 60. He further defined "scrap value" as "pennies on the dollar" of the tooling's original value or a multiple of "what a pound of iron is worth." Id. Furthermore, Stanton testified that the scrap value of the tooling at the time it was converted was around $600.00. Stanton Dep. at 73. This testimony cannot support Meritor's allegation that the tooling was worth $75,000.00 or more when Ikerd's allegedly converted it in October 2001.

Similarly, Anderson's testimony that he though the tooling was in "production" condition, does nothing to inform the inquiry about "the fair market value" of the tooling at the time of conversion. However, it does support Meritor's apparent contention that the tooling was worth more than just the $600.00 scrap value quoted by Stanton.

The solid evidence of the "fair market value of the property at the time of conversion" in this case is the amount that Ikerd's paid Highfield for the tooling, or $28,000.00; an amount clearly well below the $75,000.00 jurisdictional minimum.

For these reasons, the Court finds that Ikerd's Motion to Dismiss for Lack of Subject Matter Jurisdiction should be GRANTED.

IV. CONCLUSION

For the foregoing reasons, the defendants', Ikerd's, Inc., and Patrick F. Ikerd, Motion to Dismiss for Lack of Subject Matter Jurisdiction is GRANTED. Plaintiff's, Meritor Heavy Vehicle Systems, LLC, complaint is dismissed without prejudice. Counterclaim Plaintiff and Third-Party Plaintiff, Ikerd's, Inc., shall have five days from the date of this Order to notify the Court whether or not it intends to pursue its claims in this Court.

IT IS SO ORDERED.