Gould v. Artisoft, Inc.

• Decision Date: 30 July 1993
• Docket Number: No. 92-2419,92-2419
• Citation: 1 F.3d 544
• Parties: John GOULD, Plaintiff-Appellant, v. ARTISOFT, INCORPORATED, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 544

1 F.3d 544

John GOULD, Plaintiff-Appellant, v. ARTISOFT, INCORPORATED, Defendant-Appellee.

No. 92-2419.

United States Court of Appeals, Seventh Circuit.

Argued Feb. 18, 1993.

Decided July 30, 1993.

Mark L. LeFevour (argued), Matt LaKoma, Gene Callahan, Callahan, Fitzpatrick, Lakoma & McGlynn, Oak Brook, IL, for plaintiff-appellant.

George F. Venci, Jr., David T.B. Audley (argued), Michael W. Ford, Chapman & Cutler, Chicago, IL, for defendant-appellee.

Before POSNER and ROVNER, Circuit Judges, and ESCHBACH, Senior Circuit Judge.

ILANA DIAMOND ROVNER, Circuit Judge.

In this diversity action, John Gould alleges that Artisoft, Incorporated ("Artisoft") breached his employment contract. The district court dismissed Gould's complaint, concluding that he had failed to satisfy a condition precedent and, alternatively, that the contract failed for lack of consideration. Because we find that Gould sufficiently alleged the formation of a valid contract supported by adequate consideration, we reverse and remand for further proceedings.

I. FACTS

In reviewing this grant of a motion to dismiss, we consider only the well-pleaded factual allegations of Gould's second amended complaint and any reasonable inferences that might be drawn therefrom. See Mid Am. Title Co. v. Kirk, 991 F.2d 417, 419 (7th Cir.1993).

Artisoft, which distributes computer hardware and software products, hired John Gould in January 1991 to assemble and coordinate its nationwide sales force. In July of that year, Artisoft's Vice President of Sales and Marketing, David Hallmen, sent Gould a written offer to be Artisoft's Director of Sales. After making handwritten changes to Artisoft's offer, Gould signed the agreement on July 15, 1991, and Artisoft accepted Gould's proposed modifications in the last week of July. Under the terms of the agreement, Gould was to assume his new position on or before July 29, 1991, but until then, he was to remain in his previous position.

As a condition of his employment, the contract required Gould to execute "the enclosed nondisclosure and noncompetition agreement." (Gould App. Ex. F, at 6.) But no such agreement accompanied the written offer, nor did Artisoft tender such an agreement for Gould's signature prior to his termination. The contract provided for a three-month probationary period during which Artisoft would evaluate Gould's performance in his new position. At the end of the probationary period, either Gould or Artisoft could terminate the agreement if it became apparent that the arrangement was not mutually beneficial. The contract also contemplated that Gould would relocate to Tucson, Arizona, that Artisoft would pay the cost of his relocation, and that Artisoft would extend a bridge loan to facilitate Gould's purchase of a home in Tucson. If Gould were to resign from Artisoft within one year, however, he would be required to reimburse Artisoft for his relocation expenses. The contract further provided that in addition to his annual salary, Gould was to receive fifty shares of Artisoft stock.

When the parties executed the contract, Artisoft was a privately-held Arizona corporation. Plans were in the works, however, to make an initial public offering of Artisoft stock, and in anticipation of that offering, Artisoft was reincorporated in Delaware. On July 26, 1991, the fifty shares of stock referenced in the agreement were canceled and converted to 10,000 shares of the reincorporated Delaware corporation.

Artisoft terminated Gould's employment on August 7, 1991, less than two weeks after he assumed his new position with the company. The record does not reveal the reason, if any, for Gould's termination. Gould alleges that by the time he was terminated he already had begun "making the necessary arrangements to move and reside in Tucson, Arizona." (Gould App. Ex. F, at 4; see also id. at 2.)

After his termination, Gould sued Artisoft in the Circuit Court of Cook County, seeking specific performance of Artisoft's promise to provide fifty shares of stock. Gould asserted that he became entitled to the stock upon acceptance of Artisoft's offer and that his right to the stock was unaffected by his termination. Gould also sought a preliminary injunction barring the public offering of Artisoft stock, which he claimed would diminish the value of his shares.

Artisoft removed the action to federal court, and Gould responded with an emergency motion to remand, which the district court denied. The court found that the $50,000 amount in controversy requirement for diversity jurisdiction had been satisfied because the value of the disputed stock in either a public or private sale was likely to exceed the jurisdictional amount.

After the district court denied Gould's motion for injunctive relief, Artisoft moved to dismiss the complaint, arguing that a condition precedent to the employment contract--execution of the noncompetition agreement--had not been satisfied and that the contract lacked consideration. The district court granted Artisoft's motion in an oral opinion, and Gould appeals.

II. DISCUSSION

A. Federal Jurisdiction

We first must consider whether the $50,000 amount in controversy requirement of 28 U.S.C. Sec. 1332(a) has been satisfied. If not, we would be required to vacate the district court's judgment and remand the action to state court. See Shaw v. Dow Brands, Inc., 994 F.2d 364, 366 (7th Cir.1993).

Our recent decision in Shaw establishes the analytical framework for considering whether the amount in controversy meets the threshold for diversity jurisdiction in removal cases. We generally would determine that amount "by merely looking at plaintiff's state court complaint, along with the record as a whole." Id. (citing Oglesby v. RCA Corp., 752 F.2d 272, 275, 278 (7th Cir.1985); Davenport v. Proctor & Gamble Mfg. Co., 241 F.2d 511, 513 (2d Cir.1957)). But here, as in Shaw, Gould's original complaint does not reveal the precise value of his claim, for he requested only specific performance of Artisoft's promise to tender the fifty shares. We have struggled before with the problem of determining the actual amount in controversy when plaintiffs request only declaratory or equitable relief. See, e.g., Jadair, Inc. v. Walt Keeler Co., 679 F.2d 131, 132 (7th Cir.), cert. denied, 459 U.S. 944, 103 S.Ct. 258, 74 L.Ed.2d 201 (1982); McCarty v. Amoco Pipeline Co., 595 F.2d 389, 391-95 (7th Cir.1979). But here, it is clear that the shares of stock themselves are at issue and that the amount in controversy therefore depends on the value of those shares. See Sarnoff v. American Home Prod. Corp., 798 F.2d 1075, 1078 (7th Cir.1986) (amount in controversy equal to the present value of shares of stock allegedly due to the plaintiff over a ten-year period).

Because Artisoft invoked our jurisdiction by removing the case, it bears the burden of showing that the amount in controversy is sufficient. Shaw, 994 F.2d at 366; see also Wilson v. Republic Iron & Steel Co., 257 U.S. 92, 97, 42 S.Ct. 35, 37, 66 L.Ed. 144 (1921). Shaw requires that Artisoft meet its burden by a preponderance of the evidence, which means "proof to a reasonable probability that jurisdiction exists." Shaw, 994 F.2d at 366 & n. 2; see also McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 785, 80 L.Ed. 1135 (1936). We look to the facts that existed at the time of removal to determine our jurisdiction, for a plaintiff "may not manipulate the process" to defeat federal jurisdiction and force a remand once the case has been properly removed. Shaw, 994 F.2d at 368; see also id. at 368.

Gould argues that the jurisdictional amount was not satisfied here because neither the present nor the prospective value of the Artisoft stock could be ascertained. Instead, Gould contends that the stock's value was speculative and therefore insufficient to establish jurisdiction. Like the district court, we reject the notion that the amount in controversy requirement can never be satisfied where stock with no ascertainable public market value is at issue. If the defendant can establish to a reasonable probability that the value of the stock in a private transaction would exceed the jurisdictional amount, that requirement is satisfied. See Cumming v. Johnson, 616 F.2d 1069, 1072 (9th Cir.1979).

Artisoft attempted to satisfy its burden with a draft of the Prospectus it planned to issue in connection with the initial public offering of its stock. (R. 4, at Ex. B.) ¹ The draft Prospectus stated that the initial offering price would be between $11.50 and $13.50 per share, with a target price of $12.50 per share. Because Gould alleged an entitlement to 10,000 shares (after the conversion of his fifty shares pursuant to Artisoft's reincorporation), his claim would be valued at between $115,000 and $135,000. We view that estimate as persuasive evidence of the value of the disputed shares at the time of removal, particularly because Gould presented no evidence to cast doubt on the accuracy of the estimated price range. Gould argued only that the share value was speculative and that the initial public offering was itself not a certainty. Yet the speculative nature of the estimated share price cannot defeat federal jurisdiction in the absence of evidence suggesting a significantly lesser value. ² And even if it was possible at the time of removal that the initial public offering would not occur, ³ jurisdiction still was proper if Artisoft could show to a reasonable probability that the stock's value in a private sale also would exceed $50,000. See Cumming, 616 F.2d at 1072. Absent evidence of a previous stock sale, the private sale value can be stated as the percentage of the total value of the company represented by Gould's shares. The assets of the company as evidenced in the draft Prospectus, and therefore the company's value in a private sale, support the district court's conclusion that the amount in controversy exceeds the...