Bracken v. MH Pillars Inc., 15 Civ. 7302 (RA) (GWG)

• Decision Date: 29 November 2017
• Docket Number: 15 Civ. 7302 (RA) (GWG)
• Citation: 290 F.Supp.3d 258
• Parties: Andrew BRACKEN, Plaintiff, v. MH PILLARS INC. d/b/a Payza, Defendant.
• Court: U.S. District Court — Southern District of New York

290 F.Supp.3d 258

Andrew BRACKEN, Plaintiff,

v.MH PILLARS INC. d/b/a Payza, Defendant.

15 Civ. 7302 (RA) (GWG)

United States District Court, S.D. New York.

Signed November 29, 2017

Joseph Benjamin Russell, Campinha Bacote LLC, Dublin, OH, Dayton Peter Haigney, III, Dayton P. Haigney, New York, NY, for Plaintiff.

REPORT AND RECOMMENDATION

GABRIEL W. GORENSTEIN, UNITED STATES MAGISTRATE JUDGE

Plaintiff Andrew Bracken has moved for a default judgment against defendant MH Pillars Inc. For the reasons set forth below, this Court lacks subject matter jurisdiction over this action and thus the case should be dismissed without prejudice.

I. BACKGROUND

Bracken filed a complaint on September 16, 2015 (Docket # 1), and an amended complaint on November 4, 2015 (Docket # 14) ("Am. Compl."). The amended complaint named MH Pillars Inc., Obopay, Inc. and Ultralight FS, Inc. as defendants. Id. at 1. The complaint alleged that MH Pillars, under its trade name Payza and in conjunction with co-defendants Obopay, Inc. and Ultralight FS, Inc. (collectively, "Obopay"), provided "money transfer services" to Bracken's online business, Bidxcel, LLC, in addition to the general public. See id. ¶¶ 2–4, 7. Bracken established a corporate account with MH Pillars, in the name of Bidxcel, in the fall of 2012. Id. ¶ 7. At the time he filed the amended complaint, in November 2015, Bidxcel's account with MH Pillars had a balance of $38,871.30, representing payments to Bidxcel from customers. Id. ¶ 8. Despite repeated requests, MH Pillars had refused to release the funds, claiming that the funds were frozen due to a U.S. Department of Justice investigation. Id. ¶¶ 9–10. MH Pillars "improperly blamed the entire situation on Obopay," whom it had employed as its agent for the distribution of funds throughout the United States. Id. ¶ 10–11. Pursuant to their agreement, Obopay agreed to supply MH Pillars with the required licensing to operate and provide services to its U.S. customers, see id., but Obopay, in fact, "was an illegitimate provider of [such] banking services," id. ¶ 16. The investigation was ongoing as of the filing of the complaint. Id. ¶ 21.

Obopay moved to dismiss the complaint for lack of personal and subject matter jurisdiction. See Notice of Motion to Dismiss, filed Feb. 4, 2016 (Docket # 25). On December 29, 2016, the Court denied the motion to dismiss without prejudice to renewal following jurisdictional discovery. See Bracken v. MH Pillars Inc., 2016 WL 7496735 (S.D.N.Y. Dec. 29, 2016) (" Bracken"). Obopay later entered into a stipulation of dismissal with Bracken. See Stipulation of Discontinuance Against Obopay, Inc. and Ultraight [sic] FS, Inc., filed Mar. 6, 2017 (Docket # 43).

MH Pillars never responded to the complaint, however. Bracken obtained a Clerk's Certificate of Default on May 26, 2017 (Docket # 48) and then moved for a default judgment against MH Pillars, see Notice of Motion for Default Judgment, filed June 7, 2017 (Docket # 49). The motion papers included a declaration and documentary evidence supporting his request for an award of damages. See Affirmation of Dayton Haigney, in Support of Plaintiff's Motion for a Default Judgment, filed June 7, 2017 (Docket # 50) ("Haigney Aff."). Bracken sought a judgment for $38,871.30. Id. ¶ 10.

On June 29, 2017, MH Pillars was ordered to show cause why a default judgment should not be entered in favor of Bracken for the relief requested in the amended complaint. (Docket # 51). MH Pillars did not appear or otherwise respond to the order to show cause. See Plaintiff's Supplemental Memorandum of Law in Support of Default Judgment, filed Oct. 12, 2017 (Docket # 60) ("Pl. Supp. Mem."), at 1.

On September 1, 2017, the district court referred Bracken's motion for a default judgment to the undersigned for a report and recommendation. See Order of Reference, dated Sept. 1, 2017 (Docket # 55). On September 6, 2017, this Court instructed Bracken to file a supplemental memorandum and related affidavits by September 20, 2017, providing the factual and legal bases for subject matter jurisdiction and for personal jurisdiction over MH Pillars. See Order, dated Sept. 5, 2017 (Docket # 56). Bracken filed a supplemental memorandum of law in response to the Court's September 6 Order, but did not attach an affidavit or provide citations for factual statements. See Plaintiff's Supplemental Memorandum in Support of Default Judgment, filed Sept. 20, 2017 (Docket # 57). Accordingly, the Court ordered Bracken to resubmit a memorandum of law providing citations for factual assertions and to supply an affidavit supporting any facts relevant to his arguments. See Order, dated Sept. 28, 2017 (Docket # 58). On October 12, 2017, Bracken filed an amended memorandum of law and an affidavit from himself. See Pl. Supp. Mem.; Affidavit of Andrew Bracken, dated Oct. 12, 2017 (Docket # 59) ("Bracken Aff.").

II. EFFECT OF ENTRY OF DEFAULT

The default entered in this case establishes MH Pillars's liability. See Bambu Sales, Inc. v. Ozak Trading Inc., 58 F.3d 849, 854 (2d Cir. 1995). In the default judgment context, the only issue that usually needs to be decided is whether the plaintiff has provided adequate support for the damages or other relief he seeks. See, e.g., GAKM Res. LLC v. Jaylyn Sales Inc., 2009 WL 2150891, at *2 (S.D.N.Y. July 20, 2009) ("A default judgment that is entered on the well-pleaded allegations in a complaint establishes defendant's liability ... and the sole issue that remains before the court is whether the plaintiff has provided adequate support for the relief it seeks.") (citations omitted). However, "when entry of a default judgment is sought against a party who has failed to plead or otherwise defend, the district court has an affirmative duty to look into its jurisdiction both over the subject matter and the parties." Williams v. Life Sav. & Loan, 802 F.2d 1200, 1203 (10th Cir. 1986) ; accord System Pipe & Supply, Inc. v. M/V VIKTOR KURNATOVSKIY, 242 F.3d 322, 324 (5th Cir. 2001) ; In re Tuli, 172 F.3d 707, 707 (9th Cir. 1999).

Federal Rule of Civil Procedure 12(h)(3) provides that "[i]f the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action." In doing so, a court is not limited to examining the complaint itself, but may "refer to any material in the record." Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 108 (2d Cir. 1997) ; see generally Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000) ("In resolving a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), a district court ... may refer to evidence outside the pleadings.").

III. SUBJECT MATTER JURISDICTION

A. Legal Principles

The amended complaint invokes diversity jurisdiction pursuant to 28 U.S.C. § 1332. See Am. Compl. ¶ 6. Section 1332 authorizes federal courts to exercise jurisdiction over an action where "the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs" and complete diversity exists between the parties. Hallingby v. Hallingby, 574 F.3d 51, 56 (2d Cir. 2009) (quoting 28 U.S.C. § 1332(a)(1) )

The amount in controversy requirement may be met by a combination of economic and non-economic losses and punitive damages, so long as the punitive damages are permitted under the controlling law. See In re Gen. Motors LLC Ignition Switch Litig., 2015 WL 2130904, at *2–3 (S.D.N.Y. May 6, 2015) ; see also A.F.A. Tours, Inc. v. Whitchurch, 937 F.2d 82, 87 (2d Cir. 1991) ("if punitive damages are permitted under the controlling law, the demand for such damages may be included in determining whether the jurisdictional amount is satisfied.") (citing 14A Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3702, at 44 (2d ed. 1985) ). The requirement may also be met by aggregating a plaintiff's claims. See Pollock v. Trustmark Ins. Co., 367 F.Supp.2d 293, 300 (E.D.N.Y. 2005) (citing 15 James W. Moore, Moore's Federal Practice § 102.108(1) (3d ed. 2004)).

The "party invoking the jurisdiction of the federal court has the burden of proving that it appears to a ‘reasonable probability’ that the claim is in excess of the statutory jurisdictional amount." Scherer v. Equitable Life Assur. Soc'y of U.S., 347 F.3d 394, 397 (2d Cir. 2003) (quoting Tongkook Am., Inc. v. Shipton Sportswear Co., 14 F.3d 781, 784 (2d Cir. 1994) ). This burden, in most cases, is "hardly onerous ... for we recognize ‘a rebuttable presumption that the face of the complaint is a good faith representation of the actual amount in controversy.’ " Id. (quoting Wolde–Meskel v. Vocat'l Instruction Project Cmty. Servs., Inc., 166 F.3d 59, 63 (2d Cir. 1999) ); accord Abdel–Aleem v. OPK Biotech LLC, 665 F.3d 38, 41 (1st Cir. 2012) ("[T]he sum claimed by the plaintiff controls if the claim is apparently made in good faith.") (quoting Stewart v. Tupperware Corp., 356 F.3d 335, 338 (1st Cir. 2004) ). But a plaintiff's allegation regarding the amount in controversy may be overcome by a finding "to a legal certainty" that the amount recoverable does not exceed the jurisdictional minimum amount. Scherer, 347 F.3d at 397 (quoting Wolde–Meskel, 166 F.3d at 63 ). Courts have "set a high bar for overcoming this presumption." Id."[T]he legal impossibility of recovery must be so certain as virtually to negative the plaintiff's good faith in asserting the claim." Chase Manhattan Bank, N.A. v. Am. Nat'l Bank & Trust Co. of Chi., 93 F.3d 1064, 1070–71 (2d Cir. 1996) (quoting Tongkook, 14 F.3d at 785 ). Put another way, "[t]he question ... is whether to anyone familiar with the applicable law this claim could objectively have been viewed as worth more than the jurisdictional minimum." Abdel–Aleem, 665 F.3d at 41 (internal quotation marks omitted) (quoting Coventry Sewage Assocs. v. Dworkin Realty Co., 71 F.3d 1, 6 (1st Cir. 1995) ).

When an amount for punitive damages is required for a claim to meet the...