Family Motor Inn, Inc. v. LK ENTERPRISES DIV. CON. F. CORP.

• Decision Date: 02 August 1973
• Docket Number: Civ. No. 1695.
• Citation: 369 F. Supp. 766
• Parties: FAMILY MOTOR INN, INC., Plaintiff, v. L-K ENTERPRISES DIVISION CONSOLIDATED FOODS CORPORATION, Defendant.
• Court: U.S. District Court — Eastern District of Kentucky

369 F. Supp. 766

FAMILY MOTOR INN, INC., Plaintiff, v. L-K ENTERPRISES DIVISION CONSOLIDATED FOODS CORPORATION, Defendant.

Civ. No. 1695.

United States District Court, E. D. Kentucky, Covington Division.

August 2, 1973.

Harry L. Riggs, Jr., Erlanger, Ky., for plaintiff.

Philip Taliaferro, Covington, Ky., Richard H. Compere, Chicago, Ill., for defendant.

MEMORANDUM

SWINFORD, District Judge.

This unfair competition action was commenced in Kenton Circuit Court and removed to this court pursuant to 28 U.S.C. § 1441(a). The dispute involves the parties' mutual use of the term "family" in connection with the operation of restaurants in the same locale. Attacking defendant's use of the term as a public deception and exploitation of plaintiff's good-will, the complaint seeks injunctive relief and unspecified damages. The defendant's petition for removal recites diversity of citizenship and alleges that the injunctive relief sought by plaintiff would subject L-K Enterprises to costs in excess of the $10,000 required for federal jurisdiction. The plaintiff contested jurisdiction through its "objection to petition for removal" which the court treated as a motion to remand in its order for the submission of briefs.

The plaintiff does not dispute the diversity element of federal jurisdiction; its argument also reveals no disagreement with the petition's allegations concerning the defendant's cost of complying with the relief sought. The sole issue involves the mode of determining the amount in controversy. The plaintiff argues that this analysis is made with reference to the damages sought and since the complaint requests injunctive relief only the requisite jurisdictional amount is absent. Defendant contends that the amount in controversy may be reflected in the anticipated costs of complying with the relief demanded by plaintiff.

Removal of diversity actions from state courts is governed by 28 U.S.C. § 1441 (a):

"(A)ny civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant . . . to the district court of the United States . . . ."

Section 1332(a) of the same Title outlines the elements of diversity jurisdiction:

"The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $10,000, exclusive of interest and costs, and is between — (1) citizens of different states . . . ."

The problems generated by the application of the $10,000 requirement to complaints seeking injunctive relief have necessitated a special application of the jurisdictional statute:

"In injunction actions, the amount in controversy is not the amount which plaintiff might recover at law, but the value of the right to be protected or the extent of the injury to be prevented.

A problem which arises in the whole area of jurisdictional amount, but which is presented most acutely in the injunction cases, is whether the amount in controversy is the benefit to the plaintiff from the injunction or the cost to defendant of complying with it. Dean . . . Dobie . . . argued very forcefully that the courts should look only to the benefit to the plaintiff, the so-called `plaintiff viewpoint' rule. There is support for this rule in the language of some decisions. Nevertheless some of the lower courts . . . continue to hold that the amount in controversy is the value to the plaintiff or the cost to the defendant, whichever is greater." 1 Barron & Holtzoff, Wright Ed., Section 24, at pp. 111-113.

Although the method of identifying the amount in controversy in injunction cases does vary with the forum, most courts have adopted the "plaintiff viewpoint" rule in actions commenced in federal court. 30 A.L.R.2d 602, 621.

The Sixth Circuit courts have generally adhered to the majority rule. Seeking declaratory and injunctive relief, the plaintiff in Goldsmith v. Sutherland, 6th Cir., 426 F.2d 1395 (1970), cert. denied 400 U.S. 960, 91 S.Ct. 353, 27 L.Ed.2d 270 (1970), challenged the army's refusal to allow free entry into a military base. The court relied on the accepted rule in affirming the dismissal of the action:

"(I)n injunction actions, the amount in controversy is not the amount that the plaintiff might recover at law, but rather the value of the right to be protected or the extent of the injury to be prevented." Id. at 1398.

In Pennsylvania R. Co. v. City of Girard, 6th Cir., 210 F.2d 437 (1954), a municipality sought injunctive relief and $1,000 in damages against a railroad for maintaining a nuisance. Raising the issue sua sponte, the court noted that jurisdiction depends "upon the value of the rights which plaintiff seeks to have protected . . .", as well as the actual pecuniary damages sustained. Thus, the amount in controversy is measured by,

"the expense to which the plaintiff will reasonably be put through the years and by the value of the right sought to be protected." Id. at 439.

The majority rule was similarly applied in several earlier decisions: Pinkston v. Brotherhood of Locomotive Firemen and Enginemen, 6th Cir., 69 F.2d 600 (1934), affd., 293 U.S. 96, 55 S.Ct. 1, 79 L.Ed. 219 (1934), rehearing denied, 293 U.S. 632, 55 S.Ct. 211, 79 L.Ed. 717 (1934); Wisconsin Electric Co. v. Dumore Co., 6th Cir., 35 F.2d 555 (1929), cert. dismissed, 282 U.S. 813, 51 S.Ct. 214, 75 L.Ed. 728 (1931); Nashville, C. & St. L. Ry. Co. v. McConnell, M.D.Tenn., 82 F. 65 (1897).

The district courts within this Circuit have generally been content to restate the majority rule governing the ascertainment of damages in injunction cases. See Dixie Greyhound Lines, Inc. v. Elliott, W.D.Ky., 45 F.Supp. 953 (1942); Colony Coal & Coke Corporation v. Napier, E.D.Ky., 28 F.Supp. 76 (1939); Harris v. Brown, W.D.Ky., 6 F.2d 922 (1925); Illinois Cent. R. Co. v. Railroad Commission of Kentucky, E.D.Ky., 1 F. 2d 805 (1924). Perhaps the most relevant of these earlier lower court decisions was Sunbeam Corporation v. Richardson, W.D.Ky., 144 F.Supp. 583 (1956), reversed on other grounds, 6th Cir., 243 F.2d 501 (1957). Confronted with an action brought to enjoin the defendant's noncompliance with the Kentucky Fair Trade laws, the court found it necessary to restate the characteristics of the jurisdictional amount requirement:

"In cases of this character the jurisdictional amount is not to be determined by the amount of sales and the amount of money derived therefrom but is based upon the value of the right to be protected; that is, the value of the property right the plaintiff possesses in the good will of its products. . . .

In unfair trade practices cases it is not the immediate pecuniary damages arising from the wrongful acts that are alleged but the value of the business or the rights which the plaintiffs claim to be protected. Business reputation and good will are intangible assets and are to be taken into consideration in determining that value." Id. at 587.

There is no comprehensible reason to take issue with the majority rule that, in actions initiated in federal court for injunctive relief, the amount in controversy should be ascertained with reference to the plaintiff. However, the court questions the application of that rule to...