Gietzen Solar, LLC v. Powerco Solar, Inc.
Decision Date | 04 November 2020 |
Docket Number | Case No. 1:20-cv-00292-BLW |
Parties | GIETZEN SOLAR, LLC, an Idaho limited liability company, Plaintiff, v. POWERCO SOLAR, INC., a Utah corporation; CODY COLE, an individual; JAMES CONDER, an individual; and TAYLOR BYINGTON, an individual, Defendant. |
Court | U.S. District Court — District of Idaho |
Before the Court is Plaintiff Gietzen Solar, LLC's motion to remand. (Dkt. 8). For the reasons explained below, the removing defendants have failed to establish that the amount in controversy in this matter exceeds $75,000. Accordingly, the Court will grant the motion and remand the case to state court.
This case involves a contract dispute between Plaintiff Gietzen Solar and Defendant PowerCo Solar. Gietzen alleges that PowerCo breached a Contractor Agreement regarding Gietzen's installation of residential solar systems for PowerCo's customers. Compl., Dkt. 1-2, ¶¶ 9-18. The Contractor Agreement stipulated that the "non-prevailing party shall pay all costs and expenses of the prevailing party, including reasonable attorneys' fees." Id. at 15-16.
Defendants James Conder and Taylor Byington ("Removing Defendants") are not parties to the Contractor Agreement. Id. at 17. Gietzen has sued them for fraud. Gietzen alleges that these individuals, who are former PowerCo employees, conspired with PowerCo and its owner to use the proceeds PowerCo received under the Contractor Agreement to pay PowerCo's other creditors, or to pay their own salaries. Id. ¶¶ 19-26.
The complaint filed in state court alleges that PowerCo's breach caused Gietzen to suffer $59,473.50 in damages, plus interest. Id. ¶ 18. Gietzen calculates that as of January 2, 2020, interest of $3,469.14 had accrued and would continue to accrue at the rate of $10.32 per day. Id. Gietzen is also seeking attorneys' fees. Id. ¶ 28. The Court is not aware of the fee arrangement between Gietzen and its counsel, but the complaint requests a lump sum of $7,500 in attorneys' fees if PowerCo did not contest the matter. Id. ¶ 28
Removal from state court is governed by 28 U.S.C. § 1332 and 28 U.S.C. § 1441. Section 1332 provides that where the parties are diverse, "district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum of $75,000, exclusive of interest and costs . . . ." (emphasisadded). Section 1441 authorizes removal of civil actions from state court to federal court when the action could have been brought in federal district court. Audette v. ILWU, 195 F.3d 1107, 1111 (9th Cir. 1999) ().
Federal courts strictly construe the removal statute against removal. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (citing Boggs v. Lewis, 863 F.2d 662, 663 (9th Cir. 1988)). In diversity cases where the amount in controversy is in doubt, there is a presumption against removal jurisdiction, meaning that the defendant has the burden of establishing that removal is proper. Id. (citing Nishimoto v. Federman-Bachrach & Assocs., 903 F.2d 709, 712 n.3 (9th Cir. 1990)); see also Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 1090 (9th Cir. 2003) (). This burden is satisfied if the plaintiff claims a sum greater than the jurisdictional requirement of $75,000 or, if the amount claimed is unclear from the complaint, the defendant proves by a preponderance of the evidence that "more likely than not" the jurisdictional requirement is met. Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th Cir. 1996). The defendant is required to make this showing using summary-judgment-type evidence. Fritsch v. Swift Transp. Co. of Ariz., LLC, 899 F.3d 785, 795 (9th Cir. 2018). The NinthCircuit has explained that the "more likely than not" standard strikes an appropriate balance between the plaintiff's right to choose the forum and the defendant's right to remove. Id.
To determine whether the defendant has proved that the amount in controversy has been met, courts should consider (1) the petition for removal and (2) later-filed opposition and affidavits. Cohn v. Petsmart, Inc., 281 F.3d 837, 840 n.1 (9th Cir. 2002) (citation omitted). Relief which may be included in the amount in controversy includes (1) compensatory damages, (2) punitive damages, (3) value of injunctive relief, and (4) attorney's fees. Id. at 840; Simmons v. PCR Technology, 209 F. Supp. 2d 1029, 1033 (N.D. Cal. 2002).
The parties agree that the parties are diverse but disagree about the amount in controversy. The burden is on the removing defendants to show, by a preponderance of evidence, that more than $75,000 is at stake in this lawsuit. As noted above, Gietzen seeks the following:
Compl., Dkt. 1-2, ¶¶ 17, 28. The removing defendants argue that interest should be included in calculating the amount in controversy. The Court is not persuaded.
As noted, the diversity statute expressly states that the amount in controversy must exceed $75,000, exclusive of interests and costs . . . ." 28 U.S.C. § 1332(a) (emphasis added). Generally speaking, the "jurisdiction statutes require exclusion not only of interest that accrues after the action is brought but also interest that has accrued prior to the filing of the complaint." See 14AA Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 3712 (4th ed. 2020). Otherwise, the cases are not entirely consistent regarding interest. See id.
The removing defendants rely on the Supreme Court's 1895 decision in Brown v. Webster,156 U.S. 328, 329-30 (1895) to argue that interest should be included in the amount-in-controversy calculation. In Brown, the plaintiff sued for $6,000 after he was evicted from land. He had paid $1200 for the land and had received a warranty deed from the defendant. The defendant argued that the case did not satisfy the jurisdictional minimum of $2000 then in effect. Under applicable state law, however, the damages in such an action included the return of the purchase price with interest, and in Brown's case, the purchase price with interest from the time of purchase was more than $2000.
The Court held that federal jurisdiction existed. It distinguished between "interest as such" and interest "as an instrumentality in arriving at the amount ofdamages to be awarded on the principal demand." Id. at 329. The Court then concluded that in Brown's case, the interest was an essential ingredient of his principal claim, rather than a mere "accessory demand." Id. at 330.
Numerous courts interpreting Brown have excluded interest from the amount-in-controversy calculation if the interest "arises solely by virtue of a delay in the payment of an obligation." Wright & Miller § 3712 (1). That is precisely the case here, because under terms of the Contractor Agreement, "[a]ny invoice not paid within the applicable thirty (30) day period shall begin accruing interest on the outstanding balance of such invoice atthe rate 0.5% per month until paid." Dkt. 1-2 at 12. Accordingly, the Court will exclude interest in calculating the amount in controversy. To the extent Xerox Corp. v. CBG Legal, Inc., 2015 WL 13309101 (C.D. Cal. Apr. 16, 2015), relied upon by the removing defendants, is contrary to the decisions set out in the the preceding footnote, the Court does not find that case persuasive. Interest will not be included in calculating the amount in controversy.
2. Attorneys' Fees
Moreover, even if the Court were to include interest, the amount in controversy still would not exceed $75,000. Rather, the Court would need to include plaintiff's future attorneys' fees to nudge the amount in controversy across the $75,000 line. Gietzen seeks an award of attorneys' fees under both statute2 and contract.3
In Fritsch v. Swift Transp. Co. of Arizona, LLC, 899 F.3d 785, 795 (9th Cir. 2018), the Ninth Circuit held that courts "must include future attorneys' fees recoverable by statute or contract when assessing whether the amount-in-controversy requirement is met." Fritsch rejected an argument that future attorneys' fees are "inherently speculative and can be avoided by the defendant's decision to settle an action quickly." Id. Rather, the circuit expressed its confidence in district courts' ability "to determine whether defendants have carried their burden of proving future attorneys' fees, and to determine when a fee estimate is too speculative because of the likelihood of a prompt settlement." Id. The circuit went on to explain its charge to the district courts (and why it was parting ways with the Seventh Circuit on this point) as follows:
Unlike the Seventh Circuit, where the defendant need show only "a reasonable probability" that the amount in controversy exceeds the minimum, we require a removing defendant to prove that the amount in controversy (including attorneys' fees) exceeds the jurisdictional threshold by a preponderance of the evidence. We also require the defendant to make this showing with summary-judgment-type evidence. A district court may reject the defendant's attempts to include future attorneys' fees in the amount in controversy if the defendant fails to satisfy this burden of proof. Moreover, district courts have developed expertise in determining "the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate" when awarding attorneys' fees under a statute or contract authorizing recovery of "reasonable attorneys' fees" at the close of litigation. In estimating future attorneys' fees, district...
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