Independent Mach. v. International Tray & Pads

• Decision Date: 05 January 1998
• Docket Number: No. Civ. 97-2987(MTB).,Civ. 97-2987(MTB).
• Citation: 991 F.Supp. 687
• Court: U.S. District Court — District of New Jersey
• Parties: INDEPENDENT MACHINE CO., Plaintiff, v. INTERNATIONAL TRAY PADS & PACKAGING, INC. (Successor to National Converting Co., Inc.), Defendant.

991 F.Supp. 687

INDEPENDENT MACHINE CO., Plaintiff, v. INTERNATIONAL TRAY PADS & PACKAGING, INC. (Successor to National Converting Co., Inc.), Defendant.

No. Civ. 97-2987(MTB).

United States District Court, D. New Jersey.

January 5, 1998.

William L. Handler, West Orange, NJ, for plaintiff.

William J. Tinsley, Jr., Sills, Cummis, Zuckerman, Radin, Tischman, Epstein & Gross, P.A., Newark, NJ, for defendant.

OPINION

CHESLER, United States Magistrate Judge.

I. INTRODUCTION

This matter was opened by the Court sua sponte by an Order to Show Cause why the above captioned action should not be remanded to the New Jersey Superior Court, Law Division, Essex County, for lack of federal subject matter jurisdiction. The Order to Show Cause was filed on November 14, 1997, and was returnable on November 24, 1997. Plaintiff's response was ordered to be by written submission and no oral argument was permitted. For the reasons stated below, the above captioned action will be remanded.

II. BACKGROUND

This lawsuit arises out of the sale by Plaintiff to Defendant of a laminator/coater machine to be used in the manufacture of sealed-edge absorbent meat tray pads (the "Machine"). The full purchase price for the Machine was approximately $132,000. Shortly after accepting delivery of the Machine, Defendant discovered that the Machine had numerous defects that prevented it from functioning to produce the product for which it was designed. Numerous communications concerning the defects took place between Plaintiff and Defendant and Defendant subsequently made several attempts to repair the machine.

On October 16, 1996, Defendant wrote to Plaintiff, memorializing Defendant's revocation of its prior acceptance of the Machine, and requesting that Defendant accept the return of the machine and refund the purchase price. On October 19, 1996, Plaintiff responded in writing to Defendant's demand but did not mention that there were outstanding contract balances owed by Defendant.

Subsequent to this exchange of communications, Defendant's North Carolina counsel wrote Plaintiff demanding a refund of the $132,000 purchase price. On February 28, 1997, Plaintiff responded to the letter and stated that it refused to issue a refund. In response, on March 5, 1997, Defendant's attorneys advised Plaintiff that they had been directed to file a lawsuit on behalf of Defendant if the dispute could not be resolved. On April 16, 1997, Plaintiff commenced this action by filing a "Complaint on Contract" (the "Complaint") with the New Jersey Superior Court, Law Division, Essex County. The Complaint alleged that Defendant failed to pay for certain goods sold and services performed by Plaintiff and sought to recover the sum of $2970.90 from Defendant.

On June 4, 1997, Defendant answered Plaintiff's Complaint and filed numerous compulsory counterclaims involving various breach of contract and warranty claims. Through their counterclaims, Defendant sought to be reimbursed for the full price of the Machine.

On that same date, Defendant filed its Notice of Removal (the "Notice") with this Court. Defendant asserted in its Notice that this Court has jurisdiction through "diversity of citizenship." See Notice of Removal ¶¶ 4-8. In support of this contention, Defendant averred that Plaintiff is a New Jersey corporation, with its principal place of business in New Jersey, and that Defendant is a North Carolina corporation, with its principal place of business in North Carolina. See Notice of Removal ¶¶ 4-5. Additionally, Defendant contends that the "amount-in-controversy" requirement is satisfied because Defendant's counterclaims seek damages in excess of $120,000. See Notice of Removal ¶ 6. Therefore, Defendant concluded that there is complete diversity and federal jurisdiction. See Notice of Removal ¶ 7.

Based upon Defendant's use of damages pled in compulsory counterclaims, this Court issued an Order to Show Cause on November 14, 1997, directing Defendant to show cause why this case should not be remanded to state court for lack of federal subject matter jurisdiction. Defendant submitted a written response to the Order to Show Cause and argued that damages pled in compulsory counterclaims can satisfy the amount-in-controversy requirement of 28 U.S.C. § 1332, as amended. Defendant filed a supplemental response on December 15, 1997, reiterating its prior arguments.

III. DISCUSSION

A. Removal and Remand

Civil actions filed in a state court can generally be removed to a federal court in that state if the district courts of the United States have original jurisdiction.¹ See 28 U.S.C. § 1441 (1992). Once removed, however, a case may be remanded to the state court if the court determines that it lacks adequate federal subject matter jurisdiction.² See 28 U.S.C. § 1447(c) (1992).

When faced with a motion to remand, the party who removed the action has the responsibility of establishing the propriety of removal. Batoff v. State Farm Ins. Co., 977 F.2d 848, 851 (3d Cir.1992); Boyer v. Snap-On Tools Corp., 913 F.2d 108, 111 (3d Cir.1990), cert. denied 498 U.S. 1085, 111 S.Ct. 959, 112 L.Ed.2d 1046 (1991); Steel Valley Author. v. Union Switch and Signal Div., 809 F.2d 1006, 1012 n. 6 (3d Cir.1987), cert. dismissed, 484 U.S. 1021, 108 S.Ct. 739, 98 L.Ed.2d 756 (1988); Bishop v. General Motors Corp., 925 F.Supp. 294, 297 (D.N.J. 1996). Removal is a statutory right and, therefore, must be construed in favor of the non-removing party. Id. Any doubts about the existence of federal jurisdiction must be resolved in favor of remand. Batoff, 977 F.2d at 851; Boyer, 913 F.2d at 111; Bishop, 925 F.Supp. at 297.

B. Federal Jurisdiction

Jurisdiction in this matter is predicated upon diversity of citizenship. See Notice of Removal ¶¶ 4-8. Federal jurisdiction based on diversity of citizenship has two requirements. First, no plaintiff in the action can be a citizen of the same state as any of the defendants. Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806); Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978). Second, the "amount in controversy," exclusive of interest and costs, must exceed $75,000. 28 U.S.C. § 1332 (1992). There is no question that the parties in this case are diverse. Therefore, this Court's inquiry into the satisfaction of 28 U.S.C. § 1332 was prompted by Defendant's computation of the amount in controversy in its Notice of Removal.

1. Amount in Controversy Generally

The party who invokes the jurisdiction of the federal courts carries the burden of demonstrating that court's jurisdiction. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 785, 80 L.Ed. 1135 (1936); Columbia Gas Transmission Corp. v. Tarbuck, 62 F.3d 538, 541 (3d Cir. 1995). Courts will generally accept a party's good faith allegation of the amount in controversy, but if it is challenged by either the opposing party or the court, the party seeking the assistance of the federal court must provide sufficient evidence to justify its claims. Id.

Generally, the amount claimed in the plaintiff's complaint is controlling and is deemed to be the entire amount in controversy. St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89, 58 S.Ct. 586, 589-90, 82 L.Ed. 845 (1938). Specifically, when federal subject matter jurisdiction is based on diversity of citizenship, the amount in controversy must be determined from an examination of the complaint at the time it was filed. Horton v. Liberty Mutual Ins. Co., 367 U.S. 348, 353, 81 S.Ct. 1570, 1573, 6 L.Ed.2d 890 (1961). This is not true, however, if upon the face of the pleadings or other proof submitted, it "appears to a legal certainty that the claim is really for less." St. Paul Mercury Indem. Co., 303 U.S. at 288-89, 58 S.Ct. at 589-90, 82 L.Ed. at 845. It is then up to the plaintiff to refute the implication that jurisdiction is lacking. Gibbs v. Buck, 307 U.S. 66, 59 S.Ct. 725, 83 L.Ed. 1111 (1939); Nelson v. Keefer, 451 F.2d 289 (3d Cir.1971); Associated Business Tel. Systems Corp. v. Danihels, 829 F.Supp. 707, 709-10 (D.N.J.1993).

Where a case has been removed, however, the amount in controversy is generally decided from the plaintiff's complaint. Angus v. Shiley, Inc., 989 F.2d 142, 145 (3d Cir.1993); see also Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095-97 (11th Cir.1994) (recognizing that federal removal jurisdiction is determined by the amount of damages a plaintiff seeks); Wilson v. Belin, 20 F.3d 644, 651 n. 8 (5th Cir.1994) (noting that the amount in controversy was determined by the plaintiff's pleadings and papers); Marcel v. Pool, 5 F.3d 81, 84 (5th Cir.1993) (same); Shaw v. Dow Brands, 994 F.2d 364, 366 (7th Cir.1993) ("the amount in controversy [is determined] by merely looking at plaintiff's state court complaint"). The possibility that the plaintiff may "ask for or recover more after removal is not sufficient to support jurisdiction." Burns, 31 F.3d at 1097 n. 13; Asociacion Nacional de Pescadores v. Dow Quimica, 988 F.2d 559, 564-65 (5th Cir. 1993); Opelika Nursing Home v. Richardson, 448 F.2d 658, 664 (5th Cir.1971). If the complaint is ambiguous as to the damages asserted, the court may consider subsequent documentation. Angus, 989 F.2d at 145. The plaintiff's complaint, however, is generally still controlling. Id.

2. Defendant's Computation of the Amount in Controversy

On the face of the complaint in this matter, it is clear that there was an insufficient amount in controversy to support federal court jurisdiction. Plaintiff identified the value of its claim as $2970.90, obviously short of the $75,000 minimum. In Defendant's response to the Order to Show Cause, they conceded that the complaint lacks the jurisdictional amount, and only their counterclaim asserts an amount in controversy that will satisfy 28 U.S.C. § 1332. Accordingly, at the time the complaint was filed in the state court, the federal court did not have original...