Ldcircuit, LLC v. Sprint Communications Co., L.P., 04-2327-JWL.

• Decision Date: 08 April 2005
• Docket Number: No. 04-2327-JWL.,04-2327-JWL.
• Parties: LDCIRCUIT, LLC, Plaintiff, v. SPRINT COMMUNICATIONS COMPANY, L.P., Defendant.
• Court: U.S. District Court — District of Kansas

364 F.Supp.2d 1246

LDCIRCUIT, LLC, Plaintiff, v. SPRINT COMMUNICATIONS COMPANY, L.P., Defendant.

No. 04-2327-JWL.

United States District Court, D. Kansas.

April 8, 2005.

COPYRIGHT MATERIAL OMITTED

John R. Weist, McCormick, Adam & Long, P.A., Overland Park, KS, for Plaintiff.

Elizabeth D. Badger, Badger & Levings, Kansas City, MO, for Defendant.

MEMORANDUM AND ORDER

LUNGSTRUM, District Judge.

Plaintiff LDCircuit, LLC filed this lawsuit against defendant Sprint Communications Company, L.P., seeking damages arising from Sprint's termination of LDCircuit as a sales agent. This matter is presently before the court on Sprint's motion to dismiss for lack of subject matter jurisdiction (doc. 14), in which Sprint argues that plaintiff's claims do not meet the $75,000 amount-in-controversy requirement necessary for this court to exercise diversity jurisdiction. On April 1, 2005, the court convened a hearing on this motion by telephone. At that time, the court preliminarily announced that it anticipated it would grant the motion and the court explained its reasons for that anticipated ruling. After allowing counsel to present additional argument on the matter, the court remains convinced that the motion should be granted. Accordingly, this case is dismissed for lack of subject matter jurisdiction.

BACKGROUND

Sprint and LDCircuit entered into a Sprint Partner Program Sales Agent Agreement (the Agreement) effective December 1, 2001. Under the Agreement, LDCircuit became a sales agent authorized to sell certain Sprint products and services. In return, Sprint paid LDCircuit commissions based on the revenue that LDCircuit's customers generated for Sprint. It appears that the parties worked well together until late 2002. LDCircuit asserts that beginning in approximately November of 2002, Sprint failed to provide LDCircuit with needed sales support and assistance despite repeated requests from LDCircuit for information that it needed in order to finalize contracts with some of its customers. This caused LDCircuit to lose contracts with at least three specific customers.

The Agreement was for an initial term of three years, but it gave Sprint the right to terminate the Agreement if LDCircuit failed to achieve certain specified commissionable revenue levels. In a letter dated February 28, 2003, Sprint advised LDCircuit that it was terminating the Agreement effective March 8, 2003, due to LDCircuit's failure to achieve the required commissionable revenue levels. The letter stated that commission payments would cease as of March 14, 2003. LDCircuit contends that Sprint did not send this letter to the correct address and therefore LDCircuit did not receive the letter at that time. In early April of 2003, Sprint began notifying LDCircuit's customers that LDCircuit would no longer be their Sprint representative and that they should work directly with Sprint from that point forward. LDCircuit alleges that it did not learn that Sprint had purported to terminate the agreement until April 24, 2003.

LDCircuit filed this action in July of 2004, invoking this court's diversity jurisdiction. In this lawsuit, LDCircuit alleges that Sprint breached the Agreement in three principal respects. First, Sprint failed to provide LDCircuit with the sales support and assistance that LDCircuit needed in order to sell Sprint's services and this prevented LDCircuit from finalizing service contracts and hence earning commissions, and therefore Sprint was unjustified in terminating the Agreement based on LDCircuit's purported failure to achieve commissionable revenue requirements. Second, Sprint terminated the Agreement without justification because LDCircuit had, in fact, met the required commissionable revenue requirements. Third, Sprint was required to give LDCircuit a thirty-day cure period and then ten-days' notice of termination, but Sprint failed to do so because the February 28, 2003, letter was sent to the wrong address. LDCircuit also asserts a claim against Sprint for tortious interference with prospective business advantage on the grounds that Sprint intentionally thwarted LDCircuit's relationships with its customers.

Sprint now asks the court to dismiss plaintiff's complaint for lack of subject matter jurisdiction on the basis that this is a diversity case where the amount in controversy does not exceed $75,000. Sprint points out that the Agreement contained a provision limiting Sprint's liability to LDCircuit to one month's average commissions. This provision is at the heart of the parties' dispute regarding the amount in controversy and it is set forth in its entirety infra. Sprint submitted an affidavit in support of its motion which states that one month's average commissions is less than $75,000. In response, LDCircuit argues that, for a variety of reasons, this limitation of liability provision does not effectively limit LDCircuit's recovery in this case. In addition, LDCircuit has submitted an affidavit which states that

the amount of LDC's lost commissions alone resulting from Sprint's improper early termination of the Agreement exceeds $75,000. At the time of the termination of the Agreement, LDC was earning a recurring monthly commission of approximately $5,000. In addition, at the time of the termination of the Agreement, there were at least 21 months left under the three-year term of the Agreement. Also, the Agreement required Sprint to pay LDC its recurring monthly commission for an additional twelve months following termination of the Agreement for convenience, and LDC is entitled to recover this additional amount as well in this action.

LDCircuit also seeks to recover attorneys' fees pursuant to an indemnification provision in the Agreement. LDCircuit contends that, for these reasons, the $75,000 amount-in-controversy requirement is satisfied.

LEGAL STANDARD FOR RULE 12(B)(1) MOTION TO DISMISS FOR FAILURE TO SATISFY AMOUNT-IN-CONTROVERSY REQUIREMENT

Federal courts have jurisdiction over civil actions where the parties are of diverse citizenship and the matter in controversy exceeds the sum or value of $75,000. 28 U.S.C. § 1332(a). Generally, "the amount claimed by the plaintiff controls if the claim is apparently made in good faith." Adams v. Reliance Std. Life Ins. Co., 225 F.3d 1179, 1183 (10th Cir.2000). "When federal subject matter jurisdiction is challenged based on the amount in controversy requirement, the plaintiffs must show that it does not appear to a legal certainty that they cannot recover at least [$75,000]." Watson v Blankinship, 20 F.3d 383, 386 (10th Cir.1994). Thus, here, LDCircuit has the burden of establishing jurisdiction. LDCircuit can meet this burden "by demonstrating that it is not legally certain that the claim is less than the jurisdictional amount." Woodmen of World Life Ins. Soc'y v. Manganaro, 342 F.3d 1213, 1216 (10th Cir.2003). The legal certainty standard is very strict and dismissal is generally warranted "only when a contract limits the possible recovery, when the law limits the amount recoverable, or when there is an obvious abuse of federal court jurisdiction." Id. at 1216-17 (citing 14B Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure § 3702, at 98-101 (3d ed.1998)). Notwithstanding that language in Woodmen of the World, the Tenth Circuit has also made it clear, in a case decided less than two years earlier, that "there are cases where, even if diversity of citizenship exists, a federal court `will not take jurisdiction [ ] unless the plaintiff has asserted a claim cognizable in the state courts.'" Stuart v. Colorado Interstate Gas Co., 271 F.3d 1221, 1225 (10th Cir.2001) (quoting 13B Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure § 3602, at 375 (2d ed.1984)).

A motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1) generally takes one of two forms: either a facial challenge or a factual challenge. Id. A party making a facial challenge attacks the allegations in the complaint regarding subject matter jurisdiction. Id. In evaluating a facial challenge, the court must treat the allegations in the complaint as true. Id. Alternatively, in a factual challenge a party may "go beyond allegations contained in the complaint and challenge the facts upon which subject matter jurisdiction is based." Id. Here, Sprint chose to make a factual attack by offering an affidavit in support of its motion. See, e.g., id. (holding a defendant who offered affidavits in support of its 12(b)(1) motion made a factual attack). In addressing a factual challenge, the court does not presume the truthfulness of the factual allegations in the complaint and has "`wide discretion to allow affidavits, other documents, and a limited evidentiary hearing to resolve disputed jurisdictional facts.'" Id. (quoting Holt v. United States, 46 F.3d 1000, 1003 (10th Cir.1995)). In a factual attack under Rule 12(b)(1), the court's reference to evidence outside the pleadings does not convert the motion into a motion for summary judgment, Stuart, 271 F.3d at 1225, unless the jurisdictional question is intertwined with the merits of the case because subject matter jurisdiction is dependent on the same statute which provides the substantive claim in the case, compare Holt, 46 F.3d at 1003 (holding the district court properly considered evidence outside the pleadings without converting the motion into a Rule 56 motion where the jurisdictional issue of government immunity did not depend on the Federal Tort Claims Act which provided the substantive claims in the case), with Wheeler v. Hurdman, 825 F.2d 257, 260 (10th Cir.1987) (holding the district court properly characterized 12(b)(1) motion as motion for summary judgment where determination of whether plaintiff qualified as an "employee" under the federal discrimination statutes was both a jurisdictional question and an aspect of the substantive claim). Thus, the court will...