Monavie Llc v. Quixtar Inc.

Decision Date26 October 2009
Docket NumberArray
Citation741 F.Supp.2d 1227
PartiesMONAVIE, LLC, a Utah limited liability company, Plaintiff,v.QUIXTAR INC., a Virginia corporation, and Amway Corp., a Delaware corporation, Defendants;George and Jill Guzzardo, et al., Plaintiffs,v.Quixtar Inc., now known as Amway Corp., a Virginia corporation, and Amway Corporation, now known as Amway International, Inc., a Delaware corporation, Defendants.
CourtU.S. District Court — District of Utah

OPINION TEXT STARTS HERE

Brian C. Johnson, Strong & Hanni, P.C., Salt Lake City, UT, for Monavie, LLC and Monavie, Inc.William A. Sankbeil, Joanne Geha Swanson, Fred K. Herrmann, Kerr, Russell and Weber, PLC, Detroit, MI, for consolidated Plaintiffs, Guzzardo, et al.Kenneth B. Black, Timothy K. Conde, Stoel Rives LLP, Timothy Q. Delaney (pro hac vice), James Sobieraj (pro hac vice), Kelly J. Eberspecher (pro hac vice), Ryan L. Marshall, Brinks Hofer Gilson & Lione, Salt Lake City, UT, Cedric C. Chao (pro hac vice), William L. Stern (pro hac vice), James M. Schurz (pro hac vice), Somnath Raj Chatterjee (pro hac vice), Morrison & Foerster LLP, San Francisco, CA, Gainer M. Waldbillig, Ford & Huff LC, Salt Lake City, UT, for Amway Corp. and Amway Corporation.Mark F. James, Hatch, James & Dodge, P.C., Salt Lake City, UT, for John Brigham Hart and Jayson Lyons.Brent E. Johnson, Holland & Hart LLP, Salt Lake City, UT, for Lou Niles and Farid Zarif.

MEMORANDUM OPINION & ORDER RE: MOTION TO DISMISS, MOTION TO STAY & MOTION FOR PRELIMINARY INJUNCTION (Fed.R.Civ.P. 12(b)(1), 9 U.S.C. § 3 & Fed.R.Civ.P. 65(a))

BRUCE S. JENKINS, Senior District Judge.

George and Jill Guzzardo, together with twenty-six other named plaintiffs (the “Guzzardo Plaintiffs), filed a class-action complaint for declaratory and injunctive relief against the Amway defendants (Amway) under the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d), which grants federal district courts subject-matter jurisdiction over class actions with at least five million dollars in controversy. They seek a class-wide determination that Amway's arbitration agreement, non-competition, non-solicitation, and trade secret rules are unenforceable, and injunctive relief precluding Amway from proceeding in arbitration upon claims against the Guzzardo Plaintiffs and the plaintiff class.

The parties have briefed, offered evidence and argued a series of motions pertaining to this lawsuit, consolidated into the above-captioned proceeding upon this court's own motion. Following an extensive Pretrial Conference, Amway's attempted interlocutory appeal, and a seven-day evidentiary hearing, the motions were submitted to this court for decision.

I. AMWAY'S RULE 12(b)(1) MOTION TO DISMISS

Under CAFA, federal district courts have subject matter jurisdiction over cases in which the amount in controversy exceeds $5 million, the class contains at least 100 members, and “any member of a class of plaintiffs is a citizen of a State different from any defendant.” 28 U.S.C. § 1332(d)(2)(A), (d)(5)(B). Congress expanded diversity jurisdiction through CAFA to allow for federal court jurisdiction over class actions satisfying the statute's amount in controversy and minimal diversity requirements.” In re Hannaford Bros. Co. Customer Data Security Breach Litigation, 564 F.3d 75, 77 (1st Cir.2009).

Pursuant to 12(b)(1) of the Federal Rules of Civil Procedure, Amway moved to dismiss the Guzzardo Plaintiffs' complaint, asserting a lack of subject matter jurisdiction because of the absence in the pleading, as originally filed, of an express assertion of an amount in controversy in excess of five million dollars, as required under 28 U.S.C. § 1332(d)(2).1 The Guzzardo Plaintiffs then filed an amended complaint expressly alleging that [t]he aggregated matter in controversy requirement of $5,000,000 is satisfied by reference to the value of claims and costs in the underlying arbitration proceedings,” and “further aggregated by the value of the requested injunctive and declaratory relief sought by the Class Members,” (Plaintiffs' Amended Class Action Complaint, filed April 22, 2009 (dkt. no. 393) (Guzzardo Amd. Cmplt.”), at 11 ¶ 19(d)), to which Amway responded that [p]laintiff[s] can never meet their threshold burden of establishing jurisdiction,” (Reply Memorandum of Points and Authorities in Support of Defendants' Motion to Dismiss Plaintiffs' Complaint Pursuant to Fed.R.Civ.P. 12(b)(1), filed April 29, 2009 (dkt. no. 404) (Amway 12(b)(1) Reply Mem.”), at 1, and that [n]either the moving papers nor the opposition relied on any extrinsic facts” requiring any factual determination by this court under Rule 12(b)(1)). (Defendant Amway Corp's Supplemental Memorandum in Support of Motion to Dismiss and Motion to Stay Under 9 U.S.C. § 3, filed June 30, 2009 (dkt. no. 542) (“Amway Supp. Mem.”), at 1.) 2 According to Amway, “there are no facts to find.” ( Id. at ix.)

In Paper, Allied–Industrial, Chem. & Energy Workers Intern. Union v. Continental Carbon Co., 428 F.3d 1285 (10th Cir.2005), the Tenth Circuit explains that as a “general rule, Rule 12(b)(1) motions to dismiss for lack of jurisdiction take one of two forms: (1) facial attacks; and (2) factual attacks.” Id. at 1292 (citing Holt v. United States, 46 F.3d 1000, 1002–03 (10th Cir.1995)). A defendant makes a factual attack where “the movant goes beyond the allegations in the complaint and challenges the facts upon which subject matter jurisdiction depends.” Id. ( citing Holt 46 F.3d at 1002–03). A factual attack requires the court to look beyond the face of the amended complaint and allows the court wide discretion in considering documentary and testimonial evidence as to jurisdictional facts. Id.

Amway's initial facial attack as to the pleading of the § 1332(d) jurisdictional amount having been deflected by Paragraph 19 of the Amended Complaint, its assertion in reply that the Guzzardo Plaintiffs “still fail to ‘show it is not a legal certainty that the claim is less than the jurisdictional amount,’ 3 necessarily goes to “the facts upon which subject matter jurisdiction depends,” and is thus a substantive factual attack calling upon this court to make at least a preliminary determination as to the underlying jurisdictional facts.

As the Tenth Circuit has instructed us:

The rule governing dismissal for want of jurisdiction in federal court is that, unless the law provides otherwise, the amount claimed by the plaintiff controls if the claim is apparently made in good faith. St. Paul Indemnity Co. v. Red Cab Co., 303 U.S. 283, 288–89, 58 S.Ct. 586, 82 L.Ed. 845 (1938). It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal. Id. The burden is on the party asserting jurisdiction to show it is not a legal certainty that the claim is less than the jurisdictional amount. See Watson v. Blankinship, 20 F.3d 383, 386 (10th Cir.1994). A plaintiff's allegations in the complaint alone can be sufficient to make this showing. “Although allegations in the complaint need not be specific or technical in nature, sufficient facts must be alleged to convince the district court that recoverable damages will bear a reasonable relation to the minimum jurisdictional floor.” State Farm Mut. Auto. Ins. Co. v. Narvaez, 149 F.3d 1269, 1272 (10th Cir.1998) (quoting Gibson v. Jeffers, 478 F.2d 216, 221 (10th Cir.1973)).

Adams, 225 F.3d at 1183.4 In

Woodmen of World Life Ins. Soc'y v. Manganaro, 342 F.3d 1213 (10th Cir.2003), the court of appeals explained:

The legal certainty standard is very strict. As a result, it is difficult for a dismissal to be premised on the basis that the requisite jurisdictional amount is not satisfied. 14B Wright, Miller & Cooper, Federal Practice & Procedure: Jurisdiction 3d § 3702, at 97–98 (1998). There is a strong presumption favoring the amount alleged by the plaintiff. See Adams, 225 F.3d at 1183 (noting that amount alleged in the complaint can alone be sufficient to satisfy showing that it is not legally certain the amount is less than the jurisdictional requirement); see also Tongkook Am., Inc. v. Shipton Sportswear Co., 14 F.3d 781, 785 (2d Cir.1994) (“The legal impossibility of recovery must be so certain as virtually to negative the plaintiff's good faith in asserting the claim.” (quotation omitted)). Generally, dismissal under the legal certainty standard will be 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. 14B Wright, Miller & Cooper, Federal Practice & Procedure: Jurisdiction 3d § 3702, at 98–101 (1998).Id. at 1216–17. The same should be no less true of the larger jurisdictional amount required by § 1332(d)(2).

Estimation of the amount in controversy in this case is complicated by the fact that the Guzzardo Plaintiffs do not seek an award of money damages; they seek declaratory and equitable relief to avoid vulnerability to potential arbitration awards sought by Amway in an aggregate sum allegedly exceeding the requisite five-million-dollar jurisdictional amount. But as the Woodmen panel explained, the court of appeals

finds persuasive the holding of other circuits that “look through to the possible award resulting from the desired arbitration” to determine the amount in controversy. Doctor's Assocs., Inc. v. Hamilton, 150 F.3d 157, 160 (2d Cir.1998) (quotation omitted); see also The Barbers, Hairstyling for Men & Women, Inc. v. Bishop, 132 F.3d 1203, 1205 (7th Cir.1997); Webb v. Investacorp, Inc., 89 F.3d 252, 256 (5th Cir.1996); Jumara v. State Farm Ins. Co., 55 F.3d 873, 877 (3d Cir.1995). Accordingly, the requisite jurisdictional amount will be satisfied in a suit to compel arbitration unless it is legally certain that the stakes of the arbitration are $75,000 or less. We Care Hair Dev., Inc. v. Engen, 180 F.3d 838, 841 (...

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