Onepoint Solutions, LLC v. Borchert

• Decision Date: 11 May 2007
• Docket Number: No. 06-2481.,06-2481.
• Citation: 486 F.3d 342
• Parties: ONEPOINT SOLUTIONS, LLC, a Georgia Limited Liability Company, Appellant, v. Michael BORCHERT; William Catuzzi, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

486 F.3d 342

ONEPOINT SOLUTIONS, LLC, a Georgia Limited Liability Company, Appellant, v. Michael BORCHERT; William Catuzzi, Appellees.

No. 06-2481.

United States Court of Appeals, Eighth Circuit.

Submitted: February 12, 2007.

Filed: May 11, 2007.

Bruce A. Schoenwald, argued, Moorhead, MN, for appellant.

Curtis Dean Ripley, argued, Minnesota, MN, for appellee.

Before WOLLMAN, SMITH, and BENTON, Circuit Judges.

SMITH, Circuit Judge.

OnePoint Solutions, LLC ("OnePoint") sued Michael Borchert and William Catuzzi, in the United States District Court for the District of Minnesota, alleging diversity jurisdiction over several state law causes of action. The district court dismissed some of OnePoint's claims under Federal Rule of Civil Procedure 12(b)(6). Thereafter, the court dismissed the remainder of the suit for lack of subject matter jurisdiction, finding that diversity jurisdiction did not exist because the amount in controversy did not exceed $75,000. We affirm in part and reverse in part.

I. Background

OnePoint, a limited liability company organized under the laws of the State of Minnesota, was formed by appellees Borchert and Catuzzi, along with Chet Reilly, to provide services to businesses operating as payroll service bureaus. Borchert, Catuzzi, and Reilly served on OnePoint's Board of Governors and individually owned separate corporations that were members of OnePoint.

OnePoint's complaint alleges that it removed Borchert and Catuzzi from their positions with the company on February 24, 2004. Nearly one month later, on March 19, 2004, Borchert, Catuzzi, and Reilly met and authorized three $33,000 payments from OnePoint — one $33,000 payment to each of them — as reimbursements for prior expenses incurred during their performance of OnePoint company business. After learning of these payments, OnePoint demanded that Borchert, Catuzzi, and Reilly return the money, contending that the payments were invalid. Reilly complied with this demand, returning his $33,000 payment, but Borchert and Catuzzi refused, claiming that the payments were legitimate reimbursements.

Alleging subject matter jurisdiction based upon diversity of citizenship, OnePoint sued Borchert and Catuzzi in federal district court¹ asserting seven Minnesota² state-law causes of action — conversion, tortious interference with contract, money had and received, breach of fiduciary duty, civil theft under Minnesota Statute §§ 604.14, 609.52, and 609.53, unjust enrichment, and civil conspiracy. To reach the $75,000 jurisdictional threshold for diversity cases, OnePoint alleged three types of enhanced damages under Minnesota law. These include treble damages under the Minnesota receipt of stolen property statute; punitive damages under the Minnesota civil theft statute; and attorney's fees and costs based on the "third-party litigation" exception.

The district court dismissed OnePoint's claims for theft, receipt of stolen property, and attorney's fees for failure to state a claim. The court also dismissed the remainder of the suit for lack of subject matter jurisdiction, finding that the amount in controversy requirement for diversity jurisdiction was not met. In doing so, the court rejected each of OnePoint's bases for enhanced damages. On appeal, OnePoint contends that the district court erred in dismissing its suit for lack of subject matter jurisdiction.

II. Discussion

Federal court diversity jurisdiction of state law claims requires an amount in controversy greater than $75,000 and complete diversity of citizenship among the litigants. 28 U.S.C. § 1332(a). Complete diversity of citizenship exists where no defendant holds citizenship in the same state where any plaintiff holds citizenship. Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978). An LLC's citizenship, for purposes of diversity jurisdiction, is the citizenship of each of its members. GMAC Commercial Credit LLC v. Dillard Dept. Stores, Inc., 357 F.3d 827, 829 (8th Cir. 2004). To determine jurisdiction, we look to the parties' status at the lawsuit's filing. Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 570, 124 S.Ct. 1920, 158 L.Ed.2d 866 (2004).

At the time OnePoint commenced this action, it was a citizen of California, Georgia, Kansas, and Pennsylvania because its members at the time of filing were citizens of those states.³ The defendants, however, all resided in other states. Borchert was a citizen of Minnesota, and Catuzzi was a citizen of New Jersey. Thus, complete diversity of citizenship existed when the suit commenced.⁴

The main issue that this case presents is whether the amount in controversy exceeds $75,000. Without dispute, OnePoint has claims against Borchert and Catuzzi for $66,000, the total of their alleged theft from the company. However, OnePoint contends that three applicable enhanced damages provisions increase the potential damages beyond the $75,000 threshold for diversity jurisdiction. These damage provisions include: punitive damages under Minnesota's civil theft statute, Minnesota Statute § 604.14, treble damages under Minnesota's receipt of stolen property statute, Minnesota Statute § 609.53, and attorney's fees under the third-party litigation exception.

The district court dismissed OnePoint's claims for attorney's fees and its §§ 609.52 and 609.53 causes of action under Rule 12(b)(6) for failure to state a claim upon which relief could be granted. The court found that OnePoint had sufficiently stated a claim for civil theft under § 604.14 but subsequently granted appellees' motion to dismiss the complaint under Rule 12(b)(1) for lack of subject matter jurisdiction, finding that OnePoint failed to establish the necessary amount in controversy under § 604.14 or any other alleged cause of action.

We review de novo the grant of a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), Lupiani v. Wal-Mart Stores, Inc., 435 F.3d 842, 845 (8th Cir.2006), and the grant of a motion to dismiss for failure to state a claim under Rule 12(b)(6), Levy v. Ohl, 477 F.3d 988, 991 (8th Cir.2007). OnePoint, as the party invoking federal jurisdiction, has the burden of proving the requisite amount by a preponderance of the evidence. Rasmussen v. State Farm Mut. Auto. Ins. Co., 410 F.3d 1029, 1031 (8th Cir.2005). We will now address whether any of the potential enhancements apply.

A. Minnesota Statute § 604.14

Under Minnesota Statute § 604.14, OnePoint seeks to recover the $66,000 allegedly misappropriated by appellees, plus up to an additional $66,000 in punitive damages. This provision, if applicable, would easily enable OnePoint's damages to surpass $75,000. Section 604.14 states, in relevant part:

604.14. Civil liability for theft

Subdivision 1. Liability for theft of property. A person who steals personal property from another is civilly liable to the owner of the property for its value when stolen plus punitive damages of either $50 or up to 100 percent of its value when stolen, whichever is greater.

. . .

Subd. 4. Criminal action. The filing of a criminal complaint, conviction, or guilty plea is not a prerequisite to liability under this section. Payment or nonpayment may not be used as evidence in a criminal action.

Subd. 5. Recovery of property. The recovery of stolen property by a person does not affect liability under this section, other than liability for the value of the property.

Minn.Stat. § 604.14.

Put simply, § 604.14 states that a thief is civilly liable to the owner for the value of the property at the time it was stolen plus punitive damages of up to 100% of the value when stolen. Id. The language "plus punitive damages" entitles the plaintiff to some measure of punitive damages not to exceed the actual value of the stolen property, if it is established that the defendant stole the property. However, "up to 100 percent" caps the punitive award and makes clear that not every victim is entitled to the full punitive recovery.

According to the district court, OnePoint failed to provide any evidence of any amount of punitive damage. The court, therefore, held that punitive damages could not be used to meet the jurisdictional threshold. Thus, we must determine whether the uncertain level of punitive damages added to the $66,000 compensatory damages, would put OnePoint over the threshold amount of $75,000.

"Generally, a complaint that alleges the jurisdictional amount in good faith will suffice to confer jurisdiction, but the complaint will be dismissed if it appear[s] to a legal certainty that the claim is really for less than the jurisdictional amount." Larkin v. Brown, 41 F.3d 387, 388 (8th Cir.1994) (internal quotations and citations omitted). While "punitive damages are included in the amount in controversy, the existence of the required amount must be supported by competent proof." Id. at 388-89 (internal quotations and citations omitted). "Indeed, when determining the amount in controversy, a claim for punitive damages is to be given closer scrutiny, and the trial judge accorded greater discretion, than a claim for actual damages." Id. at 389 (internal quotations and citations omitted).

Generally, under Minnesota law, "[a] plaintiff may not seek punitive damages in the original complaint, but rather, may do so only upon permission of the court." Williamson v. Prasciunas, 661 N.W.2d 645, 653 (Minn.App.2003) (citing Minn.Stat. § 549.191 ("Upon commencement of a civil action, the complaint must not seek punitive damages.")). Section 549.191 authorizes the plaintiff to motion the court for permission to amend the pleadings to claim punitive damages after a complaint has been filed. Notably, the motion must allege the legal basis for awarding punitive damages and must be accompanied by one or more affidavits showing the factual basis for the punitive damages. Minn.Stat. § 549.191; Williamson, 661 N.W.2d at 653. Appellees contend that because OnePoint has...