Schuler v. Family Buying Power, Inc.

• Decision Date: 02 December 1969
• Docket Number: Civ. A. No. 17573-3.
• Citation: 313 F. Supp. 115
• Parties: Clinton SCHULER, Jr., et al., Plaintiffs, v. FAMILY BUYING POWER, INC., et al., Defendants.
• Court: U.S. District Court — Western District of Missouri

313 F. Supp. 115

Clinton SCHULER, Jr., et al., Plaintiffs, v. FAMILY BUYING POWER, INC., et al., Defendants.

Civ. A. No. 17573-3.

United States District Court, W. D. Missouri, W. D.

December 2, 1969.

Arthur A. Benson, II, Legal Aid & Defender Society of Greater Kansas City, Kansas City, Mo., for plaintiffs.

William C. Partin, Kusnetzky & Partin, Kansas City, Mo., for Compact Vacuum Cleaners, Inc.

Gene C. Morris, Rogers, Field & Gentry, Kansas City, Mo., for Pioneer Finance Co.

ORDER DISMISSING CAUSE FOR LACK OF JURISDICTION

BECKER, Chief Judge.

In their "complaint for damages and injunction", plaintiffs allege that in reliance upon defendants' fraudulent representations "that the named plaintiffs and other persons could receive money from the defendants in quantities sufficient to pay entirely for their purchase and to make a profit thereon simply by referring the name of acquaintances to said defendants", plaintiffs purchased certain goods from defendants. Plaintiffs therefore pray for $467.50 actual damages and $100,000 punitive damages.

Defendants have moved to dismiss for lack of jurisdiction under the diversity statute, Section 1332, Title 28, U.S.C., contending chiefly that the amount in controversy does not exceed $10,000, exclusive of costs and interests, as required by that statute. The defendants also assert that the complaint fails to state a claim and that the action is not maintainable as a class action.

Since the complaint asks only $467.50 in actual damages, if it appears legally certain under the applicable state law that plaintiffs could not recover $9532.50 or more in punitive damages, federal diversity jurisdiction fails for lack of the jurisdictional amount. Dixon v. Northwestern Nat. Bank of Minneapolis (D.Minn.) 276 F.Supp. 96. It is the duty of this court to determine whether it is "legally certain" that approximately $9532.50 in punitive damages could not be recovered. Brown v. Bank of America National Trust and Savings Assn. (N.D.Ill.) 281 F.Supp. 82, 84. Though many cases restrict the district court's discretion in cases involving actual damages, e. g. Jaconski v. Avisun Corporation (C.A.3) 359 F.2d 931, the district court can exercise a wider latitude of discretion in determining whether the damages as claimed can be recovered where punitive damages are involved. Brown v. Bank of America National Trust and Savings Assn., supra; Petroleum Transit Co. v. Copeland (E.D. S.C.) 240 F.Supp. 585; Anthony v. United Insurance Co. (E.D.S.C.) 240 F.Supp. 95; Thomas v. Travelers Ins. Co. (E.D. La.) 258 F.Supp. 873; Francis v. Bothwell (D.Colo.) 263 F.Supp. 354. While the amount of punitive damages lies in the sound discretion of the jury, there is no case reported wherein the Kansas courts have permitted a recovery in excess of $9532.50 in punitive damages in a case of this type when the actual damages were comparable to the amount of actual damages sought in this action. In Will v. Hughes, 172 Kan. 45, 238 P.2d 478, 486 (1951), the Supreme Court of Kansas stated that:

"The law establishes no fixed ratio by which the excessiveness of exemplary damages to the actual damages allowed is to be measured although the actual damages is sometimes considered. In assessing exemplary damages the nature, extent and enormity of the wrong, the intent of the party committing it, and, generally, all the circumstances attending the particular transaction involved, including any mitigating circumstances which may operate to reduce without wholly defeating such damages, may be considered."

In the allegations of the complaint in this case, a case of wilful fraud is stated. Although it is alleged that the defendants made the fraudulent representations "wilfully and maliciously", the facts pleaded would indicate that this is a case where the defendants allegedly fomented a scheme to perpetrate a program of fraudulent sales on a large number of people. However, with respect to the plaintiffs in this case, there is nothing to make the wrong particularly enormous. Even so, the Kansas cases have not yet allowed a punitive damage award in the amount needed by plaintiffs to establish diversity jurisdiction in a case like that at bar.

In Motor Equipment Co. v. McLaughlin, 156 Kan. 258, 133 P.2d 149, a case decided in 1943, the Kansas Supreme Court stated the principle that a "jury is not at liberty, unrestrained, to award by way of punitive damages any amount, regardless of how large it may be * * Their verdict * * * will be set aside if it is grossly excessive or appears to be the result of passion or prejudice or improper sympathy." 133 P.2d at 159. In that case, involving wrongful repossession of an automobile which caused $10,435.85 actual damages to the plaintiff, a punitive damages award of $8,000 was reduced to $4,000 by the Kansas Supreme Court.

McWilliams v. Barnes, 172 Kan. 701, 242 P.2d 1063, was an action for damages for fraud in the sale of real estate. The defendant falsely represented the plumbing to be connected to public sewers when in fact it simply drained into an underground pit. There, a jury award of $700 in actual damages and $250 in punitive damages was upheld by the Kansas Supreme Court.

Perry v. Schoonover Motors, Inc., 189 Kan. 608, 371 P.2d 152, was a case in which fraud was proved in the sale of an automobile. Plaintiff asked for $1273.68 in actual damages and $1000 punitive damages. The total jury award, which was upheld by the Kansas Supreme Court, was $1000 (and did not allocate which portion was punitive damages).

Fraud in the sale of an automobile was proved in Martin v. Hughes, 156 Kan. 175, 131 P.2d 682. The mileage was misrepresented by setting the speedometer back and by spoken misrepresentations. Actual damages of $450 and punitive damages of $10,000 were claimed. Awards of $175 actual damages and $300 punitive damages were upheld.

In McCarthy v. Tetyak, 184 Kan. 126, 334 P.2d 379, the plaintiff alleged and proved fraud in the sale of all the corporate stock (involving a total purchase price of $20,000). The defendant misrepresented an asset to exist which in fact was non-existent and failed to disclose corporate liabilities. Plaintiffs claimed $10,840.50 in actual damages and $10,000 punitive damages. A verdict for $9,322.50 actual damages and $1,000 punitive damages was upheld.

Cases involving aggravated wrongs other than fraud in Kansas also demonstrate that it is legally certain that plaintiffs could not obtain an award in excess of $9532.50 in the case at bar. In Rooks v. Brunch, 202 Kan. 441, 449 P.2d 580, for instance, a plaintiff was assaulted and severely beaten on the face. One wound required nine stitches and the plaintiff still had a small scar and a small nodule on his forehead three years later. The trial court awarded actual damages of $1500 and punitive damages of $3500. The latter award was reduced to $2000. In Hammargren v. Montgomery Ward & Co., 172 Kan. 484, 241 P.2d 1192, a husband and wife sued for false imprisonment. A forceful arrest and detention at defendant's direction and without justification were found by the jury. Punitive damage awards of $10,000 each to the husband and wife were reduced by the Kansas Supreme Court to $2000 and $1500, respectively. Actual damages of $10,000 awarded to the wife were reduced to $3500 and actual damages of $7500 to the husband were reduced to $3000. In making the reductions, the Kansas Supreme Court noted that four previous false arrest cases had not resulted in awards of damages as high as were awarded by the jury in that case. See 241 P.2d 1192, l. c. 1207. Such meticulous attention to the ceiling amounts permitted in previous cases of the same type strongly indicates an intent uniformly to apply damage measures by the Kansas courts. When this is considered together with the principle, as expressed by plaintiffs in their brief, that "Kansas law does not require a specific finding of an intentional and ruthless desire to injure if an award of punitive damages" is to be made (See Watkins v. Layton, 182 Kan. 702, 327 P.2d 130 (1958)), the result is a judicial limitation of the amounts which might be awarded in punitive damages cases and a very close adherence to precedents in that regard.

The cases cited by the defendants show that, under the law of Kansas, none of the cases involving fraud, fraudulent sales, or many other wrongs, have permitted in excess of $9532.50 in punitive damages. The cases further show a close...