Srour v. Barnes

• Citation: 670 F. Supp. 18
• Decision Date: 26 February 1987
• Docket Number: Civ. A. No. 86-2698.
• Parties: Farid SROUR, Plaintiff, v. F. Gordon BARNES, Defendant.
• Court: U.S. District Court — District of Columbia

670 F. Supp. 18

Farid SROUR, Plaintiff, v. F. Gordon BARNES, Defendant.

Civ. A. No. 86-2698.

United States District Court, District of Columbia.

February 26, 1987.

A. Raymond Randolf, Washington, D.C., for plaintiff.

Jack Wuerker, Washington, D.C., for defendant.

MEMORANDUM

GASCH, District Judge.

I. BACKGROUND

On March 9, 1986, plaintiff, Farid Srour, agreed to sell and defendant, F. Gordon Barnes, agreed to buy a parcel of real property located in the District of Columbia. The price agreed upon by the parties for the lot and for the single family dwelling which plaintiff Srour was to build upon it was $395,000. The parties memorialized their understanding by signing a standard form contract for the sale of land. They altered the otherwise routine nature of the transaction by making the purchaser's duty to buy contingent upon the seller's duty to accept the purchaser's existing home in trade. In standard form, the contract also required the purchaser to pay the seller a deposit of $10,000. Barnes accordingly tendered Srour a check drawn in this amount. However, on or about March 22, 1986, the check was returned to Srour marked "insufficient funds." The plaintiff alleges that this action was intentional. The defendant claims the event was a mistake which occurred as a consequence of his financial manager's movement of certain funds without his knowledge. For reasons disputed by the parties, no deposit has ever been paid to the plaintiff and no settlement ever took place.

The issue before the Court is a narrow one. Because the defendant never purchased the bargained for the real estate, the plaintiff claims that the defendant breached the sales agreement. Under the terms of the contract, plaintiff elects the liquidated remedy of forfeiture of Barnes' yet unpaid $10,000 deposit. This is the substance of Count I of the plaintiff's complaint. Count II requests the Court to award punitive damages in the amount of $100,000. The plaintiff claims that punitive damages are appropriate in this contract action because the defendant's alleged breach of contract constitutes a willful tort.

II. DISCUSSION¹

A. Jurisdiction

The plaintiff's complaint grounds jurisdiction on the diversity statute, which states, in relevant part,

(a) The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $10,000, exclusive of interest and costs, and is between — (1) citizens of different States....

28 U.S.C. § 1332 (emphasis supplied). Thus, to satisfy diversity jurisdiction, the plaintiff must demonstrate geographic diversity of the parties and must plead damages satisfying the amount in controversy requirement. Geographic diversity is uncontested. However, the defendant contests the plaintiff's allegation that more than $10,000 is at stake in this lawsuit. On its face, the plaintiff's complaint appears to satisfy the amount in controversy mandated by section 1332. Plaintiff's Count I seeks liquidated damages in the amount of exactly $10,000. Count II seeks punitive damages in the amount of $100,000. In addition, the plaintiff requests interest due, the costs of bringing this lawsuit, and attorney fees.

The defendant contends that assuming, arguendo, the $10,000 in liquidated damages is recoverable, this amount, in and of itself, does not confer jurisdiction on the Court. Section 1332 requires the amount in controversy to "exceeds the sum or value of $10,000...." Id. Moreover, by its own terms the amount in controversy must be "exclusive of interest and costs." Id. Thus, standing alone, the plaintiff's liquidated damages claim and his requests for interest and costs do not exceed $10,000 and therefore do not satisfy the amount in controversy requirement of section 1332. The question the Court must decide is whether either the plaintiff's claim for punitive damages or his claim for attorney fees is sufficient to boost the amount in controversy over the $10,000 hurdle mandated by section 1332.

It is axiomatic that federal courts are courts of limited jurisdiction. They may hear only those cases entrusted to them by a grant of power contained in either the Constitution or by Congress. City of Kenosha v. Bruno, 412 U.S. 507, 511, 93 S.Ct. 2222, 2225, 37 L.Ed.2d 109 (1973). It would therefore be an error of constitutional dimension for the court to entertain a claim not properly within its jurisdiction.

The formula for determining whether the amount in controversy is sufficient has been repeatedly stated by the Supreme Court. The test is stated as follows:

The rule governing dismissal for want of jurisdiction in cases brought in the federal court is that, unless the law gives a different rule, the sum claimed by the plaintiff controls if the claim is apparently made in good faith. It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal.

St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 288-89, 58 S.Ct. 586, 590, 82 L.Ed. 845 (1938); Mt. Healthy School Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 276-77, 97 S.Ct. 568, 570-71, 50 L.Ed.2d 471 (1977) (citing Red Cab Co. as the leading case). Courts have construed this rule as a two pronged test. The sum claimed by the plaintiff will fail if it appears to have been made in bad faith. Even where good faith is present, dismissal will still be proper if the Court finds "to a legal certainty" that the claim is really for less than the jurisdictional amount. See, e.g., Payne v. Government of D.C., 559 F.2d 809, 820 (D.C.Cir.1977). The burden of establishing the amount in controversy is upon the plaintiff as he is the party seeking jurisdiction. See King v. Morton, 520 F.2d 1140, 1145 (D.C.Cir.1975); see also Smith v. Washington, 593 F.2d 1097, 1100 (D.C.Cir.1978) (once defendant controverts plaintiff's assertion of proper jurisdictional amount, a factual issue arises and the burden is upon the plaintiff to demonstrate that the requirement of amount in controversy is satisfied).

In his motion to dismiss, the defendant does not question the plaintiff's good faith belief that the amount in controversy satisfies the diversity statute. Likewise, the Court finds no reason to question this conclusion. Dismissal, then, is only appropriate if it appears to a legal certainty that the plaintiff's complaint does not satisfy the jurisdictional amount required by section 1332. The plaintiff may aggregate the two counts in his complaint in an effort to meet this requirement. See Fed.R.Civ.P. 18. Only if neither punitive damages nor attorney fees is recoverable under the law of the District of Columbia will dismissal be proper.

Punitive damages are generally not available in the District of Columbia where the plaintiff's gravamen is breach of contract. See Sere v. Group Hospitalization, Inc., 443 A.2d 33, 37 (D.C.), cert. denied, 459 U.S. 912, 103 S.Ct. 221, 74 L.Ed.2d 176 (1982). This rule remains true even if defendant's motive for breaching was willful, wanton, or malicious. Id.; Minick v. Associates Inv. Co., 110 F.2d 267, 268 (D.C.Cir. 1940). Nevertheless, there is a narrow exception:

The rule in this jurisdiction is that only where the alleged breach of contract "`merges with, and assumes the character of, a willful tort' will punitive damages be available."

Sere, supra, 443 A.2d at 37.

Plaintiff would have the Court find this exception applicable to his request for punitive damages. In support, he sets out to demonstrate that the defendant's conduct rose to the level of a "willful tort." The plaintiff cites to no cases which define when a breach of contract assumes the character of a tort. Rather, the plaintiff argues sui generis that the defendant knew he had insufficient funds to cover the check tendered to the plaintiff and such knowledge made his breach willful, constitutes evidence of an intent to defraud, and so rises to the level of tort.²

Plaintiff's theory does not state the law. The notion of allowing punitive damages in a contract milieu was born in this jurisdiction in the case of Brown v. Coates, 253 F.2d 36, 39-40 (D.C.Cir.1958). In that case, the Court allowed punitive damages to be levied against a real estate broker who defrauded certain homeowners by having them enter into a contract of sale for their homes which did not compensate them for the equity in these homes. Although the Court did award punitive damages, it limited its holding to situations where,

one trained and experienced holds himself out to the public as worthy to be trusted for hire to perform services for others, and those so invited do place their trust and confidence, and that trust is intentionally and consciously disregarded, and exploited for unwarranted gain.

Id. at 36. In such circumstances, the Court held that the protection of the community demanded the imposition of punitive damages. Notwithstanding the salutary rule which Brown espouses, cases following it have sought to narrow its impact. In Den v. Den, 222 A.2d 647 (D.C.1966), the District of Columbia Court of Appeals returned to the issue of the propriety of punitive damages in contract actions. Den involved a husband's...