Monavie, LLC v. Quixtar Inc., No. 2:08-CV-0204 BSJ, 2:09-CV-0259 BSJ, 2:09-CV-0209 BSJ, 2:08-MC-0762 BSJ, 2009 WL 3584331 (D. Utah, Oct. 26, 2009).  

In this action, a District Court in Utah found that in absence of claim for monetary damages in a suit to compel arbitration, the requisite jurisdictional amount will be satisfied unless it is legally certain that the stakes of the arbitration are less than the jurisdictional minimum. 

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 defendants under CAFA, 28 U.S.C. §1332(d), seeking a class-wide determination that Amway’s arbitration agreement, non-competition, non-solicitation, and trade secret rules are unenforceable. They also sought injunctive relief precluding Amway from proceeding in arbitration upon claims against the Guzzardo Plaintiffs and the plaintiff class.

After consolidation of the similar actions, pursuant to Fed. R. Civ. P. 12(b)(1), 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 $5 million, as required under CAFA. 

The Guzzardo Plaintiffs then filed an amended complaint expressly alleging that the aggregated matter in controversy requirement of $5 million was 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, to which Amway responded that the plaintiffs can never meet their threshold burden of establishing jurisdiction, and that neither the moving papers nor the opposition relied on any extrinsic facts requiring any factual determination by this Court under Rule 12(b)(1). According to Amway, ‘there were no facts to find.’

The Court noted that in Paper, Allied-Industrial, Chem. & Energy Workers Intern. Union v. Continental Carbon Co., 428 F.3d 1285, 1292 (10th Cir. 2005), the Tenth Circuit explained 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.” A defendant makes a factual attack when “the movant goes beyond the allegations in the complaint and challenges the facts upon which subject matter jurisdiction depends.” 

The Court stated that Amway’s initial facial attack as to the pleading of the §1332(d) jurisdictional amount having been deflected by the complaint, its assertion in reply that the Guzzardo Plaintiffs still failed to show it was not a legal certainty that the claim was less than the jurisdictional amount, necessarily went to “the facts upon which subject matter jurisdiction depends,” and was thus a substantive factual attack calling upon the Court to make at least a preliminary determination as to the underlying jurisdictional facts.

In the Tenth Circuit, 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. It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal. 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. 

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…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. The same should be no less true of the larger jurisdictional amount required by §1332(d)(2).”

Under the this background, the Court remarked that estimation of the amount in controversy in this case was complicated because the Guzzardo Plaintiffs did not seek an award of money damages; they sought declaratory and equitable relief to avoid vulnerability to potential arbitration awards sought by Amway in an aggregate sum allegedly exceeding the requisite $5 million jurisdictional amount. The Tenth Circuit found persuasive the holding of other circuits that “look through to the possible award resulting from the desired arbitration” to determine the amount in controversy. Specifically, We Care Hair Dev., Inc. v. Engen, 180 F.3d 838, 841 (7th Cir. 1999) concluded that 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. 

The Court remarked that if a “legal certainty” is understood to be the “absence of doubt; accuracy; precision; definite as the Woodmen panel understood it–then such certainty as to the legal deficiency of the Guzzardo Plaintiffs’ alleged amount in controversy proved to be lacking here. The significant arbitration claims of a large number of class members, the absence of Amway’s assertion that the potential recovery from the Guzzardo Plaintiffs and class members would be less than $  million, and the facts relied upon by the Guzzardo Plaintiffs–including allegations set forth in Amway’s own JAMS arbitration demand–suggested otherwise.

Given the “strong presumption favoring the amount alleged by the plaintiff,” buttressed by the facts in the record, the Court concluded that the Guzzardo Plaintiffs had shown that it was not a legal certainty that the amount in controversy fell short of an aggregate $5 million.

Next, the Court found that Amway’s assertion that the Guzzardo Plaintiffs’ amended complaint should also be dismissed for lack of a formal certification of the plaintiff class ran afoul of CAFA’s express statutory language, which looks to the characteristics of the “proposed plaintiff classes” in making determinations of jurisdictional fact. Vega v. T-Mobile USA, Inc., 564 F.3d 1256, 1268 n.12 (11th Cir. 2009) found that plaintiff’s subsequent failure to make a showing of class numerosity does not divest the federal courts of subject matter jurisdiction. The language of §1332(d)(8) speaks to this precise point, “this subsection shall apply to any class action before or after the entry of a class certification order by the court with respect to that action.”

Accordingly, the Court found that subject matter jurisdiction under §1332(d) vested in it with respect to the Guzzardo Plaintiffs’ proposed plaintiff class upon the filing of their amended complaint satisfying §1332(d)’s pleading requirements. Congress drafted §1332(d)(8) “to ensure that courts have jurisdiction over putative class actions prior to determination on class certification.” 

Hence, the Court concluded that subject matter jurisdiction under § 1332(d) existed as to the Guzzardo Plaintiffs’ proposed plaintiff class, even absent formal class certification, and denied Amway’s Rule 12(b)(1) motion.