Opinion
18 Civ. 4062 (VM)
2019-08-20
Elimelech SCHWARTZ, Individually and on behalf of all others similarly situated, Plaintiff, v. HITRONS SOLUTIONS, INC., Defendant.
Mark Schlachet, Law Office of Mark Schlachet, Beachwood, OH, for Plaintiff. Stephen D. Straus, Gerard Benvenuto, Traub Lieberman Straus & Shrewsbury LLP, Hawthorne, NY, Michael J. Burke, Traub Lieberman Straus & Shrewsberry, White Plains, NY, for Defendant.
Mark Schlachet, Law Office of Mark Schlachet, Beachwood, OH, for Plaintiff.
Stephen D. Straus, Gerard Benvenuto, Traub Lieberman Straus & Shrewsbury LLP, Hawthorne, NY, Michael J. Burke, Traub Lieberman Straus & Shrewsberry, White Plains, NY, for Defendant.
DECISION AND ORDER
VICTOR MARRERO, United States District Judge.
Plaintiff Elimelech Schwartz ("Schwartz") brings this putative class action against defendant Hitrons Solutions, Inc. ("Hitrons") for false and misleading labeling and advertising in violation of New York General Business Law Sections 349 and 350 (" Sections 349 and 350"), and in breach of certain express and implied warranties related to certain products manufactured and marketed by Hitrons. (See "Amended Complaint," Dkt. No. 7.)
After Hitrons failed to respond to multiple Orders of the Court, the Court directed Schwartz to move for default judgment. (See "December 14 Order," Dkt. No. 16.) On the same day Schwartz moved for default judgment (see "Default Judgment Motion," Dkt. No. 17), Hitrons submitted a pre-motion letter seeking a conference to discuss a motion to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure (" Rule 12(b) (1)").
The Court now construes Hitrons's letter as a motion to dismiss pursuant to Rule 12(b)(1) (the "Motion to Dismiss"). For the reasons set forth below, the Default Judgment Motion and the Motion to Dismiss are both DENIED.
Except as otherwise noted, the factual background derives from the Amended Complaint and the facts pleaded therein, which the Court accepts as true for the purposes of ruling on the Motion to Dismiss. Jaghory v. N.Y. State Dep't of Educ., 131 F.3d 326, 329 (2d Cir. 1997).
A. FACTUAL BACKGROUND
Hitrons is a corporation that is "a project of the Korean Government Administration for Small and Medium Business" which "introduces products to major U.S. markets" through retailers "such as Sam's Clubs, Office Depot, [and] Amazon.com." (Amended Complaint ¶ 18.) Hitrons sells plastic food storage bags (the "Bags") called, among other names, the "New Eco Roll Bag." (Id. ¶ 1.) Hitrons labels and advertises the Bags as being "biodegradable." (Id. ¶ 2.) Following his purchase of one box of the Bags, Schwartz allegedly determined that the primary structural component of the Bags is high-density polyethylene, a petroleum-based plastic that is "not [d]egradable." (Id. ¶ 15.) Schwartz asserts that Hitrons's claim that the Bags are biodegradable constitutes an "Unqualified Degradable Claim," and contends that, but for this Unqualified Degradable Claim, he would not have purchased the Bags. (Id. ¶ 27.) Schwartz alleges that Hitrons's advertising of the Bags with an Unqualified Degradable Claim, as well as an outdated Food and Drug Administration ("FDA") logo, violates Sections 349 and 350 because the "qualities, characteristics and/or ingredients" of the Bags are "misstated." (Id. ¶ 52.) He further contends that such representations constitute an express warranty that the Bags are biodegradable, and that Hitrons breached this express warranty by providing Bags that are not biodegradable.
According to Schwartz, the Federal Trade Commission ("FTC") describes Unqualified Degradable Claims as "deceptive [when referring to items that are customarily disposed in landfills] because these locations do not present conditions in which complete decomposition will occur within one year." (Amended Complaint ¶ 6 (internal quotation marks omitted).) Schwartz asserts that plastic bags, such as the Bags at issue here, are customarily disposed in landfills, and that they "do not decompose within five (5) years in landfills." (Id. ¶¶ 5, 7.)
In support of his claims, Schwartz points to the labeling on the Bags' packaging, as well as descriptions and advertisements for the Bags featured on the websites from which they are sold. Schwartz alleges that Hitrons misrepresents the Bags as "bio-based and [d]egradable," that its online advertising representations include misleading "green claims," and that it employs an out of date FDA logo on its packaging to "trick consumers into perceiving attainment of ... FDA accreditation." (Id. ¶ 30.) In actuality, he claims, (1) the Bags are not degradable, (2) the Bags are not "eco-friendly," (3) the Bags are not made of wheat, biomass, or natural substance, and (4) the Bags are not accredited by the FDA, nor is "FDA approved raw materials" a real accreditation. (Id. ) In addition to these affirmative representations, Schwartz claims that Hitrons had a duty to disclose the Bags' effect on the environment, and without this disclosure, Hitrons has left consumers "misinformed and misled as to the true character" of the Bags. (Id. ¶¶ 53-54.)
Schwartz notes that the practices mentioned above explicitly violate a number of the FTC's "rules and formal guidance relating to claims about the environmental attributes of a product," as well as those pertaining to online advertising. (Id. ¶ 31 (internal quotation marks omitted).) He asserts that New York courts have "historically followed the FTC pronouncements as to deceptive consumer sales and marketing practices" and that Sections 349 and 350 are intended to follow the FTC's interpretation of deceptive acts and practices. (Id. ¶ 32.)
Schwartz seeks monetary damages and injunctive relief individually and on behalf of two putative classes. He defines the first class as consisting of "all persons or entities in New York who purchased [the] Bags during the three-year period preceding commencement [of the action]." (Id. ¶ 33.) He defines the second class as consisting of "those who, not for resale, purchased Bags within the United State and within the applicable statutory period." (Id. ¶ 34.) Schwartz concedes that the exact number of members in either class is unknown and "can only be ascertained through discovery," but that, upon information and belief, each class includes thousands of members. (Id. ¶ 37.)
"Excluded from [both classes] are Defendant, any entity in which Defendant has a controlling interest, and any of the Defendant's subsidiaries, affiliates, and officers, directors, or employees, and any legal representative, heir, successor, or assignee of Defendant." (Amended Complaint ¶ 35.)
By way of monetary relief, Schwartz seeks actual and statutory damages for the three years preceding commencement of this action (the "Class Period"). He asserts that the classes have suffered in the amount of the difference in cost between the Bags and standard plastic bags, because the market value of the Bags are "substantially less" than the "premium prices" customers paid for them. (Id. ¶ 58.) Accordingly, Schwartz argues that the classes are entitled to recover actual damages in the form of the cost of true degradable bags, i.e., $21-$28 per roll purchased, to compensate them for the "insufficiency of consideration" the classes have suffered. He also requests attorney's fees and costs.
Alternatively, Schwartz notes that class members are entitled to recover statutory damages of $50 per transaction involving the purchase of the Bags. (See Amended Complaint ¶ 61.)
In addition to monetary relief, Schwartz seeks injunctive relief, including "corrections to Hitrons'[s] labeling, advertising and marketing[,]" and to preclude the use of the deceptive language described above and the FDA logo. (Id. ¶¶ 64-66.) He further requests that Hitrons prominently display disclaimers on its packaging and website that the Bags are made from petroleum-based plastic and are not biodegradable.
B. PROCEDURAL BACKGROUND
After Hitrons answered the Amended Complaint, the Court scheduled an initial conference for July 27, 2018. By letter dated July 13, 2018, Schwartz apprised the Court that: (1) Hitrons was not responding to requests to collaborate on a joint letter to the Court as required by the Court's Individual Practices; and (2) Hitrons's defenses raised a subject matter jurisdiction issue. (See Dkt. No. 13.)
At the July 27, 2018 initial conference, the Court ordered the parties to conduct limited jurisdictional discovery and provide a status report in sixty days (the "July 27 Discovery Order"). (See Dkt. Minute Entry for 7/27/2018.) No joint status report was ever filed. By letter dated September 20, 2018, Schwartz described the interactions between the parties during the sixty days. (See "September 20 Letter," Dkt. No. 14.) According to Schwartz, he served document requests and deposition notices on Hitrons, but Hitrons never complied or responded. Similarly, Hitrons allegedly ignored all of Schwartz's efforts to coordinate on the status letter ordered by the Court. Given this behavior, Schwartz requested the Court (1) award Schwartz injunctive relief; (2) draw an adverse inference against Hitrons; and (3) sanction Hitrons for its conduct.
The Court ordered Hitrons to respond to the September 20 Letter by September 25, 2018. (See id. at 5.) Hitrons never responded. On November 9, 2018, the Court again ordered Hitrons to respond to the September 20 Letter by November 16, 2018. (See Dkt. No. 15.) Because Hitrons failed to meet that deadline as well, the Court ordered Schwartz to move for default judgment by January 4, 2019. (See December 14 Order.)
In response to the Court's direction, Schwartz filed for default judgment on January 2, 2019. (See Default Judgment Motion.) On the same day, after months of silence, Hitrons filed a letter requesting a pre-motion conference and seeking leave to file a motion to dismiss the Amended Complaint for lack of subject matter jurisdiction under Rule 12(b)(1). (See "January 2 Letter," Dkt. No. 19.) Relying solely on a sworn affidavit, Hitrons claims that this action fails to satisfy the jurisdictional requirements for both (1) a class action pursuant to 28 U.S.C. Section 1332(d) and (2) an individual diversity action pursuant to 28 U.S.C. Section 1332(a). (See id. at 1.)
Counsel for Hitrons explained that he was unaware of the September 21, 2018 and November 9, 2018 Court Orders because he "inadvertently failed to electronically register[ ] [his] appearance in this action" and thus "did not receive the ‘ECF’ electronic notifications." (Dkt. No. 21 ¶ 8.) The Court notes that two lawyers for Hitrons have appeared in this case, and counsel for Hitrons does not attempt to explain why the second lawyer -- who did appear electronically -- did not notify the client or otherwise respond to the Court's Orders. Hitrons also does not explain why, upon learning about the Court's December 14 Order the day it was issued, it proceeded to wait until January 2, 2019 to address the Court.
Specifically, Hitrons argues that Schwartz's individual damages, as well as the putative class damages, fall short of the required amount in controversy. (See id. at 5.) Hitrons contends that it sold only 443 units of the Bags in the United States during the Class Period. (See id. at 5-6 (citing "Kim Affidavit," Dkt. No. 21-4, ¶ 9).) Hitrons emphasizes that even if customers recover $28 per box of Bags, and "assum[ing] that a box contained up to ten units," the total amount in controversy for Schwartz's individual claim would be less than $300, and the total amount in controversy for the class claims would be less than $18,000. Hitrons argues that, given these figures, the Court must dismiss the Amended Complaint. In addition, Hitrons requests that the Default Judgment Motion be held in abeyance pending a conference pertaining to the default and jurisdictional issues. (See id. ) Hitrons made similar arguments in its opposition to the Default Judgment Motion. (See Dkt. No. 20)
Schwartz responded to Hitrons's January 2 Letter on January 12, 2019. (See "January 12 Letter," Dkt. No. 22.) Schwartz does not object to addressing the question of subject matter jurisdiction. However, he reiterates his request for limited jurisdictional discovery and contends that Hitrons cannot challenge subject matter jurisdiction with an "untested affidavit" alone. Schwartz also emphasizes that Hitrons did not respond to, or comply with, the Court's July 27 Discovery Order, nor did it participate in drafting a status report for the Court. In addition, Schwartz highlights inconsistencies with respect to the trade name of the Bags, and reiterates that his request for discovery "includ[es], but [is] not limited to those [Bags] known as the ‘New Eco Roll Bag’ " in order to identify the universe of relevant Bags. (Id. at 3.) Finally, Schwartz claims that it is too late for Hitrons to object to the discovery requests. In sum, Schwartz argues that the issue of subject matter jurisdiction cannot be resolved on the merits without Hitrons responding to his prior discovery requests.
The Court now construes the January 2 Letter from Hitrons as a motion to dismiss the Amended Complaint pursuant to Rule 12(b)(1). The Court addresses this Motion to Dismiss and the Default Judgment Motion below.
II. LEGAL STANDARDS
The Default Judgment Motion is governed by Rule 37(b) (2) (A) of the Federal Rules of Civil Procedure, under which a district court may sanction a party that refuses to obey a discovery order, including by issuing a default judgment against the party that fails to comply. However, sanctions as "drastic" as default judgment are not "ordinarily imposed unless the disobedience has been willful, or in bad faith, or otherwise culpable." Luft v. Crown Publishers, Inc., 906 F.2d 862, 865 (2d Cir. 1990) ; see also Southern New Eng. Tel. Co. v. Global NAPs Inc., 624 F.3d 123, 143-44 (2d Cir. 2010) (describing general factors for courts to consider when assessing appropriate sanctions for failing to comply with discovery orders). Underpinning this rationale is the "public policy" which "favors resolving disputes on the merits." American Alliance Ins. Co. v. Eagle Ins. Co., 92 F.3d 57, 61 (2d Cir. 1996).
The Motion to Dismiss is governed by Rule 12(b) (1). Federal courts are courts of limited jurisdiction, and Rule 12(b)(1) requires dismissal of an action "when the district court lacks the statutory or constitutional power to adjudicate it." Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000) (citing Fed. R. Civ. P. 12(b)(1) ). On a motion to dismiss under Rule 12(b) (1), "the court must accept all factual allegations in the complaint as true and draw inferences ... in the light most favorable to the plaintiff." Jaghory v. N.Y. State Dep't of Educ., 131 F.3d 326, 329 (2d Cir. 1997). "A federal court's lack of subject matter jurisdiction is not waivable by the parties," and courts "must address jurisdictional questions before reaching the merits." Holt v. Town of Stonington, 765 F.3d 127, 132 (2d Cir. 2014) (internal quotation marks omitted).
Schwartz brings both individual and class action claims, which must meet the requirements of 28 U.S.C. Section 1332(a) (" Section 1332(a)") or 28 U.S.C. Section 1332(d) (" Section 1332(d)"), respectively. Section 1332(a) requires (1) complete diversity of parties, and (2) an amount in controversy in excess of $75,000. See Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 552, 125 S.Ct. 2611, 162 L.Ed.2d 502 (2005) (citing 28 U.S.C. § 1332(a) ). In turn, the Class Action Fairness Act ("CAFA"), codified in relevant part at 18 U.S.C. Section 1332(d), requires: (1) no fewer than 100 members of the plaintiff class, (2) minimal diversity (at least one plaintiff is from a state different from that of any defendant), and (3) an aggregate amount in controversy in excess of $5 million. See Fields v. Sony Corp. of Am., No. 13 Civ. 6520, 2014 WL 3877431, at *1 (S.D.N.Y. Aug. 4, 2014) (citing Blockbuster, Inc. v. Galeno, 472 F.3d 53, 59 (2d Cir. 2006) ).
In either case, plaintiffs like Schwartz bear the burden of "proving that it appears to a reasonable probability that the claim is in excess of the statutory jurisdictional amount." Scherer v. Equitable Life Assurance Soc'y of U.S., 347 F.3d 394, 397 (2d Cir. 2003) (citation omitted). This "reasonable probability" burden is identical for class action claims. See Mehlenbacher v. Akzo Nobel Salt, Inc., 216 F.3d 291, 296 (2d Cir. 2000).
The "reasonable probability" burden is minimal at the pleading stage because "a rebuttable presumption [exists] that the face of the complaint is a good faith representation of the actual amount in controversy[.]" Scherer, 347 F.3d at 397 (citation omitted). However, the presumption "is available only if the face of the complaint alleges facts plausibly suggesting the existence of claims aggregating over the jurisdictional minimum amount in controversy." Wood v. Maguire Auto. LLC, No. 09 Civ. 0640, 2011 WL 4478485, at *2 (N.D.N.Y. Sept. 26, 2011). Conclusory allegations that the amount-in-controversy requirement is satisfied are insufficient. See John Wiley & Sons, Inc. v. Glass, No. 10 Civ. 598, 2010 WL 1848226, at *3 (S.D.N.Y. May 7, 2010) ; see also Valente v. Garrison From Harrison LLC, No. 15 Civ. 6522, 2016 WL 126375, at *2 (E.D.N.Y. Jan. 11, 2016) ("[B]oilerplate pleadings do not suffice to establish that [an] action involves an amount in controversy adequate to support federal diversity jurisdiction.").
A defendant can overcome this rebuttable presumption if the defendant can show to "a legal certainty that the plaintiff could not recover the amount alleged or that the damages alleged were feigned to satisfy jurisdictional minimums." Colavito v. N.Y. Organ Donor Network, Inc., 438 F.3d 214, 221 (2d Cir. 2006). To overcome the presumption, "the legal impossibility of recovery must be so certain as virtually to negate the plaintiff's good faith in asserting the claim." Scherer, 347 F.3d at 397.
The defendant is not limited to the pleadings in overcoming this presumption. Of course, at the motion to dismiss stage, a court must evaluate the jurisdictional facts pertaining to the amount in controversy based on the pleadings and "construe all ambiguities and draw all inferences" in the plaintiff's favor. Aurecchione v. Schoolman Transp. Sys., 426 F.3d 635, 638 (2d Cir. 2005). However, when appropriate, a court "may look outside the pleadings to other evidence on the record." United Food & Commercial Workers Union Local 919, AFL-CIO v. CenterMark Props. Meriden Square Inc., 30 F.3d 298, 305 (2d Cir. 1994). A court retains "considerable latitude" in devising procedures for drawing out facts pertaining to jurisdiction. APWU v. Potter, 343 F.3d 619 (2d Cir. 2003) (citation omitted). "In so doing, the Court is guided by the body of decisional law that has developed under Federal Rule of Civil Procedure 56." Dukes v. New York City Emps.' Ret. Sys., 361 F. Supp. 3d 358, 363-64 (S.D.N.Y. 2019). Despite this burden-shifting framework that places the onus on defendants to overcome the rebuttable presumption by making a strong showing of lack of jurisdiction, in close cases, any "doubts are resolved against [jurisdiction] out of respect for the limited jurisdiction of the federal courts and the rights of states." In re Methyl Tertiary Butyl Ether ("MTBE") Prods. Liability Litig., 488 F.3d 112, 124 (2d Cir. 2007) (internal quotation marks omitted).
Courts may consider materials such as affidavits, documents, and testimony to determine whether jurisdiction exists. See Anglo-Iberia Underwriting Mgmt. Co. v. P.T. Jamsostek (Persero), 600 F.3d 171, 175 (2d Cir. 2010) ; APWU v. Potter, 343 F.3d 619, 627 (2d Cir. 2003) ; Filetech S.A. v. France Telecom S.A., 157 F.3d 922, 932 (2d Cir. 1998).
"The courts, when resolving claims that they lack subject matter jurisdiction, have acted in a fashion suggestive of Rule 56(f) : ‘they have required that the party asserting jurisdiction be permitted discovery of facts demonstrating jurisdiction, at least where the facts are peculiarly within the knowledge of the opposing party.’ " Greenery Rehabilitation Grp., Inc. v. Sabol, 841 F. Supp. 58, 61 (N.D.N.Y. 1993) (quoting Kamen v. Am. Tel. & Telegraph Co., 791 F.2d 1006 (2d Cir. 1986) ).
Finally, courts treat the three categories of relief Schwartz seeks differently for purposes of calculating the amount in controversy. The first, and most straightforward, category is the actual and statutory damages sought by a plaintiff. All alleged actual and statutory damages may be considered to meet amount-in-controversy requirements. Second, attorney's fees may be counted to satisfy the amount-in-controversy threshold only "if they are recoverable as a matter of right pursuant to statute or contract." Ryan v. Legends Hospitality, LLC, No. 11 Civ. 3110, 2012 WL 3834088, at *2 (S.D.N.Y. Aug. 1, 2012). Third, with respect to Schwartz's request for injunctive relief, the amount in controversy is determined by valuing the object of litigation. See Hunt v. Wash. State Apple Adver. Comm'n, 432 U.S. 333, 347, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977). In the Second Circuit, courts value the object of the litigation from the plaintiff's standpoint; "the value of the action's intended benefit or the value of the right being protected or the injury being averted constitutes the amount in controversy when damages are not requested." Kheel v. Port of N.Y. Auth., 457 F.2d 46, 49 (2d Cir. 1972) (internal quotation marks omitted).
III. DISCUSSION
Hitrons has placed itself and the Court in a difficult position. On the one hand, the Court must assess its subject matter jurisdiction before addressing the merits. See Holt, 765 F.3d at 132. On the other hand, the Court already-attempted to assess subject matter jurisdiction by ordering the parties to conduct jurisdictional discovery. (See December 14 Order at 1.) Hitrons failed to comply with that Order and let the case proceed to default judgment before it re-asserted jurisdictional concerns at the eleventh hour, on the basis of a single four-page affidavit. (See Kim Affidavit.)
In other circumstances, Hitrons's delay would likely justify an adverse finding on the specific matters contested. However, the defense of subject matter jurisdiction cannot be waived and goes to the heart of the Court's ability to adjudicate the case. See Holt, 765 F.3d at 132. Therefore, the Court must proceed cautiously, even if its approach risks Hitrons's continued non-compliance and delay. See Funk v. Belneftekhim, 861 F. 3d 354, 370 (2d Cir. 2017) (reversing district court order striking defendants' jurisdictional defense because such conduct "risks a district court's exercise of jurisdiction where none may exist").
The Court, guided by the above concerns, first addresses Schwartz's Default Judgment Motion. Hitrons's delay -- while inexcusable and not wholly explained — appears to be the result of its counsel's negligence both in failing to appear in this action and then unduly delaying appearance upon becoming aware of it. Nonetheless, the Court is persuaded that Hitrons's failure was not the result of willful disobedience. See Luft, 906 F.2d at 865. Schwartz points to no intentional misconduct of Hitrons that typically justifies default judgment, such as the destruction or falsification of discovery. See id. The Court finds that it would not be appropriate to issue a default judgment against Hitrons in favor of Schwartz, and therefore denies the Default Judgment Motion.
The Court is mindful, however, of Schwartz's expenditure of efforts in pursuing this action and the Default Judgment Motion that were necessitated by Hitrons's failure to comply with the Court's Orders. Therefore, the Court is persuaded that Schwartz should be afforded an opportunity to move formally for discovery-related sanctions under Federal Rules of Civil Procedure Rule 37 for Hitrons's non-compliance with the Court's Orders directing Hitrons to provide jurisdictional discovery. Notably, the Court may order appropriate sanctions for procedural violations, even if it ultimately concludes it does not have subject matter jurisdiction. See Willy v. Coastal Corp., 503 U.S. 131, 133, 112 S.Ct. 1076, 117 L.Ed.2d 280 (1992) (affirming order of attorney's fees issued pursuant to Rule 11 of the Federal Rules of Civil Procedure for procedural violations despite lacking subject matter jurisdiction).
Turning next to Hitrons's Motion to Dismiss, the Court is not persuaded that Hitrons has demonstrated to a "legal certainty" that Schwartz cannot meet the amount-in-controversy threshold necessary for exercise of jurisdiction over the class action claims. See Colavito, 438 F.3d at 221.
To begin, Schwartz is limited to his demand for actual and statutory damages to satisfy the amount-in-controversy requirement. Under Sections 349 and 350, judges "may" award increased damages, attorney's fees, and costs. Because these fees are not recoverable as a matter of course, they should not be considered in the calculation of the amount in controversy. See Ryan, 2012 WL 3834088, at *2. Similarly, Schwartz's claim for injunctive relief adds little, if anything, to the alleged amount in controversy. Of course, Schwartz alleges the Bags cause various harms to the environment, but he does not attempt to place any sort of value on this harm that injunctive relief might avoid. Rather, Schwartz focuses largely on the price difference between authentic "eco-friendly" bags and common petroleum-based bags. This focus, as regards the Bags already sold, appears to be the value of the object of the litigation for Schwartz. Hence, the appropriate measure of the value of the object of the litigation for the purpose of calculating the amount in controversy for Schwartz's claim for injunctive relief is likely identical to his claim for monetary relief. Even if the Court considered the value to consumers of Hitrons relabeling the Bags as Schwartz suggests, that value depends on Hitrons continuing to sell the Bags. Thus, the Court finds that Schwartz's invocation of subject matter jurisdiction rises and falls with the actual and statutory damages he seeks.
Hitrons's argument regarding the damages any putative class member may have suffered relies solely on the four-page Kim Affidavit, which states that Hitrons sold only 443 units of the Bags in the United States during the Class Period. (See Kim Affidavit ¶ 9.) A single affidavit with no accompanying documentary support, however, is not conclusive. First, the Court notes that Schwartz benefits from the rebuttable presumption of subject matter jurisdiction for his allegations. Far from being conclusory, Schwartz alleges that Hitrons sold its products through multiple online retailers such as Amazon.com, with support from the South Korean government. Taken as a whole, the Amended Complaint describes a reasonably sophisticated company that could sell many thousands of the Bags.
More importantly, as Schwartz persuasively points out, Hitrons sold the Bags under numerous trade names. Schwartz has consistently sought discovery regarding the sale of all similar "food storage bags" with different trade names. (See January 12 Letter at 2.) Even though Hitrons received Schwartz's discovery requests months ago and the parties have had numerous informal conversations, the Kim Affidavit provides no assurance that it addresses sales of all relevant food storage bags potentially under different brand names. Without further evidence of Hitrons's total sales of the Bags taking account of these considerations, and the resulting damages to the proposed classes, the Court cannot find to a legal certainty that Schwartz's pleadings do not meet the amount-in-controversy requirement. Accordingly, the Court denies the Motion to Dismiss for lack of subject matter jurisdiction at this time.
However, the question of what other food storage bags Hitrons may have sold does not apply to Schwartz's individual claims. The allegations in the Amended Complaint support that, at most, Schwartz bought less than $300 worth of the Bags from Hitrons. That amount is insufficient to meet Schwartz's burden regarding the amount-in-controversy requirement. Therefore, Schwartz can pursue his individual claims in this Court only to the extent the Court can exercise supplemental jurisdiction over them, which requires an anchor claim with original jurisdiction. See, e.g., F5 Capital v. Pappas, 856 F. 3d 61, 79 (2d Cir. 2017) ; see also 28 U.S.C. § 1367 (b). Because the individual and class action claims are nearly identical, the Court provisionally exercises supplemental jurisdiction over the individual claims until final resolution of the subject matter jurisdiction issue over the class action claims.
IV. ORDER
For the reasons stated above, it is hereby
ORDERED that the motion so deemed by the Court as filed by defendant Hitrons Solutions, Inc. ("Hitrons") to dismiss (Dkt. No. 19) the Amended Complaint (Dkt. No. 7) of plaintiff Elimelech Schwartz ("Schwartz") for lack of subject matter jurisdiction is DENIED without prejudice. It is further
ORDERED that the motion for default judgment (Dkt. No. 17) filed by Schwartz is DENIED. It is further
ORDERED that Schwartz may file a motion for reasonable and appropriate attorney's fees as sanctions pursuant to Rule 37 of the Federal Rules of Civil Procedure by September 13, 2019. Hitrons shall respond to any such motion September 27, 2019. A reply, if any, shall be filed by October 4, 2019.