Opinion
Civil Action No. 3:02-CV-2404-R.
July 11, 2003.
FINDINGS, CONCLUSIONS, RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
Before the Court are Defendant's Preliminary Motions, filed January 29, 2003, Plaintiff's Objection to Frivolous Lawsuit Motion, and Plaintiff's Objection to Motion to Transfer, both filed March 28, 2003. The preceding pleadings were referred to United States Magistrate Judge Irma Carrillo Ramirez for hearing, if necessary, and to submit to the District Court proposed findings and recommendations on dispositive motions pursuant to the District Court's Order, filed March 18, 2003, which referred the remainder of the case to this Court. After thorough consideration of the motions, the responses, and the applicable law, the Court is of the opinion that Defendant's Preliminary Motion to dismiss for lack of subject matter jurisdiction should be GRANTED.
Along with his answer ("Ans.") to the amended complaint ("Compl."), the defendant filed "Preliminary Motions" to transfer venue or to dismiss for lack of subject matter jurisdiction or as frivolous.
I. BACKGROUND
This is a civil action brought by Plaintiff Wendell D. Taylor ("Plaintiff"), an inmate at the Big Muddy River Correctional Center in Ina, Illinois, against Defendant Richard A. Slatkin ("Defendant"), a private investigator doing business in Texas as Investigative Resource Service, Inc. On September 5, 2001, Plaintiff mailed Investigative Resource Service, Inc. a letter in which he alleged that he had a "14 year old daughter" residing with her mother in Dallas, Texas, and that he wanted to hire someone at Defendant's company to obtain photographs of her. (Compl. at 2.) The parties negotiated a fee of $200. (Ans. at Ex. A, C, D, and E.) Based upon information supplied by Plaintiff, Defendant found and photographed a young female that he thought was Plaintiff's daughter. (Compl. at 3.) He then mailed the photographs to Plaintiff. Plaintiff received the photographs and claimed that the young female was not his daughter. Id. In a January 5, 2002 letter entitled "Preliminary Settlement Offer," Plaintiff demanded that Defendant pay him $175.00 in attorney's fees and $200.00 for "payment for the photographs . . ." (Ans. at Ex. C.) Defendant responded by letter dated January 10, 2001, "I would be happy to refund the $200.00 for the work that was done on the wrong individual. However, I am not going to pay attorney fees without an invoice." Id. at Ex. D. On January 27, 2002, Plaintiff requested that Defendant cease his investigative activities and refund the full fee of $200.00. Id. at Ex. E. On March 1, 2002, Defendant mailed Plaintiff four separate money orders of $50.00 each for a total reimbursement of the $200.00 fee. Id. at Ex. A. Each money order was noted that it was intended for deposit only into Plaintiff's inmate trust account. Id. All four money orders were accepted and deposited into Plaintiff's inmate trust account. Id. at 2.On November 4, 2002, Plaintiff filed the instant case alleging that Defendant committed fraud, negligent misrepresentation, and breach of fiduciary duty, which caused him severe mental anguish with wide-ranging physical manifestations. Plaintiff also filed a motion to proceed in forma pauperis, which the Court granted on November 12, 2002. On December 12, 2002, Plaintiff moved to amend his complaint, and the District Court allowed the amendment on December 18, 2002. The amended complaint realleged Plaintiff's claims for fraud, negligent misrepresentation, and breach of fiduciary duty and was served on Defendant on January 7, 2003. (Compl. at 2-9.) On January 29, 2003, Defendant, who is also proceeding pro se, filed an answer in which he included "Preliminary Motions" to dismiss this case for lack of subject matter jurisdiction or as frivolous or, alternatively, to transfer this case to the Fort Worth Division. (Ans. at 1, 4-5.) On March 28, 2003, Plaintiff filed separate "Objections" to each of Defendant's requests. The motions are now before the Court and ripe for determination.
Defendant's challenge to subject matter jurisdiction is intertwined with his motion to dismiss as frivolous. The Court will address its subject matter jurisdiction first.
II. ANALYSIS
A. Subject Matter Jurisdiction
Defendant requests that the Court "dismiss this suit for want of jurisdiction." (Ans. at 4, 5 and 7.) The Court must determine whether it has subject matter jurisdiction before addressing the merits of a case. See Steel Co. v. Citizens for Better Environment, 523 U.S. 83, 94-95 (1998) ("The requirement that jurisdiction be established as a threshold matter . . . is `inflexible and without exception."'). Plaintiff alleges state-law claims for fraud, negligent misrepresentation, and breach of fiduciary duty. Because none of these claims invoke federal question jurisdiction, the only basis for subject matter jurisdiction is diversity jurisdiction. See Carr v. FHM Magazine Co., 2002 WL 1477427, at *1 (N.D. Tex. July 5, 2002).
Federal question jurisdiction is conferred by § 1331, which provides "The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. Plaintiff's claims do not arise under the Constitution or federal laws or treaties.
Federal courts have diversity jurisdiction in cases "where the matter in controversy exceeds the sum or value of $75,000.00, exclusive of interest and costs, and is between . . . citizens of different States." 28 U.S.C. § 1332(a). Plaintiff claims to be a citizen of Illinois, where he is incarcerated. (Compl. at 1.) Plaintiff alleges that Defendant is a citizen of Texas, Defendant's business is incorporated in Texas, and claims $300,000 in damages. Defendant does not dispute diversity of citizenship, but instead argues that the true amount in controversy is less than $75,000. (Ans. 1, and 4-5.)
Because Plaintiff is a prisoner, his current domicile is where he maintained his domicile before he was incarcerated. See Wagman v. Dallas Morning News Co., 2001 WL 1516747, at *1 (N.D. Tex. Nov. 28, 2001). Defendant does not dispute Plaintiff's claim that he is a citizen of Illinois, nor does the record reflect otherwise.
A corporation is deemed to be a citizen of both its state of incorporation and the state where it has its principal place of business. See 28 U.S.C. § 1332(c)(1) (2003). In this case, the two locations are both Texas; thus, the corporation is a citizen of Texas.
For each substantive claim, Plaintiff demands $35,000 in compensatory damages and $65,000 in punitive damages. With three substantive claims, the total amount of requested damages is $300,000.
As the party invoking diversity jurisdiction, Plaintiff bears the burden of establishing the amount in controversy. See Hartford Ins. Group v. Lou-Con Inc., 293 F.3d 908, 910 (5th Cir. 2002)). Because Plaintiff is proceeding pro se, his pleadings are to be construed liberally. See Eason v. Holt, 73 F.3d 600, 603 (5th Cir. 1996). "The general federal rule has long been to decide what the amount in controversy is from the complaint itself, unless it appears or is in some way shown that the amount stated in the complaint is not claimed `in good faith.'" Nat'l Union Fire Ins. Co. v. Russell, 972 F.2d 628,630 (5th Cir. 1992) (quoting Horton v. Liberty Mut. Ins. Co., 367 U.S. 348,353 (1961)). "In deciding this question of good faith we have said that it `must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal.'" Id. (emphasis added). However, the court "should look to the actual amount in controversy, not just the damages claimed." Carr, 2002 WL 1477427, at *1 (citing Deifenthal v. C.A.B., 681 F.2d 1039, 1052 (5th Cir. 1982) (noting that the court would be remiss in accepting every damage claim at face value, no matter how trivial the underlying injury)).
A. Plaintiff's Damage Claims Fail Under State Law
According to Defendant, Plaintiff alleges $300,000 in damages "in a spurious attempt to meet the jurisdictional requirements of the Federal courts, and not because the measure of damages is in any way commensurate with any possible damage Plaintiff might have suffered from the alleged facts." (Ans. at 5.) Plaintiff predicates his claims for fraud, negligent misrepresentation, and breach of fiduciary duty on the general allegation that Defendant breached a contract to provide Plaintiff photographs of his alleged daughter. As stated above, each claim arises under state law, Plaintiff contends that he suffered mental anguish with resulting physical manifestations for each claim.
Under Texas law, "damages for mental anguish are not recoverable in an action for breach of contract or for a tort founded on a right growing out of a breach of contract." Rayburn v. Equitable Life Assur. Soc. of U.S., 805 F. Supp. 1401, 1409 (S.D. Tex. 1992) (citing Dean v. Dean, 837 F.2d 1267, 1268 (5th Cir. 1988)). In Plaintiff's January 27, 2002 letter to Defendant, which is attached to Defendant's answer as Exhibit E, Plaintiff stated that what the parties "entered into is called a bilateral contract. In that, I agreed to pay you $250.00 for you obtaining photographs of my daughter. With that, together we formed a bilateral contract." (Ans. at Ex. E.) Plaintiff admits that this actions arises out of a breach of contract. Plaintiff cannot recover mental anguish damages founded on a right growing out of that breach. See Rayburn, 805 F. Supp. at 1409. Thus, because Plaintiff cannot claim mental anguish damages, he cannot allege the required $75,000 in controversy. Consequently, the Court lacks diversity jurisdiction over Plaintiff's case.
Neither party has briefed whether Texas or Illinois law should apply in this case. Thus, the Court will address the viability of Plaintiff s claims in light of both state's laws.
Assuming, arguendo, that Plaintiff's claims do not arise out of a contractual breach, both states' laws preclude Plaintiff from recovering mental anguish damages for his claim of negligent misrepresentation. See Bass v. Hendrix, 931 F. Supp. 523, 538 (S.D. Tex. 1996) ("Under Texas law, damages for mental anguish may not be recovered on a claim for negligent misrepresentation."); accord Brogan v. Mitchell Intern., Inc., 181 Ill.2d 178, 278 (Ill. 1998) (noting that there is no duty to avoid negligent misrepresentations that cause only emotional injury, rather than physical harm). Therefore, because Plaintiff predicates the full amount of damages for negligent misrepresentation on his mental anguish, and such damages are not recoverable for this claim, these damages cannot meet the $75,000 threshold.
Similarly, both states preclude recovery of mental anguish damages when there is no pecuniary loss for the type of fraud that Plaintiff alleges. See Coffel v. Stryker Corp., 284 F.3d 625, 637 (5th Cir. 2002) ("To recover for fraud, the plaintiff must plead and prove that a pecuniary loss was suffered as a result of reliance upon a false representation."); accord Greisz v. Household Bank (Illinois), N.A., 176 F.3d 1012, 1016 (7th Cir. 1999) (noting that Illinois law requires in fraud cases without "any pecuniary loss but only an emotional injury, proof of a serious degree of distress caused by outrageous and not merely unlawful behavior by the defendant."). Here, Plaintiff admits that there was no pecuniary loss and does not allege any outrageous behavior by Defendant. Thus, Plaintiff cannot recover for mental anguish, and he has alleged no other damages for negligent misrepresentation or fraud that could be used to meet the jurisdictional minimum.
B. Plaintiff's Damage Claims Are Not Made In Good Faith
Even if Plaintiff could recover mental anguish damages for his claims, it is abundantly clear that Plaintiff's damage estimates are not made in good faith. Plaintiff's claims arise out of a $200 contract to purchase four photographs of his alleged daughter. Once Plaintiff told Defendant that the photographs were of a stranger who was not his alleged daughter, Defendant promptly refunded his money. Despite the refund, Plaintiff claims that receiving the photographs caused him $300,000 in damages. The record does not support Plaintiff's good faith. Indeed, it reflects that after Plaintiff received the photographs, he mailed Defendant a letter stating "To be honest with you, I would like for you to continue to work on the matter." (Ans. at Ex. E.) However, in the same letter, Plaintiff terminated their business dealings and demanded reimbursement of the $200 fee. In that letter, Plaintiff failed to indicate that he was suffering from any mental anguish or resulting physical manifestations. Plaintiff simply demanded, and received, reimbursement of his $200 fee. It was not until over ten months later that Plaintiff filed this suit, complaining of a litany of mental and physical problems. (Compl. at 4-5.)
In Carr v. FHM Magazine Co., this Court determined that a plaintiff could not in good faith plead over $75,000 in damages for "stress" and "migraine headaches" for not receiving a magazine subscription. See Carr, 2002 WL 1477427, at * 1-2. There, the Court reasoned that it "should look to the actual amount in controversy, not just the damages claimed" in determining if there is diversity jurisdiction. See id. at * 1. The Carr plaintiff claimed "$20 million in damages as a result of defendant's failure to deliver a magazine he ordered." Id. The Court found that "[s]uch an allegation is patently insufficient to support a good faith claim for damages in excess of $75,000." In an objection to that finding, the Carr plaintiff admitted to "overreacting" and reduced his damage claim to $200,000. Id. at * 1. The District Court rejected the plaintiff s grasp at jurisdiction, stating that "[w]hether plaintiff seeks $200,000 or $20 million, . . . it is abundantly clear that plaintiff has failed to plead a good faith basis for damages in excess of $75,000 based on the fact that a magazine publisher `got [his] money and caused [him] a lot of trouble' and should `pay for all the stuff they have put [him] through." Id.
In this case, the difference between the $200 investigative fee and the $300,000 alleged in damages is as disproportionate as the difference between the magazine subscription and the $200,000 in reduced damages in Carr. The Court recognizes that this case is about a business relationship involving an alleged family member rather than a magazine subscription. Nevertheless, the Court looks to the actual amount in controversy, not just the damages claimed to discern whether there is diversity jurisdiction. See Carr, at *2. Given Plaintiff's allegations, it is abundantly clear that the actual amount in controversy arising out of the $200 contract is not over $75,000. See id.; see also Deifenthal, 681 F.2d at 1052-53 (finding that a brusque refusal by flight attendant to seat passenger in particular section of plane will not justify damage claim over the then-jurisdictional minimum of $10,000); Raymond v. Alvord ISD, 639 F.2d 257, 258 (5th Cir. 1981) (questioning whether federal jurisdiction is proper in cases involving "frivolous or insubstantial" property interests); accord Christensen v. Northwest Airlines, Inc., 633 F.2d 529, 530-31 (9th Cir. 1980) (holding that rude and discourteous conduct by airline agents was insufficient to support damages in excess of $10,000); Jones v. Malaco Music, 2 F. Supp.2d 880, 884 (S.D. Miss. 1998) (dismissing diversity case where plaintiff sought $5.8 million in damages as a result of failure to timely receive a $896.39 payment); Free v. United States, 879 F.2d 1535, 1536 (7th Cir. 1989) (explaining that federal courts are not the proper forum for resolving small tort claims brought by prisoners).
Consequently, because Plaintiff fails to satisfy the amount in controversy requirement, the Court lacks diversity jurisdiction over Plaintiff's case.
III. RECOMMENDATION
For the foregoing reasons, the Court hereby RECOMMENDS that Defendant's request to dismiss for lack of subject matter jurisdiction be GRANTED and that this case be dismissed without prejudice. The parties have several other motions pending before this Court that do not vest this Court with subject matter jurisdiction. Thus, the Court also hereby RECOMMENDS that the parties' respective outstanding motions be DENIED as moot.
SO RECOMMENDED on this 11th day of July, 2003.
INSTRUCTIONS FOR SERVICE AND NOTICE OF RIGHT TO APPEAL/OBJECT
The United States District Clerk shall serve a copy of these findings and recommendation on all parties by mailing a copy to each of them. Pursuant to Title 28, United States Code, Section 636(b)(1), any party who desires to object to these findings and recommendation must file and serve written objections within ten (10) days after being served with a copy. A party filing objections must specifically identify those findings or recommendation to which objections are being made. The District Court need not consider frivolous, conclusory or general objections. Failure to file written objections to the proposed findings and recommendation within ten days after being served with a copy shall bar the aggrieved party from appealing the factual findings, legal conclusions, and recommendation of the Magistrate Judge that are accepted by the District Court, except upon grounds of plain error. See Douglass v. United Servs. Auto Ass'n, 79 F.3d 1415, 1428-29 (5th Cir. 1996) ( en banc.)