The opinion of the court was delivered by: VICTOR Marrero, United States District Judge
Plaintiff Martin Trepel ("Trepel"), a resident of Florida, filed this
action against defendant Ibrahim Abdoulaye ("Abdoulaye"), a French
citizen, invoking this Court's subject matter jurisdiction under
42 U.S.C. § 1332. In his complaint, Trepel seeks damages for breach
of contract, uttering a false check, fraud, and deceptive acts and
practices under New York law.
Trepel's claims arise out of a series of transactions concerning the
sale of African art. Trepel alleges that he and Abdoulaye entered into an
agreement whereby Abdoulaye would reimburse Trepel for all
scientific testing done on antique African art if Abdoulaye subsequently
purchased one of the tested items. Pursuant to their agreement, Trepel
had several items tested, and, Abdoulaye purchased some of the tested
items. Trepel alleges that Abdoulaye has not paid the full balance of
scientific testing charges, which totals $29,353.00, as he agreed to do.
In addition, Trepel alleges that Abdoulaye, as partial payment for the
scientific testing, uttered a false check in the amount of $7,500. In
this action, Trepel seeks a total of $101,353 in damages, which is
comprised of claims for $29,353 in compensatory damages on his breach of
contract cause of action, "not less than $50,000" in exemplary damages
for "aggravation and emotional anguish" and punitive damages on his fraud
cause of action, $7,500 plus costs in compensatory damages on his
uttering a false check cause of action, and, $15,000 in actual and
punitive damages and attorney's fees on his deceptive acts and practices
cause of action.
Because federal courts are courts of limited jurisdiction, courts must
police subject matter delineations on their own initiative. See
Fed.R.Civ.P. 12(h); Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583 (1999)
(citing Fed.R.Civ.P. 12(h)); Lyndonville Savings Bank & Trust Co. v.
Lussier, 211 F.3d 697, 700 (2d Cir. 2000) ("[F]ailure of subject matter
jurisdiction is not waivable and may be raised at any time by a party or
by the court sua sponte.") Creaciones Con Idea, S.A. de C.V. v.
Confecciones, S.A. de C.V., 75 F. Supp.2d 279, 280-81 (S.D.N.Y. 1999)
(sua sponte dismissal for lack of subject matter jurisdiction under
28 U.S.C. § 1332). Diversity jurisdiction is appropriate where "the
matter in controversy exceeds the sum or value of $75,000, exclusive of
interests and costs, and is between citizens of a State and citizens or
subjects of a foreign state." 42 U.S.C. § 1332. Trepel sufficiently
alleges diversity of citizenship under 28 U.S.C. § 1332. However, it
appears that Trepel's claims fail to meet the amount in controversy
A plaintiff may not rely upon a claim for damages that may not be
legally awarded under state law in order to meet the threshold amount in
controversy requirement under 28 U.S.C. § 1332. See Schwartz v.
Victory Container Corp., 294 F. Supp. 866, 867 (S.D.N.Y. 1969).
Trepel has stated a claim for breach of contract and damages in the
amount of $29,353. Under New York law, a fraud claim is precluded where
it relates to a breach of contract. See R.H. Damon & Co., Inc. v. Softkey
Software Products, Inc., 811 F. Supp. 986, 992 (S.D.N.Y. 1993) (citing
Tesoro Petroleum Corporation v. Holborn Oil Company Ltd., 484 N.Y.S.2d 834,
835 (App. Div. 1st Dep't 1985)). Therefore:
[I]t is a settled principle of New York [s]tate
law that, in order to allege a claim of fraud
arising out of a contractual relationship, a
plaintiff must not only allege the basic elements
of fraud. but also either (1) a legal duty
separate and apart from the contractual duty to
perform; (2) a fraudulent representation
collateral or extraneous to the contract; or (3)
special damages proximately caused by the
fraudulent representation that are not recoverable
under the contract measure of damages.
DS Capital v. Carlisle Sports Emporium, 116 F. Supp.2d 376, 378
(E.D.N.Y. 2000) (internal quotations and citations omitted).
Further, under New York law, emotional distress is "not redressable
under a business fraud theory of liability." Citicorp Int'l Trading v.
Western Oil & Refining Co., 790 F. Supp. 428, 436 (S.D.N.Y. 1992)
(dismissing claim for emotional distress damages stemming from fraudulent
misrepresentation in business transaction) (citations omitted). Here, the
exemplary damages are sought on the basis of Abdoulaye's conduct as a
buyer in a commercial transaction. On that basis, a court applying New
York law could not award Trepel exemplary damages.
Likewise, under New York law, punitive damages are not available in the
ordinary fraud and deceit case; a plaintiff must plead that defendant's
conduct was morally culpable. See Lovely Peoples Fashion, Inc. v. Manna
Fabrics, No. 95 Civ. 8450, 1998 WL 422482, *8-*9 (S.D.N.Y. July 22, 1998)
(citations omitted). Failure to pay the scientific testing charges
pursuant to an alleged contract, by itself, is not so "`eggregious' nor
`gross and morally reprehensible,' as these terms are generally
understood in the context of punitive damage awards." Id. at *9.
Without a proper claim for fraud, the total amount in controversy,
therefore, is reduced by $50,000. Thus, the Court's initial review of the
complaint reveals that Trepel's claims fail to satisfy the amount in
controversy requirement under 28 U.S.C. § 1332, and, that the Court
lacks subject matter jurisdiction. Accordingly, it is hereby
ORDERED that the complaint be dismissed with leave to amend; and it is
ORDERED that the case be dismissed with prejudice should Martin Trepel
fail to amend the complaint by ...