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FASHIONWEAR

United States District Court, S.D. New York


September 29, 2004.

FASHIONWEAR (PVT) LTD., Plaintiff,
v.
REGATTA (U.S.A.) LLC, Defendant.

The opinion of the court was delivered by: JOHN KEENAN, Senior District Judge

OPINION and ORDER

Before the Court is the Motion of defendant Regatta (U.S.A.) LLC ("Regatta") to dismiss the Complaint for lack of jurisdiction over the subject matter pursuant to Federal Rule of Civil Procedure 12(b)(1), and to dismiss Counts II and III of the Complaint plus the demand for attorney's fees contained therein for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons given below, the Motion is granted in part and denied in part.

Background

  Plaintiff Fashionwear (PVT) Ltd. ("Fashionwear") is a Pakistani business with its principal place of business in Pakistan. Complaint ("Cplt.") ¶ 2. Regatta is a New York corporation. Affidavit of Noella Gomes dated December 29, 2003 ("Gomes Aff.") ¶ 2. Fashionwear, a garment manufacturer, and Regatta, an importer and wholesaler of women's clothing, agreed that Fashionwear would manufacture and sell garments to Regatta for an agreed-upon price. Cplt. ¶¶ 6-8; Gomes Aff. ¶ 3. Fashionwear alleges, however, that Regatta failed to pay $77, 483.50 for garments that Fashionwear manufactured for Regatta and thus brings claims for breach of contract, quantum meruit, and unjust enrichment and asks the Court for judgment in the amount of $77,483.50 plus interest, costs, and attorney's fees. Regatta concedes that the contract price for goods delivered for which Regatta has not paid is $36,127.50 (although Regatta notes that it will claim to owe nothing because the garments failed to meet the agreed-upon quality standards). Def. Mem. at 3. However, Regatta claims, and Fashionwear concedes, that the remaining amount of $41,356 is attributable to garments that were manufactured but never shipped to Regatta. Def. Mem. at 3-4; Affidavit of Saqib Butt dated February 12, 2004 ("Butt Aff.") ¶¶ 11-12.

  In its Motion to dismiss, Regatta argues that this Court lacks subject matter jurisdiction because the amount in controversy does not exceed the statutorily required amount of $75,000. This is so, says Regatta, because § 2-709 of the Uniform Commercial Code of New York ("U.C.C.") prohibits recovery for the contract price of undelivered goods unless a seller first affirmatively alleges and proves that the goods could not be readily resold. Defendant's Memorandum of Law ("Def. Mem") at 3-4. Regatta argues that the resale value of the unshipped garments is at least $2,500 and that this reduction in available damages would bring the actual amount in controversy below the statutory minimum. Gomes Aff. ¶ 6; Def. Mem. at 4-5. Alternatively, Regatta contends that, under U.C.C. § 2-708, damages are calculated based on the difference between the contract price and the market price. This too, Regatta argues, would result in a damages award below $75,000. Def. Mem. at 4-5. Moreover, Regatta argues that the undelivered goods may not have been produced at all, or, if the goods were produced, they would have been shipped late and in breach of contract, or else were produced in spite of Fashionwear's having had notice of Regatta's claimed rejection of the goods. Defendant's Reply Memorandum of Law ("Reply Mem.") at 2-3.

  Fashionwear argues that the garments were never shipped because Regatta refused to inspect the goods. Butt Aff. ¶ 11 Furthermore, Fashionwear asserts that the goods have no resale value either in Pakistan, because the garments are Western in style and not suitable for the local market, or as exports, because the garments were created exclusively for Regatta and contain Regatta labels that render them useless to any other buyer. Butt Aff. ¶ 12; Plaintiff's Memorandum of Law ("Pl. Mem.") at § I.

  Regatta also contends that Fashionwear cannot assert claims for quantum meruit and unjust enrichment because a valid and enforceable written agreement exists precluding recovery in quantum meruit and unjust enrichment. Fashionwear counters this argument by stating that "it is merely asserting alternative causes of action as the Federal Rules [of Civil Procedure] allow and only intends to rely on one cause of action in the event that a judgment is in fact rendered." Pl. Mem. at § II. Finally, Regatta argues that Fashionwear's demand for attorney's fees should be dismissed because such fees may not be collected unless an award is authorized by agreement, statute, or court rule. Fashionwear does not address this prong of Regatta's Motion.

  I. Legal Standards

  Federal Rule of Civil Procedure 12(b)(1) provides for the dismissal of a complaint when the federal court lacks jurisdiction over the subject matter. Because a lack of subject matter jurisdiction renders other defenses moot, a court usually gives first consideration to a motion to dismiss under Rule 12(b)(1). Friedman v. United States, No. 01 Civ. 7518 (LTS) (RLE), 2003 WL 1460525 at *5 (S.D.N.Y. Mar. 18, 2003); Prestop v. Hamlett, No. 99 Civ. 2747 (GBD), 2001 WL 363676 at *6 (S.D.N.Y. Apr. 12, 2001). Where the defendant challenges the legal, and not the factual, sufficiency of the plaintiff's jurisdictional allegations, the district court takes all facts alleged in the complaint as true, and draws all reasonable inferences in favor of the plaintiff. Robinson v. Gov't of Malaysia, 269 F.3d 133, 140 (2d Cir. 2001) (citations omitted).

  On review of a motion to dismiss for failure to state a claim upon which relief can be granted, pursuant to Federal Rule of Civil Procedure 12(b)(6), a court must accept the plaintiff's allegations of fact as true, and must draw all reasonable inferences in the plaintiff's favor. Smith v. Potter, 208 F. Supp. 2d 415, 417 (S.D.N.Y. 2002).

  II. Subject Matter Jurisdiction

  Under 28 U.S.C. § 1332(a), a federal court has jurisdiction over the subject matter of a civil action "where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between . . . citizens of a State and citizens or subjects of a foreign state." A party invoking the jurisdiction of the federal courts has the burden of proving jurisdiction, Brauner v. Provident Life and Cas. Ins. Co., No. 97 Civ. 3556 (JG), 1998 WL 812612 (E.D.N.Y. Mar. 24, 1998) at *1, including a "reasonable probability" that the claim is in excess of the $75,000 statutory minimum. See Tongkook America, Inc. v. Shipton Sportswear Co., 14 F.3d 781, 784 (2d Cir. 1994). "[T]he sum claimed by the plaintiff controls if the claim is apparently made in good faith." Chase Manhattan Bank, N.A. v. American Nat'l Bank and Trust Co., 93 F.3d 1064, 1070 (2d Cir. 1996) (quoting St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89 (1938)).

  Moreover, "[i]t must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal." St. Paul, 303 U.S. at 289; Ocean Ships, Inc. v. Stiles, 315 F.3d 111, 115 (2d Cir. 2002); see Romano v. MTI/The Image Group, Inc., No. 01 Civ. 6201 (GBD), 2003 WL 22203735 (S.D.N.Y. Sept. 22, 2003) at *2. Thus, the "legal impossibility of recovery must be so certain as virtually to negative the plaintiff's good faith in asserting the claim. If the right of recovery is uncertain, the doubt should be resolved . . . in favor of the subjective good faith of the plaintiff." Tongkook, 14 F.3d at 785-86 (quotation and citation omitted). Neither "grave doubt about the likelihood of a recovery of the requisite amount," Zacharia v. Harbor Island Spa, Inc., 684 F.2d 199, 202 (2d Cir. 1982), nor a valid defense to the claim may deprive the Court of jurisdiction. See Tongkook, 14 F.3d at 784.

  Under the good faith standards enumerated above, this Court must take Fashionwear's representations, including the total lack of resale value of the goods, at face value, resolving doubt in favor of Fashionwear. While Regatta's contentions that the goods have some market value, and that such value must exceed $2,500, are persuasive, and even raise grave doubt as to the likelihood of Fashionwear's recovery, the contentions do not amount to the "legal certainty" required for dismissal. Instead, Regatta has raised a series of defenses that, although quite possibly meritorious, do not unequivocally prohibit Fashionwear's recovery of an amount in excess of $75,000. For these reasons, dismissal of Fashionwear's breach of contract claim for failure to satisfy the required amount in controversy is not warranted. III. Quantum Meruit and Unjust Enrichment*fn1

  Under the doctrine of quantum meruit, when one party agrees to accept the services of another, an implied contract to pay the reasonable value of such services is formed. GSGSB, Inc. v. New York Yankees, 862 F. Supp. 1160, 1170 (S.D.N.Y. 1994). But, where there is already an express contract to render such services to a party, an implied contract is not formed. See Clark-Fitzpatrick, Inc. v. Long Island R.R. Co., 521 N.Y.S.2d 653, 656 (1987) ("A `quasi contract' only applies in the absence of an express agreement, and is not really a contract at all, but rather a legal obligation imposed in order to prevent a party's unjust enrichment."). Thus, under New York law, the existence of an express contract will ordinarily preclude quantum meruit relief. The exception to this rule being circumstances in which the express contract does not address the specific issue in dispute. Hotel Aquarius, B.V. v. PRT Corp., No. 92 Civ. 4498 (MBM), 1992 WL 391264 (S.D.N.Y. Dec. 22, 1992) at *5 ("[T]he existence of an express contract does not preclude recovery on the basis of [quantum meruit] for services and benefits conferred outside the contract."); see also Joseph Sternberg, Inc. v. Walber 36th St. Assocs., 594 N.Y.S.2d 144, 145-46 (1st Dep't 1993) (allowing plaintiff to proceed with a quantum meruit claim while also proceeding on an express contract claim because the express contract did not cover the dispute).

  Fashionwear concedes that an express agreement between itself and Regatta existed. Furthermore, no contention has been made that there is an issue in dispute that the agreement does not cover, or that Fashionwear has conferred a service or benefit on Regatta outside the agreement. Fashionwear's claims for quantum meruit and unjust enrichment are therefore precluded.

  IV. Attorney's Fees

  In general, New York adheres to the American Rule that attorney's fees are not recoverable absent a contractual or statutory provision providing for the award of attorney's fees to the prevailing party. United States Fid. and Guar. Co. v. Braspetro Oil Servs. Co., 369 F.3d 34, 74 (2d Cir. 2004); see In re Arbitration Before the New York Stock Exchange, Inc., No. 04 Civ. 488 (RWS), 2004 WL 2072460 (S.D.N.Y. Sept. 8, 2004) at *14 ("[A]bsent statutory authorization or contractual agreement between the parties, the prevailing American rule is that each party in federal litigation pays his own attorneys' fees. . . ."); Folksamerica Reins. Co. v. Republic Ins. Co., No. 03 Civ. 0402 (HB) (AJP), 2004 WL 1824320 (S.D.N.Y. Aug. 16, 2004) at *1; Hooper Assocs. v. AGS Computers, Inc., 74 N.Y.2d 487, 491 (1989) ("Under the general rule, attorney's fees are incidents of litigation and a prevailing party may not collect them from the loser unless an award is authorized by agreement between the parties, statute or court rule.").

  Fashionwear has not alleged any contractual or statutory basis for an award of attorney's fees in this case. Indeed, Fashionwear does not dispute this portion of Regatta's Motion. Therefore, Fashionwear is not entitled to attorney's fees.

  Conclusion

  For the reasons set forth above, defendant's Motion to dismiss the Complaint for lack of subject matter jurisdiction is denied, and defendant's Motion to dismiss Counts II and III of the Complaint plus the accompanying demand for attorney's fees is granted. The parties are to appear before the Court for a scheduling conference on November 1, 2004, at 10:15 a.m.

  SO ORDERED.


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