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Lorena International North America, Inc. v. Vican Trading

July 2, 2009

LORENA INTERNATIONAL NORTH AMERICA, INC., PLAINTIFF,
v.
VICAN TRADING, DEFENDANT.



The opinion of the court was delivered by: Sifton, Senior Judge.

MEMORANDUM OPINION AND ORDER

Plaintiff Lorena International North America, Inc. ("Lorena"), commenced this action against defendant Vican Trading ("Vican") on July 3, 2008, claiming (1) breach of contract, (2) unjust enrichment, and (3) conversion. Plaintiff alleges that defendant's failure to perform under its contracts with plaintiff caused plaintiff to lose orders from its customers. Presently before this Court is defendant's motion to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction. The premise of defendant's motion is an argument that plaintiff failed to plead the amount in controversy in good faith. For the reasons set forth below, defendant's motion is denied.

BACKGROUND

The following facts are taken from the complaint and the parties' submissions in connection with this motion. Disputes are noted.

Plaintiff Lorena is a corporation duly organized and existing under the laws of the State of New York, with its principal place of business in Flushing, New York. Defendant Vican is a Canadian corporation authorized to do business in the State of New York, with its principal place of business in Montreal, Quebec.

In April, 2008, plaintiff entered into two contracts with defendant, the first for the purchase by plaintiff of 100 metric tons of motors, at $980.00 a ton, and the second for the purchase of 200,000 pounds of car batteries, at $.34 a pound, for a total price of $166,000. Complaint at ¶ 8, Affidavit of Sherri Jayson, Exs. D, E.*fn1 The motors were to be delivered by May 23, 2008, and the batteries by May 30, 2008. Jayson Aff. Exs. D, E. On April 28, 2008, plaintiff wire-transferred a $9,800 deposit to defendant for the motors. Compl. at ¶ 9. On May 8, 2008, plaintiff made a deposit of $6,600, and additional deposits thereafter. Id. at ¶ 10. Defendant received the wire deposits but did not deliver the goods as provided in the contract.*fn2 Id. at ¶ 11. Defendant has retained some amount of money from the deposits.*fn3 Compl. at ¶ 12, Jayson Aff. at ¶¶ 17-18.

Plaintiff alleges that, as a result of defendant's failure to deliver the motors and batteries, plaintiff was unable to fulfill delivery obligations to its customers in China. Id. at ¶ 13. Plaintiff has submitted two sales agreements between Lorena and the Shanghai Zhen Xing Metal Fabrication Factory ("Shanghai Zhen"), in which Shanghai Zhen agreed to buy 100 metric tons of motors at $1400 a metric ton, and 200,000 pounds of auto batteries at $0.45 a pound, for a total contract price of $230,000. Affidavit of Wei Zhu, Ex. C. These agreements included a term providing that if Lorena failed to timely deliver the motors before May 23, 2008 and the batteries by May 30, 2008, it would compensate Shanghai Zhen at three times the contracted amount. Plaintiff has submitted a letter from Shanghai Zhen alleging that it is due $690,000 in damages for the alleged contract breach by Lorena. Zhu Aff. Ex. F. Plaintiff further asserts that it suffered thousands of dollars in damages due to delays, loss of business, labor costs, fees, and reshipment costs following defendant's breach.

Plaintiff claims that it is due in total $1,200,000 in damages.

DISCUSSION

Plaintiff's complaint alleges that this Court has diversity jurisdiction over this action pursuant to 28 U.S.C. § 1332, which provides that "district courts have original jurisdiction of all civil actions 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." 28 U.S.C. § 1332(a)(2). Plaintiff is a citizen of New York, and defendant is a citizen of Canada. However, defendant maintains that plaintiff has not plead the amount in controversy in good faith, and that this Court accordingly lacks jurisdiction. Defendant asserts that plaintiff is not entitled to seek consequential damages, and therefore the only money in dispute is the $10,000 retained by defendant from plaintiff's deposits. Defendant further contends that, even if plaintiff were entitled to seek consequential damages, they would be limited to the $68,000 profit that plaintiff would have received after purchasing goods from defendant and selling them to the Chinese buyer.

A. Law Governing Amount in Controversy

In a diversity case, the party invoking the jurisdiction of the federal court bears the burden of establishing a reasonable probability that the amount in controversy requirement of 28 U.S.C. § 1332(a) is met." Burns v. King, 160 Fed. Appx. 108, 111 (2d Cir. 2005). "This burden is hardly onerous, however, for we recognize a rebuttable presumption that the face of the complaint is a good faith representation of the actual amount in controversy." Scherer v. Equitable Life Assur. Soc'y of the United States, 347 F.3d 394, 397 (2d Cir. 2003). "[M]otions to dismiss for lack of a sufficient amount in controversy must be directed solely to the plaintiff's allegations," and "defenses asserted on the merits [may not be] considered and adjudicated on jurisdictional motions." Zacharia v. Harbor Island Spa, Inc., 684 F.2d 199, 202 (2d cir. 1982). "To overcome the face-of-the-complaint presumption, the party opposing jurisdiction must show to a legal certainty that the amount recoverable does not meet the jurisdictional threshold." Scherer, 347 F.3d at 397. "Where the damages sought are uncertain, the doubt should be resolved in favor of the plaintiff's pleadings." Tongkook Am. v. Shipton Sportswear Co., 14 F.3d 781, 785 (2d Cir. 1994). "[W]hen a plaintiff is seeking unliquidated damages in a tort action, a district court should permit the case to proceed and not predetermine whether the plaintiff could recover the minimum statutory amount." Id.

B. Consequential Damages

Defendant has not met its burden of showing to a legal certainty that plaintiff could not recover $75,000 in this action, because it cannot be determined as a matter of law at this stage that plaintiff is not entitled to ...


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