Summary
dismissing case for lack of subject matter jurisdiction on account of Plaintiffs not being entitled to include punitive damages in the amount in controversy
Summary of this case from Graubart v. Jazz Images, Inc.Opinion
00 Civ. 3335 (AKH)
October 4, 2000
ORDER MEMORANDUM
Plaintiff, a New York citizen and Manhattan resident, sued Defendant Carleton College "Carleton", a Minnesota corporation, on April 4, 2000 in New York Supreme Court, County of New York, claiming breach of contract and misrepresentation. On May 2, Defendant removed the action to federal court on diversity grounds. Defendant now brings a motion (i) pursuant to Fed.R.Civ.P. 12(b)(3) and 28 U.S.C. § 1391, to dismiss the Complaint for improper venue; or in the alternative, (ii) pursuant to 28 U.S.C. § 1404 (a), to transfer the action to the District of Minnesota. However, because Plaintiff fails to satisfy the amount in controversy requirement of diversity jurisdiction under 28 U.S.C. § 1332, this Court need not reach the issues raised by Defendants motion. Instead, this case is remanded to New York State Supreme Court pursuant to 28 U.S.C. § 1447 (c).
I. Background
Plaintiffs complaint alleges the following. Plaintiffs son, an unemancipated minor, suffers from Attention Deficit Disorder and other unspecified learning disabilities, which have caused him difficulty with his school work. The son applied to Carleton College and included with his application two letters describing his learning disabilities. He was admitted and enrolled in September 1997. For both the Fall and Winter Terms, the son earned very poor grades. Plaintiff makes no mention of when she learned of the Fall grades, but purports to have learned of the Winter grades only early in the Spring Term. Her sons education "ceased" in the beginning of the Spring Term, though Plaintiff does not specify whether her son dropped out voluntarily or was asked to leave.
Plaintiffs claims arise from alleged representations made to her by Carleton College administrators on three occasions.
• First, on an unspecified date after her son was accepted, Plaintiff telephoned Carletons Associate Dean of Student, Hudlin Wagner, who coordinates Carletons Disabled Student Services. Plaintiff explained her sons learning disabilities, and Dean Wagner allegedly assured Plaintiff that Carleton would be able to provide appropriate care and supervision and would give Plaintiff timely notice if the son, s academic performance slipped.
• In September 1997, Plaintiff accompanied her son to Carleton and met with Dean Wagner. At the meeting, Plaintiff provided documentation of her sons condition. At Plaintiffs request, Dean Wagner promised to provide timely notification if the son experienced academic difficulties, a "tracking system" for professors to report to Dean Wagner if the son had difficulties, supervision of the sons scheduling of work, and regular meetings between Dean Wagner and the son.
• Later in September 1997, Plaintiff telephoned Dean Wagner to request that her son not be permitted to join the wrestling team because she felt it would interfere with his studies. The Dean refused to recommend the removal of her son from the wrestling team. The Dean also reiterated that the College would notify Plaintiff if her son experienced academic problems. Plaintiff alleges that Defendant breached these promises by failing to inform Plaintiff of her sons academic difficulties until the beginning of the Spring Term (although it appears that Plaintiff knew of her sons poor Fall Term performance at an earlier date), by failing to provide her son with adequate supervision and regular meetings with Dean Wagner, and by failing to establish a tracking system. Plaintiff alleges one count of breach of contract and three counts of tortious intentional or negligent misrepresentation (apparently based on Defendant having invoked her sons right of academic privacy to explain its refusal to provide academic information to Plaintiff). As described in detail below, Plaintiff seeks $ 37,812.50 in compensatory damages and $300,000 in punitive damages.
II. The Amount in Controversy
This Court has jurisdiction, if at all, only through diversity of citizenship under 28 U.S.C. § 1332. To satisfy the requirements of diversity jurisdiction, "[t]he amount in controversy must appear on the face of the complaint or be established by proof" to exceed the sum of $75,000, exclusive of interest and costs. Miller v. European American Bank, 921 F. Supp. 1162, 1167 (S.D.N.Y. 1996); see also 28 U.S.C. § 1332. For purposes of this analysis, the Court accepts as true all facts alleged in the Complaint. Jackson v. Kump, 1994 WL 9691 at *3 (S.D.N Y 1994). Unless the court can conclude to a legal certainty that Plaintiff cannot recover the amount sought, jurisdiction is not defeated. A.F.A. Tours, Inc. v. Whitchurch, 937 F.2d 82, 87 (2d Cir. 1991).
In her Complaint, Plaintiff claims compensatory damages of $27,812.50 for the costs of tuition, room, and board during her son's period of enrollment at Carleton, $2,500 in travel and miscellaneous expenses related to her sons attendance, and $7,500 in attorney's fees and other miscellaneous expenses allegedly stemming from Defendant's misrepresentations. Though Plaintiff cites these amounts several times in separate counts, she only paid the amounts once. Hence, the repeated claims for those compensatory damages appear to be duplicative, not cumulative. Thus, the total amount of compensatory damages sought by Plaintiff is $37,812.50. These damages, without more, fail to reach the $75,000 minimum.
This finding does not end the Courts inquiry, however. Plaintiff claims $200,000 in punitive damages on her breach of contract claim and $100,000 in punitive damages on her misrepresentation claims. "If punitive damages are permitted under the controlling law, the demand for such damages may be included in determining whether the jurisdictional amount is satisfied." A.F.A. Tours, 937 F.2d at 87. This Court need not reach the question of which state's law is controlling, because under either New York or Minnesota law, punitive damages are not recoverable for breach of contract and Plaintiff's misrepresentation claims are duplicative of her breach of contract claim.
"[I]n computing jurisdictional amount, a claim for punitive damages is to be given closer scrutiny, and the trial judge afforded greater discretion, than a claim for actual damages." Zahn v. Int'l Paper Co., 469 F.2d 1033, 1034 (2d Cir. 1972), aff'd on other grounds, 414 U.S. 291, 94 S.Ct. 505 (1973). Under New York law, punitive damages are not available in actions for breach of contract unless either (1) the wrong is aimed at the public generally, or (2) there is an "extraordinary showing" of dishonesty or bad faith. Career Initiatives Corp. v. Palmer, 893 F. Supp. 295, 296 (S.D.N Y 1995). The first of these exceptions plainly is not implicated here. As for the second exception, "mere fraud is insufficient . . . [P]unitive damages [are] available only where [the] defendant acts with evil and reprehensible motives." Miller, 921 F. Supp. at 1167 (citation omitted). Nothing in the Complaint suggests that Defendant acted with such extreme bad faith. Similarly, under Minnesota law, "punitive damages are not recoverable in actions for breach of contract except in exceptional circumstances." Breen v. Norwest Bank Minnesota, 865 F. Supp. 574, 581 (D.Minn. 1994). "Unless [Defendant's] willful and malicious conduct constitutes an independent tort, Minnesota law does not permit recovery of punitive damages." Barr/Nelson, Inc. v. Tonto's, Inc., 336 N.W.2d 46, 53 (Minn. 1983). As described below, the conduct underlying the breach of contract cannot form the basis of an independent tort claim. Therefore, Plaintiff is not entitled to punitive damages on her breach of contract claim.
Nor is Plaintiff entitled to punitive damages on her misrepresentation claim, under either New York or Minnesota law. "It is well settled under New York law that a cause of action for fraud will not arise if the alleged fraud merely relates to the breach of a contract." G.D. Searle Co. v. Medicore Communications, Inc., 843 F. Supp. 895, 909 (S.D.N.Y. 1994). "The rule in New York is that a fraud claim should be dismissed when it merely restates a breach of contract claim." U.S. Network Services, Inc. v. Frontier Communications of the West, Inc., 2000 WL 1455678 at *2 (W.D.N.Y. 2000) (internal quotes and citation omitted). "[P]unitive damages will not be available for breach of contract and ordinary fraud if the complaint alleges a private wrong. . . . If the fraud merely restates the contract breach, punitive damages will also be denied." Pizzatola v. Berkshire Life Ins. Co., 1992 WL 165833 at *4 (N.D.N.Y.) (citations omitted). Similarly, "Minnesota law does not recognize an independent tort for negligent misrepresentation based on conduct that merely constitutes a breach of contract. . . . Moreover, . . . any damages for negligent misrepresentation would be duplicative of the damages for breach of contract because the same conduct underlies both actions, and thus would constitute an improper recovery of the same loss under two theories." UFE Inc. v. Methode Electronics, Inc., 808 F. Supp. 1407, 1415 (D.Minn. 1992).
The misrepresentation and breach of contract claims stem from the same underlying conduct: Defendant, s representations about providing care for Plaintiff's son, and its subsequent failure to provide the agreed-upon care. Specifically, Plaintiff alleges that Defendant misrepresented its right not to provide notice to Plaintiff about her son's academic performance, despite having agreed in the contract to provide such notice. This conduct is integral to the breach of contract claim, and does not constitute an independent tort. As Plaintiff bases her misrepresentation claims on conduct that also underlies her breach of contract claim, Plaintiff is not entitled to punitive damages under her tort claims. Therefore, the amount in controversy consists only of the $37,812.50 sought in compensatory damages.
A suit which has been improperly removed from state to federal court must be remanded back to the state court. 28 U.S.C. § 1447 ("If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.") The amount in controversy in this case does not reach the $75,000 threshold required to confer diversity jurisdiction under 28 U.S.C. § 1332. As no other basis exists in this case for jurisdiction in federal court, the Clerk of the Court is hereby ordered to remand this action to New York State Supreme Court.
SO ORDERED.