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Insurance Brokers West, Inc. v. Liquid Outcome, LLC

United States District Court, D. Rhode Island

March 15, 2017

INSURANCE BROKERS WEST, INC., Plaintiff,
v.
LIQUID OUTCOME, LLC f/k/a ASTONISH RESULTS, LLC d/b/a INTYGRAL Defendant.

          MEMORANDUM AND ORDER

          JOHN J. MCCONNELL, JR., UNITED STATES DISTRICT JUDGE.

         Plaintiff Insurance Brokers West, Inc., ("IBW") brought this suit against Defendant Liquid Outcome, LLC, f/k/a Astonish Results, LLC, d/b/a INTYGRAL ("Astonish"), alleging that Astonish breached its contract to provide IBW with digital marketing products and services as set forth in a marketing agreement ("Agreement") and a subsequent amendment to the marketing agreement ("Amendment"). Pursuant to Fed.R.Civ.P. 12(b)(1), Astonish moved to dismiss IBW's First Amended Complaint (ECF No. 7) for lack of jurisdiction, arguing that IBW does not meet the amount-in-controversy requirement. ECF No. 9-1 at 5-11. Astonish also moved to strike the jury demand because IBW agreed to a jury-waiver provision in the Agreement. Id. at 11-15. Because the Court finds that the Amendment precludes IBW from seeking damages in excess of $22, 500, IBW fails to meet the amount-in-controversy requirement for diversity jurisdiction.[1]

         BACKGROUND

         IBW is an insurance agency based in California, and Astonish is a Delaware marketing services provider based in Rhode Island. ECF No. 7 at ¶ 1-2. IBW and Astonish entered into the Agreement in December of 2010. ECF No. 9-2 at 14-15. IBW alleges that, according to the Agreement, Astonish agreed to provide digital marketing services, including website design and development, and IBW agreed to pay Astonish for those services. ECF No. 7 at ¶ 8-9. In December of 2014, IBW and Astonish executed the Amendment, where Astonish agreed to "complete a website theme-based redesign and website content re-optimization." ECF No. 9-2 at 35. The payment provision in the Amendment ("Reduction Provision") provided for thirteen payments of $1, 350 and five payments of $1, 000, thus totaling $22, 550. ECF No. 9-2 at 35.

         The Agreement included a jury-waiver provision, id, at 15, and the Amendment contained a release ("Release") for "any and all claims, actions, damages, and losses" that occurred before IBW and Astonish executed the Amendment, id. at 34. Following the execution of the Amendment, Astonish sold its assets to Zywave in July of 2015, ECF No, 7 at ¶ 12. Zywave and Astonish agreed that Zywave would provide services to Astonish's then-clients, but IBW was not a party to this agreement. Id. at ¶ 14-15. Moreover, IBW asserts that Zywave did not provide IBW with the products and services in the Agreement or Amendment. Id., at ¶ 16.

         IBW filed this suit against Astonish seeking damages, declaratory judgment, and attorneys' fees under a breach of contract cause of action. ECF No. 1 at ¶ 61-71. Astonish originally moved to dismiss for lack of jurisdiction and, in the alternative, to strike IBW's demand for a jury trial. ECF No. 6-1. In response, IBW filed its First Amended Complaint, alleging $140, 000 in damages. ECF No. 7 at ¶ 66. Claiming that IBW does not meet the amount-in-controversy requirement and waived its right to a jury trial, Astonish again filed its Motion to Dismiss and Motion to Strike the First Amended Complaint. ECF No. 9-1. According to its Motion, Astonish disputes IBW's ability to claim damages in excess of $75, 000 because the Amendment limits damages to conduct that occurs after the Amendment. And even if IBW meets the amount-in-controversy requirement, Astonish submits that IBW is not entitled to a jury trial given the contracted jury waiver. ECF No. 9-1 at 11-15. IBW filed its Objection to Defendant's Motion to Dismiss and Motion to Strike. ECF No. 12. In its objection, IBW contends that, because the Amendment was breached, the Release does not limit damages to post-Amendment conduct. Id. at 3. Additionally, IBW posits that jury waivers remain unenforceable under the Rhode Island Constitution because Rhode Island does not have legislation that permits jury waiver. Id., at 5. Astonish filed its Reply. ECF No. 14.

         STANDARD OF REVIEW

         As a court of limited jurisdiction, this Court may not-absent subject matter jurisdiction-proceed with an action. Belsito Commons, Inc. v. Decker, 845 F, 3d 13, 21 (1st Cir. 2016). The party invoking jurisdiction bears the burden of establishing the jurisdictional requirements. Wal-Mart P.K, Inc. v. Zaragoza-Gomez, 834 F.3d 110, 116 (1st Cir. 2016).

         When ruling on a challenge to the sufficiency of jurisdictional facts, the Court "must credit the plaintiffs well-pled factual allegations and draw all reasonable inferences in the plaintiffs favor." Merlonghi v. United States, 620 F.3d 50, 54 (1st Cir. 2010) (citing Valentin v. Hosp. Bella Vista, 254 F.3d 358, 363 (1st Cir. 2001)). In contrast, when ruling on the accuracy of jurisdictional facts-that is, a "factual challenge"-the Court provides "no presumptive weight" to the jurisdictional allegations, but instead "address[es] the merits of the jurisdictional claim by resolving the factual disputes between the parties." Valentin, 254 F.3d at 363. The Court retains broad discretion "to order discovery, consider extrinsic evidence, and hold evidentiary hearings in order to determine its own jurisdiction." Id.

         DISCUSSION

         IBW's Amended Complaint seeks $140, 000 in damages because Astonish allegedly failed to provide digital marketing services as set forth in the Agreement and Amendment. ECF No. 12-1 at 2-3. Astonish argues that IBW's Amended Complaint does not meet the amount-in-controversy requirement for diversity jurisdiction because the Reduction Provision in the Amendment provides for a maximum of $22, 500 in damages. ECF No. 9-1 at 7. And to the extent that IBW seeks damages for pre-Amendment damages, the Amendment, Astonish contends, releases Astonish from those claims. Id. at 6. The Release provides:

From and after the date hereof [IBW] agrees it will not sue for any reason and hereby releases and forever discharges Astonish from any and all claims, actions, damages, and losses whatsoever known and unknown as of the date of this Amendment, except those claims which occur in the future as a result of a material default in Astonish's performance of this Amendment.

ECF No. 9-2 at 34. IBW reasons that, because Astonish breached the Amendment, IBW can recover pre-Amendment damages. ECF No. 12-1 at 4.

         "[T]he party seeking to invoke jurisdiction . . . has the burden of showing that [it] has met the statutory requirements." Spielman v. Genzyme Corp.,251 F.3d 1, 4 (1st Cir. 2001). Generally, the amount of damages alleged by the invoking party "will control the amount in controversy for jurisdictional purposes" as long as the claim is made "in good faith." Coventry Sewage Assocs. v. Dworkin Realty Co.,71 F.3d 1, 6 (1st Cir. 1995). An invoking party demonstrates good faith by showing that "'to anyone familiar with the applicable law this claim could objectively have been viewed as worth more than the ...


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