Opinion
99 Civ. 4881 (AJP)
September 19, 2000
OPINION AND ORDER
Plaintiff Steven V. Blumenthal has brought this action against defendants to collect money that Blumenthal alleges he loaned them over a period of ten months in 1997 and early 1998. Defendants move to dismiss the complaint, contending that it does not: (1) meet the amount-in-controversy requirement for diversity jurisdiction in federal court, 28 U.S.C. § 1332(a)(1); (2) plead facts sufficient to show that defendant Gary M. Sills, a resident of California, is subject to personal jurisdiction in this Court or liable for the loaned money; and (3) state a cause of action for fraud. The parties have consented to disposition of this action by a Magistrate Judge pursuant to 28 U.S.C. § 636 (c). (Dkt. No. 20.)
Because the Court, at this point in the proceedings, cannot find to a "legal certainty" that the $75,000 jurisdictional amount-in-controversy threshold has not been met, defendants' motion to dismiss on that ground is DENIED. The Court, however, agrees that plaintiff Blumenthal has not pleaded a cause of action against defendant Sills and, therefore, whether or not personal jurisdiction over him would be appropriate, his motion to dismiss is GRANTED. Finally, because the complaint alleges only a breach of a loan contract and not facts sufficient to show fraud, defendants' motion to dismiss the fraud claim is GRANTED.
BACKGROUND
The allegations in the complaint, which for purposes of the instant motion are taken as true, show the following: plaintiff Steven V. Blumenthal, met Albert DeVaul in 1997 and agreed to lend money to him individually and to his company, SeaTel Corp., which was in the business of developing a concept for a chain of floating hotels around the world. (Dkt. No. 1: Compl. ¶¶ 1, 11-12, 15; Dkt. No. 21: Blumenthal 8/17/00 Aff. ¶¶ 4-5.) The loan was due and payable upon demand. (Compl. ¶ 14; Blumenthal 8/17/00 Aff. ¶ 6.) While the complaint alleges that "DeVaul proposed that plaintiff [Blumenthal] enter into a joint venture" that would also include DeVaul's business partner Gary M. Sills (Compl. ¶ 13; see also Blumenthal 8/17/00 Aff. ¶ 5), there is no allegation that this offer was accepted, that Sills or a partnership including Sills was a co-borrower on the loan, or that Sills received any money from Blumenthal. Indeed, Blumenthal concedes that "no written agreements were ever entered into between [him] and the defendants." (Blumenthal 8/17/00 Aff. ¶ 7.)
According to the complaint, SeaTel Corp. is now known as The Sea Hotel Corporation. (Compl. ¶ 3.) For convenience, I will refer to it as SeaTel.
According to the complaint, after the agreement was made in New York, Blumenthal made various payments to or for the benefit of DeVaul and SeaTel "in excess of $75,000." (Compl. ¶ 16.) On order of the Court (Dkt. No. 19:8/15/00 Order), Blumenthal substantiated by affidavit $74,075.78 in payments and swore under penalty of perjury that although he did not have complete records of the amounts he had loaned, he had made additional advances and paid additional bills. (Blumenthal 8/17/00 Aff. ¶¶ 9-10.) That $74,075.78 amount is further substantiated by a letter which Blumenthal's attorney obtained from DeVaul, in which DeVaul admits that SeaTel had received "not less than $74,075.78" from Blumenthal. (Dkt. No. 9: DeVaul 8/11/00 Aff. Ex. A: 4/23/99 Letter Agreement.) The complaint also alleges that DeVaul charged $3,954.20 on Blumenthal's credit card for SeaTel related travel (Compl. ¶¶ 20-24; see also Blumenthal 8/17/00 Aff. ¶¶ 13-14), but it is not clear whether this payment is part of the $74,075.78 accounted for in Blumenthal's affidavit and DeVaul's concession letter.
As defense counsel was quick to point out, Blumenthal's original affidavit contained a list of payments totaling only $72,510.78. (Blumenthal 8/17/00 Aff. ¶ 9; Burns 8/17/00 Letter.) Blumenthal's attorney responded that this was a mere oversight, omitting a $1,565 advance made in December 1997 that was not on the list. (D'Orazio 8/17/00 Letter.) That brings the total to the original amount Blumenthal alleged in his affidavit.
Blumenthal alleges that he demanded repayment of the loans beginning in April 1998 but DeVaul and SeaTel have failed to pay back the loans to date. (Compl. ¶¶ 25-26; Blumenthal 8/17/00 Aff. ¶ 15.) Blumenthal filed this suit on July 8, 1999. (Dkt. No. 1: Compl.)
ANALYSIS I. BLUMENTHAL HAS COMPLIED WITH THE AMOUNT IN CONTROVERSY REQUIREMENT BECAUSE THERE IS A REASONABLE PROBABILITY THAT THE LOANS EXCEEDED $75,000 AS ALLEGED IN THE COMPLAINTThe Supreme Court has instructed federal courts to dismiss lawsuits based on the amount in controversy requirement only when it is clear "to a legal certainty" that the plaintiff cannot recover the amount demanded:
The rule governing dismissal for want of jurisdiction in cases brought in the federal court is that, unless the law gives a different rule, the sum claimed by the plaintiff controls if the claim is apparently made in good faith. It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal. . . . But if, from the face of the pleadings, it is apparent, to a legal certainty, that the plaintiff cannot recover the amount claimed . . . and that his claim was therefore colorable for the purpose of conferring jurisdiction, the suit will be dismissed.
St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89, 58 S.Ct. 586, 590 (1938) (emphasis added footnotes omitted); accord, e.g., The Chase Manhattan Bank v. American Nat'l Bank Trust Co., 93 F.3d 1064, 1070 (2d Cir. 1996); Tongkook America, Inc. v. Shipton Sportswear Co., 14 F.3d 781, 784 (2d Cir. 1994); Zacharia v. Harbor Island Spa, Inc., 684 F.2d 199, 202 (2d Cir. 1982); South Park Assocs. L.L.C. v. Renzulli, 94 F. Supp.2d 460, 462 (S.D.N.Y. 2000); Coker v. Bank of America, 984 F. Supp. 757, 762-63 (S.D.N.Y. 1997) (Keenan, D.J. Peck, M.J.); Reddy v. Barclays Bank, 773 F. Supp. 655, 657 (S.D.N.Y. 1991); Posner v. Merrill Lynch, Pierce, Fenner Smith, Inc., 469 F. Supp. 972, 986 (S.D.N.Y. 1979); 14A Wright, Miller Cooper, Federal Practice Procedure: Jurisdiction 2d § 3702.
The Second Circuit places on the party invoking federal court jurisdiction the burden of showing "a `reasonable probability' that the claim is in excess of the statutory jurisdictional amount." Tongkook America, Inc. v. Shipton Sportswear Co., 14 F.3d at 784; accord, e.g., The Chase Manhattan Bank v. American Nat'l Bank Trust Co., 93 F.3d at 1070; South Park Assocs. L.L.C. v. Renzulli, 94 F. Supp.2d at 462; Slaven v. Mee Noodle Shop Grill, Inc., 96 Civ. 0374, 1998 WL 661477 at *2 (S.D.N Y Sept. 24, 1998). This burden may be met by producing "competent proof" outside the pleadings showing that the amount-in-controversy threshold amount has been met. Pang v. Allstate Ins. Co., 97 Civ. 4971, 1998 WL 190291 at *1 (S.D.N.Y. April 21, 1998), aff'd, No. 98- 7877, 173 F.3d 845 (table) (2d Cir.), cert. denied, 120 S.Ct. 328 (1999); see also, e.g., United Food Commercial Workers Union v. Centremark Properties Meridien Square, Inc., 30 F.3d 298, 304-05 (2d Cir. 1994); South Park Assocs. L.L.C. v. Renzulli, 94 F. Supp.2d at 462-63.
Here, plaintiff Blumenthal's complaint alleged damages in excess of $75,000.00 (see Compl. ¶ 16), the jurisdictional threshold set forth in 28 U.S.C. § 1332(a)(1). In addition, the Court ordered Blumenthal to produce competent evidence, through a sworn affidavit, detailing the sum for which he was suing. (Dkt. No. 19:8/15/00 Order.) As described above, Blumenthal submitted an affidavit detailing $74,075.78 in monies loaned out and swearing that further sums also were loaned to DeVaul, with a total in excess of $75,000. (Blumenthal 8/17/00 Aff. ¶¶ 3, 10.) In addition, Blumenthal pointed to a letter countersigned by DeVaul in which DeVaul concedes that SeaTel owes Blumenthal "not less than $74,075.78." (4/23/99 Letter.)
Blumenthal has made an adequate showing that the amount-in-controversy exceeds $75,000; defendants have not shown "`to a legal certainty that the claim is really for less than the jurisdictional amount [so as] to justify dismissal.'" Coker v. Bank of America, 984 F. Supp. at 763 (quoting St. Paul Indem. Co. v. Red Cab Co., 303 U.S. at 288-89, 58 S.Ct. at 590); see also, e.g., Wolde-Meskel v. Vocational Instruction Project Community Servs., Inc., 166 F.3d 59, 63 (2d Cir. 1999). DeVaul admits that SeaTel owes at least $74,075.78, Blumenthal has pointed to at least one additional bill he paid for DeVaul (the airplane tickets charged on Blumenthal's credit card), and Blumenthal swore that he expects to be able to substantiate additional payments. Under the "legal certainty" standard, this is more than sufficient competent evidence to survive defendants' motion. Defendants' motion to dismiss on this ground is DENIED.
II. THE COMPLAINT FAILS TO STATE A CLAIM AGAINST DEFENDANT SILLS
Defendant Sills argues both that this Court lacks personal jurisdiction over him (Defs. Br. at 5-6; Defs. Reply Br. at 7-9) and that the complaint fails to state a claim against him (Defs. Br. at 7-8; Defs. Reply Br. at 9-10). Because I agree that the complaint fails to state a claim against Sills, there is no need to reach the question of personal jurisdiction, and the action against Sills is DISMISSED DISMISSED.
The only direct references to Sills in the complaint state that (1) he is a California resident (Compl. ¶ 5); (2) he is an officer of Sea Hotel LLC and has an interest in SeaTel (id. ¶ 8); (3) he is DeVaul's brother-in-law (id.); and (4) "DeVaul proposed that plaintiff [Blumenthal] enter into a joint venture composed of plaintiff [Blumenthal], Sills, DeVaul, and . . . a lawyer with whom plaintiff [Blumenthal] was acquainted." (Id. ¶ 13.) The complaint goes on to detail the loan terms agreed to by DeVaul and Blumenthal. (Id. ¶¶ 14-16.)
Nowhere does it allege that Sills made any agreement or representation to Blumenthal, granted authority to DeVaul to bind him to a loan agreement, personally received funds, or committed acts that would lead to Sills' personal liability for loans to either of the corporate entities, SeaTel or Sea Hotel LLC.
Nevertheless, Blumenthal urges that the complaint states a valid cause of action against Sills for money had and received. (Blumenthal Br. at 12.) Under New York law, an action for money had and received lies when "`(1) defendant received money belonging to plaintiff; (2) defendant benefitted from the receipt of money; and (3) under principles of equity and good conscience, defendant should not be permitted to keep the money.'" Nordlicht v. New York Tel. Co., 799 F.2d 859, 865 (2d Cir. 1986) (quoting Aaron Ferrer Sons Ltd. v. Chase Manhattan Bank, 731 F.2d 112, 125 (2d Cir. 1984)), cert. denied, 479 U.S. 1055, 107 S.Ct. 929 (1987); accord, e.g., Barroso v. Polymer Research Corp., 80 F. Supp.2d 39, 42 (E.D.N.Y. 1999); see also Parsa v. State of New York, 64 N.Y.2d 143, 148, 485 N.Y.S.2d 27, 29-30 (1984); Miller v. Schloss, 218 N.Y. 400, 406-07 (1916). Blumenthal's complaint does not meet the first of these requirements: there is no allegation that Sills personally received any money belonging to Blumenthal. See, e.g., Parsa v. State of New York, 64 N.Y.2d at 148, 485 N.Y.S.2d at 29-30 (no action for money had and received where state had not received any money belonging to plaintiff).
The complaint states six causes of action against all defendants including Sills; only the second cause of action is for money had and received. (Compl. ¶¶ 33-36.) Blumenthal has not presented any argument to sustain any of the other causes of action against Sills, and those claims therefore are dismissed as having been abandoned by plaintiff Blumenthal. See, e.g., McLean v. City of Rome, New York, No. Civ. A. 95CV1713, 1998 WL 312350 at *5 (N.D.N.Y. June 8, 1998) (Pooler, D.J.) ("I find that [plaintiff] has consented to defendants' motion for summary judgment on this claim by failing to oppose it."); Koehler v. Bank of Bermuda (New York) Ltd., 96 Civ. 7885, 1998 WL 67652 at *8 (S.D.N.Y. Feb. 19, 1998) ("Because Plaintiff has failed to oppose Defendant['s] motion to dismiss these two counts, the Court views Plaintiff's failure to oppose as an implicit concession to the relief sought by [defendant] and therefore dismisses these two counts as against [defendant]."), aff'd, 209 F.3d 130 (2d Cir. 2000).
Therefore, since the complaint fails to state a cause of action against Sills individually, his motion to dismiss is GRANTED GRANTED.
III. THE COMPLAINT FAILS TO STATE A CLAIM SOUNDING IN FRAUD
Finally, defendants move for dismissal of the fraud counts, contending that the "[c]omplaint is absolutely barren of any purported factual misrepresentations. . . . At best, all that we have is a breach of contract dressed up in fraud clothing." (Defs. Reply Br. at 10; see also Defs. Br. at 6-7.)
The Court agrees: as alleged in the complaint, the only statements made by defendants that could possibly be construed as misrepresentations concerned DeVaul's intent to eventually repay the loan. (Compare Compl. ¶ 14 with Compl. ¶ 30.) New York law, however, does not permit a cause of action for fraud "when the only fraud charged relates to a breach of contract." Barroso v. Polymer Research Corp., 80 F. Supp.2d 39, 44 (E.D.N Y 1999). "[M]ere failure of promised performance has never permitted a factual finding that defendants never intended to perform." Soper v. Simmons Int'l Ltd., 632 F. Supp. 244, 249 (S.D.N.Y. 1986) (dismissing complaint where plaintiffs allege false promises without averring specific facts showing defendants never intended to pay a commission); see also, e.g., Powers v. British Vita, P.L.C., 57 F.3d 176, 185 (2d Cir. 1995) ("`[t]he mere non-performance of promises is insufficient to create an inference of fraudulent intent'"); United States v. D'Amato, 39 F.3d 1249, 1261 n. 8 (2d Cir. 1994) ("A breach of contract does not amount to mail fraud."); Mills v. Polar Molecular Corp., 12 F.3d 1170, 1176 (2d Cir. 1993) ("Contractual breach, in and of itself, does not bespeak fraud. . . ."); Gerstenfeld v. Nitsberg, 190 F.R.D. 127, 132 (S.D.N.Y. 1999) (Stein, D.J. Peck, M.J.); Bernstein v. Misk, 948 F. Supp. 228, 238 (E.D.N.Y. 1997) ("The defendants correctly assert that the fact that [defendants] intended to default on an obligation cannot transform what otherwise looks like a breach of contract claim into a fraud claim"). Therefore, the fraud claim does not survive as a distinct cause of action from the breach of contract claim, and is DISMISSED .
CONCLUSION
For the reasons set forth above, plaintiff Blumenthal's fraud claims are DISMISSED against all defendants and the complaint is DISMISSED in its entirety as against defendant Gary M. Sills. In all other respects, defendants' motion to dismiss is DENIED.
SO ORDERED.