Schultz v. American Lighting Inc Et Al - Document No. 19
Schultz v. American Lighting Inc Et Al - Document No. 19
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Case 1:06-cv-00508-WCG Filed 05/05/2006 Page 1 of 4 Document 19
RANDAL L. SCHULTZ,
Plaintiff,
Defendants.
ORDER
Plaintiff Randal L. Schultz sued Defendant American Lighting LLC (formerly known as
American Lighting, Inc.) in Winnebago County Circuit Court, seeking a declaratory judgment that
two confidentiality agreements were unenforceable. American Lighting removed the case to this
court on the basis of diversity jurisdiction, asserting that the parties were citizens of different states
and that the amount in controversy exceeded $75,000. See 28 U.S.C. § 1332. Schultz has now
moved to remand the case to state court. For the following reasons, his motion will be denied.
citizenship, the parties must be citizens of different states and the amount in controversy must
exceed $75,000. 28 U.S.C. § 1332. American Lighting, as the proponent of federal jurisdiction,
bears the burden of establishing the existence of those elements. Brill v. Countrywide Home Loans,
Dockets.Justia.com
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Schultz, a natural person, is a citizen of Arizona. (Compl. ¶ 2.) American Lighting, Inc.,
was a corporation incorporated under Colorado law with its principal place of business in Denver,
Colorado, and thus a citizen of Colorado. (Compl. ¶ 3.) The notice of removal does not specify the
membership of American Lighting LLC. As a limited liability company, American Lighting LLC
is a citizen of every state of which its members are citizens. Hicklin Engineering, L.C. v. Bartell,
439 F.3d 346, 348 (7th Cir. 2006). Schultz argues that because the notice of removal fails to
identify American Lighting’s members and their states of citizenship, the notice is defective and
remand is required.
Schultz correctly states that the absence of subject-matter jurisdiction may not be waived
by the parties. Belleville Catering Co. v. Champaign Market Place, LLC, 350 F.3d 691, 692 (7th
Cir. 2003). However, in response to Schultz’s motion, American Lighting filed an affidavit by its
chief financial officer that identifies its members and states of their citizenship. None is a citizen
of Arizona. (Hoeven Aff. ¶¶ 4-8.) Thus, it appears complete diversity of citizenship does exist.
Schultz nevertheless suggests that because defendants failed to properly allege the jurisdictional
facts in their notice of removal, remand is required. But this is not the law in this circuit. See
Hicklin Engineering, L.C., 439 F.3d at 347-48 (basing finding of jurisdiction on “supplemental
statement” filed after oral argument on appeal). Accordingly, remand will not be ordered based on
Schultz next argues that even if diversity of citizenship exists, the amount in controversy
does not exceed the $75,000 threshold set by 28 U.S.C. § 1332. In a suit for declaratory relief, the
amount in controversy is the “pecuniary result that would flow to either party from the court’s
granting the request for declaratory judgment.” America’s Moneyline, Inc. v. Coleman, 360 F.3d
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782, 785 (7th Cir. 2004). In this case, that result potentially includes past and future lost profits that
American Lighting will be unable to recover if the court declares the confidentiality agreements
invalid.1
American Lighting alleges, in its notice of removal, that the amount in controversy exceeds
$75,000. (Notice of Removal ¶ 5.) In response to Schultz’s motion, American Lighting also
submits the affidavit of Kurt Hoeven, its chief financial officer, who avers that American Lighting
suffered “substantially in excess of $75,000 in lost profits[] through the end of 2005” as a result of
plaintiff’s alleged violation of the confidentiality agreements. (Hoeven Aff. ¶ 12.) Schultz objects
that the allegation in the notice of removal and the averment in the affidavit do not suffice to prove
that American Lighting’s loss exceeds $75,000. Schultz expects too much at this stage in the
suits are removed on the pleadings, long before “evidence” or “proof” have been
adduced. The question is not what damages the plaintiff will recover, but what
amount is “in controversy” between the parties. That the plaintiff may fail in its
proof, and the judgment be less than the threshold (indeed, a good chance that the
plaintiff will fail and the judgment will be zero) does not prevent removal. Once the
proponent of jurisdiction has set out the amount in controversy, only a “legal
certainty” that the judgment will be less forecloses federal jurisdiction.
Id. at 448; cf. St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289 (1938) (“[I]f, from
the face of the pleadings, it is apparent, to a legal certainty, that the plaintiff cannot recover the
amount claimed or if, from the proofs, the court is satisfied to a like certainty that the plaintiff never
was entitled to recover that amount, and that his claim was therefore colorable for the purpose of
conferring jurisdiction, the suit will be dismissed.”) Based on the pleadings and the evidence in
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American Lighting has sued Schultz in the United States District court for the District of
New Mexico for breach of the confidentiality agreements. (Hoeven Aff. ¶ 10.)
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record, the court cannot say to a legal certainty that American Lighting has not suffered in excess
of $75,000 in lost profits as a result of Schultz’s alleged breach of the confidentiality agreements.
IT IS FURTHER ORDERED that defendants’ motion for leave to file a Surreply is denied
as moot.
IT IS ALSO ORDERED that the clerk shall schedule this matter fora Rule 16 conference.
s/ William C. Griesbach
William C. Griesbach
United States District Judge