Stuart v. Cocorilla, Ltd.

          ORDER

          Kristen L. Mix United States Magistrate Judge.

         This matter is before the Court on Defendant's Motion to Dismiss For Lack of Subject Matter Jurisdiction Under FRCP 12(b)(1) and 12 U.S.C. § 1332 [#19] (the “Motion”). Plaintiffs filed a Response [#23] in opposition to the Motion, and Defendant filed a Reply [#24]. The Court has reviewed the Motion, the Response, the Reply, the entire case file, and the applicable law, and is sufficiently advised in the premises. For the reasons set forth below, the Motion [#19] is GRANTED.^[1]

         I. Background

         Defendant, a start-up entity producing and selling coconut products, sold a series of 7.5% Convertible Promissory Notes to fund the further development of its business. Compl. [#1] ¶¶ 9-11. Plaintiffs Linden Stuart (“L. Stuart”), Melissa Stuart (“M. Stuart”), Bruskin Girls, LLC (“Bruskin”), and Presence, LLC (“Presence”) entered into Subscription Agreements with Defendant for Convertible Promissory Notes (“Note(s)”) with principal and interest due and payable by Defendant on March 31, 2018. Id. at 2-3. Each Note provided that “in the case of a default in the payment of any principal of or interest on the Note, the Company will pay the Holder, such further amount as shall be sufficient to cover the costs and expenses of collection, including, without limitation, reasonable attorneys' fees, expense and disbursements.” See, e.g., Pls.' Attach. 1, Stuart Note [#23-1] at 2.^[2]

         More specifically, Plaintiffs L. Stuart and M. Stuart entered into a Subscription Agreement with Defendant pursuant to which they purchased a $50, 000 Convertible Promissory Note, with a 7.5% interest rate, dated March 10, 2016, and due and payable on March 31, 2018 (the “Stuart Note”). Compl. [#1] ¶ 12; Stuart Note [#23-1] at 1. Plaintiffs allege that $8, 353.99 of contractual interest had accrued on the Stuart Note by March 31, 2018. Compl. [#1] ¶ 20.^[3] Plaintiff Bruskin entered into a Subscription Agreement pursuant to which it purchased a $12, 500 Convertible Promissory Note, with a 7.5% interest rate, dated April 8, 2016, and due and payable on March 31, 2018 (the “Bruskin Note”). Compl. [#1] ¶ 13; Pls.' Attach. 2, Bruskin Note [#23-2] at 8. Plaintiff Presence entered into a Subscription Agreement pursuant to which it purchased a $15, 000 Convertible Promissory Note, with a 7.5% interest rate, dated April 8, 2016, and due and payable on March 31, 2018 (the “Presence Note”). Compl. [#1] ¶ 14; Pls.' Attach. 3, Presence Note [#23-3] at 8.

         Plaintiffs unsuccessfully sought enforcement of the Notes issued, alleging that “[d]espite due demand, Defendant Cocorilla has, to date, failed to pay any of the amounts due and owing under the . . . Note.” See, e.g., Compl. [#1] ¶ 19. On April 19, 2018, Plaintiffs filed their Complaint [#1] against Defendant. Plaintiffs assert that the Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332 over enforcement of the Stuart Note (“Stuart Claim”) and supplemental jurisdiction pursuant to 28 U.S.C. § 1367 over the other claims.^[4] Compl. [#1] ¶¶ 5-6. Plaintiffs assert six claims for relief: (1) the Stuart Claim; (2) enforcement of the Bruskin Note; (3) enforcement of the Presence Note; and (4, 5, 6) claims for unjust enrichment against Defendant by the Stuarts, Presence, and Bruskin. Id. ¶¶ 15-53.

         Attorneys Christopher P. Milazzo (“Milazzo”) and Trevor J. Willard (“Willard”) appear to have worked for all four Plaintiffs collectively throughout the relevant times of this lawsuit. Pls.' Attach. 4, Milazzo Affidavit [#23-4] at 5; Pls.' Attach. 5, Willard Affidavit [#23-5] at 4. Their invoices do not separately identify billing per claim or per Plaintiff. See Id. Plaintiffs assert that attorneys' fees thus far total $10, 492.40. Response [#23] at 8. Moreover, Plaintiffs' “counsel anticipates future attorney fees to be greater than $7, 000.” Response [#23] at 8.

         In the present Motion [#19], Defendant argues that none of the claims meet the minimum amount in controversy of $75, 000 required by 28 U.S.C. § 1332(a). Motion [#19] at 3. Plaintiffs respond that, when the contractual interest and attorneys' fees are included, the Stuart Claim meets the jurisdictional minimum. Response [#23] at 7-8. Defendant replies that Plaintiffs improperly (1) aggregated the attorneys' fees on the individual notes and (2) speculated on future attorneys' fees to meet the minimum. Reply [#24] at 4-6.

         Neither Plaintiffs' Complaint [#1] nor Response [#23] specifies the mathematical breakdown or exact amount of damages they seek for the Stuart Claim; rather, they contend the total is “well in excess” of $75, 000. Response [#23] at 8. Without specifically saying so, Plaintiffs appear to rely on the following numbers to meet the jurisdictional minimum: (1) the $50, 000 principal on the Stuart Note, (2) the $8, 353.99 of interest on the Stuart Note, (3) $10, 492.39 in aggregated past attorneys' fees, and (4) over $7, 000 of estimated future attorneys' fees. See Response [#23] at 7-8. These four amounts combined equal $75, 846.38. The Court discusses these amounts in greater detail in the analysis section below.

         II. Standard of Review

         The purpose of a motion to dismiss pursuant to Rule 12(b)(1) is to test whether the Court has jurisdiction to properly hear the case before it. Because “federal courts are courts of limited jurisdiction, ” the Court must have a statutory basis to exercise its jurisdiction. Montoya v. Chao, 296 F.3d 952, 955 (10th Cir. 2002); Fed.R.Civ.P. 12(b)(1). Statutes conferring subject matter jurisdiction on federal courts are to be strictly construed. F & S Const. Co. v. Jensen, 337 F.2d 160, 161 (10th Cir. 1964). It is well established that “[t]he party invoking federal jurisdiction bears the burden of establishing such jurisdiction as a threshold matter.” Radil v. Sanborn W. Camps, Inc., 384 F.3d 1220, 1224 (10th Cir. 2004).

         A motion to dismiss pursuant to Rule 12(b)(1) may take two forms: facial attack or factual attack. Holt v. United States, 46 F.3d 1000, 1002 (10th Cir. 1995). When reviewing a facial attack, the Court accepts the allegations of the complaint as true. Id. By contrast, when reviewing a factual attack, the Court “may not presume the truthfulness of the complaint's factual allegations.” Id. at 1003. With a factual attack, the moving party challenges the facts upon which subject matter jurisdiction depends. Id. The Court therefore must make its own findings of fact. Id. In order to make its findings regarding disputed jurisdictional facts, the Court “has wide discretion to allow affidavits, other documents, and a limited evidentiary hearing.” Id. (citing Ohio Nat'l Life Ins. Co. v. United States, 922 F.2d 320, 325 (6th Cir. 1990); Wheeler v. Hurdman, 825 F.2d 257, 259 n.5 (10th Cir.), cert. denied, 484 U.S. 986 (1987)). The Court's reliance on “evidence outside the pleadings” to make findings concerning purely jurisdictional facts does not convert a motion to dismiss pursuant to Rule12(b)(1) into a motion for summary judgment pursuant to Rule 56. Id.

         III. Analysis

         Defendant argues that the Court lacks subject matter jurisdiction because there is no single claim meeting the $75, 000 minimum amount in controversy. Motion [#19] at 3. Specifically, Defendant argues that because (1) accrued attorneys' fees cannot be aggregated for purposes of diversity jurisdiction, and (2) speculative attorneys' fees cannot be considered to ...