Andersen v. Vagaro, Inc.

57 F.4th 11

• Court: Court of Appeals for the First Circuit
• Decided: January 3, 2023
• Docket: 22-1471P
• Status: Published

Opinion

United States Court of Appeals For the First Circuit

No. 22-1471

SANDI ANDERSEN, d/b/a Dharma Nutrition, LLC, d/b/a Dharma Healing Center,

Plaintiff, Appellant,

v.

VAGARO, INC.,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND

[Hon. Mary S. McElroy, U.S. District Judge]

Before

Kayatta, Lynch, and Gelpí, Circuit Judges.

Megan Sheehan, with whom Sheehan & Associates was on brief, for appellant. Sally P. McDonald, with whom Cameron & Mittleman, LLP was on brief, for appellee.

January 3, 2023 GELPÍ, Circuit Judge. Plaintiff-Appellant Sandi

Andersen ("Andersen") brought a complaint for contract claims

against Vagaro, Inc. ("Vagaro") in federal district court based on

diversity jurisdiction. Vagaro filed a motion to dismiss, pursuant

to Federal Rule of Civil Procedure ("FRCP") 12(b)(1), arguing that

Andersen insufficiently pled that her claims met the amount in

controversy required by 28 U.S.C. § 1332(a). After Andersen

failed to provide further substantiation for her jurisdictional

claim, the district court concurred with Vagaro and dismissed

Andersen's complaint. We affirm.

I. Background

A. Facts

As a preliminary matter, we presume the facts to be as

alleged in the complaint, minus conclusory allegations, and

supplemented by Vagaro's unchallenged proffer. See 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)) (crediting

"plaintiff's well-pled factual allegations and draw[ing] all

reasonable inferences in the plaintiff's favor" when reviewing a

FRCP 12(b)(1) motion). Thus, the following constitute the facts

before us.

Andersen owned and operated a holistic healing center,

Dharma Nutrition, LLC, also known as Dharma Healing Center

("Dharma"), from 2009 to 2019. Dharma offered wellness services

- 2 - such as massage, reiki, and yoga. In December 2018, Andersen

contracted with Vagaro for business management software capable of

managing Dharma's database of client contact and billing

information; booking appointments; and processing monthly

membership fees, point-of-sale transactions, and employee payroll.

Per Andersen, Dharma's issues began in February 2019

after Vagaro, despite receiving instructions on which clients and

services to import, migrated all of Dharma's data to its platform.

Following the transfer, Dharma's clients were frequently double

booked, unable to book services with their desired practitioner,

or charged twice for services. Vagaro's inability to resolve those

issues forced Andersen to give away free services on at least

thirty occasions and caused her to lose clients and employees.

Andersen also alleged that the Vagaro software erroneously

cancelled hundreds of Dharma's monthly memberships. Citing the

financial impact of losing the monthly memberships and "bad will"

from the software issues, Andersen closed Dharma in July 2019.

B. Procedural History

On July 7, 2021, Andersen filed a complaint against

Vagaro in the United States District Court for the District of

Rhode Island asserting diversity jurisdiction, 28 U.S.C.

§ 1332(a). She alleged that her claims -- breach of contract,

breach of implied warranty, and breach of the duty of good faith

and fair dealing -- exceeded the statutory amount-in-controversy

- 3 - requirement and demanded $7,186,785 in damages. Vagaro filed a

motion to dismiss under FRCP 12(b)(1) for lack of subject matter

jurisdiction,1 asserting that Andersen's complaint failed to

sufficiently establish that her claims met the amount-in-

controversy requirement. More specifically, Vagaro stated that

the software at issue cost only "a few thousand dollars" and that

because it is not obvious that Andersen sustained over $7 million

in damages based on the claims asserted, she must provide

additional factual support to establish jurisdiction. Andersen

stood pat, stating that the complaint provided sufficient facts

showing that Vagaro's breach of contract significantly harmed

Dharma by resulting in significant damages, including the loss of

profits. The district court granted Vagaro's motion to dismiss.

This appeal followed.

II. Discussion

We review a district court's dismissal for lack of

subject matter jurisdiction de novo. Abdel-Aleem v. OPK Biotech

LLC, 665 F.3d 38, 41 (1st Cir. 2012). A federal court has original

jurisdiction over a civil state law claim when there is diversity

of citizenship between the parties and "the matter in controversy

1 Vagaro also moved to dismiss pursuant to FRCP 12(b)(6) for failure to state a claim upon which relief can be granted. The district court did not reach this claim because it dismissed on jurisdictional grounds. Because we affirm on the same basis, we do not address whether Andersen failed to state a claim.

- 4 - exceeds the sum or value of $75,000, exclusive of interest and

costs." 28 U.S.C. § 1332(a). At issue here is the latter

requirement that, put another way, demands that "more than $75,000

[is] at stake." Abdel-Aleem, 665 F.3d at 42.2

The party invoking diversity jurisdiction bears the

burden of establishing that the amount-in-controversy requirement

is satisfied. See Stewart v. Tupperware Corp., 356 F.3d 335, 338

(1st Cir. 2004). The well-established test for deciding whether

the amount requirement is met states: "[T]he 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." Id.

(quoting St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S.

283, 288–89 (1938)); see 14AA Charles Alan Wright et al., Federal

Practice and Procedure § 3702 (4th ed. 2011); Joseph W. Glannon,

Examples & Explanations: Civil Procedure 96 (8th ed. 2018). While

normally "a plaintiff's general allegation that the dispute

exceeds the jurisdictional minimum is sufficient to support

jurisdiction," when challenged, the plaintiff "has the burden of

alleging with sufficient particularity facts indicating that it is

not a legal certainty that the claim involves less than the

jurisdictional amount." Dep't of Recreation & Sports of P.R. v.

2 Vagaro did not challenge the parties' diversity.

- 5 - World Boxing Ass'n, 942 F.2d 84, 88 (1st Cir. 1991); see St. Paul

Mercury Indemnity Co., 303 U.S. at 287 n.10 ("It is plaintiff's

burden both to allege with sufficient particularity the facts

creating jurisdiction . . . and, if appropriately

challenged, . . . to support the allegation.").

To fend off a jurisdictional challenge, a plaintiff may

amend the complaint or submit additional documentation, such as

affidavits, medical reports, or interrogatories. See Abdel-Aleem,

665 F.3d at 42–43; McNutt v. Gen. Motors Acceptance Corp. of Ind.,

298 U.S. 178, 189 (1936) (holding that a plaintiff, when

challenged, must provide "competent proof" supporting

jurisdictional claim). We have made clear that merely reiterating

general descriptions of damages is insufficient, particularly when

a plaintiff is put on notice of the complaint's deficiencies by a

FRCP 12(b)(1) motion to dismiss. Abdel-Aleem, 665 F.3d at 42–43

(affirming dismissal where plaintiff proffered only "bald

statements and round numbers" in response to a jurisdictional

challenge); see Diefenthal v. Civ. Aeronautics Bd., 681 F.2d 1039,

1053 (5th Cir. 1982) (explaining that when the damage amount is

challenged, the burden is on the plaintiff to establish the factual

basis for the claim).

Here, Vagaro contested the sufficiency of Andersen's

jurisdictional pleading and thus, the burden shifted back to her

to present "with 'sufficient particularity' facts that in some way

- 6 - support the contention that there is more than $75,000 at stake,"

Abdel-Aleem, 665 F.3d at 42 (quoting Dep't of Recreation & Sports

of P.R., 942 F.2d at 88). Instead of proffering additional factual

support for her claim, Andersen simply relied on the face of her

complaint. In her response to Vagaro's motion to dismiss, she

stated: "The Plaintiff has pled sufficient facts that the

Defendant's breach of contract resulted in significant damages to

the Plaintiff, including the loss of profits." Andersen's strategy

of speaking in "general terms" and "offer[ing] no particulars" is

exactly what we rejected in Abdel-Aleem. See id. at 43–45

(affirming dismissal where plaintiff, when challenged, failed to

adequately substantiate jurisdictional claim).

Andersen attempts to distinguish the present case from

Abdel-Aleem. Unfortunately, she misses the thrust of our holding.

In Abdel-Aleem, the plaintiff brought an abuse of process claim

alleging emotional distress and damage to his reputation,

emotional tranquility, and privacy. The complaint, however,

stated only that "the amount of [sic] controversy exceeds,

exclusive of interest and costs, the amount of ($75,000), pursuant

to 28 U.S.C. § 1332." Id. at 40. When challenged for failing to

support his allegation that the amount in controversy was met, the

plaintiff amended his complaint, added claims for intentional and

negligent infliction of emotional distress, and claimed the amount

at issue was "at least $1,000,000." Id. at 40–41. He further

- 7 - alleged physical and emotional distress, loss of employment, and

"thousands of dollars in legal fees." Id. at 41. Nevertheless,

we still concluded that the plaintiff failed to satisfy the amount-

in-controversy requirement because he offered no factual support

for his jurisdictional claim. Id. at 43–45 (noting plaintiff

continued to generally describe damages and provided no

calculation of alleged lost wages or substantiation for his claim

of legal fees).

At the outset, Andersen's demand for damages is not

conclusive proof that "more than $75,000 [is] at stake." See id.

at 42–43. While Andersen demanded $7,186,785 (a highly specific

figure, unlike Abdel-Aleem's "at least $1,000,000" claim),

claiming more than a "round number" does not alone satisfy the

amount-in-controversy requirement. See id. at 43. As we explained

in Abdel-Aleem, "giv[ing] due credit to the good faith claims of

the plaintiff" does not require the court to blindly "accept[]

every claim of damages at face value," id. (quoting Diefenthal,

681 F.2d at 1052), given the court's duty "to police the border of

federal jurisdiction," id. at 45 (quoting Spielman v. Genzyme

Corp., 251 F.3d 1, 4 (1st Cir. 2001)).

Despite Abdel-Aleem's warning to provide substantiation

for the amount claimed once challenged, 665 F.3d at 43, Andersen

relied entirely on her complaint. Thus, from her complaint, we

understand the factual basis for Andersen's jurisdictional claim

- 8 - to be free services given away on at least thirty occasions;

hundreds of cancelled monthly memberships; the loss of over 8,000

clients and two employees; and lost profits from Dharma's closure.

While Andersen, in contrast to the plaintiff in Abdel-Aleem,

provided facts to support her damage claim and not just "conclusory

statements," id. at 45, she similarly failed to provide any numeric

substantiation or evaluation establishing that her claims exceeded

$75,000, let alone over $7 million. Andersen attached no monetary

value to services given away or to monthly memberships, clients,

and employees lost. Further, while Andersen claimed losses

associated with Dharma's closure, she proffered nothing as to

Dharma's profits or overall value other than calling the company

"successful." Notably, Andersen admitted at oral argument that

based on the face of the complaint, there were insufficient facts

to reach the jurisdictional threshold of $75,000.

Andersen's silence is perplexing. She had possession of

or easy access to records -- such as pricing of services and

memberships, tax returns, and business receipts or

records -- which might have substantiated her claim, but she did

not use them. Given Andersen's admission and disinclination to

support her claim when challenged, we cannot conclude on the record

that Andersen met her burden of establishing the amount in

controversy required for diversity jurisdiction.

- 9 - III. Conclusion

For the foregoing reasons, the district court's order of

dismissal is affirmed. Costs are awarded to Appellee, Vagaro.

- 10 -