Andersen v. Vagaro, Inc. ( 2023 )

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
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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
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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.
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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.
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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
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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
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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
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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.
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III. Conclusion
For the foregoing reasons, the district court's order of
dismissal is affirmed. Costs are awarded to Appellee, Vagaro.
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