Zimmer-Hatfield, Inc. v. Wolf

843 F.Supp. 1089 (1994)

ZIMMER-HATFIELD, INC., Plaintiff,
v.
Brian WOLF, et al., Defendants.

Civ. A. No. 6:93-0537.

United States District Court, S.D. West Virginia, Parkersburg Division.

February 18, 1994.

Bryan R. Cokeley, Steptoe & Johnson, Charleston, WV, for plaintiff.

John J. Cowan, Charleston, WV, for defendant Wolf.

Lonnie C. Simmons and P. Rodney Jackson, DiTrapano & Jackson, Charleston, WV, for defendants Howmedica France & Kevin France.

MEMORANDUM OPINION AND ORDER

HADEN, Chief Judge.

Pending before the Court is the Defendant's motion for summary judgment. The Plaintiff brought this action seeking injunctive and monetary relief for the alleged violation of a restrictive covenant not to compete on the part of the Defendant, a former employee. The Defendant asserts two basic reasons in support of his motion: (1) the Court lacks jurisdiction over this case because the amount in controversy is less than $50,000.00 pursuant to 28 U.S.C. § 1332(a); and (2) the restrictive covenant is unreasonable and overbroad.

I.

JURISDICTION

The Defendant asserts the record shows the amount in controversy is less than $50,000.00, thus precluding the jurisdiction of this Court pursuant to 28 U.S.C. § 1332(a). The leading case from the Fourth Circuit Court of Appeals discussing the determination of the amount in controversy is McDonald v. Patton, 240 F.2d 424, 425-26 (4th Cir.1957), which opines:

"It is the firmly established general rule of the federal courts that the Plaintiff's claim is the measure of the amount in controversy and determines the question of jurisdiction; and it is indisputably the law that if the ultimate recovery is for less than the amount claimed, this is immaterial on the question of jurisdiction.... From early days, the broad sweep of the rule has been subject to a qualification namely, that the plaintiff's claim must appear to be made in good faith.... Where it is plain that there is a mere pretense as to the amount in dispute, the amount of the claim will not avail to create jurisdiction, but where the plaintiff makes his claim in obvious good faith, it is sufficient for jurisdictional purposes; and this is so even where it is apparent on the face of the claim that the defendant has a valid defense.... In [Smithers v. Smith, 204 U.S. 632, 644, 27 S.Ct. 297, 300, 51 L.Ed. 656 (1907)], the Supreme Court said, ... that when a plaintiff in good faith asserts a claim in an amount within the jurisdiction of the Court, the Judge is forbidden ``to interpose and try a sufficient part of the controversy between the parties to satisfy himself that the plaintiff ought to recover less than the jurisdictional amount, and to conclude, therefore, that the real controversy between the parties is concerning a subject of less than jurisdictional value.'

"In applying this test, it has been further recognized that while good faith is a salient factor, it alone does not control; for if it appears to a legal certainty that the plaintiff cannot recover the jurisdictional amount, the case will be dismissed for want of jurisdiction. Such is the doctrine laid down in St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 289, 58 S.Ct. 586 [590], 82 L.Ed. 845 [(1938)]. However, the legal impossibility of recovery must be so certain as virtually to negative the plaintiff's good faith in asserting the claim. If the right of recovery is uncertain, the doubt should be resolved, for jurisdictional purposes, in favor of the subjective good faith of the plaintiff." (citations omitted).

See Wiggins v. North American Equitable Life Ins. Co., 644 F.2d 1014, 1016-17 (4th Cir.1981); Cale v. City of Covington, 586 F.2d 311, 312-13 (4th Cir.1978); Broglie v. MacKay-Smith, 541 F.2d 453, 455 (4th Cir. 1976); Deering Milliken Research Corporation v. Textured Fibres, Inc., 415 F.2d 875, 877 (4th Cir.1969); Gauldin v. Virginia Winn-Dixie, Inc., 370 F.2d 167, 170 (4th Cir.1966); Texas Eastern Transmission Corp. v. Giannaris, 818 F.Supp. 755, 758 (M.D.Pa.1993); Arias v. Solis, 754 F.Supp. 290, 292-93 (E.D.N.Y.1991); Steele v. Morris, 608 F.Supp. 274, 276 (S.D.W.Va.1985) (Haden, C.J.); Patrick v. Sharon Steel Corp., 549 F.Supp. 1259, 1261-62 (N.D. W.Va.1982) (Haden, C.J.); Cf. In re A.H. Robins Co., 880 F.2d 709, 723-24 (4th Cir.1989) (unnamed claimants in class action met jurisdictional amount requirement where it could not be said to "a legal certainty" that amount in controversy would be below required amount pursuant to 28 U.S.C. § 1332). See generally 1 Moore's Federal Practice ¶ 0.92[1]-[3.-1]. It should also be noted that the damages claimed must be more than merely "symbolic," because, "a claim not measurable in ``dollars and cents' fails to meet the jurisdictional test of amount in controversy." McGaw v. Farrow, 472 F.2d 952, 953 (4th Cir.1973).

In cases where the original jurisdiction of a federal court is invoked, the burden of proof is on the plaintiff to show, "by a preponderance of the evidence, that it is not clear to a legal certainty that she will not recover less than the jurisdictional requirement; stated affirmatively, the plaintiff generally is required to show that it is probable that she would recover at least the jurisdictional amount." (emphasis in original). 1 Moore's Federal Practice ¶ 0.92[3.-1] at 844-45. See McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 785, 80 L.Ed. 1135, 1144 (1939). Furthermore, it should be noted that the burden imposed on the plaintiff is not a heavy one: "The jurisdictional determination is to be made on the basis of the plaintiff's allegations, not on a decision on the merits. Moreover, even where those allegations leave grave doubt about the likelihood of a recovery of the requisite amount, dismissal is not warranted." Zacharia v. Harbor Island Spa, Inc., 684 F.2d 199, 202 (2d Cir.1982).

Defendant points to the deposition testimony of Norman Hatfield, owner of the Plaintiff company. Mr. Hatfield testified that he had yet to discern any losses to Zimmer from the Defendant's new employment. He testified there was nothing to indicate that the Defendant had done anything to the detriment of Zimmer, beyond leaving.

Plaintiff suggests that the appropriate standard for determining the amount in controversy in actions involving a covenant not to compete is not simply the amount of "lost sales" incurred, but also "the profits generated by the employee (and therefore the potential loss to be incurred by the employer)[.]"^[1] This view finds support in USAchem, Inc. v. Goldstein, 512 F.2d 163, 170 (2d Cir.1975) where it was held, inter alia, that the amount of "sales volumes involved," may give rise to "the expectation that damages could exceed the jurisdictional amount." See Hulsenbusch v. Davidson Rubber Co., 344 F.2d 730, 733-34 (8th Cir.1965) (allowing consideration of potential loss to plaintiff company in an injunctive proceeding to enforce a restrictive covenant); American Eutectic Welding Alloys Sales Co. v. Garcia-Rodriguez, 353 F.Supp. 850, 853 (D.P.R.1973); Zep Manufacturing Corp. v. Haber, 202 F.Supp. 847 (D.C.Tex.1962) (amount of defendant's profit for the employer is the determining amount). Cf. Glenwood Light & Water Co. v. Mutual Light, Heat & Power Co., 239 U.S. 121, 125, 36 S.Ct. 30, 31-32, 60 L.Ed. 174 (1915) (value of maintenance and operation of electric power plant is correct jurisdictional valuation, not the cost of removal of defendant's interfering power lines). Other courts have reached similar conclusions based upon the premise that, "[t]he value to the plaintiff of the rights he is seeking to protect is the measure of jurisdiction in equity cases, even though the value of that right may not be capable of exact valuation in money." Premier Indus. Corp. v. Texas Indus. Fastener Co., 450 F.2d 444, 446 (5th Cir.1971). See Basicomputer Corp. v. Scott, 973 F.2d 507, 510 (6th Cir.1992) ("A complaint may reach the jurisdictional amount by including claims for losses that are difficult to quantify, such as competitive losses." The competitive losses resulted from mass departure of defendants to competitors of plaintiff); Robert Half Int'l v. Van Steenis, 784 F.Supp. 1263, 1265 (E.D.Mich.1991).^[2]

Plaintiff submits the affidavit of Norman Hatfield asserting that the Defendant earned in excess of $50,000.00 for the Plaintiff in 1992. The loss of those profits due to the employment by the defendant with the Plaintiff's competitor meets the jurisdictional amount in controversy requirement for the purpose of this motion to dismiss. Whether such loss can be proved on the merits is not the determining factor, McDonald v. Patton, supra at 425; the allegations have been made in good faith and clearly the potential loss to the plaintiff is more than symbolic, and is adequate to preserve this Court's jurisdiction at this stage of the proceedings. The Defendant's motion for summary judgment based upon a lack of jurisdiction is therefore denied.

II.

The standard used to determine whether a motion for summary judgment should be granted or denied was most recently stated by our Court of Appeals as follows:

"A moving party is entitled to summary judgment ``if the pleading, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to material fact and that the moving party is entitled to judgment as a matter of law.' Fed.R.Civ.Pro. 56(c). See Charbonnages de France v. Smith, 597 F.2d 406 (4th Cir.1979).

"A genuine issue of material fact exists ``if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.' Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 [106 S.Ct. 2505, 2510, 91 L.Ed.2d 202] (1986). In considering a motion for summary judgement, the court is required to view the facts and draw reasonable inferences in a light most favorable to the nonmoving party. Id. at 255 [106 S.Ct. at 2513]. The plaintiff is entitled to have the credibility of all his evidence presumed. Miller v. Leathers, 913 F.2d 1085, 1087 (4th Cir.1990), cert. denied, [498 U.S. 1109] 111 S.Ct. 1018 [112 L.Ed.2d 1100] (1991). The party seeking summary judgement has the initial burden to show absence of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 [106 S.Ct. 2548, 2553-2554, 91 L.Ed.2d 265] (1986). The opposing party must demonstrate that a triable issue of fact exists; he may not rest upon mere allegations or denials. Anderson, 477 U.S. at 248 [106 S.Ct. at 2510]. A mere scintilla of evidence supporting the case is insufficient. Id." Shaw v. Stroud, 13 F.3d 791, 798 (4th Cir.1994).

It is clear to this Court, when viewing the facts and drawing reasonable inferences in favor of the nonmoving party — the Plaintiff — that genuine issues of material fact exist in this case concerning the validity of the restrictive covenant and the Defendant is not entitled to judgment as a matter of law.^[3]

III.

Based upon the foregoing, the Defendant's motion for summary judgment is DENIED. The Clerk is directed to send a copy of this order to counsel of record.

NOTES

[1] Plaintiffs Memorandum in Opposition to Defendant's Motion for Summary Judgement at 9-10.

[2] From the foregoing caselaw it appears that, for the purpose of determining the jurisdictional amount in controversy in a case involving a restrictive covenant not to compete in a summary judgment proceeding, it is proper to consider not only the lost sales of the plaintiff company due to the departure of the defendant employee, but also the amount of profit made by the defendant employee for the plaintiff company prior to his departure to the competitor.

[3] The Defendant also asserts that there was no consideration given to him for the covenant not to compete. Plaintiff alleges otherwise. Because the facts are in dispute, summary judgment can not be granted on that ground.