Plaintiff Should Not Have Rested on Complaint Allegations to Establish Amount in Controversy in Diversity Case, Holds First Circuit

In Andersen v. Vagaro, Inc., No. 22-1471 (1st Cir. Jan. 3, 2022), The First Circuit affirms dismissal for lack of subject matter jurisdiction where the plaintiff, though duly warned, failed to allege facts or present evidence to support that amount in controversy exceeded $75,000 was required by 28 U.S.C. § 1332(a).

“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 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.”

Unfortunately, plaintiff alleged, the platform played havoc with booking customers. Anderson alleged that she was compelled to provide free make-good services, lost hundreds of memberships, and was eventually forced to close the spa. She sued Vagaro for breach of contract and warranty, filing her suit in federal court citing diversity jurisdiction and alleging exactly $7,186,785 in damages.

Vagaro moved to dismiss, in part by challenging the amount in controversy. The defendant “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.” The plaintiff did not amend the complaint or submit additional factual material, and the district court dismissed the action.

The First Circuit affirms. Noting that the plaintiff bears the burden of proving the amount-in-controversy, the panel observes that a general allegation in a complaint that a case exceeds the jurisdictional minimum can suffice at the pleadings stage. But when the amount is challenged, the plaintiff must respond, such as by “amend[ing] the complaint or submit[ting] additional documentation, such as affidavits, medical reports, or interrogatories . . . . 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.”

Here, fatally, Andersen failed to supplement her allegations and “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 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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