Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_17-cv-00990/USCOURTS-casd-3_17-cv-00990-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 28:1391 Venue

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

WELK RESORT GROUP, INC.,

Plaintiff,

v.

NEWTON GROUP TRANSFERS, LLC; 

THE NEWTON GROUP ESA, LLC,

Defendants.

Case No.: 3:17-cv-00990-BEN-MDD

ORDER GRANTING DEFENDANTS’

MOTION TO DISMISS

Before the Court is the motion to dismiss Plaintiff’s complaint filed by Defendants 

Newton Group Transfers, LLC and The Newton Group ESA, LLC (together, “Newton”). 

(Docket No. 8.) The motion is fully briefed. For the reasons that follow, Newton’s 

motion is GRANTED. 

BACKGROUND1

This diversity action arises out of the alleged interference with contractual relations 

between Plaintiff Welk Resort Group, Inc. (“Welk”) and its timeshare customers by 

Defendant Newton. Welk is a corporation, organized and existing under the laws of the 

 

1 The following overview of the facts are drawn from the allegations of Plaintiff’s 

Complaint (Docket No. 1). The Court is not making findings of fact. 

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State of California, with its principal place of business in the State of California. Welk 

develops vacation ownership properties in California, Missouri, and Cabo San Lucas, 

Mexico. Welk also sells timeshare ownership.

Both Newton Group Transfers, LLC and The Newton Group, LLC are limited 

liability companies organized and existing under the laws of the State of Michigan. 

In essence, Welk alleges that since approximately October 2016, Newton has been, 

inter alia, “engaging in a scheme designed to disrupt Welk’s relationships with its client 

timeshare owners, which includes sending unsolicited and knowingly fraudulent and 

misleading correspondence to Welk’s timeshare owners.” (Compl. ¶ 13.) As a result of 

the alleged wrongful conduct, Welk claims “performance under the established contracts 

[with its customers] has become more difficult and expensive” and it has “suffered 

monetary and non-monetary damages, including reputational damage and the expenditure 

of time and energy in maintaining its established relationships with timeshare owners.” 

(Id. ¶ 2.)

Subsequently, Welk filed this action against Newton asserting three claims for 

relief: (1) interference with contractual relations, (2) violation of the California Vacation 

Ownership and Time-Share Act, and (3) Violation of the California Unfair Competition 

Law. Newton now moves to dismiss Welk’s complaint for failure to establish diversity 

jurisdiction and for failure to state a claim. 

DISCUSSION

“It is a fundamental principle that federal courts are courts of limited jurisdiction.” 

Stock W., Inc. v. Confederated Tribes of the Colville Reservation, 873 F.2d 1221, 1225 

(9th Cir. 1989) (quoting Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 374, 

(1978). Under Rule 12(b)(1) of the Federal Rules of Civil Procedure, a defendant can 

move a court to dismiss an action for lack of subject matter jurisdiction. Fed. R. Civ. 

Proc. 12(b)(1). Even though the motion is brought by the defendant, it is the plaintiff’s 

burden to establish jurisdiction in a motion to dismiss for lack of subject matter 

jurisdiction. See Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375 (1994) 

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(“It is to be presumed that a cause lies outside [federal court] jurisdiction . . . and the 

burden of establishing the contrary rests upon the party asserting jurisdiction.”) (internal 

citations omitted). 

A Rule 12(b)(1)2jurisdictional attack may be facial or factual. White v. Lee, 227 

F.3d 1214, 1242 (9th Cir. 2000). A defendant presenting a facial attack asserts that the 

allegations contained in a complaint are insufficient on their face to invoke federal 

jurisdiction. See Safe Air v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). A Rule 

12(b)(1) motion will be granted if, on the face of the complaint, and when considered in 

its entirety, the complaint fails to allege facts sufficient to establish subject matter 

jurisdiction. 

According to Welk’s complaint, federal diversity jurisdiction exists pursuant to 28 

U.S.C. § 1332 (a)(1) (diversity jurisdiction based on claims between citizens of different 

states). (Compl. ¶ 8.) “To establish federal jurisdiction under § 1332(a)(1), the 

proponent must allege (1) the parties are completely diverse, and (2) the amount in 

controversy exceeds $75,000.” Naffe v. Frey, 789 F.3d 1030, 1039 (9th Cir. 2015) (citing 

28 U.S.C. § 1332(a)(1); McNutt v. Gen. Motors Acceptance Corp. of Ind., 298 U.S. 178, 

189 (1936)).

Newton only challenges the existence of the second requirement. It argues that 

Welk’s complaint does not allege it has actually lost any contracts and lacks allegations 

“supporting a reasonable inference that its alleged expenditure of ‘money, time and 

energy’ exceeds the jurisdictional minimum[.]” (Mot. at p. 2.) Welk counters that “it is 

well settled that a general averment that the damages exceed the minimum jurisdictional 

limit is sufficient, and that a request for injunctive relief alone can be sufficient to meet 

the minimum jurisdictional amount pursuant to the ‘either viewpoint’ rule.” The Court 

 

2 The Court’s reference to Rules in this Order are to the Federal Rules of Civil Procedure, 

unless otherwise stated.

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agrees with Newton that Welk has not met its burden to establish the amount in 

controversy.

In the Ninth Circuit, courts apply the “legal certainty” test to determine whether a 

complaint meets § 1332(a)’s amount in controversy requirement where, as here, a 

plaintiff files an action in federal court. Naffe, 789 F.3d at 1039 (citing Pachinger v. 

MGM Grand Hotel–Las Vegas, Inc., 802 F.2d 362, 363–64 (9th Cir. 1986) (additional 

citation omitted). “Under this test, ‘the 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. at 1040 (quoting 

St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89 (1938)). 

The Ninth Circuit has explained that “the legal certainty test makes it very difficult 

to secure a dismissal of a case on the ground that it does not appear to satisfy the 

jurisdictional amount requirement.” Id. at 1040. It identified three situations that 

“clearly meet the legal certainty standard: 1) when the terms of a contract limit the 

plaintiff's possible recovery; 2) when a specific rule of law or measure of damages limits 

the amount of damages recoverable; and 3) when independent facts show that the amount 

of damages was claimed merely to obtain federal court jurisdiction.” Id. (citing 

Pachinger, 802 F.2d at 364). 

Based on the factual allegations of Welk’s complaint, the Court finds the third 

situation applies. In short, other than its conclusory allegation that “the amount in 

controversy exceeds the sum or value of $75,000,” Welk did not allege any facts to 

suggest it could meet the amount in controversy. (Compl. ¶ 8.) Although Welk alleges 

interference with contractual relations, it does not actually identify any specific contracts 

that were allegedly lost or interfered with (or even a specific amount of damages as a 

result). Nor does it specify any amount of damages related to its alleged reputational 

harm, or the “money, time and energy” spent to maintain its relationships with existing 

clientele. (Id. ¶ 36.) Therefore, without any indication of actual breached contract, 

“disrupted” contract, or resulting expenditures, the Court concludes that it appears to a 

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legal certainty that Welk’s claim is really for less than the jurisdictional amount. Naffe, 

789 F.3d at 1040.

Welk fares no better under the “either viewpoint” rule. The test for determining 

the amount in controversy under the “either viewpoint” rule “is the pecuniary result to 

either party which the judgment would directly produce.” In re Ford Motor Co./Citibank 

(S. Dakota), N.A., 264 F.3d 952, 958 (9th Cir. 2001) (citing Ridder Bros. Inc., v. Blethen,

142 F.2d 395, 399 (9th Cir. 1944)). “In other words, where the value of a plaintiff's 

potential recovery . . . is below the jurisdictional amount, but the potential cost to the 

defendant of complying with the injunction exceeds that amount, it is the latter that 

represents the amount in controversy for jurisdictional purposes.” Id. Thus, in order for 

Welk to defeat Newton’s motion to dismiss under the “either viewpoint” rule, it must 

appear from the face of the complaint that the potential cost to Newton to comply with 

any resulting injunction exceeds $75,000. Id. 

In its opposition, Welk points to its request to enjoin Newton “from soliciting 

Welk’s timeshare owners, from false and misleading advertising, and from encouraging 

and/or offering to assist them in breaching their timeshare obligations” before summarily 

concluding “the value of their unlawful solicitation of Welk’s Clients exceeds $75,000 

several times over.” (Opp’n at p. 5.) However, reviewing the factual allegations of 

Plaintiff’s complaint, the Court finds there is simply a dearth of factual allegations to 

support the jurisdictional requirement from Defendant’s viewpoint. 

Finally, Welk argues that because it is requesting punitive and exemplary damages, 

it cannot be said with legal certainty that it would not be entitled to recover the 

jurisdictional amount. The Court disagrees. Indeed, if all a plaintiff had to allege to meet 

the amount in controversy was assert punitive or exemplary damages, almost no suit, no 

matter how small, could meet the jurisdictional requirement, which would 

“fundamentally violat[e] . . . the principle underlying the jurisdictional amount 

requirement—to keep small diversity suits out of federal court.” In re Ford Motor Co., 

264 F.3d at 961.

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In sum, the Court finds Welk has failed to establish diversity jurisdiction and 

therefore must grant Defendant’s motion to dismiss on this ground.3 Fed. R. Civ. P. 

12(b)(1). However, the Court shall grant Plaintiff an opportunity to file an amended 

pleading that corrects the deficiencies identified in this Order.

CONCLUSION

Defendant’s motion to dismiss is GRANTED. Plaintiff’s complaint is 

DISMISSED without prejudice for lack of subject matter jurisdiction. Plaintiff’s first 

amended complaint, if any, is due no later than seven (7) days from the date of this 

Order.

IT IS SO ORDERED.

 

Dated: February 6, 2018

 

3 Because the Court finds subject matter jurisdiction lacking, it need not address 

Newton’s arguments for dismissal for failure to state a claim.

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