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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

CSNK WORKING CAPITAL FINANCE 

CORP.,

Plaintiff,

v.

NEXT CREATION HOLDINGS,

Defendant.

Case No.17-cv-00305-HRL 

ORDER RE: DEFENDANT’S MOTION 

TO DISMISS FOR LACK OF SUBJECT 

MATTER JURISDICTION

Dkt. No. 43

Defendant Next Creations Holding, LLC (“Next”) moves to dismiss for lack of subject 

matter jurisdiction. Dkt. No. 43. Next argues that federal diversity jurisdiction does not exist 

because the amount in controversy does not exceed $75,000. Plaintiff CSNK Working Capital 

Finance Corp, d/b/a Bay View Funding (“Bay View”) opposes the motion. Dkt. No. 46. The 

matter is deemed submitted without oral argument. Civil L.R. 7-1(b). Upon consideration of the 

moving and responding papers, and for the reasons set forth below, the Court denies the motion. 

Both parties consented to magistrate judge jurisdiction. Dkt. Nos. 8, 13. 

I. BACKGROUND

Bay View alleges that it executed a factoring agreement with a non-party, Shell Home 

Fashions LLC (“Shell”), acquiring the rights to some of Shell’s accounts receivable. Dkt. No. 1 ¶ 

6. Shell then entered an agreement to sell goods to Next. Id. ¶ 8. The total value of the goods 

sold by Shell to Next was $93,542.30. Id. Ex. D. 

Next sold the goods purchased from Shell to Macy’s Inc., which alleged that some of the 

goods were defective. Id. ¶¶ 13-15. According to the complaint, Next “issued a Debit memo1in 

 

1 Next refers to this transaction as an “initial partial credit,” Dkt. No. 43 at 2:25. For the sake of 

consistency, the Court will refer to the transaction as the “debit memo.” 
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United States District Court

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the amount of $32,379.00 to [Shell], and informed [Bay View] that [Next] would commit” to pay 

the remainder of the Shell-Next invoice ($61,163.30). Id. ¶ 16. Next allegedly never paid Bay 

View, id. ¶ 20, and Bay View sued for breach of contract and other claims. 

Bay View moved for summary judgment. Dkt. No. 38. In the summary judgment motion, 

Bay View “accept[ed], for the purposes of this motion only, that the Debit Memo for $32,379.00 

issued by SHELL to [Next] is binding. For purposes of this motion, [BAY VIEW] asserts the 

remaining $61,630.30 plus interest at the legal rate is due and owing.” Dkt. No. 38 at 3:14-16. 

Next then moved to dismiss the case under Federal Rule of Civil Procedure 12(b)(1). Dkt. No. 43. 

Next argues that Bay View’s concession as to the debit memo proves that Bay View’s 

claim is for less than the jurisdictional minimum. Bay View asserts that it conceded the validity of 

the debit memo only for the purpose of its summary judgment motion. If the motion is 

unsuccessful, Bay View says, it will seek the full $93,542.30. 

II. DISCUSSION

Federal district courts have original jurisdiction over civil actions where there is complete 

diversity between the parties, and where the matter in controversy exceeds $75,000, exclusive of 

interest and costs. 28 U.S.C. § 1332. The test for determining whether a plaintiff has met the 

jurisdictional amount is found in St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 238 

(1938), where the Supreme Court stated that:

“The rule governing dismissal for want of jurisdiction in cases 

brought in the federal court is that, unless the law gives a different 

rule, 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. The inability of plaintiff to recover an amount 

adequate to give the court jurisdiction does not show his bad faith or 

oust the jurisdiction.” 

St. Paul, 303 U.S. at 288–89. In light of St. Paul, a court will dismiss a case where, for example, 

reaching the jurisdictional threshold depends on the plaintiff obtaining punitive damages for 

breach of contract, Czechowski v. Tandy Corp., 731 F. Supp. 406, 409-10 (N.D. Cal. 1990), or 

where an accounting error causes the plaintiff to overvalue its claim, Flournoy v. U.S. Aviation 

Underwriters, Inc., 206 F. Supp. 237, 238 (W.D. Tex. 1962). “[T]he fact that the complaint 
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United States District Court

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discloses the existence of a valid defense to the claim,” does not deprive the court of jurisdiction. 

St. Paul, 303 U.S. at 289. 

Here, Bay View claimed entitlement to more than $75,000 in its complaint. Bay View’s 

claim to the full value of the invoice seems to be at least “colorable for the purpose of conferring 

jurisdiction[.]” St. Paul, 303 U.S. at 289-90. Therefore, unless it appears to a legal certainty that 

the claim is really for less than the jurisdictional minimum, the Court is not deprived of subject 

matter jurisdiction. 

Next directs the Court to Tongkook America, Inc. v. Shipton Sportswear Co., 14 F.3d 781 

(2d Cir. 1994), but the case is distinguishable. In Tongkook an apparel company (Shipton) agreed 

to purchase goods from a manufacturer (Tongkook) for an agreed price of $306,762.16. 

“Shipton paid $189,141.11 against the sum due, leaving an unpaid 

balance of $117,621.05. Shipton's bank also issued a letter of credit 

for Tongkook's benefit. On February 5, 1990, Tongkook drew 

$80,760.00 on the letter of credit, but apparently both Tongkook and 

Shipton neglected to credit this amount to the outstanding balance of 

$117,621.05. Thus, when the suit was commenced, the balance due 

was actually $36,861.05, not $117,621.05.”

Tongkook, 14 F.3d at 782–83. The Second Circuit determined that the plaintiff’s claim was for 

less than the jurisdictional minimum, and that the court therefore lacked subject matter jurisdiction 

over the suit. Id. at 786. 

Next argues that the letter of credit in Tongkook is analogous to the debit memo in this 

case. In Tongkook, however, neither side disputed that, after taking into account the letter of 

credit, the defendant had paid the plaintiff all but approximately $36,000 under the contract. The 

only question for the Second Circuit was whether, once the parties’ oversight was discovered, it 

was otherwise clear to a legal certainty that the plaintiff would never have been entitled to at least 

the jurisdictional minimum. There is no such legal certainty in this case. Bay View alleges that it 

has not received any of the funds owed to it under the Shell-Next invoice. Further, Bay View 

disputes the validity of Next’s debit memo to Shell. Although Next may have valid defenses to 

Bay View’s claims, the Court cannot identify a hornbook-style rule, such as the unavailability of 

punitive damages for breach of contract, Czechowski, 731 F. Supp. at 409-10, that would preclude 

Bay View from collecting the full value of the invoice. See St. Paul, 303 U.S. at 289. In the 
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absence of legal certainty that Bay View’s claim is for less than the jurisdictional minimum, the 

Court retains subject matter jurisdiction over the suit. Next’s motion is denied. 

IT IS SO ORDERED.

Dated: November 21, 2017

HOWARD R. LLOYD

United States Magistrate Judge