Court Opinion

ID: 4214041
Source: CourtListenerOpinion
Date Created: 2017-10-23 21:00:59.656813+00
Date Added: 2024-06-11T14:41:47.447307
License: Public Domain

United States Court of Appeals
                      For the First Circuit

No. 17-1372

                  INSURANCE BROKERS WEST, INC.,

                      Plaintiff, Appellant,

                                v.

        LIQUID OUTCOME, LLC, f/k/a ASTONISH RESULTS, LLC,

                         d/b/a INTYGRAL,

                       Defendant, Appellee.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                FOR THE DISTRICT OF RHODE ISLAND

        [Hon. John J. McConnell, Jr., U.S. District Judge]

                              Before

                Torruella, Thompson, and Kayatta,
                         Circuit Judges.

     Matthew W. Sparks, with whom Rosenberg Johnson & Sparks, PLLC,
Charles S. Beal, and Beal Law, LLC were on brief, for appellant.
     Robert J. Cavanagh, Jr., with whom Blish & Cavanagh, LLP was
on brief, for appellee.

                         October 23, 2017
            KAYATTA, Circuit Judge.       This appeal turns on whether it

is certain that Plaintiff Insurance Brokers West, Inc. ("IBW") has

no chance to recover in excess of $75,000 should it prevail on its

claim for breach of contract against Liquid Outcome, LLC, formerly

known as Astonish Results, LLC ("Astonish").             For the following

reasons, we agree with the district court that IBW certainly has

no such chance.       We therefore affirm the dismissal of IBW's

complaint    for    failure    to      meet   the   amount-in-controversy

requirement for diversity jurisdiction under 28 U.S.C. § 1332.

                              I.      Background

            The    limited    facts     relevant    to   jurisdiction   are

undisputed for purposes of considering the issue on appeal.             IBW

is an insurance agency incorporated and located in California.

Astonish is a Delaware marketing firm, with its principal place of

business in Rhode Island.          In December 2010, IBW and Astonish

entered into an agreement (the "Agreement"), pursuant to which

Astonish agreed to provide digital marketing services, such as

website development and design, and IBW agreed to pay Astonish for

those services.      IBW agreed to pay an initial "Set Up Fee" of

$8,000 due immediately, as well as $2,695 per month for sixty

months.     Four years later, in December 2014, IBW and Astonish

executed an amendment (the "Amendment") to the Agreement.               Both

parties agree that they executed the Amendment because of a dispute

regarding Astonish's performance of the Agreement.

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             Three parts of the Amendment are relevant to this appeal.

First, Astonish agreed to "complete a website theme-based redesign

and website content re-optimization at no additional cost to

[IBW]," in addition to performing its original duties under the

Agreement, which were incorporated into the Amendment.        Second,

Astonish agreed to accept reduced monthly payments from IBW for

the remaining eighteen months of the contract term, totaling

$22,550.   Third, the Amendment contained a release provision (the

"Release"), stating the following:

             From and after the date hereof, [IBW] agrees
             it will not sue for any reason and hereby
             releases and forever discharges Astonish from
             any and all claims, actions, damages, and
             losses whatsoever known and unknown as of the
             date of this Amendment, except those claims
             which occur in the future as a result of a
             material default in Astonish's performance of
             this Amendment.

             Twenty-two months later, IBW filed suit against Astonish

in federal court, alleging that Astonish breached the Agreement

both before and after it was amended.       IBW's complaint asserted

diversity jurisdiction but did not estimate its damages stemming

from Astonish's alleged breaches.     After Astonish moved to dismiss

IBW's complaint for lack of jurisdiction, IBW filed an amended

complaint.    In its amended complaint, IBW estimated its damages as

exceeding $140,000, based on all the payments IBW had made to

Astonish both before and after the Amendment.     IBW did not specify

how it calculated $140,000, but presumably it derived the estimate

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by summing the $8,000 set up fee, forty-two monthly payments at

$2,695 per month (pursuant to the Agreement), thirteen monthly

payments at $1,350 per month (pursuant to the Amendment), and five

monthly payments at $1,000 per month (pursuant to the Amendment).

            Astonish moved to dismiss the amended complaint, on the

basis that IBW's claims did not meet the amount-in-controversy

requirement for diversity jurisdiction.      Astonish argued that the

bulk of IBW's alleged damages occurred prior to the execution of

the Amendment and, pursuant to the Release, IBW had released those

claims.    The district court granted Astonish's motion to dismiss,

finding:   that the Release "clearly and unambiguously prevents IBW

from pursuing claims for pre-Amendment conduct"; that IBW's post-

Amendment claims do not exceed $75,000; and that IBW therefore

fails to meet the amount-in-controversy requirement for diversity

jurisdiction.    IBW timely appealed.

                          II.   Discussion

            United States district courts have original jurisdiction

in all civil actions between citizens of different states "where

the matter in controversy exceeds the sum or value of $75,000,

exclusive of interest and costs."       28 U.S.C. § 1332(a).   Neither

party disputes that diversity of citizenship exists in this case.

The only issue on appeal is whether the amount-in-controversy

requirement is met.   We decide that issue de novo.    See Stewart v.

                                - 4 -
Tupperware Corp., 356 F.3d 335, 337 (1st Cir. 2004); Spielman v.

Genzyme Corp., 251 F.3d 1, 4 (1st Cir. 2001).

             The Supreme Court long ago established the test for

determining     whether   the   amount-in-controversy   requirement    is

satisfied:

             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.

St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288–89

(1938) (footnotes omitted); see also Abdel-Aleem v. OPK Biotech

LLC, 665 F.3d 38, 41–45 (1st Cir. 2012) (applying the St. Paul

Mercury test and affirming the district court's dismissal based on

the plaintiff's failure to adequately support the alleged amount

in controversy).

             In the absence of a convincing argument to the contrary,

we presume that IBW makes its claim in good faith.         So we limit

our inquiry to determining whether it is "a legal certainty that

the claim is really for less than the jurisdictional amount."         St.

Paul Mercury, 303 U.S. at 289; see also Esquilín-Mendoza v. Don

King Prods., Inc., 638 F.3d 1, 4 (1st Cir. 2011).       In so doing, we

look to Rhode Island substantive law, as the parties have agreed.

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             IBW makes no claim that its post-Amendment damages, by

any measure, could exceed or even approach $75,000.                     Rather, IBW

contends that Astonish's alleged breach of the Amendment entitles

IBW to recover all the damages it suffered, both before and after

the parties signed the Amendment, and that those damages exceed

$75,000.     This entitlement arose, IBW argues, either because the

Release was conditioned on performance of the Amendment, or because

IBW was, in any event, entitled to restitution of all the amounts

paid to Astonish over the entire contract term.

             We address first IBW's argument that the Release was

conditioned    on    Astonish's    performance       of     the    Amendment.      In

presenting this argument, IBW labors hard to characterize the

Amendment as an accord (requiring satisfaction), rather than as a

novation or substitute contract. Notably, Rhode Island law regards

substitute     contracts   as     simply       one   type    of    an   accord    and

satisfaction.       See Salo Landscape & Constr. Co. v. Liberty Elec.

Co., 376 A.2d 1379, 1381 (R.I. 1977).                 More importantly, Rhode

Island law grants little if any significance to the label affixed

to an agreement, focusing instead on its substance.                     See id. at

1382 ("[I]t matters not whether we refer to this transaction as an

accord   and   satisfaction     or   as    a    rescission        followed   by   the

formation of a new contract . . . ."); see also Newport Plaza

Assocs., L.P. v. Durfee Attleboro Bank (In re Newport Plaza), 985

F.2d 640, 644 (1st Cir. 1993) (characterizing the Rhode Island

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Supreme Court on this subject as "manifest[ing] a concern with

substance rather than form"); Weaver v. Am. Power Conversion Corp.,

863 A.2d 193, 198 (R.I. 2004) (noting that the Rhode Island Supreme

Court has "overlooked fine common law distinctions" between types

of accords and substitute contracts).

            Here, we have only substance, not form, because the

Amendment     bears   no   label   that   speaks   either   of   accord   and

satisfaction or novation. In gauging that substance, we look first

to the intent of the parties, as manifested in the language of the

written contract.     See Warner v. Rossignol, 513 F.2d 678, 682 (1st

Cir. 1975) ("Most jurisdictions . . . hold that whether compromises

are to be styled an 'accord executory' or a substituted contract,

depends on the intention of the parties."); Weaver, 863 A.2d at

198 ("It is wholly a question of intention, to be determined by

the   usual     processes     of    interpretation,     implication,      and

construction." (quoting 6 Corbin on Contracts § 1293 at 190

(1962))).     And we also stop with the language of the contract when

it is unambiguous and where, as here, neither party claims any

exception to the dictates of a plainly written contract.             See In

re Newport Plaza, 985 F.2d at 645 ("Where the language of a

contract is clear and unambiguous, the Rhode Island Supreme Court

has generally interpreted the parties' intent based solely on the

written words." (emphasis added)).

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           The language of the Amendment on the issue at hand is

unambiguous.      It makes no mention of any condition upon which the

effectiveness of the Release hinges.       Rather, the Release plainly

became operative "[f]rom and after the date hereof"; it precludes

suit "for any reason"; and its discharge of claims for breach of

the Agreement is both categorical and "forever."            Adding belt to

suspenders, the language of the Release directly addresses the

subject of a material default by Astonish in performing under the

Amendment, allowing IBW to pursue "those claims which occur in the

future as a result of [such] default."         To argue that IBW can also

pursue claims that accrued in the past is to argue that we should

rewrite the Amendment.

           This brings us to IBW's second argument:          that a claim

for restitution could recover all the consideration IBW provided

under the Amendment, and the consideration it provided was not

just the post-Amendment fees, but also the surrender of its pre-

Amendment claims.       The value of those claims would supposedly be

enough,   added    to   the   post-Amendment    payments,   to   result   in

restitution exceeding $75,000.

           IBW does not explain why restitution would even be an

available option.       Under Rhode Island law, the traditional measure

of damages in an action for breach of contract is the amount that

"will serve to put the injured party as close as is reasonably

possible to the position he would have been in had the contract

                                   - 8 -
been fully performed."       George v. George F. Berkander, Inc., 169

A.2d 370, 372 (R.I. 1961); see also Sophie F. Bronowiski Mulligan

Irrevocable Tr. v. Bridges, 44 A.3d 116, 120 (R.I. 2012).                 This

measure is also known as expectation damages.                 See Restatement

(Second) of Contracts § 347 cmt. a (explaining that damages based

on a party's "expectation interest" will "put him in as good a

position   as   he   would   have   been    in    had   the    contract   been

performed"). IBW makes no claim that its expectation damages would

even approach $75,000, nor does it assert that it is not possible

to estimate those damages.

           Even putting this oversight to one side, the fact remains

that success on the theory posited by IBW would require not just

restitution, but also rescission of the Amendment.             Otherwise, the

theory is simply a backdoor attempt to disregard the binding

Release, which explicitly limits IBW to suing on claims that arise

"in the future," i.e. after the Amendment was signed.             Rescission,

in turn, is not a claim or theory IBW advanced in the complaint.

Nor did IBW allege any facts that even remotely invite a remedy of

rescission.     Cf. McNulty v. Chip, 116 A.3d 173, 183 (R.I. 2015)

("[A] party who has been induced by fraud to enter into a contract

may elect . . . to rescind the contract . . . ." (first alteration

in original) (quoting Stebbins v. Wells, 766 A.2d 369, 372 (R.I.

2001))).   Nor was counsel able at oral argument to provide us with

any conceivable basis for rescission.            Without rescission of the

                                    - 9 -
Release, Astonish is correct:       The most IBW could recover in

restitution, assuming it is entitled to that remedy, is $22,550.

           The Agreement itself closes the door on any possibility

that other, plausibly conceivable measures of IBW's damage might

exceed $22,550.   The Agreement provides that Astonish's "liability

for the breach of any provision in this agreement shall not exceed,

in the aggregate an amount equal to the monthly payment set forth

in paragraph 3B above."    It goes on to state that Astonish "will

not be liable for loss of profits or revenue or for incidental,

consequential or punitive damages."         IBW makes no argument that

these   agreed-upon   limitations   on    its   potential   recovery   are

unenforceable.

           It is therefore certain as a matter of law that IBW

cannot recover more than $75,000.        In order to discharge our duty

"to police the border of federal jurisdiction," Spielman, 251 F.3d

at 4, we must affirm the district court's dismissal.

                          III.   Conclusion

           For the foregoing reasons, we affirm.

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