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.
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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
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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
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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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