U.S. District Court in New York: Damages claimed in good faith,

Daily Record (Rochester, NY), Jul 25, 2008

Bausch & Lomb Inc. v. CIBA Vision Corp., 07-CV-6575, U.S. District Court for the Western District of New York; written by Judge Charles J. Siragusa

When federal jurisdiction is purported to exist because the amount in question exceeds $75,000, does the plaintiff's allegation of this level of damages allow a federal court to hear the lawsuit?

A presumption exists that the damages claimed by a plaintiff are in good faith and the defendant must offer evidence to overcome this presumption.

The parties to this action signed a non-disclosure agreement and the factual background provided in the court's opinion is sparse; however, Bausch & Lomb alleges CIBA breached a contract between them by failing to comply with one of its terms. As a result, Bausch & Lomb is seeking specific performance of the contract as well as damages in excess of $75,000.

The defendant moved to dismiss on the grounds that the district court lacks subject matter jurisdiction, and the complaint fails to state a cause of action on which relief can be granted.

The court's jurisdiction in this case is based on 28 U.S.C. [section]1332, which states that "district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000" and the suit is between "citizens of different states."

The parties do not dispute the basis for diversity jurisdiction as they are residents of different states -- CIBA is based in Texas. The minimum alleged damages required for a federal district court to decide such an action is $75,000 and the plaintiff claims to have suffered damages in excess of this sum.

The defendant argues that the actual damages, if any exist, do not meet this threshold and the allegation was designed solely to create federal jurisdiction. At issue is whether there is a legal certainty that the purported damages are far less than the $75,000 required.

So as not to create a rule whereby plaintiffs have unabashed power to decide the question by simply alleging damages greater than the threshold, courts generally grant plaintiffs a presumption of good faith as to the alleged damages but allow defendants to make a showing and overcome this presumption.

The court rejected CIBA's contention that the complaint must be dismissed because it does not meet the jurisdictional requirements. Judge Charles J. Siragusa noted in his decision that Bausch & Lomb "need only demonstrate that it appears to a 'reasonable possibility' that the claim is in excess of the statutory jurisdictional amount."

At oral argument, the plaintiff's counsel said the amount claimed relates primarily to the underlying lawsuit in Texas, which resulted in a $40 million verdict.

CIBA failed to rebut the presumption that the damages were alleged in good faith. The court determined that the complaint meets the jurisdictional threshold of $75,000 and states causes of action sufficient to avoid dismissal; alternative relief is not warranted. Oral argument on summary judgment motions is scheduled for August.

Laura W. Smalley and Paul J. Yesawich III of Harris Beach PLLC for the plaintiff, and K. Wade Eaton, of Chamberlain D'Amanda for the defendant.