The opinion of the court was delivered by: Brewster, Senior District Judge.
ORDER GRANTING MOTION TO STAY PENDING ARBITRATION
The Court considers whether it should stay or dismiss the case
pending before it based on the arbitration provision contained in
the contract between Plaintiff and Defendant. In short, the Court
decides the arbitrability of the case.
Plaintiff is Ken Bosinger ("Bosinger"), the sole owner of
K-Tronics. Defendant is Phillips Plastics Corp. ("PPC"). Prior to
his termination, Bosinger dba K-Tronics acted as the exclusive
sales representative for PPC in the San Diego market on an
independent contractor basis. Compensation was solely in the form
The parties signed the contract in question, one of an apparent
series of such agreements, on September 1, 1997. The parties'
relationship began in March, 1993. Shortly after this signing, on
approximately October 10, 1997, Plaintiff alleges PPC arbitrarily
designated certain lucrative accounts he had been working to
establish for PPC as "house accounts" for which he was no longer
entitled to commission. (Compl. ¶ 15-19.) Four months later, PPC
notified Bosinger that he would be terminated as its
manufacturer's sales representative, and he was terminated on May
3, 1998. (Compl. ¶ 16.) Plaintiff alleges that PPC deliberately
took these actions to deprive him of commissions resulting from
the large volume of sales subsequently made to certain customers.
Plaintiff specifically asserts the following causes of action:
fraud, breach of contract, breach of the covenant of good faith
and fair dealing,
conversion, unfair business practices, unjust enrichment,
accounting, and quantum meruit.
Over the course of their relationship, PPC had Bosinger sign
approximately fifteen new or amended sales representative
agreements. A review of the pleadings indicates that the last,
and perhaps last two, of these agreements contained an
arbitration clause, requiring that "[a]ny dispute, controversy,
or claim arising out of or relating to this Agreement or the
relationship between the parties shall be settled by binding
arbitration in accordance with the rules of the American
Arbitration Association ("AAA")." (Emphasis added.) Defendant PPC
argues that the clause mandates that this Court dismiss, or, at
minimum, stay this litigation until the parties have taken their
dispute to arbitration.
In his Complaint, Bosinger claims that his signature on the
agreement at issue was the result of coercion from PPC. In
particular, Plaintiff notes: "The agreements or amendments were
usually forced upon K-TRONICS weeks before a substantial client
contracted with PPC." (Compl. ¶ 11.) Plaintiff also disputes the
applicability of this arbitration agreement on the basis that the
agreement(s) are illusory and void on their face because PPC
could avoid paying commissions by the simple means of designating
an account a "house account." (Compl. ¶ 14.)
The Court first considers its jurisdiction. This case was
removed to federal court by Defendant on the grounds of diversity
jurisdiction. See 28 U.S.C. § 1332, 1441. However, the
Complaint does not allege a specific amount in controversy. Thus,
the Court must first consider whether the amount in controversy
requirement contained in Section 1332 is met.
The party seeking to invoke the jurisdiction of the federal
courts has the burden of proving the existence of jurisdiction,
see NcNutt v. General Motors Acceptance Corp., 298 U.S. 178,
189, 56 S.Ct. 780, 80 L.Ed. 1135 (1936), and the burden of proof
in removal cases is on the defendant. See Wilson v. Republic
Iron & Steel Co., 257 U.S. 92, 97, 42 S.Ct. 35, 66 L.Ed. 144
(1921); Gaus v. Miles, Inc., 980 F.2d 564, 566-67 (9th Cir.
1992) (per curiam) ("[T]he defendant bears the burden of actually
proving the facts to support jurisdiction, including the
jurisdictional amount."). The removal statute is strictly
construed against removal jurisdiction. See Boggs v. Lewis,
863 F.2d 662, 663 (9th Cir. 1988). "[I]n cases where a plaintiff's
state court complaint does not specify a particular amount of
damages, the removing defendant bears the burden of establishing,
by a preponderance of the evidence, that the amount in
controversy exceeds [$75,000]." Sanchez v. Monumental Life Ins.
Co., 102 F.3d 398, 404 (9th Cir. 1996). The burden is one of
"actually proving the facts to support jurisdiction." Gaus, 980
F.2d at 567.
Defendant asserts only that "Plaintiff is seeking damages in
excess of the amount of $75,000, exclusive of interest and costs.
Although no dollar amount appears on the face of the Complaint,
plaintiff has indicated in writing that he values his claim
against defendant at almost $2,000,000.00." (Notice of Removal, ¶
6(b).) Without submitting an affidavit or documents to support
that allegation, the allegation verges on the conclusory.
In the situation where a defendant does not meet its burden of
proof, a federal court has several options. It may either: "(1)
look to the petition for removal, (2) make an independent
appraisal of the amount of the claim, or suggest that the
defendant is free to do so, or (3) remand the action." Chapman
v. Powermatic, Inc., 969 F.2d 160, 163 n. 6 (5th Cir. 1992).
Ninth Circuit case law suggests that a district court may follow
either options (2) or (3). In Gaus, involving the same basic
fact pattern in the instant matter, the court enunciated a
standard that imposed a strict requirement on a defendant to
prove that the amount in controversy was satisfied. With a
plaintiff not alleging an amount of damages in his or her
complaint, the defendant must actually prove the facts
supporting the jurisdictional basis for removal. Id. at 567.
Simple allegations — i.e., "the amount in controversy exceeds
$75,000" — are insufficient; instead, the underlying facts
supporting removal must be stated in the removal notice itself.
Id. With only a conclusory statement regarding amount before
it, the Gaus court vacated defendants' judgment and remanded
the matter to the district court with instructions to remand the
case to the state court.
This case is not Gaus. Here, as noted, Defendant does point
to — though does not provide — specific evidence upon which bases
its conclusion that the amount in controversy exceeds $75,000.
The better practice would be to submit an affidavit or
documentary evidence of this belief with the notice of removal.
However, as such evidence may not always be available to a
removing defendant, to require such proof might defeat removal in
an instance where a plaintiff declined to plead a specific amount
of damages and a defendant could not readily ascertain the
approximate amount of damages a plaintiff seeks within thirty
days. Moreover, while it ...