Midwest Drilled Foundations & Engineering, Inc. v. Zucone Engineering Corp., No. 3:2012cv01333 - Document 17 (D.P.R. 2012)

Court Description: OPINION AND ORDER. DENIED 13 Motion to Dismiss. Signed by Judge Salvador E. Casellas on 8/27/2012. (AVB)

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO 1 2 3 4 5 6 7 MIDWEST DRILLED FOUNDATIONS & ENGINEERING, INC., Plaintiff, v. Civil No. 12-1333 (SEC) ZUCONE ENGINEERING CORP., Defendant. 8 9 OPINION AND ORDER 10 Before the Court are the defendant s motion to dismiss (Docket # 13), and the plaintiff s 11 12 response thereto (Docket # 14). After reviewing the filings and the applicable law, the defendant s motion is DENIED. 13 Factual and Procedural Background 14 A succinct introduction to the facts of this case suffices to set the stage for the analysis. 15 The plaintiff, Midwest Drilled Foundations & Engineering, Inc. ( Midwest ), a corporation 16 organized under the laws of Wisconsin, filed this diversity suit against the defendant, Zucone 17 Engineering Corp. ( Zucone ), a Puerto Rico corporation. Advancing two claims for collection 18 of monies against Zucone, Midwest seeks a total of $81,048.650 allegedly due under a contract 19 for the installation of caissons. Docket # 1, ¶¶ 19-22. Midwest claims $44,783.73 for 20 backcharges and $36,264.92 for amounts that Zucone, pursuant to certain provisions of the 21 22 Puerto Rico Internal Revenue Code, withheld from it. Id. On July 13, 2012, Zucone moved to dismiss the complaint, arguing that Midwest cannot meet the jurisdictional amount of $75,000. See 28 U.S.C. § 1332(a). Specifically, Zucone 23 maintains, without much in the way of elaboration, that because Midwest cannot demand 24 25 26 reimbursement of the amounts withheld, the amount in controversy is only $44,783.73 the amount pertaining to the backcharges. 1 2 Page 2 Civil No. 12-1333 (SEC) Midwest demurs on two alternate grounds. First, Midwest argues that Zucone had no obligation to withhold income taxes from payments due to Midwest but improperly did so. And 3 second, assuming that Zucone properly withheld such funds, Midwest faults Zucone for failing 4 5 to provide it with any information regarding the withholding, which in turn deprived it of claiming a tax credit. Docket # 14, p. 6. 6 Standard of Review 7 FED. R. CIV. P. 12(b)(1) is the proper vehicle for challenging a court s subject matter 8 jurisdiction. Valentín v. Hospital Bella Vista, 254 F.3d 358, 362-63 (1st Cir. 2001). Under this 9 rule, a wide variety of challenges to the Court s subject matter jurisdiction may be asserted. Id. 10 (citations omitted). As relevant here, Rule 12(b)(1) is the appropriate vessel for analyzing 28 11 U.S.C. § 1332(a) s amount-in-controversy requirement. Soprema, Inc. v. Workers Corp., 485 12 F.Supp. 2d 1, 3 (D.P.R. 2007). When faced with a jurisdictional challenge, courts must [g]ive 13 weight to the well-pleaded factual averments in the operative pleadings . . . and indulge every 14 15 reasonable inference in the pleader s favor. Aguilar v. U.S. Immigration and Customs Enforcement Div. of Dept. of Homeland Sec., 510 F.3d 1, 8 (1st Cir. 2007). A plaintiff faced with a motion to dismiss for lack of subject matter jurisdiction has the 16 burden to demonstrate that such jurisdiction exists. E.g., Lord v. Casco Bay Weekly, Inc., 789 17 F. Supp. 32, 33 (D. Me.) (citations omitted), reh g denied, 789 F. Supp. 32, 36 (D. Me. 1992); 18 see also Campbell v. Gen. Dynamics Gov t Sys. Corp., 407 F.3d 546, 551 (1st Cir. 2005) ( The 19 burden of establishing jurisdiction rests with the party who asserts its existence. ) (citation 20 omitted). In this context, this court is empowered to resolve factual disputes by making 21 reference to evidence in the record beyond the plaintiff s allegations without having to convert 22 the motion to dismiss into one for summary judgment. See Hernández-Santiago v. Ecolab, Inc., 23 397 F. 3d 30, 33 (1st Cir. 2005) (per curiam). 24 25 26 1 2 Civil No. 12-1333 (SEC) Applicable Law and Analysis Page 3 Amount-in-Controversy Requirement 3 As related above, Zucone contends that Midwest falls short of meeting the $75,000 4 5 jurisdictional amount, thus depriving this court of subject-matter jurisdiction. For the reasons laid out below, the Court disagrees. 6 When determining whether a party meets the amount-in-controversy minimum, federal 7 courts must apply the long-standing test established by the Supreme Court in St. Paul Mercury 8 Indemnity Co. v. Red Cab Co. The Court described the so-called legal certainty test as follows: 9 12 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 13 303 U.S. 283, 288-89 (1938) (footnotes omitted). The First Circuit s decisions have interpreted 14 the aforementioned passage [t]o mean that legal certainty that the claim is really for less than 15 the jurisdictional amount, trumps the plaintiff s good faith in claiming for a larger amount. 16 Esquilín-Mendoza v. Don King Prods., 638 F.3d 1, 4 (1st Cir. 2011) (citations omitted); accord 17 Abdel-Aleem v. OPK Biotech LLC, 665 F.3d 38, 41 (1st Cir. 2012). 10 11 18 Under the St. Paul standard, a plaintiff s allegations suffice[ ] unless questioned by the 19 opposing party or the court. Stewart v. Tupperware Corp., 356 F.3d 335, 338 (1st Cir. 2004). 20 Once challenged, the party seeking to invoke jurisdiction has the burden of alleging with 21 sufficient particularity facts indicating that it is not a legal certainty that the claim involves less than the jurisdictional amount. Id. Although a plaintiff may meet this burden by amending the 22 pleadings, [j]urisdiction is not conferred by the stroke of a lawyer s pen. When challenged, it 23 24 25 26 must be adequately founded in fact. Diefenthal v. C.A.B., 681 F. 2d 1039, 1052 (1st Cir. 1982). 1 2 Page 4 Civil No. 12-1333 (SEC) Here, the burden has shifted to Midwest to show with sufficient particularity facts that in some way support the contention that there is more than $75,000 at stake. Abdel-Aleem 665 3 F.3d at 42 (citation omitted). Midwest meets this burden. 4 The analysis begins with the substantive law, which, in this diversity action, is controlled 5 by the Puerto Rico Internal Revenue Code. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 6 78(1938); Univ. Emergency Med. Found. v. Rapier Invs., Ltd., 197 F.3d 18, 19 n. 1 (1st 7 Cir.1999). The Puerto Rico Internal Revenue Code of 2011 provides in pertinent part that 8 foreign corporations not engaged in industry or business in Puerto Rico , will be taxed on the 9 amount received from sources within Puerto Rico. See P.R. Laws Ann. tit. 13, § 10 1092.01(a)(1)(A) (certified translations of all cited statutes provided by the parties at Docket 11 # 15-1). Section 1062.08(b)(1) in turn provides that those obligated to deduct and withhold such 12 taxes (the Withholding Agent ), must remit them to the Secretary of the Treasury Department, 13 together with an informative declaration showing the amount of taxes withheld. The 14 15 Withholding Agent must also provide a copy to the person whose taxes were withheld. See id. §1062.08(j) (alterations in original). The amount of tax withheld under these sections shall be admitted as a tax credit. Id. § 1053.02. But for the credit to be sanctioned by the Treasury 16 Department, the corporation s income tax return must contain a copy of the informative 17 declaration provided by the Withholding Agent. 18 In this case, the complaint states that Zucone made the tax withholdings but never 19 remitted them to the Treasury Department. Docket # 1, ¶¶ 13-16. It also alleges that Zucone 20 never provided Midwest with the requisite informative declaration. Id. If these allegations were 21 true, Midwest would be unable to claim the tax credit in question, as it would have no evidence 22 to support its request for reimbursement from the Treasury Department. So viewed, Zucone s 23 failure to neither remit the tax withholdings nor to provide Midwest with the informative 24 declaration appears to have caused Midwest a loss of $36,264.92. Such an alleged loss, standing 25 alone, suffices to deny Zucone s motion to dismiss. But there is more. 26 1 2 Page 5 Civil No. 12-1333 (SEC) The rules and regulations of the Puerto Rico Treasury Department provide in pertinent 3 part that withholding agents have no obligation to withhold taxes from payments due to a 4 foreign corporation when the foreign corporation is engaged in trade or business in Puerto Rico. See Docket 15-1, pp. 2-3 (providing a certified translation of article 1150-2(a) of regulation 5 5901 of the Puerto Rico Treasury Department). In such a scenario, the foreign corporation 6 7 [s]hall give written notice to the person who pays such income that it is not subject to the provisions on withholding at source under Section 1150 of the [Internal Revenue] Code. Id. 8 The regulation provides that the letter of the corporation [s]hall contain the grounds or criteria 9 under which it has determined that it is engaged in industry or business in Puerto Rico and the 10 address of its office or place of business . . . Id. (alterations in original). 11 Here, the complaint states that Midwest sent various letters to Zucone, asking it not to 12 send the amounts withheld to the Treasury Department because the withholding exception 13 applied, since Midwest was registered as a merchant in Puerto Rico. See, e.g., Docket # 1-4, p. 14 1. Without pointing to any legal authority, Zucone argues that because Midwest has not 15 provided it with a certificate of merchant registration, it had the legal obligation to withhold the 16 amount in question. Docket # 13, p. 6. But Midwest correctly points out that regulation 5901 17 does not mandate the Withholding Agent to request any certificate to the foreign corporation; it merely requires the foreign corporation to notify in writing the reasons why the withholding 18 disposition is inapplicable to it. See Docket 15-1, pp. 2-3 (citing regulation 5901). And the 19 20 21 pleadings appear to show that Midwest has satisfied such a requirement. See Docket # 14-2. If, in fact, Midwest did so, and Zucone improperly withheld the funds in question, Midwest can likewise make a plausible case for relief on this front. 22 Although Zucone insists that Midwest is not entitled to demand from Zucone 23 reimbursement of the amounts withheld, it neither cites case law nor provides a developed 24 discussion supporting its contention that Midwest is legally impeded to recover such a plausible 25 loss. That should suffice to deem Zucone s argument waived. See King v. Town of Hanover, 26 116 F.3d 965, 970 (1st Cir.1997) ( [I]t is not enough merely to mention a possible argument in 1 2 Page 6 Civil No. 12-1333 (SEC) the most skeletal way, leaving the court to do counsel s work . . . Judges are not expected to be mindreaders. Consequently, a litigant has an obligation to spell out its arguments squarely and 3 distinctly, or else forever hold its peace. (citations and internal quotations marks omitted)). 4 In any event, as concluded above, it appears from the complaint that Midwest has suffered a 5 legally cognizable harm caused by Zucone s alleged negligence. Zucone s argument, therefore, 6 is unavailing.1 7 Conclusion 8 As succinctly put by Midwest, either Zucone had to return the $36,264.92 to it, or 9 Zucone had to remit $36,264.92 to the Treasury Department, so that Midwest could claim and 10 receive its reimbursement. Either way, Midwest has stated a plausible claim for a loss of 11 $36,264.92 on this front, which, together with the $44,783.73 for backcharges allegedly owed 12 to Midwest, catapults its claim over the $75,000 threshold. Indulging all inferences in 13 Midwest s favor, one familiar with the applicable law . . . could objectively have . . . viewed 14 15 [it] as worth [$75,000]. Coventry Sewage Assoc. v. Dworkin Realty Co., 71 F.3d 1, 6 (1st Cir. 1995). Because Midwest has shouldered its burden of showing that it is not a legal certainty that its claim involves less than $75,000, the Court possess jurisdiction to entertain this action. 16 Consequently, Zucone s motion to dismiss is DENIED. 17 18 IT IS SO ORDERED. In San Juan, Puerto Rico, this 27thday of August, 2012. 19 S/Salvador E. Casellas SALVADOR E. CASELLAS U.S. Senior District Judge 20 21 22 1 23 24 25 26 To the extent that Zucone s argument can be construed as a challenge to Midwest s standing under Article III to raise this claim, it also fails. Standing under Article III of the Constitution requires that an injury be concrete, particularized, and actual or imminent; fairly traceable to the challenged action; and redressable by a favorable ruling. United States v. Moloney (In re Price), 685 F.3d 1, 37 (1st Cir. 2012) (quoting Monsanto Co. v. Geertson Seed Farms, 130 S. Ct. 2743, 2752 (2010)). On its face, the complaint appears to allege the requisite Article III injury that is fairly traceable to Zucone s alleged negligent acts and redressable by a favorable ruling.

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