Case 2:06-cv-00113-SRW Document 20 Filed 04/21/06 Page 1 of 10
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`IN THE DISTRICT COURT OF THE UNITED STATES
`FOR THE MIDDLE DISTRICT OF ALABAMA
`NORTHERN DIVISION
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`CIVIL ACTION NO. 2:06CV113-SRW
`(WO)
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`DIMENSION D, LLC,
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`Plaintiffs,
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`v.
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`GREG TRUE, et al.,
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`Defendants.
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`ORDER
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`Plaintiff commenced the present action in the Circuit Court of Autauga County,
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`Alabama, asserting state law claims of: (1) Breach of Contract; (2) Open Account;
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`(3) Account Stated; (4) Money Had and Received; and (5) Work and Labor Done. In its ad
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`damnum clause, plaintiff seeks judgment “for all compensatory damages to which Dimension
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`D, LLC is entitled in an amount less than $75,000 to be determined by a jury, plus interest
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`and costs.” (Complaint, p. 6). Defendants removed the action to this court on February 6,
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`2006, asserting that this court has both diversity and federal question jurisdiction. This
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`action is presently before the court on plaintiff’s motion to remand this matter to the state
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`court. Upon consideration of the motion, the court concludes that it is due to be granted.
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`Diversity Jurisdiction
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`To support jurisdiction on the basis of diversity of citizenship, the amount in
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`controversy must “exceed[] the sum or value of $75,000, exclusive of interest and costs.”
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`Case 2:06-cv-00113-SRW Document 20 Filed 04/21/06 Page 2 of 10
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`28 U.S.C. § 1332(a).1 Defendants contend that it is apparent from the face of the complaint
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`that the amount in controversy is in excess of $75,000. (Doc. # 1, p. 3). Defendants argue
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`that, “[a]lthough Plaintiff artfully pleads its damages to total $73,786.44, it arbitrarily picks
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`July 19, 2005 as a cut off date for damages and also arbitrarily picks 20 months in order to
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`arrive at an amount of damages just below the $75,000 amount in controvers[y].” Id.
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`Defendant further argues that the language in plaintiff’s ad damnum clause limiting the
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`amount of compensatory damages sought to “an amount less than $75,000” should be
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`ignored because plaintiff precedes this language with a demand for all compensatory
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`damages to which it is entitled, which may exceed $75,000. Id., pp. 3-4.
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`Despite defendants’ assertions to the contrary, the court concludes that the complaint
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`expressly claims damages in an amount less than $75,000. Defendants argue that plaintiff
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`has not adequately explained its initial damage calculation of $37,096.50 as of July 19, 2005
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`– which defendants contend is “random and arbitrary” – or its decision to claim damages for
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`20 months following July 19, 2005, characterized by defendants as an “artificial limitation.”
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`(Doc. # 10, p. 3). However, the court need not decide whether plaintiff’s failure to fully
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`explain its damage calculation is sufficient to require it to ignore plaintiff’s express claim for
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`“$73,786.44, plus accrued interest.” As noted above, plaintiff’s ad damnum clause
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`specifically limits its damages to “an amount less than $75,000.” (Complaint, p. 6).2 Under
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`1 The parties do not dispute that there is complete diversity of citizenship between the
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`parties.
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`2 Contrary to defendants’ argument, Werwinski v. Ford Motor Co., 286 F.3d 661 (3rd Cir.
`2002) and Raye v. Employer’s Ins. of Wausau, 345 F.Supp.2d 1313 (S.D. Ala. 2004), do not hold
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`2
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`Case 2:06-cv-00113-SRW Document 20 Filed 04/21/06 Page 3 of 10
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`these circumstances, defendants may avoid remand only if they prove to a legal certainty that
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`the amount in controversy actually exceeds the jurisdictional minimum. Burns v. Windsor
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`Insurance Co., 31 F.3d 1092 (11th Cir. 1994). Defendants’ burden is heavy. To prevail on
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`the present motion defendants must prove that, should plaintiffs prevail, “an award below the
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`jurisdictional amount would be outside the range of permissible awards.” Id. at 1096. In
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`determining whether removal was proper, the court assesses its jurisdiction as of the time of
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`removal. Id. at 1097 n. 13; Williams v. Best Buy Company, Inc., 269 F.3d 1316, 1321 (11th
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`Cir. 2001); Poore v. American-Amicable Life Insurance Co. of Texas, 218 F.3d 1287, 1290-
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`91 (11th Cir. 2000).
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`In the present case, plaintiff claims that defendants engaged its services to develop an
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`algorithm to calculate “the potential or actual savings from the optimization of wood chip
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`quality,” that plaintiff provided the “proprietary algorithm” to defendants, and that
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`defendants have used the algorithm on a website (www.thevirtualchipdoctor.com) and have
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`failed to pay plaintiff as agreed. Defendants have filed the affidavit of defendant True. True
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`states:
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`The Virtual Chip Doctor is based upon computer software developed jointly
`by Biomass and Sunbury. This program’s value is in excess of $100,000.00.
`Dimension D LLC has claimed that it has an interest in these programs and
`software, and has ordered that use of the program be terminated.
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`Dimension D’s request for all compensatory damages, if granted to the extent
`claimed by Shane Gaither based upon previous demands and based upon the
`value of the Virtual Chip Doctor and related accounts to which Gaither claims
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`or suggest that this express limitation should be ignored.
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`3
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`Case 2:06-cv-00113-SRW Document 20 Filed 04/21/06 Page 4 of 10
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`an interest, greatly exceeds $100,000.00.
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`(True affidavit, ¶¶ 11, 12).
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`However, plaintiff’s complaint asserts an entitlement to compensation based on its
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`services in developing a “proprietary algorithm,” not the Virtual Chip Doctor computer
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`program. (Complaint, ¶¶ 8-15; see also Exhibit C to Notice of Removal). Additionally, the
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`plaintiff’s complaint does not demand injunctive relief, but only compensatory damages.
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`Defendants have failed to establish that plaintiff’s asserted interest in the Virtual Chip Doctor
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`program exceeds $75,000, and they have not indicated how the stated value of the program
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`was calculated or how this stated value demonstrates to a legal certainty that plaintiff must
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`recover more than $75,000 if he prevails on his claims.3 Additionally, plaintiff has filed a
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`copy of a letter from its counsel to defense counsel calculating plaintiff’s damages at a total
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`of $66,448.48 and offering to settle the controversy for a lump sum of $42,500. (Exhibit A
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`to Doc. # 17).4 The court concludes that defendants have failed to meet their heavy burden
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`of proving to a legal certainty that – at the time of removal – the actual amount in
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`3 Although the court does not rely on this statement, the court notes that defendants’ counsel
`has taken the position in settlement negotiations that the Virtual Chip Doctor software was created
`independently of the algorithm it uses. (Attachment to Defendant’s motion to strike, Doc.
`# 15)(Laboe letter to Finch, March 10, 2005, paragraph 3).
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`4 An offer to compromise would not be admissible in the trial of this action. F.R.E. 408.
`However, “[a] settlement letter is relevant evidence of the amount in controversy if it appears to
`reflect a reasonable estimate of the plaintiff’s claim.” Cohn v. Petsmart, Inc., 281 F.3d 837, 840 (9th
`Cir. 2002); see also Burns v. Windsor Ins. Co., 31 F.3d 1092, 1097 (11th Cir. 1994)(“While
`[plaintiff’s] settlement offer, by itself, may not be determinative, it counts for something.”).
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`4
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`Case 2:06-cv-00113-SRW Document 20 Filed 04/21/06 Page 5 of 10
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`controversy was more than $75,000.00, exclusive of interest and costs.5 See Burns, supra.
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`Defendants’ evidence falls far short of that required to prove that plaintiff’s counsel has
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`falsely or incompetently assessed his client’s case and that plaintiff, if successful, must
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`recover more than $75,000.00. See id., 31 F.3d at 1095. Thus, defendants have failed to
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`establish that this court has diversity jurisdiction over this matter pursuant to 28 U.S.C. §
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`1332.
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`Federal Question Jurisdiction
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`As noted above, plaintiff pleads only state law causes of action in its complaint.
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`Defendants contend that this court nevertheless has federal question jurisdiction over the
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`present action because: (1) plaintiff’s state law contract-based claims are barred by the statute
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`of frauds and, thus, “the only possible or logical theory upon which the claims can be based
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`would be that the algorithms, derivative software, and other intellectual property are
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`protectable under federal copyright or patent law”6 (Notice of Removal, ¶¶ 24-25);
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`(2) plaintiff’s claims are preempted by federal patent and copyright law (id., ¶26).
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`The Eleventh Circuit has discussed the requirements for removal of a complaint
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`asserting only state law claims on the basis of federal question jurisdiction as follows:
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`Any claim that was originally filed in state court may be removed by a
`defendant to federal court if the case could have been filed in federal court
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`5 Even under the preponderance standard, defendants have not demonstrated that the
`requisite amount is in controversy.
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`6 The complaint does not assert any claim based on “derivative software” or intellectual
`property other than the “proprietary algorithm.”
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`5
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`Case 2:06-cv-00113-SRW Document 20 Filed 04/21/06 Page 6 of 10
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`originally. 28 U.S.C. § 1441(a). Where, as here, there is not complete diversity
`of citizenship, the defendant must show that federal question jurisdiction is
`present. Id. § 1441(b). Federal courts have federal question jurisdiction over
`“all civil actions arising under the Constitution, laws, or treaties of the United
`States.” Id. § 1331.
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`Whether a claim “arises under” federal law “is governed by the ‘well-pleaded
`complaint rule,’ which provides that federal jurisdiction exists only when a
`federal question is presented on the face of the plaintiff’s properly pleaded
`complaint.” Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425,
`2429, 96 L.Ed.2d 318 (1987). Thus, “the plaintiff [is] the master of the claim;
`he or she may avoid federal jurisdiction by exclusive reliance on state law,”
`even where a federal claim is also available. Id. However, even when a
`plaintiff has pled only state-law causes of action, he may not avoid federal
`jurisdiction if either (1) his state-law claims raise substantial questions of
`federal law or (2) federal law completely preempts his state-law claims. See
`Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 13, 103
`S.Ct. 2841, 2848, 77 L.Ed.2d 420 (1983).
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`In order for a state-law claim to raise substantial questions of federal law,
`“[federal] law must be an essential element of [plaintiff's] claim[, and] the
`federal right or immunity that forms the basis of the claim must be such that
`the claim will be supported if the federal law is given one construction or
`effect and defeated if it is given another.” Mobil Oil Corp. v. Coastal
`Petroleum Co., 671 F.2d 419, 422 (11th Cir.1982). “[T]he mere presence of a
`federal issue in a state cause of action does not automatically confer federal-
`question jurisdiction.” Merrell Dow Pharms., Inc. v. Thompson, 478 U.S. 804,
`813, 106 S.Ct. 3229, 3234, 92 L.Ed.2d 650 (1986). In other words, the state-
`law claim must “really and substantially involve[] a dispute or controversy
`respecting the validity, construction or effect of [federal] law.” Mobil Oil, 671
`F.2d at 422.
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`Complete preemption occurs when federal law so occupies a given field that
`a state-law claim is transformed into a claim “arising under” federal law.
`Geddes v. Am. Airlines, Inc., 321 F.3d 1349, 1353 (11th Cir.2003), cert.
`denied, 540 U.S. 946, 124 S.Ct. 386, 157 L.Ed.2d 276 (2003). In other words,
`“if a federal cause of action completely preempts a state cause of action any
`complaint that comes within the scope of the federal cause of action
`necessarily ‘arises under’ federal law.” Franchise Tax Bd., 463 U.S. at 24, 103
`S.Ct. at 2854.
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`6
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`Case 2:06-cv-00113-SRW Document 20 Filed 04/21/06 Page 7 of 10
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`Dunlap v. G&L Holding Group, Inc., 381 F.3d 1285, 1289-90 (11th Cir. 2004)(footnote
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`omitted).
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`Defendants have cited no case law in support of their theory that, because plaintiff’s
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`state law claims are untenable7 and plaintiff could have instead asserted federal claims,
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`plaintiff’s state law claims support federal question jurisdiction. The court concludes that
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`this theory is without merit. See id. at 1290 (“‘[T]the plaintiff [is] the master of the claim;
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`he or she may avoid federal jurisdiction by exclusive reliance on state law,’ even where a
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`federal claim is also available.”)(citing Caterpillar, 482 U.S. at 392).
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`Plaintiff alleges that defendants engaged him to provide a service – creation of a
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`model or algorithm to calculate the potential or actual savings from the optimization of wood
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`chip quality – that plaintiff did so, and that defendants thereafter failed to continue payments
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`to plaintiff as agreed. (Complaint, ¶¶ 8-15). Defendants have not demonstrated that any of
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`plaintiff’s state law claims require, as an essential element of the claim, that the product
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`developed by plaintiff be protected or protectable by federal copyright or patent law, or that
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`federal patent or copyright rights otherwise are otherwise required elements of plaintiff’s
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`claims. Thus, defendants’ removal of this action was proper only if any of plaintiff’s state
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`law claims are completely preempted by federal copyright or patent law.
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`The Eleventh Circuit has held that a state law claim is not completely preempted by
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`§ 301 of the Copyright Act unless the right at issue falls within the subject matter of
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`7 While the court need not decide this issue, it is possible that plaintiff’s claims are not, in
`fact, barred by the statute of frauds. See e.g., Hensley v. Poole, 910 So.2d 96, 105 (Ala. 2005).
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`7
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`Case 2:06-cv-00113-SRW Document 20 Filed 04/21/06 Page 8 of 10
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`copyright and, further, that “the subject matter of copyright, in terms of preemption, includes
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`only those elements that are substantively qualified for copyright protection.” Dunlap, supra,
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`381 F.3d at 1293-95. Copyright protection is not generally available for a mathematical
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`formula or algorithm. See id. at 1295 (“‘[U]nder the merger doctrine, “expression is not
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`protected in those instances where there is only one or so few ways of expressing an idea that
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`protection of the expression would effectively accord protection to the idea itself.”’ . . . [The
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`idea at issue in Dunlap] is akin to the classic merger doctrine application to an
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`algorithm.”)(citations omitted); 17 U.S.C. § 102(b)(excluding from copyright protection “any
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`idea, procedure, process, system, method of operation, concept, principle, or discovery”);
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`Baker v. Selden, 101 U.S. 99, 103 (1879)(“The copyright of a work on mathematical science
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`cannot give to the author an exclusive right to the methods of operation which he propounds,
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`or to the diagrams which he employs to explain them, so as to prevent an engineer from using
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`them whenever occasion requires.”); MiTek Holdings, Inc. v. Arce Engineering Company,
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`Inc., 89 F.3d 1548, 1556 n. 19 (11th Cir. 1996)(“MiTek seems to misapprehend the
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`fundamental principle of copyright law that copyright does not protect an idea, but only the
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`expression of the idea. . . . Were we to grant copyright protection to MiTek’s user interface,
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`which is nothing more than a process, we would be affording copyright protection to a
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`process that is the province of patent law.”). The removing defendants, who bear the burden
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`of establishing jurisdiction, have not produced evidence demonstrating that the algorithm at
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`issue in this case is “substantively qualified for copyright protection” and, thus, have failed
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`to establish that plaintiff’s state law claims are preempted by the Copyright Act.
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`8
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`Case 2:06-cv-00113-SRW Document 20 Filed 04/21/06 Page 9 of 10
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`Defendants cite no case law in support of their argument that plaintiff’s claims are
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`preempted by federal patent law. (See Doc. # 10, pp. 5-7; Doc. # 1, pp. 6-7).
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`Commercial agreements traditionally are the domain of state law. State law
`is not displaced merely because the contract relates to intellectual property
`which may or may not be patentable; the states are free to regulate the use of
`such intellectual property in any manner not inconsistent with federal law. In
`this as in other fields, the question of whether federal law pre-empts state law
`“involves a consideration of whether that law ‘stands as an obstacle to the
`accomplishment and execution of the full purposes and objectives of
`Congress.’”
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`In Kewanee Oil Co. [v. Bicron Corp., 416 U.S. 470, 480-81 (1974), the
`Supreme Court] reviewed the purposes of the federal patent system. First,
`patent law seeks to foster and reward invention; second, it promotes disclosure
`of inventions, to stimulate further innovation and to permit the public to
`practice the invention once the patent expires; third, the stringent requirements
`for patent protection seek to assure that ideas in the public domain remain
`there for the free use of the public.
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`Aronson v. Quick Point Pencil Company, 440 U.S. 257, 262 (1979)(citations omitted).
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`Defendants have not argued or demonstrated that enforcement of the contract rights alleged
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`in the complaint is inconsistent with the purposes of federal patent law. Thus, the court
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`concludes that plaintiff’s state law claims are not preempted by patent law.
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`CONCLUSION
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`Upon consideration of defendant’s motion to strike (Doc. # 15), it is
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`ORDERED that the motion is DENIED.
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`For the foregoing reasons, it is further ORDERED that plaintiff’s motion to remand
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`and to award attorney fees (Doc. # 5) is GRANTED to the extent that this action is
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`REMANDED to the Circuit Court of Autauga County, Alabama pursuant to 28 U.S.C.
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`9
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`Case 2:06-cv-00113-SRW Document 20 Filed 04/21/06 Page 10 of 10
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`§ 1447(c) for lack of subject matter jurisdiction. To the extent the motion seeks an award of
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`attorney’s fees, the motion is DENIED.8
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`Done, this 21st day of April, 2006.
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`/s/ Susan Russ Walker
`SUSAN RUSS WALKER
`UNITED STATES MAGISTRATE JUDGE
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`8 While this is a close case, the court concludes that defendants’ removal of this action on
`the basis of federal question jurisdiction was objectively reasonable in view of their preemption
`argument. See Martin v. Franklin Capital Corporation, 126 S.Ct. 704, 708 (2005)(“We hold that,
`absent unusual circumstances, attorney’s fees should not be awarded [under 28 U.S.C. § 1447(c)]
`when the removing party has an objectively reasonable basis for removal.”).
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`10