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Pickford v. Kemp & Associates, Inc.

United States District Court, D. Minnesota

August 2, 2019



          Nancy E. Brasel United States District Judge.

         After the death of the Plaintiffs' father, the Plaintiffs Denise Pickford and John Turnage executed a contract with Defendant Kemp & Associates, Inc. (“Kemp”), under which Kemp agreed to identify and acquire unclaimed probate assets for the Plaintiffs in exchange for 25 percent of the recovery. The Plaintiffs now argue that the agreement violates Minnesota law under the doctrines of champerty and maintenance. The Plaintiffs' Amended Complaint alleges several common-law claims and a claim under the Minnesota Prevention of Consumer Fraud Act (“MCFA”). The case rests in this Court on removal diversity jurisdiction. If the Plaintiffs cannot state a claim under the MCFA, they cannot meet the amount-in-controversy requirement, and jurisdiction falls. The Court finds that the Plaintiffs have failed to state a claim under the MCFA. As a result, the Court lacks subject-matter jurisdiction over the remaining claims, declines to exercise supplemental jurisdiction over these claims, and remands the case to state court.


         Plaintiffs Denise Pickford and John Turnage are siblings residing in Minnesota. [ECF No. 9 (“Am. Compl.” ¶¶ 1-3.)] Kemp is a Utah corporation that notifies and helps beneficiaries acquire unclaimed probate assets for a contingency fee. (Id. ¶¶ 4, 10.) In April 2016, Kemp informed the Plaintiffs that they may be beneficiaries of their late father's estate. (Id. ¶¶ 11, 15.) The parties then executed an agreement, which they call “the Assignments, ” under which Kemp agreed to pay all expenses to prove the Plaintiffs' claim, in exchange for 25 percent of the amount acquired from the estate. (Id. ¶¶ 24-25.) The estate was probated in Lake County, Illinois. (Id. ¶ 32.) Kemp retained a law firm to represent the Plaintiffs. (Id. ¶ 31.) The law firm obtained a distribution of $249, 606.61 for the Plaintiffs and automatically distributed $62, 401.65 (25 percent) of that sum to Kemp. (Id. ¶¶ 36-37.)

         The Plaintiffs, residents of Minnesota, filed this suit in state court, alleging that their agreement with Kemp violates Minnesota's laws against champerty and maintenance. The Amended Complaint alleges claims against Kemp for negligent misrepresentation, unjust enrichment, and violations of the MCFA. Kemp removed the case to federal court [ECF No. 1] and moved to dismiss [ECF No. 4].


         I. Subject-Matter Jurisdiction

         This Court must make certain it has subject-matter jurisdiction to review this case. See 28 U.S.C. § 1447(c). While the parties do not question subject-matter jurisdiction in their briefing, the Court may-and here will-address the issue sua sponte. Bueford v. Resolution Tr. Corp., 991 F.2d 481, 485 (8th Cir. 1993). Kemp asserts diversity jurisdiction, present where there is complete diversity between the parties and the amount-in- controversy exceeds $75, 000. 28 U.S.C. §§ 1332. The removing party must prove the amount-in-controversy by a “preponderance of the evidence.” James Neff Kramper Family Farm Pʹship v. IBP, Inc., 393 F.3d 828, 833 (8th Cir. 2005).

         The parties here are appropriately diverse, but it is not immediately clear to the Court that the Plaintiffs have alleged an amount-in-controversy exceeding $75, 000. The Amended Complaint merely asks for “damages in excess of $50, 000” and the Plaintiffs provide no reason why they would be entitled to damages beyond the $62, 401.65 already transferred to Kemp. Any interest accrued is not included in the amount-in-controversy calculation. 28 U.S.C. § 1332(a). To get them through the $75, 000 doorway, the Plaintiffs point out that they have asked for attorneys' fees. (Am. Compl. at 15.) While courts generally do not count attorneys' fees toward the amount-in-controversy, “statutory attorneys' fees can be counted towards the jurisdictional amount.” Hartis v. Chicago Title Ins. Co., 656 F.3d 778, 781 (8th Cir. 2009). The Plaintiffs bring a claim under the MCFA which allows a plaintiff to request “reasonable attorney's fees.” Minn. Stat. § 8.31, Subd. 3a. As a result, the Plaintiffs have sufficiently requested statutorily allowed attorneys' fees, which are included in the calculation towards $75, 000. While there is nothing in the Complaint alleging any calculation of attorneys' fees, it is likely the amount-in- controversy will exceed $75, 000 with the addition of reasonable attorneys' fees. The Court can therefore conclude that the amount-in-controversy likely exceeds $75, 000, and that Kemp has established diversity jurisdiction for the MCFA claim.

         II. The MCFA Claim.

         Because the MCFA claim is the sole claim conferring jurisdiction on the Court, the operative question becomes whether the Plaintiffs have sufficiently alleged a violation of the statute. Kemp argues they have not. At this stage in the litigation, the Court accepts all factual allegations in the complaint as true and draws all reasonable inferences in the plaintiff's favor. Aten v. Scottsdale Ins. Co., 511 F.3d 818, 820 (8th Cir. 2008). The complaint must allege facts sufficient to “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

         The MCFA prohibits the “act, use, or employment by any person of any fraud, false pretense, false promise, misrepresentation, misleading statement or deceptive practice, with the intent that others rely thereon in connection with the sale of any merchandise . . . .” Minn. Stat. § 325F.69, Subd. 1.[1] As with other fraud claims, the Plaintiffs must allege fraudulent activity under the MCFA with particularity. Baker v. Best Buy Stores, LP, 812 N.W.2d 177, 183 (Minn.Ct.App. 2012). To satisfy the particularity requirement, the Plaintiffs must identify the “who, what, when, where, and how” of the alleged fraud. Id. at 184 (quoting Parnes v. Gateway 2000, Inc., 122 F.3d 539, 549-50 (8th Cir. 1997)).

         The Plaintiffs contend that Kemp violated the MCFA by inducing them to enter into the Assignments when “[o]n information and belief, at all times relevant herein, [Kemp] knew that champerty and maintenance were prohibited in Minnesota.” (Am. Compl. ¶ 105.) At no point in the Amended Complaint do the Plaintiffs describe any affirmative misrepresentations made by Kemp, instead stating that Kemp “did not disclose and/or misrepresented the legality of the Assignments for the purpose of inducing Plaintiffs into executing the Assignments.” (Id. ¶ 107.) By merely alleging that Kemp “misrepresented the legality of the Assignments, ” the Plaintiffs fail to put forth the “who, what, when, where, and how” necessary in a case for fraud. This statement therefore fails to plead any affirmative misrepresentation with particularity.

         This conclusion does not immediately destroy the Plaintiffs' case. They may also bring a claim under the MCFA for fraudulent omission. Graphic Commc'ns Local 1B Health& Welfare Fund A v. CVS Caremark Corp., 850 N.W.2d 682, 696 (Minn. 2014). To do so, they “must plead and prove not only an omission of material fact, but also special circumstances that trigger a duty to ...

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