Midwest Drilled Foundations & Engineering, Inc. v. Zucone Engineering Corp.
3:12-cv-01333
D.P.R.Aug 27, 2012Background
- Midwest Drilled Foundations & Engineering, Inc. sues Zucone Engineering Corp. in diversity for $81,048.650 total under a caisson installation contract.
- Plaintiff claims $44,783.73 in backcharges and $36,264.92 for amounts withheld by Zucone under Puerto Rico tax provisions.
- Zucone moved to dismiss for lack of $75,000 jurisdictional amount under 28 U.S.C. § 1332(a).
- Puerto Rico Internal Revenue Code provides withholding, information return, and credit provisions; withholding agents must remit to Treasury and provide an informative declaration to the payee.
- Regulation 5901 allows a withholding exception when a foreign corporation is engaged in Puerto Rico business; Midwest contends it met notice requirements.
- Court denies Zucone’s motion, holding Midwest plausibly alleges over $75,000 in controversy and thus subject-matter jurisdiction exists.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the amount in controversy over $75,000 under §1332(a)? | Midwest argues more than $75,000 is at stake due to $36,264.92 loss plus $44,783.73 backcharges. | Zucone contends only $44,783.73 is at issue because withheld amounts are not recoverable. | No; Midwest plausibly alleges over $75,000 and jurisdiction exists. |
| Can Midwest recover the $36,264.92 withheld taxes as a loss or credit? | If Zucone improperly withheld and failed to deliver the informative declaration, Midwest loses the credit. | Zucone argues Midwest cannot recover withheld amounts. | Yes; Midwest states a plausible loss and credit issue, supporting jurisdiction. |
| Did regulation 5901 require Midwest to have a merchant certificate to avoid withholding? | Midwest asserts it satisfied the withholding-notice requirement and was not subject to withholding. | Zucone argues Midwest needed a merchant certificate mandating withholding. | Zucone's argument waived; regulation 5901 requires notice, not a certificate. |
Key Cases Cited
- St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283 (U.S. 1938) (establishes the legal-certainty test for amount-in-controversy)
- Esquilín-Mendoza v. Don King Prods., 638 F.3d 1 (1st Cir. 2011) (interprets the legal-certainty standard in the First Circuit)
- Abdel-Aleem v. OPK Biotech LLC, 665 F.3d 38 (1st Cir. 2012) (explains burden-shifting when jurisdiction challenged)
- Coventry Sewage Assoc. v. Dworkin Realty Co., 71 F.3d 1 (1st Cir. 1995) (caution that reasonable inferences favor plaintiff in jurisdictional analysis)
- Aguilar v. U.S. Immigration and Customs Enforcement Div. of Dept. of Homeland Sec., 510 F.3d 1 (1st Cir. 2007) (guides weighing pleadings on jurisdiction)
- Diefenthal v. C.A.B., 681 F.2d 1039 (1st Cir. 1982) (notes on jurisdiction and factual development in disputes)
- Hernández-Santiago v. Ecolab, Inc., 397 F.3d 30 (1st Cir. 2005) (allowing consideration of evidence beyond pleadings in jurisdiction)
- Lord v. Casco Bay Weekly, Inc., 789 F. Supp. 32 (D. Me. 1992) (discusses burden of proving jurisdiction)
- Campbell v. General Dynamics Gov’t Sys. Corp., 407 F.3d 546 (1st Cir. 2005) (burden on proponent to establish jurisdiction)