Scales v. American Web Coders

Background

William Scales, of New York, New York, proceeded without a lawyer and sued American Web Coders and Silicon Graphics. He invoked federal-question and diversity jurisdiction, but identified his underlying claims as breach of contract and negligence. He alleged that the defendants failed to complete website and mobile-application work, refused to provide a refund, and thereby caused lost revenue, depleted investments, missed business opportunities, and other harm involving several companies. He estimated his damages in the millions or possibly billions of dollars. He also sought default judgment and asked the court to request a volunteer lawyer.

The court had previously allowed Scales to proceed without prepaying filing fees. Because he was proceeding without a lawyer, the court was required to screen his complaint and dismiss claims that were legally insufficient, frivolous, malicious, barred by immunity, or outside the court’s subject-matter jurisdiction.

Claims on behalf of businesses

The court found the complaint unclear about whether Scales was asserting claims for himself or for his businesses. A person who is not a lawyer generally cannot represent a corporation, partnership, association, or other artificial entity in federal court. The court noted that some courts allow a sole proprietorship to proceed without a lawyer because it has no separate legal existence from its owner, but Scales did not identify any business as a sole proprietorship.

The court therefore dismissed without prejudice any claims Scales was asserting on behalf of other entities, while allowing him to amend to allege facts showing that he was asserting claims on his own behalf and not for another entity.

Subject-matter jurisdiction

The court held that Scales had not pleaded facts establishing federal-question jurisdiction. His stated claims—breach of contract and negligence—are usually state-law claims, and merely invoking federal-question jurisdiction does not create it.

The court also found that the complaint did not adequately establish diversity jurisdiction. Scales alleged that he was a New York citizen and that American Web Coders was incorporated and had its principal place of business in California. But he did not allege where Silicon Graphics was incorporated or, if it was a corporation, where it had its principal place of business. He also did not identify how Silicon Graphics was legally organized. As a result, the court could not determine whether the parties were citizens of different states.

Although Scales alleged damages in the millions or billions, the court found it unclear whether the complaint showed a reasonable probability that his claims exceeded the diversity-jurisdiction threshold of $75,000. The court granted leave to amend so he could provide facts establishing the parties’ citizenship and showing that his claims in this action—not claims in other lawsuits—satisfied the jurisdictional amount.

Venue

The court found that Scales had not shown that the Southern District of New York was a proper venue. He did not allege facts showing that both defendants resided in New York with at least one residing in this district. Although he alleged that he resided in New York County, he did not allege where a substantial part of the events or omissions occurred or where relevant property was located.

The court granted leave to amend to provide facts showing why this district was a proper venue.

Rulings and amendment requirements

The court granted Scales 60 days to file an amended complaint. The amended complaint would replace the original complaint rather than supplement it, so Scales would have to repeat any facts and claims he wanted the court to consider. The court directed him to describe the relevant people, events, dates, locations, injuries, and requested relief, and to provide addresses for named defendants if he had them.

The court denied Scales’s motion for default judgment because summonses had not been issued. It did not consider his request for volunteer counsel until after he filed a compliant amended complaint. No summonses would issue at that time. The court stated that if Scales failed to amend within 60 days and could not show good cause, it would dismiss the action for the reasons described in the order. It also certified that an appeal would not be taken in good faith and denied fee-free status for purposes of an appeal.