Scales v. Design Nortex

Background

William Scales filed the action without a lawyer against Design Nortex and The Branded Professionals. He alleged breach of contract and negligence, claiming that the defendants interfered with hiring a new web developer and prevented the launch of corporate websites and a mobile application. He alleged lost revenue, depleted investments, missed business opportunities, and other damages that he estimated at millions, possibly billions, of dollars.

Scales invoked both federal-question jurisdiction and diversity jurisdiction. The court explained that federal-question jurisdiction requires a claim arising under federal law, while diversity jurisdiction generally requires complete diversity of citizenship and an amount in controversy exceeding $75,000.

Claims on behalf of entities

The court found it unclear whether Scales was asserting claims for himself or for a business he called a corporation. A person who is not a lawyer generally cannot represent a corporation, partnership, association, or other artificial entity in federal court. Because Scales did not allege that he was a lawyer or that the business was a sole proprietorship, the court dismissed without prejudice any claims he was bringing on behalf of entities other than any sole proprietorships. The court allowed him to amend to allege that he was asserting claims on his own behalf rather than on behalf of another entity.

Subject-matter jurisdiction

The court concluded that Scales had not alleged facts establishing federal-question jurisdiction. His stated claims for breach of contract and negligence were usually state-law claims, and the complaint did not identify a viable federal cause of action.

The court also found that the complaint did not adequately establish diversity jurisdiction. Scales alleged that he was a New York citizen and that Design Nortex was incorporated and had its principal place of business in California. But he did not allege the citizenship of The Branded Professionals. The court noted that the complaint gave that defendant a Philadelphia, Pennsylvania address but did not state whether it was a corporation, limited liability company, or another type of entity, or provide the information needed to determine its citizenship. The complaint also did not clearly show, to a reasonable probability, that the claims satisfied the amount-in-controversy requirement of more than $75,000.

Rather than dismissing the entire action at that stage, the court granted Scales leave to amend to provide facts establishing federal jurisdiction. If he pursued state-law claims under diversity jurisdiction, he had to allege facts showing that the parties were citizens of different states and that the amount in controversy exceeded $75,000.

Requests for counsel and default judgment

Scales asked the court to request volunteer counsel. Because the case was too early for the court to assess its merits, the court denied that motion without prejudice to renewal later.

The court also denied Scales’s motion for default judgment because summonses had not been issued.

Disposition

The court granted Scales 60 days to file an amended complaint that completely replaced, rather than supplemented, the original complaint. The amended complaint had to provide facts supporting each claim against each defendant, including relevant events, dates, locations, injuries, and requested relief. If Scales did not comply and could not show good cause, the court stated that it would dismiss the action for lack of subject-matter jurisdiction. The court also denied fee-free status for an appeal, finding that an appeal would not be taken in good faith.