Scales v. Newtek One

Background

William Scales, who was representing himself, sued Newtek One. He alleged that Newtek One personnel told him that his corporation could receive a business loan backed by a business plan, financial projections, and collateral. Scales said he was seeking an Small Business Administration loan of up to $5 million. After he returned one to two weeks later, he alleged that a loan officer refused to let him speak with the officer assigned to his application, told him he could no longer proceed, and did not explain why or provide a denial letter. He identified his theories as negligence and breach of contract and sought more than $1 million in damages.

Scales invoked federal-question jurisdiction and diversity-of-citizenship jurisdiction. The court explained that federal-question jurisdiction requires a claim arising under the Constitution, federal law, or a treaty. It found that Scales's negligence and breach-of-contract allegations appeared to be state-law claims and did not suggest a viable federal claim. The court noted that Scales alleged he was a New York citizen and that Newtek One was incorporated in Florida and had its principal place of business in Boca Raton, Florida, which appeared sufficient to allege diverse citizenship. But Scales did not provide facts showing a reasonable probability that his claims exceeded the $75,000 jurisdictional threshold, despite stating that he sought more than $1 million.

Claims on Behalf of Other Entities

The court found the complaint unclear about whether Scales was asserting claims for himself or for his business. A nonlawyer may represent himself but generally may not represent a corporation, partnership, association, or other artificial entity. Because Scales did not allege that he was an attorney or specify that the business was a sole proprietorship, the court dismissed, without prejudice, any claims he asserted on behalf of entities other than any sole proprietorships. The court allowed him to amend to allege facts showing that he was asserting claims on his own behalf.

Leave to Amend and Disposition

The court granted Scales leave to file an amended complaint within 60 days. The amended complaint must provide a short and plain statement of the facts supporting each claim, identify relevant people and defendants, describe what each defendant did, state when and where events occurred, describe his injuries, and identify the relief sought. The amended complaint will replace the original complaint, so any facts or claims Scales wants to preserve must be repeated.

The court did not issue summonses at that time. It stated that if Scales failed to amend within the allowed period and could not show good cause, it would dismiss the action for lack of subject-matter jurisdiction. The court also certified that an appeal would not be taken in good faith and denied Scales fee-free status for purposes of an appeal. Judge Laura Taylor Swain signed the order.