Unreported / Non-Citable
Background
Michael Luinstra and several colleagues joined Nitor E, LLC, a national physical-security and managed-services platform. Each signed an employment agreement containing post-employment noncompete, nonsolicitation, and confidentiality provisions. While still employed by Nitor, Luinstra formed Neptune Security, Inc.; he and the other employees then left Nitor to work for Neptune.
Nitor alleged that the former employees began competing with it, soliciting its customers, and misappropriating trade secrets and confidential information. It identified efforts to obtain one Nitor project worth $651,232 and another worth $260,000 per year, each with potential follow-on work. Luinstra sued in Texas state court to prevent enforcement of his restrictive covenants, and Zachary West, Christopher Smith, and Michael Damron intervened seeking similar relief. After Nitor removed the action and asserted counterclaims against Lauren Lombas and Neptune, the former employees and Neptune sought remand, arguing that the amount in controversy did not exceed $75,000.
The Court’s Holding
The court denied all three remand motions. Because the state-court pleadings did not specify an amount of monetary relief and the plaintiffs contested Nitor’s jurisdictional allegation, Nitor had to prove by a preponderance of the evidence that more than $75,000 was in controversy for each plaintiff. The court concluded that Nitor met that burden through declarations from its president.
For Luinstra, the court valued the requested injunction from his perspective and found that invalidating the restrictive covenants would free him and Neptune to pursue projects worth hundreds of thousands of dollars. For West, Smith, and Damron, their prior annual salaries and commissions supported the inference that relief from their one-year noncompetes was worth at least $75,000 to each of them; their demands for actual, exemplary, and treble damages and attorney’s fees added further value. The court did not separately decide whether Lombas and Neptune satisfied the amount-in-controversy requirement because Nitor’s claims against them shared a common nucleus of operative fact with the claims within the court’s diversity jurisdiction, permitting supplemental jurisdiction under 28 U.S.C. § 1367.
Key Takeaways
- In an action seeking declaratory or injunctive relief, the amount in controversy is measured by the value of the right to be protected or injury to be prevented from the plaintiff’s perspective.
- Evidence of project values, prior compensation, damages demands, statutory multipliers, and attorney’s fees may establish that the jurisdictional threshold is satisfied.
- Once the removing defendant proves the amount in controversy by a preponderance of the evidence, the plaintiff must show to a legal certainty that the value does not exceed $75,000.
- Supplemental jurisdiction may cover additional counterclaim defendants whose alleged conduct forms part of the same case or controversy as claims within the court’s original jurisdiction.
Why It Matters
The decision illustrates how federal courts may quantify nonmonetary relief in restrictive-covenant litigation even when the state-court pleadings omit a damages figure. A plaintiff cannot make the value of an injunction irrelevant merely by describing it as unquantifiable; courts may use declarations, compensation evidence, identified business opportunities, and common-sense inferences to assess the economic value at stake.
The ruling also shows that each plaintiff ordinarily must independently satisfy the diversity amount, while closely related claims against additional counterclaim defendants may remain in federal court through supplemental jurisdiction.