31 F. 3d 1092 - Burns v. Windsor Insurance Co

This case was removed to federal court from state court. The appeal asks whether federal diversity jurisdiction exists when plaintiff, in state court, seeks an award of actual and punitive damages "in such sum as the jury determines to be just, lawful and fair, but not more than $45,000.00", but plaintiff admits to the federal court she may, if circumstances change, amend her initial complaint in the future and seek more damages.

In 1990, appellant Jacqueline Burns bought a car insurance policy from Windsor Insurance Company ("Windsor"). The policy included no uninsured motorist coverage. Burns was later involved in a collision with an uninsured motorist. Believing she was covered, she filed a claim with Windsor. Windsor denied the claim.

Burns then filed suit in Alabama state court alleging fraud, breach of contract, bad faith failure to pay an insurance claim, and negligence. She sought actual and punitive damages "in such sum as the jury determines to be just, lawful, and fair, but not more than $45,000 plus costs." In December 1991, Windsor filed for removal on the basis of diversity under 28 U.S.C. Secs. 1332 & 1441.1

Burns sought a remand, and Windsor opposed it. Windsor argued the amount in controversy actually exceeded $50,000 and that Burns' request to cap her damages was illusory. The self-imposed limit, Windsor said, was designed only to defeat diversity jurisdiction.

Then, the district court entered an order requiring Burns, to obtain a remand to state court, to file a statement that she would, in the future, attempt to collect no more than $50,000. She responded that her present claim was for $45,000 (for which she offered to settle immediately), but that the amount may change "upon a worsening health condition of the plaintiff, or perhaps greater punitive damages would be justifiable if facts discovered during the litigation showed a more sinister or oppressive character." After she refused a second opportunity to agree never to seek more than $49,999, the court denied Burns' motion to remand.2 Burns appeals.3

In the typical diversity case, plaintiff files suit in federal court against a diverse party for damages exceeding $50,000. Such a case will not be dismissed unless it appears to a "legal certainty" that plaintiff's claim is actually for less than the jurisdictional amount. St. Paul's Indemnity Corp. v. Red Cab Co., 303 U.S. 283, 288-289, 58 S.Ct. 586, 590, 82 L.Ed. 845 (1938). In the typical removal case, a plaintiff files suit in state court seeking over $50,000. The defendant can remove to federal court if he can show, by a preponderance of the evidence, facts supporting jurisdiction. See McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 785, 80 L.Ed. 1135 (1936). These standards give great weight to plaintiff's assessment of the value of plaintiff's case.

Neither of these general rules fits our atypical case. Here, plaintiff filed suit in state court specifically requesting $45,000, five thousand dollars less than the jurisdictional amount. Defendant says plaintiff's prayer is illusory, that she actually intends to recover more than $50,000; so, the case should remain in federal court. As support, defendant stresses that Alabama Rule of Civil Procedure 54(c) allows a fact finder to give a plaintiff any relief she is entitled to, even if she asked for less. And, defendant points to plaintiff's refusal to sign a stipulation precluding her from ever amending her claim to seek damages over $50,000.4 Defendant argues that, as the party seeking jurisdiction, it should receive the benefit of the St. Paul's "legal certainty" test. That is, the case should remain in federal court unless it appears to a legal certainty that the claim is for less than $50,000. We disagree.

Federal courts are courts of limited jurisdiction. While a defendant does have a right, given by statute, to remove in certain situations, plaintiff is still the master of his own claim. See Caterpillar, Inc. v. Williams, 482 U.S. 386, 391 & n. 7, 107 S.Ct. 2425, 2429 & n. 7, 96 L.Ed.2d 318 (1987); Great Northern R. Co. v. Alexander, 246 U.S. 276, 282, 38 S.Ct. 237, 239, 62 L.Ed. 713 (1918); Gafford v. General Electric, 997 F.2d 150 (6th Cir.1993); see also, Insigna v. LaBella, 845 F.2d 249, 253-54 (11th Cir.1988); Lane v. Champion Int'l Corp., 844 F.Supp. 724, 731 (S.D.Ala.1994); see generally, Wright & Miller, 14A Federal Practice and Procedure Sec. 3702 ("[p]laintiff is the master of his or her own claim; if plaintiff chooses to ask for less than the jurisdictional amount, only the sum actually demanded is in controversy"); see also, St. Paul's, 303 U.S. at 294, 58 S.Ct. at 592. Defendant's right to remove and plaintiff's right to choose his forum are not on equal footing; for example, unlike the rules applied when plaintiff has filed suit in federal court with a claim that, on its face, satisfies the jurisdictional amount, removal statutes are construed narrowly; where plaintiff and defendant clash about jurisdiction, uncertainties are resolved in favor of remand. See Boyer v. Snap-on Tools Corp., 913 F.2d 108 (3rd Cir.1990), cert. denied, 498 U.S. 1085, 111 S.Ct. 959, 112 L.Ed.2d 1046 (1991); see also Coker v. Amoco Oil Co., 709 F.2d 1433 (11th Cir.1983) (when defendant removes alleging nondiverse defendant was joined to defeat diversity, if there is chance plaintiff will recover against non-diverse defendant, case should be remanded).

Because removal is only permissible when plaintiff's claim could have been filed in federal court originally, we must look to plaintiff's claim to determine whether removal was appropriate. Plaintiff's complaint specifically requests $45,000 in damages. Therefore, no jurisdiction exist on the face of plaintiff's claim. So, the critical question is to what extent must defendant prove jurisdiction exists despite plaintiff's express claim to less than the minimum jurisdictional sum?

We believe the defendant's burden of proof must be a heavy one. Cf. Boyer, 913 F.2d at 110-112. Every lawyer is an officer of the court. And, in addition to his duty of diligently researching his client's case, he always has a duty of candor to the tribunal.5 So, plaintiff's claim, when it is specific and in a pleading signed by a lawyer, deserves deference and a presumption of truth. We will not assume--unless given reason to do so--that plaintiff's counsel has falsely represented, or simply does not appreciate, the value of his client's case. Instead, we will assume that plaintiff's counsel best knows the value of his client's case and that counsel is engaging in no deception. We will further presume that plaintiff's counsel understands that, because federal removal jurisdiction is in part determined by the amount of damages a plaintiff seeks, the counsel's choices and representations about damages have important legal consequences and, therefore, raise significant ethical implications for a court officer.

By his assertions, defendant in this case essentially argues that opposing counsel is falsely assessing the case or is incompetently doing so. Considering the specific nature of plaintiff's damage claim, we conclude that, to avoid a remand, defendant must prove to a legal certainty that plaintiff's counsel has, in effect, done one or the other. That is, defendant must prove to a legal certainty that plaintiff's claim must exceed $50,000. This strict standard is consistent with case law and congress' policy of limiting federal diversity jurisdiction.6

The Fifth Circuit recently reached a similar conclusion in Kliebert v. Upjohn Co., 915 F.2d 142 (5th Cir.1990).7 In Kliebert, the plaintiff sought exactly $10,000.8 Defendants removed, claiming this amount was not pled in good faith. Defendant offered proof of higher damage awards in similar cases and also argued that plaintiffs would amend after the year deadline to thwart removal. The court considered imposing a light burden on defendant. But, the court concluded that plaintiff's claim was entitled to deference and that anything less than requiring defendant to prove that, should plaintiff prevail, she would be entitled to at least the jurisdictional amount was too permissive. We agree. Cf. Boyer, 913 F.2d at 110-112 (finding that when removing defendant charges plaintiff has fraudulently joined non-diverse defendants to defeat diversity jurisdiction, defendant bears a "heavy burden of persuasion", quoting, Steel Valley Auth. v. Union Switch & Signal, 809 F.2d 1006, 1010 & 1012 n. 6 (3rd Cir.1987)).9

Adopting this standard does not mean that a removing defendant can never prevail. A defendant could remain in federal court if he showed that, if plaintiff prevails on liability, an award below the jurisdictional amount would be outside the range of permissible awards because the case is clearly worth more than $50,000. See Kliebert, 915 F.2d at 147. The standard is an objective one; plaintiff's or plaintiff's counsel's subjective intent in drafting the prayer is not the true issue.10

Unlike the rule this Court adopts, Windsor's approach would greatly expand federal diversity jurisdiction. Under defendant's proposed rule, anytime a plaintiff sued for less than the jurisdictional amount but there remained even a possibility that she would amend her claim or be awarded more than she pleaded, jurisdiction would exist. This approach would unacceptably broaden removal jurisdiction. See generally 14A WRIGHT & MILLER, FEDERAL PRACTICE AND PROCEDURE Secs. 3702, 3725 (noting that adopting such a rule would render jurisdictional amount requirements meaningless). Also, Windsor's approach would allow state rules of procedure to determine when federal jurisdiction existed.11 This approach could lead to inconsistent application of federal jurisdictional rules. Cf. Continental Carriers, Inc. v. Goodpasture, 169 F.Supp. 602, 603 (S.D.Ga.1959) (noting that treating compulsory and optional counterclaims differently for purposes of determining amount in controversy would make federal removal practice dependent on state procedure). We are unwilling, without congressional guidance, to construe the removal statute in such a way that it would expand federal court jurisdiction or promote inconsistent application of the removal rule.12

Having determined what defendant must show to remain in federal court, we find defendant has not met his burden of proof. Defendant has offered nothing more than conclusory allegations that predict that plaintiff intends to wait a year from her filing date and then boost her damage request. Plaintiff on the other hand has offered to settle the case for $45,000. While this settlement offer, by itself, may not be determinative, it counts for something. Defendant also offered no proof that plaintiff's prayer is grossly inconsistent with her alleged damages.13 Her awareness that she "could"--given the power of the court to award more than is requested--recover more is not enough to prove jurisdiction in the face of plaintiff's specific pleading. The case should have been remanded to state court.

We conclude that because plaintiff asserts in her ad damnum clause a specific claim for less than the jurisdictional amount, defendant, to establish removal jurisdiction, was required to prove to a legal certainty that plaintiff, if she prevailed, would not recover below $50,000. The possibility that plaintiff may in the future seek or recover more damages is insufficient to support federal jurisdiction now. Under these facts, defendant did not meet its burden of proof.

VACATED and REMANDED.