St. Paul Reinsurance Co., Ltd. v. Greenberg, 97-20294

• Decision Date: 10 February 1998
• Docket Number: No. 97-20294,97-20294
• Citation: 134 F.3d 1250,1998 WL 49084
• Parties: ST. PAUL REINSURANCE COMPANY, LTD., Plaintiff-Appellant, v. Larry GREENBERG, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1250

134 F.3d 1250

ST. PAUL REINSURANCE COMPANY, LTD., Plaintiff-Appellant, v. Larry GREENBERG, Defendant-Appellee.

No. 97-20294.

United States Court of Appeals Fifth Circuit.

Feb. 10, 1998.

Edward B. Chatelain, III, Clint W. Lewis, Lewis & Henry, Beaumont, TX, for Plaintiff-Appellant.

Jim Alan Adams, Richmond, TX, for Defendant-Appellee.

Appeal from the United States District Court for the Southern District of Texas.

Before DAVIS, WIENER and PARKER, Circuit Judges.

WIENER, Circuit Judge:

In this declaratory judgment action, Plaintiff-Appellant St. Paul Reinsurance Company, Ltd. (St. Paul) appeals the district court's grant of Defendant-Appellee Larry Greenberg's motion to dismiss for lack of subject matter jurisdiction, finding that St. Paul's complaint failed to satisfy the amount in controversy requirement for diversity jurisdiction under 28 U.S.C. § 1332. After reviewing the record and the arguments of counsel, and applying the applicable law, we conclude that the district court erred in dismissing the action. Accordingly, we reverse and remand.

I. FACTS AND PROCEEDINGS

In August 1995, Greenberg purchased a homeowner's policy from St. Paul. In March 1996, the home covered by that policy was destroyed by arson. After Greenberg filed a sworn proof of loss in July 1996 in the amount of $35,000--the policy's limits of coverage--St. Paul denied coverage. It asserted, inter alia, that (1) Greenberg had increased the risk of hazard, (2) the property was vacant for more than thirty days prior to the fire, and (3) Greenberg had misrepresented material facts concerning the property.

On September 20, 1996, Greenberg's counsel wrote to St. Paul demanding that it acknowledge coverage under the policy within ten days or Greenberg would file suit seeking "all damages available to him under the various common laws or statutes relative to this case." On October 10, 1996, Greenberg's attorney wrote again, demanding coverage and stating, "Obviously, if we file suit, we will A week later St. Paul filed a complaint for declaratory relief in federal district court. St. Paul pleaded the following facts in its complaint:

seek additional damages including any penalties and interest to which Mr. Greenberg may be entitled."

1.01 Plaintiff, St. Paul Reinsurance Company, Ltd., is a foreign corporation, incorporated and having its principal place of business in London, England.

1.02 Defendant, Larry Greenberg, is a citizen of Texas.

2.01 The jurisdiction of this Court is based on diversity of citizenship pursuant to 28 U.S.C. § 1332. This is a civil action in which the matter in controversy exceeds the sum of $50,000.00, exclusive of interest and costs.

In response, Greenberg filed a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, arguing that he was seeking only $45,500 in the aggregate, comprising the $35,000 policy limits and attorney's fees not to exceed $10,500, ¹ so that St. Paul's claim did not meet the amount in controversy requirement of § 1332. ² Included with Greenberg's Rule 12(b) motion was his counterclaim for that amount. While Greenberg's motion to dismiss was pending in federal court, he filed a petition in state court requesting the $35,000 limits of the policy plus $10,500 in attorney's fees and alleging that St. Paul violated the Texas Deceptive Trade Practices Act (DTPA) ³ and the Texas Insurance Code.

The district court granted Greenberg's motion, dismissing St. Paul's complaint for declaratory relief. In its order, the court explained:

The plaintiff cannot bring a suit for declaratory relief on a claim that does not exceed $50,000 and create federal jurisdiction by stating all of the possible claims for relief that a defendant may bring. There is nothing in the plaintiff's counterclaim that suggests that the defendant's claim will exceed $50,000.

After the court denied St. Paul's motions for reconsideration, rehearing, or, in the alternative, a new trial, St. Paul timely appealed.

II. DISCUSSION

A. Standard of Review

We review dismissals for lack of subject matter jurisdiction de novo, applying the same standard as that applied by the district court. ⁴

B. Applicable Law

"The amount in controversy, in an action for declaratory or injunctive relief, is The burden of establishing subject matter jurisdiction in federal court rests on the party seeking to invoke it. ⁸ It has long been recognized that "unless the law gives a different rule, the sum claimed by the plaintiff controls if the claim is apparently made in good faith." ⁹ To justify dismissal, "it must appear to a legal certainty that the claim is really for less than the jurisdictional amount." ¹⁰ We have previously indicated, however, that this "legal certainty" test has limited utility--in fact is inapplicable--when the plaintiff has alleged an indeterminate amount of damages. ¹¹ Furthermore, "bare allegations [of jurisdictional facts] have been held insufficient to invest a federal court with jurisdiction." ¹²

                the value of the right to be protected or the extent of the injury to be prevented." 5  When an insurer seeks a declaratory judgment regarding the coverage provided by an insurance policy, "the 'object of the litigation' is the policy and the 'value of the right to be protected' is plaintiff's potential liability under that policy." 6  Thus, in addition to policy limits and potential attorney's fees, items to be considered in ascertaining the amount in controversy when the insurer could be liable for those sums under state law are inter alia penalties, statutory damages, and punitive damages--just not interest or costs. 7  In this case, St. Paul contends that we should include the penalties and treble damages available under the DTPA and the Texas Insurance Code in determining the amount in controversy
                

Although most of our caselaw regarding § 1332's amount in controversy requirement has arisen in the context of removal from state to federal court, we find the procedures developed in those cases to be instructive in the converse context of declaratory judgment actions such as the one now before us. In removal practice, when a complaint does not allege a specific amount of damages, the party invoking federal jurisdiction must prove by a preponderance of the evidence that the amount in controversy exceeds the jurisdictional amount. ¹³ The district court must first examine the complaint to determine whether it is "facially apparent" that the claims exceed the jurisdictional amount. ¹⁴ If it is not thus apparent, the court may rely on "summary judgment-type" evidence to ascertain the amount in controversy. ¹⁵ Importantly, the jurisdictional facts must be judged as of the time the complaint is filed; subsequent events cannot serve to Applying this test solely to the facts pleaded by St. Paul in its complaint for declaratory relief, we cannot conclude that the amount in controversy will likely exceed $50,000. St. Paul sets out its reasons for denying coverage under the policy, but asserts neither that Greenberg has expressly threatened to seek statutory penalties or punitive damages nor that St. Paul has acted with bad faith or intent. Similarly, St. Paul's complaint contains no prayer for a declaration of nonliability under the DTPA or the Texas Insurance Code. Conclusional allegations are insufficient to establish jurisdiction. ¹⁷

deprive the court of jurisdiction once it has attached. ¹⁶

This is not the end of our inquiry, however. In addition to the complaint itself, we must look as well to other evidence relevant at the time St. Paul filed its complaint for declaratory relief.

The district court based its determination of the amount in controversy on Greenberg's counterclaim, in which he sought only the $35,000 policy limits and attorney's fees not to exceed $10,500. But this was error as a matter of law, given that neither this counterclaim nor Greenberg's state court petition were filed until after the filing of St. Paul's declaratory judgment complaint. ¹⁸ Thus, neither of these pleadings may be considered in testing the amount here in controversy.

The only pre-complaint evidence of Greenberg's potential claim against St. Paul are the letters from Greenberg's attorney, demanding coverage under the policy and threatening to seek "all damages available to [Greenberg] under the various common laws or statutes relative to this case" ¹⁹ and "any penalties and interest to which Mr. Greenberg may be entitled." ²⁰ One such penalty is found in § 6 of Article 21.55 of the Texas Insurance Code, which provides for statutory "damages" in the amount of "18 percent per annum" for failure timely to pay an insurance claim. ²¹ The district court and Greenberg summarily concluded that "a statutory penalty that requires no adjudication cannot be used to establish threshold jurisdiction." But this is simply an incorrect statement of the law in this circuit. Although not cited by either party or the district In Buras, we considered whether a "penalty" of six percent per annum mandated under a Louisiana statute for the unjustified failure to pay a life insurance claim timely should be included in the jurisdictional amount. Noting that the exaction was not due at all if the claim settled within sixty days, we held that the charge was "intended to be in the nature of a coercive penalty towards prompt settlement" as opposed to interest. ²³ As such, the penalty could serve to establish jurisdiction.

court, this issue is controlled by our decision in Buras v. Birmingham Fire Insurance Co. of Pennsylvania. ²²

We discern no distinguishing characteristics between the penalty assessed under the Louisiana statute analyzed in Buras and the damages provided in § 6 of Article 21.55 of the Texas Insurance Code. The latter impost is labeled "damages" in the statute and applies over and above any other recovery. Moreover, the Texas statute specifically states that its purpose is "to obtain prompt payment of claims made...