134 F.3d 1250 (5th Cir. 1998), 97-20294, St. Paul Reinsurance Co., Ltd. v. Greenberg

Docket Nº:97-20294.
Citation:134 F.3d 1250
Party Name:ST. PAUL REINSURANCE COMPANY, LTD., Plaintiff-Appellant, v. Larry GREENBERG, Defendant-Appellee.
Case Date:February 10, 1998
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

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134 F.3d 1250 (5th Cir. 1998)



Larry GREENBERG, Defendant-Appellee.

No. 97-20294.

United States Court of Appeals, Fifth Circuit

February 10, 1998

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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.



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

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

A week later St. Paul filed a complaint for declaratory relief in federal district court. St. Paul pleaded the following facts in its complaint:

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.



  1. 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

  2. Applicable Law

    "The amount in controversy, in an action for declaratory or injunctive relief, is

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    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.

    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

    Although most of our caselaw regarding § 1332's amount in controversy requirement has arisen in the context of removal from...

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