367 U.S. 348 (1961), 478, Horton v. Liberty Mutual Insurance Co.

Docket Nº:No. 478
Citation:367 U.S. 348, 81 S.Ct. 1570, 6 L.Ed.2d 890
Party Name:Horton v. Liberty Mutual Insurance Co.
Case Date:June 12, 1961
Court:United States Supreme Court

Page 348

367 U.S. 348 (1961)

81 S.Ct. 1570, 6 L.Ed.2d 890



Liberty Mutual Insurance Co.

No. 478

United States Supreme Court

June 12, 1961

Argued May 3, 1961




Petitioner was injured while working in Texas for an employer insured by respondent insurance company. Under the Texas Workmen's Compensation Law, he filed a claim with the Texas Industrial Accident Board for $14,035. The Board awarded him only $1,050. Basing jurisdiction on diversity of citizenship, respondent sued in a Federal District Court to have the award set aside, alleging that petitioner was entitled to nothing, but had claimed and would claim $14,035. Petitioner moved to dismiss the suit on the ground that the value of the "matter in controversy" was only $1,050.

Held: The "matter in controversy" was more than $10,000, within the meaning of 28 U.S.C. § 1332, as amended in 1958, and the Federal District Court had jurisdiction. Pp. 349-355.

(a) Notwithstanding the 1958 amendment which forbade the removal of state workmen's compensation cases from state courts to Federal District Courts, the District Court had jurisdiction to try this civil case originally filed therein, if the matter in controversy exceeded $10,000. Pp. 350-352.

(b) In view of the allegation in respondent's complaint that petitioner had claimed and would claim $14,035 and petitioner's failure to deny that allegation or to disclaim any part of his original claim, the amount in controversy exceeded $10,000. Pp. 352-354.

(c) Under the Texas Workmen's Compensation Law, as construed by the State Supreme Court, this suit was not an appeal from a state administrative order, and its dismissal by the District Court was not supportable on the ground that it was such an appeal. Pp. 354-355.

275 F.2d 148, affirmed.

Page 349

BLACK, J., lead opinion

MR. JUSTICE BLACK delivered the opinion of the Court.

This case raises questions under that part of 28 U.S.C. § 1332, as amended in 1958,1 which grants jurisdiction to United States District Courts of all civil actions between citizens of different States "where the matter in controversy exceeds the sum or value of $10,000, exclusive of interest and costs. . . ."

Petitioner, Horton, was injured while working for an employer in Texas insured by the respondent, liberty Mutual Insurance Company. Pursuant to the Texas Workmen's Compensation Law,2 petitioner filed a claim with the Texas Industrial Accident Board against his employer and the respondent insurance company alleging that he had been totally and permanently incapacitated and claiming the maximum recovery under the law of $35 per week for 401 weeks, or a total of $14,035. After administrative hearings, the Board decided that petitioner would be disabled for only 30 weeks, and accordingly made an award of only $1,050. Section 5 of Art. 8307 of the Texas Workmen's Compensation Law permits either the employee or the insurance company, if dissatisfied with an award, to "bring suit in the county where the injury occurred to set aside said final ruling," in which event the issues shall be determined "upon trial de novo, and the burden or [sic] proof shall be upon the party claiming compensation," but in no event shall the court allow recovery in excess of the statutory maximum of $14,035. Acting under this provision of state law, the respondent, on April 30, 1959, the very day of the award, filed this diversity case in the United States District Court to set aside the award, alleging that petitioner had claimed, was claiming, and would claim $14,035, but denying that petitioner was entitled to recover anything at all under Texas

Page 350

law. One week later, the petitioner, who also was dissatisfied with the award, filed an action in the state court to set aside the Board's award and to recover in that court the full $14,035. After that, petitioner moved to dismiss the respondent's federal court suit on the ground that the value of the "matter in controversy" was only the amount of the award, $1,050, and not the amount of his claim of $14,035, although he also contemporaneously filed, subject to his motion [81 S.Ct. 1572] to dismiss, what he designated as a compulsory counterclaim3 for the full amount he had claimed before the Texas Board and in his Texas State Court suit. The District Court held that the "matter in controversy" in the federal action was only the amount of the $1,050 award that the respondent company had asked the court to set aside. In so holding the District Court relied on National Surety Corp. v. Chamberlain,4 in which another District Court in Texas had reached the same conclusion as to jurisdiction largely on the basis of what it deemed to have been the purpose of Congress in enacting the 1958 amendment to 28 U.S.C. § 1332, which amendment rather severely cut down the jurisdiction of Federal District Courts, particularly in state workmen's compensation cases. The Court of Appeals reversed,5 and we granted certiorari to decide the important jurisdictional questions raised under the 1958 amendment.6

For reasons to be stated, we hold that the District Court has jurisdiction of the controversy.

First. It is true, as the Chamberlain opinion pointed out, that the purpose and effect of the 1958 amendment

Page 351

were to reduce congestion in the Federal District Court's partially caused by the large number of civil cases that were being brought under the longstanding $3,000 jurisdictional rule. This effort to reduce District Court congestion followed years of study by the United States Judicial Conference and the Administrative Office of the United States Courts, as well as by the Congress.7 To accomplish this purpose, the 1958 amendment took several different but related steps. It raised the requisite jurisdictional amount from $3,000 to $10,000 in diversity and federal question cases; it provided that a corporation is to be deemed a citizen not only of the State by which it was incorporated, but also of the State where it has its principal place of business; and, most importantly here, it also for the first time forbade the removal of state workmen's compensation cases from state courts to United States District Courts. By granting district judges a discretionary power to impose costs on a federal court plaintiff if he should "recover less than the sum or value of $10,000," the amendment further manifested a congressional purpose to discourage the trying of suits involving less than $10,000 in federal courts. In discussing the question of state workmen's compensation cases, the Senate Report on the amendment evidenced a concern not only about the problem of congestion in the federal courts, but also about trial burdens that claimants might suffer by having to go to trial in federal, rather than state, courts due to the fact that the state courts are likely to be closer to an injured worker's home, and may also

Page 352

provide him with special procedural advantages in workmen's compensation cases.8

The foregoing are some of the appealing considerations that led the District Court to conclude that it would frustrate the congressional purpose to permit insurers to file workmen's compensation [81 S.Ct. 1573] suits in federal courts when Congress had deliberately provided that such suits could not be removed to federal courts if filed by claimants in state courts. But after the most deliberate study of the whole problem by lawyers and judges, and after its consideration by lawyers on the Senate Judiciary Committee in the light of statistics on both removals and original filings,9 Congress used language specifically barring removal of such cases from state to federal courts and, at the same time, left unchanged the old language which just as specifically permits civil suits to be filed in federal courts in cases where there are both diversity of citizenship and the prescribed jurisdictional amount. In this situation we must take the intent of Congress with regard to the filing of diversity cases in Federal District Courts to be that which its language clearly sets forth. Congress could very easily have used language to bar filing of workmen's compensation suits by the insurer as well as removal of such suits, and it could easily do so still. We therefore hold that, under the present law, the District Court has jurisdiction to try this civil case between citizens of different States if the matter in controversy is in excess of $10,000.

Second. We agree with petitioner that determination of the value of the matter in controversy for purposes of federal jurisdiction is a federal question to be decided under federal standards,10 although the federal courts must, of course, look to state law to determine the nature

Page 353

and extent of the right to be enforced in a diversity case. It therefore is not controlling here that Texas has held that the crucial factor for allocating its cases among different state courts on an amount in controversy basis is the amount originally claimed before its State Compensation Board.11

The general federal rule has long been to decide what the amount in controversy is from the complaint itself, unless it appears or is in some way shown that the amount stated in the complaint is not claimed "in good faith."12 In deciding this question of good faith, we have said that it "must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal."13 The complaint of the respondent company filed in the District Court, while denying any liability at all and asking that the award of $1,050 against it be set aside, also alleges that petitioner Horton has claimed, now claims, and will claim that he has suffered total and permanent disability, and is entitled to a maximum recovery of $14,035, which, of course, is in excess of the $10,000 requisite to give a...

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