Liberty Mut. Ins. Co. v. Ward Trucking Corp.

• Decision Date: 10 April 1995
• Docket Number: No. 94-3377,94-3377
• Citation: 48 F.3d 742
• Parties: LIBERTY MUTUAL INSURANCE COMPANY and Liberty Mutual Fire Insurance Company, Petitioners, v. WARD TRUCKING CORP., Respondent and The Honorable Gustave Diamond, District Judge, United States District Court for the Western District of Pennsylvania, Nominal Respondent.
• Court: U.S. Court of Appeals — Third Circuit

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48 F.3d 742 63 USLW 2535 LIBERTY MUTUAL INSURANCE COMPANY
and
Liberty Mutual Fire Insurance Company, Petitioners,
v.
WARD TRUCKING CORP., Respondent
and
The Honorable Gustave Diamond, District Judge, United States
District Court for the Western District of
Pennsylvania, Nominal Respondent. No. 94-3377. United States Court of Appeals,
Third Circuit. Argued Nov. 8, 1994.
Decided Feb. 24, 1995.
As Amended April 10, 1995.

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Edward A. Greenberg (argued), Daller, Greenberg & Dietrich, Fort Washington, PA, for petitioners.

Arlin M. Adams (argued), Carl A. Solano, Schnader, Harrison, Segal & Lewis, Philadelphia, PA, Daniel D. Harshman, Pietragallo, Bosick & Gordon, Pittsburgh, PA, for respondent.

Before: BECKER, MANSMANN and ALITO, Circuit Judges.

OPINION OF THE COURT

MANSMANN, Circuit Judge.

This case comes to us by way of a petition for writ of mandamus filed by the defendants Liberty Mutual Insurance Company and Liberty Mutual Fire Insurance Company (collectively, "Liberty Mutual"). Faced with Liberty Mutual's second notice of removal based on diversity jurisdiction, the United States District Court for the Western District of Pennsylvania granted Plaintiff Ward Trucking Company's ("Ward") motion for remand without giving Liberty Mutual an opportunity to respond. Liberty Mutual asserts that in doing so, the district court acted without authority, and asks for our review. We are, therefore, once again required to address the parameters of a district court's statutorily defined power to remand under 28 U.S.C. Sec. 1447(c) and the scope of Congress' prohibition on appellate review of remand orders set forth in 28 U.S.C. Sec. 1447(d).

I.

On May 11, 1993, Ward instituted a civil action by writ of summons in the Court of Common Pleas of Allegheny County, Pennsylvania against Liberty Mutual, its insurers. ¹ Thereafter, Ward filed a seven-count complaint in assumpsit and tort, asserting that Liberty Mutual mishandled claims, reserves and premiums under various insurance policies. Paragraph 52 of the complaint

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stated that "the amount of damages resulting from the breach of duty and/or breach of contract are presently unknown ...", and the ad damnum clause in six of the seven counts requested an unspecified amount in damages in excess of the jurisdictional limits of the Arbitration Division of the Court of Common Pleas, currently $25,000.

Count III of the complaint set forth a claim under Pennsylvania's Bad Faith Statute, 42 Pa.C.S.A. Sec. 8371, which authorizes an action for an insurer's bad faith toward its insured and allows for an award of interest on the claim at issue in the amount equal to the prime rate of interest plus 3%, punitive damages and the assessment of attorneys fees. Count III's ad damnum clause requested "an amount exceeding the jurisdictional limits of [the Court of Common Pleas], inclusive of interest equal to prime plus 3%, punitive damages, costs and attorneys fees."

On July 7, 1993, Liberty Mutual filed a notice of removal with the United States District Court for the Western District of Pennsylvania, alleging federal diversity jurisdiction under 28 U.S.C. Sec. 1332. While both the writ and the complaint, which were attached to the notice of removal, stated that Ward is a Pennsylvania citizen and Liberty Mutual is a citizen of Massachusetts, neither document showed that Ward's damages exceed $50,000, the amount in controversy requirement of federal diversity jurisdiction. Consequently, in an attempt to establish this monetary threshold, Liberty Mutual attached counsel's affidavit to its removal notice, setting forth his personal belief that Ward's damages were greater than $50,000.

On July 19, 1993, Ward filed a motion to remand, which was subsequently amended on August 2, 1993, challenging, inter alia, Liberty Mutual's failure to show the requisite amount of damages for diversity jurisdiction. On July 28, 1993, Liberty Mutual filed a response to Ward's original remand motion and on August 20, 1993, responded to Ward's amended motion. On November 3, 1993, the district court issued a memorandum opinion and order, granting Ward's amended motion to remand and returning the case to state court. Citing our decision in Foster v. Mutual Life Marine & Inland Ins. Co., 986 F.2d 48 (3d Cir.1993), ² the district court rejected counsel's affidavit as evidence of Ward's damages, and held that because the writ and complaint included in Liberty Mutual's notice of removal did not establish the amount in controversy necessary to support federal jurisdiction, remand was in order.

In the course of subsequent discovery, Liberty Mutual obtained Ward's response to a document request which stated that Ward incurred $156,045.89 in attorneys fees arising out of its dispute with Liberty Mutual for the years 1987 to 1993. ³

On April 6, 1994, Liberty Mutual filed a second notice of removal, attaching Ward's discovery response regarding attorneys fees for the purpose of establishing the required federal jurisdictional monetary amount. On April 28, 1994, Ward followed with a motion to remand, asserting, inter alia, that Liberty Mutual's second removal notice failed to establish that Ward's damages exceed $50,000. Without giving Liberty Mutual an opportunity to respond, the district court granted Ward's motion. In a memorandum opinion and order dated May 9, 1994, the district court again cited to Foster, 986 F.2d at 48, and concluded that Ward's discovery response could not be used to demonstrate the amount in controversy requirement of diversity jurisdiction. Referring to its prior remand opinion, the district court found that Liberty Mutual's second removal suffered from the same deficiency as the first, and concluded that remand was required. Thus,

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the district court issued an order returning the case to the state Court of Common Pleas.

Liberty Mutual then filed a petition for writ of mandamus, requesting that we direct the district court to vacate the May 9, 1994 remand order; reinstate the case and permit Liberty Mutual an opportunity to respond to Ward's remand motion; and find that Ward's discovery response constitutes "other paper" under the second paragraph of section 1446(b), which may establish removability. Ward, in turn, filed a motion for damages for frivolous appeal pursuant to Fed.R.App.P. 38.

II.

The threshold question before us is whether we have jurisdiction to review the district court's remand order. We must determine whether the district court's decision to remand, which was made without giving Liberty Mutual the opportunity to respond to Ward's motion may be considered in light of the bar to appellate review of remand orders set forth in section 1447(d).

We turn first to the removal statutes, particularly the history of section 1447(d).

A.

Congress enacted a comprehensive statutory scheme for the removal of state court actions to federal court. 28 U.S.C. Secs. 1441-1452. Section 1441(a) provides in pertinent part:

Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.

Section 1446 sets forth the procedure for removing a case to federal court, and section 1447 covers procedure after removal has occurred. Section 1447(c) specifically provides for the remand of a case that has been removed under section 1446 and delineates two categories for removal: (1) a "defect in the removal procedure" and (2) the absence of subject matter jurisdiction:

(c) A motion to remand the case on the basis of any defect in removal procedure must be made within 30 days after the filing of the notice of removal under section 1446(a). If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.

Section 1447(d), which speaks to the reviewability of remand orders, severely circumscribes our authority to review by providing that except for civil rights cases removed pursuant to 28 U.S.C. Sec. 1443, "[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise...." By adopting section 1447(d) and its statutory predecessors, Congress sought to make the judgment of a district court remanding a case final and conclusive in order to avoid the delay caused by appellate review of remand decisions. United States v. Rice, 327 U.S. 742, 751-52, 66 S.Ct. 835, 838-39, 90 L.Ed. 982 (1946). In keeping with this policy, until 1976, section 1447(d) was construed to prohibit review of all remand orders without exception. In re TMI Litigation Cases Consolidated II, 940 F.2d 832, 840 (3d Cir.1991), cert. denied, --- U.S. ----, 112 S.Ct. 1262, 117 L.Ed.2d 491 (1992).

In 1976, the Supreme Court decided Thermtron Prod., Inc. v. Hermansdorfer, 423 U.S. 336, 96 S.Ct. 584, 46 L.Ed.2d 542 (1976). There, the district court had remanded a case removed from state court on the basis of an overcrowded docket. The plaintiffs sought a writ of mandamus from the Court of Appeals for the Sixth Circuit compelling the district court to exercise jurisdiction over the action. The court of appeals denied the petition, relying on the bar to review in section 1447(d).

Reversing, the Supreme Court concluded that section 1447(d) operates to preclude review of only those remand orders which rely on the grounds contained in the controlling statute, section 1447(c). The Court held that sections 1447(c) and 1447(d) must be read together and that "only remand orders issued under Sec. 1447(c) and invoking the

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grounds specified therein ... are immune from review under Sec. 1447(d)." Id. at 346, 96 S.Ct. at 590. Acknowledging that it had declared an exception to the seemingly absolute prohibition to review...