Ce Design Ltd. v. Am. Econ. Ins. Co.

Decision Date19 June 2014
Docket NumberNo. 13–1080.,13–1080.
Citation755 F.3d 39
PartiesCE DESIGN LTD., Plaintiff–Appellant, v. AMERICAN ECONOMY INSURANCE COMPANY, Defendant–Appellee, and Ernida, LLC, Defendant.
CourtU.S. Court of Appeals — First Circuit

OPINION TEXT STARTS HERE

David M. Oppenheim, with whom Brian J. Wanca, Jeffrey A. Berman, Anderson + Wanca, Alan L. Cantor and Swartz & Swartz, P.C. were on brief, for the appellant.

Myles W. McDonough, with whom Christopher M. Reilly, Ryan B. MacDonald and Sloane and Walsh, LLP were on brief, for the appellee.

Before HOWARD, STAHL, and THOMPSON, Circuit Judges.

THOMPSON, Circuit Judge.

This is an appeal from a dismissal of an action for declaratory judgment. Because, as a threshold issue, we have an obligation to ascertain sua sponte the existence of federal subject-matter jurisdiction, we asked the parties for supplemental briefing on how (or whether) the plaintiff-appellant's claim in this action met the $75,000 amount-in-controversy requirement for diversity jurisdiction. Finding federal jurisdiction wanting, we remand this case to the district court with instructions to dismiss.

BACKGROUND

In 2008, plaintiff-appellant CE Design Ltd. (CE) filed a class action suit in the Circuit Court of Cook County, Illinois, on behalf of itself and others similarly situated, against Ernida, LLC. The complaint alleged violations of the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227, the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 Ill. Comp. Stat. 505/2, and common law conversion. CE claimed that Ernida had faxed unsolicited advertisements to CE and “more than 39 other recipients,” without first obtaining their permission. CE sought damages, including statutory damages of $500 for each violation of the TCPA, as well as costs, and any further relief the court deemed just and proper. The complaint specifically disclaimed any individual recovery in excess of $75,000.1After being notified of this suit, Ernida's insurer, American Economy Insurance Company (American), took up Ernida's defense in Cook County, explicitly reserving its rights to withdraw from the defense and to deny coverage.

With the Cook County action still ongoing, CE then filed suit in federal court against American, seeking a declaratory judgment on American's duty to defend Ernida in the Cook County action and American's responsibility to indemnify and pay any judgment entered in that action against Ernida.2 Ernida is also a named defendant in the federal suit. CE asserted diversity jurisdiction under 28 U.S.C. § 1332.

American moved to dismiss CE's federal action for lack of a justiciable controversy and for failure to state a claim on which relief could be granted; alternatively, it asked the court to exercise its discretion under the Declaratory Judgment Act, 28 U.S.C. §§ 2201–2202, and decline to enter declaratory relief. The district court granted American's motion, holding CE had not presented a justiciable controversy. Applying Illinois law, it found CE did not have a cognizable injury for standing purposes because “an injured claimant generally has no direct rights against the insurer prior to a judgment of the tortfeasor's liability,” and the Cook County court had yet to issue a judgment against Ernida.3 This appeal followed.

Both parties filed appellate briefs, focusing on the issues addressed by the district court in its order granting American's motion to dismiss. However, in an extended footnote, American raised a jurisdictional amount challenge, questioning whether CE's claim met the amount-in-controversy requirement for diversity jurisdiction since CE had expressly waived any right to recover anything over $75,000 in its Cook County complaint. This jurisdictional challenge went unanswered in CE's reply brief. During oral argument, we asked CE's appellate counsel whether and how his client's claim reached the amount-in-controversy requirement of $75,000. Without a satisfactory answer, we ordered the parties to file supplemental briefs on the issue.

In its supplemental brief, CE maintains federal jurisdiction exists because the object of this litigation is to obtain indemnity coverage, and the pecuniary burden on the insurer (i.e., American's overall potential payout to all putative class members 4 in the Cook County action) exceeds the minimum jurisdictional amount. American now squarely contests subject-matter jurisdiction, arguing CE's claim does not meet the amount-in-controversy requirement because it waived all individual damages in excess of $75,000 in the Cook County complaint, and because it cannot aggregate its claim with the claims of other putative class members in the Cook County action to reach the required minimum.5

DISCUSSION

As a court of limited jurisdiction, we have “a responsibility to police the border of federal jurisdiction.” Spielman v. Genzyme Corp., 251 F.3d 1, 4 (1st Cir.2001). Even where “no party has questioned whether the district court had jurisdiction to rule in [a] case, it is well established that [we] have a duty to ensure that [federal district courts] are not called upon to adjudicate cases which in fact fall outside the jurisdiction conferred by Congress.” Esquilín–Mendoza v. Don King Prods., Inc., 638 F.3d 1, 3 (1st Cir.2011).

When an action is brought in federal court pursuant to diversity jurisdiction, jurisdiction lies only “where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs.” 28 U.S.C. § 1332. The burden is on the federal plaintiff to establish that the minimum amount in controversy has been met. Abdel–Aleem v. OPK Biotech LLC, 665 F.3d 38, 41 (1st Cir.2012). A plaintiff's good faith allegation of damages meeting the required amount in controversy is usually enough. Id. And [t]he inability of plaintiff to recover an amount adequate to give the court jurisdiction does not show his bad faith or oust the jurisdiction.” Esquilín–Mendoza, 638 F.3d at 4 (quoting St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289, 58 S.Ct. 586, 82 L.Ed. 845 (1938)). However, “where it appears ‘to a legal certainty that the claim is really for less than the jurisdictional amount,’ dismissal is required.” Id. (quoting St. Paul Mercury Indem. Co., 303 U.S. at 289, 58 S.Ct. 586).

Amount in controversy is usually assessed from the viewpoint of the plaintiff. See, e.g., Miles v. Funk, 259 Fed.Appx. 335, 337 (1st Cir.2008) (per curiam) (unpublished) (finding only three plaintiffs were “involved in the litigation” when assessing the value of the matter in controversy); see also Richard C. Young & Co., Ltd. v. Leventhal, 389 F.3d 1, 3 (1st Cir.2004) (considering the value of the object of the litigation in a case involving both declaratory and injunctive relief from the plaintiff's perspective). The amount in controversy in actions seeking declaratory relief “is the value of the right or the viability of the legal claim to be declared, such as a right to indemnification or a duty to defend.” 14AA Charles Alan Wright et al., Federal Practice and Procedure § 3708 (4th ed.). As a general rule, multiple plaintiffs cannot aggregate their separate individual claims to meet the jurisdictional amount threshold. See Zahn v. Int'l Paper Co., 414 U.S. 291, 294–95, 94 S.Ct. 505, 38 L.Ed.2d 511 (1973), superseded by 28 U.S.C. § 1367 on other grounds, as stated in Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 125 S.Ct. 2611, 162 L.Ed.2d 502 (2005).6 A limited exception to this rule exists where “several plaintiffs unite to enforce a single title or right, in which they have a common and undivided interest.” Id. at 294, 94 S.Ct. 505 (quoting Troy Bank of Troy, Indiana v. G.A. Whitehead & Co., 222 U.S. 39, 40–41, 32 S.Ct. 9, 56 L.Ed. 81 (1911)). In that instance, “it is enough if their interests collectively equal the jurisdictional amount.” Id. (quoting Troy Bank, 222 U.S. at 41, 32 S.Ct. 9) (internal quotation mark omitted). For this exception to apply, the interest must be both common and undivided. See Everett v. Verizon Wireless, Inc., 460 F.3d 818, 824 (6th Cir.2006) (“A common interest in a litigation recovery thus represents a necessary, but by itself insufficient, ground to qualify claims for aggregation.”). Courts have found that individually cognizable and calculable claims do not fit the exception. See, e.g., Travelers Prop. Cas. v. Good, 689 F.3d 714, 720 (7th Cir.2012) ( [W]here the plaintiffs' claims are ‘cognizable, calculable, and correctable individually,’ ... they are clearly ‘separate and distinct’ and may not be aggregated to meet the amount in controversy.” (citation omitted)).

We first questioned the amount in controversy in this case at oral argument with the anti-aggregation rule in mind. CE appeared to rely on the claims of the other putative class members in the Cook County action, presumably because its individual claim cannot reach $75,000. Again, CE had expressly waived any relief over $75,000 in the Cook County complaint.

As the party seeking to invoke jurisdiction, CE has the burden of showing it has met the amount-in-controversy requirement. See Spielman, 251 F.3d at 4. Recognizing the anti-aggregation rule would otherwise bar jurisdiction, CE makes two distinct arguments as to why this rule is inapplicable in this case. First, CE argues the “common and undivided interest” exception to this rule applies here. Second, CE argues we should not assess the value of the object of the litigation for our amount-in-controversy determination from the plaintiff's viewpoint (which would require the aggregation of its claims with those of the other putative class members in the Cook County action), but rather from the defendant's perspective. We are not persuaded by either argument.

As to the first argument, CE fails to show us how this case falls within the “common and undivided interest” exception. CE limits its exposition to the following: “CE Design seeks to vindicate the class's common and undivided interest in...

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