Tapscott v. MS Dealer Service Corp.

• Decision Date: 20 March 1996
• Docket Number: No. 95-6055,95-6055
• Parties: Gregory TAPSCOTT, Jessie James Davis, Sharon West, Leroy Brown, Carrie L. Bowen, Ira P. Lewis, Bobby G. Shore, Minnie B. Shore, Sheila D. Ware, James R. Bickley, Inez T. Davis, Olivia Thompson, Emma Galloway, Marie A. Anderson, Lola D. Greer, Russell Thornton, Stephen H. Schoepflin, Robbie L. Langley, Tollie L. Isome, Larry Clark, Vanessa Mahone, Bobbie S. Kimbrell, Andrew Moreland, Jr., Robin A. Watkins, Angela McWaine, David W. Reyer, Plaintiffs-Appellants, North American Specialty Insurance Co., Intervenor, v. MS DEALER SERVICE CORP., Defendant, Lowe's Home Centers, Inc., Defendant-Appellee, Jim Burke Automotive, Inc., Mississippi Life Insurance Co., MS Casualty Insurance Co., Serra Automotive, Inc., d/b/a Serra Budget Center, Roadguard Motor Club Inc., etc., et al., Defendants, Ford Life Insurance Company, Ford Motor Company, Movants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1353

77 F.3d 1353

Gregory TAPSCOTT, Jessie James Davis, Sharon West, Leroy

Brown, Carrie L. Bowen, Ira P. Lewis, Bobby G. Shore, Minnie

B. Shore, Sheila D. Ware, James R. Bickley, Inez T. Davis,

Olivia Thompson, Emma Galloway, Marie A. Anderson, Lola D.

Greer, Russell Thornton, Stephen H. Schoepflin, Robbie L.

Langley, Tollie L. Isome, Larry Clark, Vanessa Mahone, Bobbie S. Kimbrell, Andrew Moreland, Jr., Robin A. Watkins, Angela McWaine, David W. Reyer, Plaintiffs-Appellants, North American Specialty Insurance Co., Intervenor, v. MS DEALER SERVICE CORP., Defendant, Lowe's Home Centers, Inc., Defendant-Appellee, Jim Burke Automotive, Inc., Mississippi Life Insurance Co.,

MS Casualty Insurance Co., Serra Automotive, Inc.,

d/b/a Serra Budget Center, Roadguard

Motor Club Inc., etc., et al.,

Defendants,

Ford Life Insurance Company, Ford Motor Company, Movants.

No. 95-6055.

United States Court of Appeals, Eleventh Circuit.

March 20, 1996.

Lanny S. Vines, Michael L. Allsup, Emond & Vines, Birmingham, AL, for Appellants.

Clifford Lee Reeves, Sirote & Permutt, Birmingham, AL, for Appellees.

Appeal from the United States District Court for the Northern District of Alabama.

Before TJOFLAT, Chief Judge, BLACK, Circuit Judge, and GOODWIN ^*, Senior Circuit Judge.

BLACK, Circuit Judge:

Appellants challenge the exercise of diversity jurisdiction by the federal district court over a state law action. Appellee Lowe's Home Centers (Lowe's) removed the putative class action, and the district court denied Appellants' motion to remand with respect to Lowe's. The district court held the amount-in-controversy requirement was satisfied by aggregating punitive damages and diversity of citizenship was not defeated by a fraudulent joinder. We affirm and hold where a plaintiff makes an unspecified claim for damages, the defendant must prove the amount in controversy by a preponderance of the evidence.

I. BACKGROUND

Appellant Gregory Tapscott, an Alabama resident, originally filed this state law class action against four defendants, one of which is an Alabama resident. On behalf of a putative class, Tapscott alleged violations of the Alabama Code, Ala.Code §§ 5-19-1, 5-19-19, & 5-19-20 (1975 & Supp.1995), common law and statutory fraud, Ala.Code § 6-5-100, et seq (1975), and civil conspiracy arising from the sale of "service contracts" on automobiles sold and financed in Alabama. Appellants' first amended complaint, alleging identical claims as the original complaint, added sixteen named plaintiffs and twenty-two named defendants.

A second amended complaint contained four additional named plaintiffs, including Appellants Jessie Davis and Sharon West, Alabama residents, and three additional named defendants, including Appellee Lowe's, a North Carolina resident. ¹ Unlike the initial and first amended complaints, which alleged violations arising from sales of service contracts in connection with the sale of automobiles, the second amended complaint alleged violations of the Alabama Code §§ 5-19-1, 5-19-19, and 5-19-20, arising from the sale of "extended service contracts" in connection with the sale of retail products. Davis and West are the putative plaintiff class representatives, ² and Lowe's is the putative defendant class representative for a "merchant" class. Appellants seek statutory damages, unspecified compensatory and punitive damages, and injunctive relief.

On August 18, 1994, Lowe's filed a notice of removal to the United States District Court for the Northern District of Alabama, asserting diversity jurisdiction under 28 U.S.C. § 1332. ³ Lowe's also filed a motion to sever the claims against Lowe's from the claims against the other defendants. On August 26, 1994, Appellants filed a motion to remand for lack of federal subject matter jurisdiction. In support of their motion to remand, Davis and West filed affidavits on October 11, 1994, purporting to limit their individual damages and those of any other class members to an amount not more than $49,000. Their attorney also filed an affidavit stating that no class member would seek more than $49,000 and that he would not attempt to obtain more than $49,000 by amendment or otherwise.

The district court granted Lowe's Motion to Sever and denied Appellants' Motion to Remand as to Lowe's. The action was remanded to state court as to all defendants except Lowe's. Appellants appeal the district court's order, and we have jurisdiction under 28 U.S.C. § 1292(b). ⁴

II. STANDARD OF REVIEW

The subject matter jurisdiction of the district court is a question of law subject to de novo review. Mutual Assur., Inc. v. United States, 56 F.3d 1353, 1355 (11th Cir.1995) (citing United States v. Perez, 956 F.2d 1098 (11th Cir.1992).

III. DISCUSSION

A. Burden of Proof

Any civil case filed in state court may be removed by the defendant to federal court if the case could have been brought originally in federal court. 28 U.S.C. § 1441(a). ⁵ A removing defendant has the burden of proving the existence of federal jurisdiction. We first decide what burden of proof the defendant must bear in demonstrating the amount-in-controversy requirement of diversity jurisdiction where the plaintiff has made an unspecified demand for damages.

This Court recently examined the burden of proving the amount in controversy for diversity jurisdiction:

In the typical diversity case, plaintiff files suit in federal court against a diverse party for damages exceeding $50,000. Such a case will not be dismissed unless it appears to a "legal certainty" that plaintiff's claim is actually for less than the jurisdictional amount. St. Paul's Indemnity Corp. v. Red Cab Co., 303 U.S. 283, 288-289, 58 S.Ct. 586, 590, 82 L.Ed. 845 (1938). In the typical removal case, a plaintiff files suit in state court seeking over $50,000. The defendant can remove to federal court if he can show, by a preponderance of the evidence, facts supporting jurisdiction. See McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 785, 80 L.Ed. 1135 (1936).

Burns v. Windsor Insurance Co., 31 F.3d 1092, 1094 (11th Cir.1994). In Burns, we held where a plaintiff has specifically claimed less than the jurisdictional amount in state court, a defendant, to establish removal jurisdiction, must prove to a "legal certainty" that the plaintiff would not recover less than $50,000 if she prevailed. ⁶ Id. at 1095. The rationale is that although a defendant has a right to remove in certain cases, a plaintiff is still master of her own claim. Id. Noting an attorney's twin duties to investigate his client's case and be candid with the court, we reasoned that a pleading containing a specific demand of damages and signed by a lawyer was due deference and a presumption of truth. Id. We concluded the defendant's burden was a "heavy one" and the legal certainty standard was therefore appropriate. Id. Any lesser burden would impermissibly expand federal diversity jurisdiction. Id. at 1096-97.

In contrast to Burns, the present case concerns an unspecified claim for damages. See Burns, 31 F.3d at 1096 n. 6 (noting that Burns was not a case where the amount of damages sought by plaintiff was unspecified). ⁷ Where a plaintiff has made an unspecified demand for damages, a lower burden of proof is warranted because there is simply no estimate of damages to which a court may defer. See also Gafford v. General Elec. Co., 997 F.2d 150, 160 (6th Cir.1993). ⁸ Nevertheless, a defendant's ability to remove a state case to federal court is not unfettered. The proper balance between a plaintiff's right to choose his forum and a defendant's right to remove, without unnecessarily expanding federal diversity jurisdiction, is struck by a "preponderance of the evidence" standard. As the Gafford Court stated:

It does not place upon the defendant the daunting burden of proving, to a legal certainty, that the plaintiff's damages are not less than the amount-in-controversy requirement. Such a burden might well require the defendant to research, state and prove the plaintiff's claim for damages. On the other end of the spectrum, requiring the defendant to prove that the amount in controversy "may" meet the federal requirement would effectively force the plaintiff seeking remand to prove in rebuttal that only a relatively small amount of damages is legally possible.

Gafford, 997 F.2d at 159 (footnote omitted). Thus, we hold where a plaintiff has made an unspecified demand for damages in state court, a removing defendant must prove by a preponderance of the evidence that the amount in controversy more likely than not exceeds the $50,000 jurisdictional requirement.

B. Amount in Controversy

We now turn to whether Appellee has established an amount in controversy exceeding $50,000 by a preponderance of the evidence. ⁹ Appellants have made a claim for punitive damages on behalf of a putative plaintiff class. If the punitive damages in this putative class action may be considered in the aggregate, then the amount in controversy will exceed the $50,000 requirement. ¹⁰

In Snyder v. Harris, 394 U.S. 332, 89 S.Ct. 1053, 22 L.Ed.2d 319 (1969), the Supreme Court held that aggregation is permissible to meet the amount-in-controversy requirement where "two or more plaintiffs unite to enforce a single title or right in which they have a common and undivided interest." 394 U.S. at 335, 89 S.Ct. at 1056. The corollary is that "separate and distinct" claims may not be aggregated to satisfy the jurisdictional requirement. Id. at 336, 89 S.Ct. at 1057. Despite the Court's belief that the "lower courts have developed largely workable standards for determining when claims are joint and common, and therefore entitled to be aggregated, and when they are separate and distinct and therefore not aggregable," Id. at 341, 89 S.Ct. at 1059, distinguishing a "common and undivided" interest from claims that are "separate and distinct" remains a difficult task in many cases. See generally ...