Abs Ins., Ltd. v. National Union Fire Ins. Co.

• Decision Date: 21 June 1999
• Citation: 51 F.Supp.2d 762
• Parties: ABS INSURANCE, LTD., et al., Plaintiffs, v. NATIONAL UNION FIRE INSURANCE COMPANY, Insurance Company of the State of Pennsylvania, and AIG Risk Managers, Inc., Defendants.
• Court: U.S. District Court — Eastern District of Texas

Page 762

51 F.Supp.2d 762

ABS INSURANCE, LTD., et al., Plaintiffs, v. NATIONAL UNION FIRE INSURANCE COMPANY, Insurance Company of the State of Pennsylvania, and AIG Risk Managers, Inc., Defendants.

United States District Court, E.D. Texas, Marshall Division.

June 21, 1999.

Werner A. Powers, Hughes & Luce, Dallas, TX, for plaintiffs.

John L. Ross, Harrison Henry Yoss, Thompson, Coe, Cousins & Irons, Dallas, TX, for defendants.

ORDER DENYING MOTION TO REMAND

HEARTFIELD, District Judge.

Before this Court is Plaintiff's Motion to Remand and for Relief from Pretrial Disclosure Requirements [4]. Having considered the motion, the response, the reply to the response, the surreply, and the arguments of counsel, this Court DENIES Plaintiff's Motion to Remand and for Relief from Pretrial Disclosure Requirements [4].

1. Procedural History

On January 22, 1997 Plaintiff ABS Insurance, Ltd., a Cayman Islands reinsurance company, and several of its stockholders (collectively referred to as "ABS") sued Defendants National Union Fire Insurance Company, Insurance Company of the State of Pennsylvania, and AIG Risk Managers, Inc. (collectively referred to as "AIG") in the 71st District Court, Harrison County, Texas (state Cause No. 97-0074) (the "Texas state-court lawsuit"). This Texas state-court lawsuit was not served upon AIG until March 18, 1999. However, one day before being served with the already filed Texas state-court lawsuit, AIG sued ABS in the United States District Court for the Southern District of New York (the "New York federal-court lawsuit"). It appears that both of these lawsuits between ABS and AIG may concern the same reinsurance agreement entered into by the parties.¹ Nevertheless, on April 7, 1999, AIG removed the Texas state-court lawsuit to this federal court alleging diversity of citizenship and an amount in controversy exceeding seventy-five thousand dollars ($75,000.00) under Title 28 U.S.C. §§ 1441(a) and 1332(a). What's the problem? ABS' Texas state-court petition did not state an amount of damages they were seeking. Thus, ABS filed its Motion to Remand and for Relief from Pretrial Disclosure Requirements [4] wherein it argues its un-stated damages are less than seventy-five thousand dollars ($75,000.00), thereby placing this case in state court — not federal court. AIG argues the reverse. AIG argues that ABS' unstated damages are greater than seventy-five thousand dollars ($75,000.00), thereby placing this case in federal court — not state court. ABS is wrong and AIG is right. This case belongs in federal court.

2. Facts

Under a captive insurance program established by ABS's parent, Allied Building Stores, Inc., ABS procured general liability, auto liability, and workers' compensation insurance coverage from AIG. Under a reinsurance agreement between ABS and AIG, ABS reinsured the first two hundred fifty thousand dollars ($250,000.00) per occurrence per line of business sustained under the various policies issued by AIG to ABS. ABS posted security for its potential reinsurance obligations. Specifically, ABS posted irrevocable letters of credit for AIG's benefit. AIG had the right to draw down on these letters of credit to obtain reimbursement for losses within the two hundred fifty thousand dollar ($250,000.00) amount reinsured by ABS for losses which AIG paid but ABS refused to reimburse. ABS alleges that certain claims were settled by AIG for amounts far in excess of their true value and the values assigned to such claims by AIG's third-party administrator, Alexsis, Inc.

ABS argues that, as a result of the alleged overpayment of these claims by AIG, ABS' historical loss experience was adversely affected. This historical loss experience is a factor used to calculate the reinsurance premiums that it paid to reinsure ABS' two hundred fifty thousand dollar ($250,000.00) liability under the insurance program ABS bought on behalf of its stockholders. Thus, ABS alleges that because these claims were over-payed, it has been, and will continue to be, forced to pay substantially greater premiums to reinsure the two hundred fifty thousand dollar ($250,000.00) per occurrence obligation under the insurance program. Further, ABS alleges that its increased reinsurance premiums have resulted, and will continue to result, in substantial damages to its stockholders in the form of decreased profits available to pay dividends. Moreover, ABS alleges that AIG's overpayment of claims has resulted in further damages to its stockholders in the form of increases in premiums that the policyholders paid to procure workers' compensation insurance, general liability insurance, or both.

In its Plaintiffs' Original Petition ABS does not state any specific amount of damages sought. However, ABS does seek (in an unspecified amount): recovery of actual damages constituting past and future decreased profits and past and future increases in premiums that ABS has paid and will pay to procure insurance, statutory double damages under Texas Insurance Code, Article 21.21, punitive damages, pre-and post-judgment interest, court costs, and attorneys' fees. Plaintiffs' Original Petition, ¶¶ 87, 88, 89, 101, 102, and 109. So, does Plaintiffs' Original Petition plead an amount in excess of the jurisdictional limits of this Court (seventy-five thousand dollars ($75,000.00)) despite failing to plead a specific amount of damages? Yes, it does.

3. Law of Removal

Whether or not removal was proper is determined "on the basis of claims in the state court complaint as it exists at the time of removal ..." Cavallini v. State Farm Mutual Auto Ins., 44 F.3d 256, 264 (5th Cir.1995); see Nolan v. Boeing, 919 F.2d 1058, 1063 fn. 5 (5th Cir.1990) ("In removed cases, the existence of federal subject matter jurisdiction is determined at the time of removal."). This rule is, to say the least, well-grounded. In 1914, the Supreme Court wrote:

Whether a case is one arising under the Constitution or a law or treaty of the United States, in the sense of the jurisdictional statute ... must be determined from what necessarily appears in the plaintiff's statement of his own claim in the bill or declaration, unaided by anything alleged in anticipation or avoidance of defenses which it is thought the defendant may interpose.

Taylor v. Anderson, 234 U.S. 74, 75-76, 34 S.Ct. 724, 58 L.Ed. 1218 (1914). Moreover, once a defendant properly removes a case to federal court, a plaintiff may not defeat that removal by simply amending the complaint. Cavallini, supra, at 265 ("... [R]emoval jurisdiction should be determined on the basis of the state court complaint at the time of removal, and ... a plaintiff cannot defeat removal by amending it."); see Robinson v. Quality Ins., 633 F.Supp. 572, 577 (S.D.Ala.1986) ("[A]ction by a plaintiff subsequent to removal cannot deprive this Court of jurisdiction if the removal was proper when filed."); see also Brown v. Southwestern Bell, 901 F.2d 1250, 1254 (5th Cir.1990); Hammond v. Terminal R.R. Ass'n of St. Louis, 848 F.2d 95, 97 (7th Cir.1988), cert. denied, 489 U.S. 1032, 109 S.Ct. 1170, 103 L.Ed.2d 229 (1989) ("[R]emoval is not defeated by the fact that, after the case is removed, the plaintiff files a new complaint, deleting the federal claim or stating a claim that is not removable."); see also Holland/Blue Streak v. Barthelemy, 849 F.2d 987, 989 (5th Cir.1988) ("The assertion of a claim under a federal statute alone is sufficient to empower the District Court to assume jurisdiction over the case ...") (internal quotation omitted) (footnote citations omitted), quoted in Cervantez v. Bexar County Civil Service Comm'n, 99 F.3d 730, 733 (5th Cir.1996).

So, this Court must look to ABS' Plaintiffs' Original Petition as it existed at the time of removal in order to determine whether AIG's removal was proper. But how does this Court figure out whether ABS' complaint alleges damages sufficient to confer jurisdiction upon this Court? The Fifth Circuit:

In removal practice, when a complaint does not allege a specific amount of damages, the party invoking federal jurisdiction must prove by a preponderance of the evidence that the amount in controversy exceeds the jurisdictional amount. The district court must first examine the complaint to determine whether it is "facially apparent" that the claims exceed the jurisdictional amount. If it is not apparent, the court may rely on "summary judgment-type" evidence to ascertain the amount in controversy. Importantly, the jurisdictional facts must be judged as of the time the complaint is filed; subsequent events cannot serve to deprive the court of jurisdiction once it has attached.

St. Paul Reinsurance Co., Ltd. v. Greenberg, 134 F.3d 1250, 1253-54 (5th Cir.1998) (citing Allen v. R & H Oil & Gas Co., 63 F.3d 1326, 1335 (5th Cir.1995)) (footnotes omitted); see De Aguilar v. Boeing, Co., 47 F.3d 1404, 1411 (5th Cir.1995); Cross v. Bell Helmets, U.S.A., 927 F.Supp. 209, 213 (E.D.Tex.1996); HWJ v. Burlington Insurance Co., 926 F.Supp. 593 (E.D.Tex. 1996); Carnahan v. Southern Pacific Railroad Trans. Co., 914 F.Supp. 1430 (E.D.Tex.1995).² So, it's a two-step test. First, if it is "facially apparent" from the state court petition as it existed at the time of removal that the amount in controversy exceeds seventy-five thousand dollars ($75,000.00), the Defendant need only point this out to bear its burden for proper removal. But, if jurisdiction is not "facially apparent" from the state court petition as it existed at the time of removal, the Defendant must prove by a "preponderance of the evidence" the jurisdictional facts in question. De Aguilar, 11 F.3d at 58. Here, it is not facially apparent from Plaintiff's Original Petition that the amount in controversy exceeds seventy-five thousand dollars ($75,000.00). However, AIG has successfully demonstrated that the preponderance of the evidence indicates that this jurisdictional amount has been crossed.

4. Analysis

First, ABS argues,...