Adams v. Reliance Standard Life Ins.

• Decision Date: 19 September 2000
• Docket Number: No. 98-8094,98-8094
• Citation: 225 F.3d 1179
• Parties: (10th Cir. 2000) MARK ADAMS, Plaintiff-Appellee, v. RELIANCE STANDARD LIFE INSURANCE COMPANY, a Philadelphia corporation, Defendant-Appellant
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1179

225 F.3d 1179 (10th Cir. 2000)

MARK ADAMS, Plaintiff-Appellee, v. RELIANCE STANDARD LIFE INSURANCE COMPANY, a Philadelphia corporation, Defendant-Appellant.

No. 98-8094

UNITED STATES COURT OF APPEALS TENTH CIRCUIT

September 19, 2000

Appeal from the United States District Court for the District of Wyoming (D.C. No. 95-CV-43-J) [Copyrighted Material Omitted] Gary R. Scott of Hirst & Applegate, P.C., Cheyenne, Wyoming, for Defendant-Appellant.

Mitchell E. Osborn of Grant & Osborn, Cheyenne, Wyoming, for Plaintiff-Appellee.

Before LUCERO, Circuit Judge, McWILLIAMS, Senior Circuit Judge, and BROWN, Senior District Judge.^*

BROWN, Senior District Judge.

Reliance Standard Life Insurance Company ("Reliance") appeals a judgment in favor of plaintiff Mark Adams on Adams' claim for breach of contract. At issue is the district court's determination that Reliance misinterpreted the terms of a long term disability policy and thereby underpaid Adams on benefits due under the policy.

I.

The first issue we must address is whether this case falls within the subject matter jurisdiction of the federal courts. Throughout the lengthy history of this case, the parties and the district court apparently assumed the case arose under the court's diversity jurisdiction. See 28 U.S.C. § 1332. But the complaint did not even address federal jurisdiction and, although it alleged that plaintiff was a resident of Wyoming and that Reliance was an insurer domiciled in Pennsylvania and licensed to transact business in Wyoming as a foreign insurer, it contained no specific allegation that diversity jurisdiction existed or that the amount in controversy exceeded $50,000.¹ The closest it came was in a prayer for relief where it sought judgment "for a sum sufficient to invoke the jurisdiction of this court under F.R.C.P. § 28(c) 1242 [sic] ....".

In light of the limited subject matter jurisdiction granted to the federal courts by Congress, we have a duty to satisfy ourselves that jurisdiction is appropriate. See Cisneros v. ABC Rail Corp., 217 F.3d 1299, 1302 (10th Cir. 2000). Accordingly, after oral arguments we ordered the parties to brief the issue of subject matter jurisdiction. Unfortunately, the resulting briefs focused only on the parties' citizenship and not on the amount in controversy. Defendant's brief did not discuss the amount in controversy, and plaintiff's only mention of it was a cryptic assertion that the prayer for relief in the complaint was sufficient because it constituted an unchallenged general allegation that the amount in controversy was over the minimum. (Citing Gibbs v. Buck, 307 U.S. 66 (1939)). An open-ended prayer for recovery, however, is not an allegation that diversity jurisdiction exists or that the amount in controversy exceeds $50,000. See Gibson v. Jeffers, 478 F.2d 216, 221 (10th Cir. 1973) (plaintiff must allege sufficient damages to assure the district court that the jurisdictional requirement has not been "thwarted by the simple expedient of inflating the complainant's ad damnum clause."). Cf. Gibbs, 307 U.S. at 69 ("There was a formal allegation that the amount in controversy exceeded $3,000, exclusive of interests and costs.").

Faced with this apparent void, we remanded the case to the district court to conduct additional proceedings concerning the jurisdictional issue. In the course of a hearing on that issue (at which all present agreed the amount in controversy exceeded $50,000), the district court and counsel reviewed some of the factual allegations in the complaint. At the conclusion of the hearing, the district court entered an order finding diversity jurisdiction was present under § 1332 because the court "may infer from the pleadings filed in this case that the amount in controversy is over $50,000." The district court's order cited several facts in the complaint in support of this inference.

In the course of the aforementioned hearing, the district court noted a fact not otherwise appearing in the record before us: that the pretrial order in this case contained a specific finding that jurisdiction was appropriate under § 1332. Transcript Of May 17, 2000, Hearing at p 12.² Because a pretrial order supersedes the pleadings, we may consider this as a proper allegation of jurisdiction, even if the complaint was inadequate in that regard.³ In view of this allegation and the district court's finding, the question now before us is simply whether the record will support the court's finding. We are satisfied that the dispute is between citizens of different states, and so our discussion is limited only to the amount in controversy.

The rule governing dismissal for want of jurisdiction in federal court is that, unless the law provides otherwise, the amount claimed by the plaintiff controls if the claim is apparently made in good faith. St. Paul Indemnity Co. v. Red Cab Co, 303 U.S. 283, 288-89 (1938). It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal. Id. The burden is on the party asserting jurisdiction to show it is not a legal certainty that the claim is less than the jurisdictional amount. See Watson v. Blankinship, 20 F.3d 383, 386 (10th Cir. 1994). A plaintiff's allegations in the complaint alone can be sufficient to make this showing. "Although allegations in the complaint need not be specific or technical in nature, sufficient facts must be alleged to convince the district court that recoverable damages will bear a reasonable relation to the minimum jurisdictional floor." State Farm Mut. Auto. Ins. Co. v Narvaes, 149 F.3d 1269, 1272 (10th Cir. 1998) (quoting Gibson v. Jeffers, 478 F.2d 216, 221 (10th Cir. 1973)).

We stated in our order of May 4, 2000, that plaintiff's claim for breach of contract alleged he was underpaid the sum of $651.88 per month from July 1990 to the filing of his complaint on February 25, 1995, and we thus concluded he sought $35,853.40 in damages over this period. The district court accepted that figure as a starting point and went on to conclude that plaintiff's other claims for damages- including for statutory attorney's fees and emotional distress - could easily exceed the remaining $14,000 or so necessary to reach $50,000. Having reviewed the record before us, we now conclude - for a somewhat different reason - that plaintiff has made an adequate showing that the amount in controversy exceeded $50,000. In so finding, we note that we may have previously read the complaint too narrowly when we concluded that plaintiff only sought relief up to the date his complaint was filed. A further review of the record now persuades us that plaintiff also sought prospective relief relating to his benefits. Plaintiff alleged in the complaint that he "is contractually entitled to receive monthly disability benefits ... for as long as the Plaintiff remains totally disabled." Aplt. App. at 9. The complaint asserted that Reliance breached the contract by miscalculating plaintiff's monthly benefit and "[t]hus, since July of 1990, the Plaintiff has been underpaid by the sum of $651.88 per month." Id. It alleged that the breach "has resulted in the refusal to pay Plaintiff approximately 37% of the total benefits to which he is entitled." Id. at 11. The complaint alleged that "[a]s a result of Defendants' continuing breach of contract, the Plaintiff has incurred and sustained substantial loss," and it sought damages for "[a]ll benefits to which the Plaintiff was entitled and remain [sic] entitled to receive under his contract of insurance with Reliance" as well as "[s]uch other and further relief as the court may find equitable and just after hearing the evidence at trial." Id. at 12. It further alleges that the defendant breached a duty of good faith and fair dealing "because it did not, nor does it now, have a reasonable basis for refusing to pay the Plaintiff a monthly disability benefit" in the sum requested by plaintiff. Id. at 13. An attachment to the complaint showed that plaintiff had demanded that Reliance pay the allegedly past due benefits and that it make future payments in the amount asserted by plaintiff. Id. at 50. While the complaint certainly could have been drafted more clearly, these allegations may be fairly construed as seeking past and future relief concerning the payment of plaintiff's benefits. When the value of these disputed future benefits is taken into account, it is clear that the amount in controversy in fact exceeded $50,000 at the time the action was brought. Accordingly, any other issues relating to the amount in controversy are immaterial. In sum, the record supports the district court's finding, and we now conclude that we have subject matter jurisdiction over the dispute.

II.

Plaintiff Mark Adams was hired as a teacher with Laramie County School District No. 1 in 1986. In April of 1989, he became totally disabled, and thereupon became entitled to disability benefits under a group long term disability insurance policy that had been purchased by the School District from defendant Reliance Standard Life Insurance Company. Adams has received monthly disability payments from Reliance from the date of his initial disability to the present.

The policy covering Adams provided that the monthly disability benefit paid to an insured would be the lesser of: (1) "66 2/3% of Covered Monthly Earnings" or (2) "70% of your total earnings minus Other Income Benefits...." Aplt. App. at 31, 41.

According to a definition in the policy, "Covered Monthly Earnings" means "the Insured's basic monthly salary received from [the Employer] on the Policy anniversary just before the date of Total Disability. Covered Monthly Earnings do not include commissions, overtime pay, bonuses or any other special compensation not received as Covered Monthly Earnings." Aplt. App. at 32. The parties agree that plaintiff's Covered Monthly Earnings were $2,858.00 (from his annual base salary of...