American Mut. Liab. Ins. Co. v. CAMPBELL LBR. MFG. CORP.

• Decision Date: 12 August 1971
• Docket Number: Civ. A. No. 13850.
• Citation: 329 F. Supp. 1283
• Parties: AMERICAN MUTUAL LIABILITY INSURANCE COMPANY v. CAMPBELL LUMBER MANUFACTURING CORPORATION.
• Court: U.S. District Court — Northern District of Georgia

329 F. Supp. 1283

AMERICAN MUTUAL LIABILITY INSURANCE COMPANY v. CAMPBELL LUMBER MANUFACTURING CORPORATION.

Civ. A. No. 13850.

United States District Court, N. D. Georgia, Atlanta Division.

August 12, 1971.

Lipshutz, Macey, Zusmann & Sikes, Atlanta, Ga., for plaintiff.

Campbell & Campbell, Covington, Ga., for defendant.

ORDER

RICHARD C. FREEMAN, District Judge.

This is an action in one count for the alleged unpaid and due balance on insurance contracts.¹ Jurisdiction is alleged on the basis of diversity of citizenship. 28 U.S.C. § 1332(a). The case has been submitted to the court on plaintiff's motion for summary judgment, defendant's motion to dismiss and defendant's motion for summary judgment.

As the granting of the motion to dismiss would obviate the need to rule on the remaining pending motions, the court will first consider defendant's motion for dismissal on the ground that the court does not have jurisdiction of the subject matter.

The federal district courts are, of course, courts of limited jurisdiction. In cases brought in federal court because of diversity of citizenship, 28 U.S.C. § 1332(a) provides that the matter in controversy must exceed the sum of TEN THOUSAND DOLLARS ($10,000.00), exclusive of interests and costs. If the matter in controversy does not exceed that amount, this court has no jurisdiction over the subject matter of this action.

In the complaint plaintiff alleged that defendant owed plaintiff ELEVEN THOUSAND FIVE HUNDRED NINETY & 07/100 ($11,590.07), the unpaid balance on two insurance policies. However, plaintiff now states that as a result of discovery it has learned that the maximum amount in controversy is EIGHT THOUSAND NINE HUNDRED SIXTY & 74/100 ($8,960.74), or ONE THOUSAND THIRTY NINE & 26/100 ($1,039.26) less than the requisite jurisdictional amount.

The question posed for the court, then, is as follows: If a claim is brought which asserts that the amount in controversy exceeds the jurisdictional minimum but plaintiff subsequently learns, as a result of discovery, that the maximum amount in controversy is less than the statutory jurisdictional minimum, should the district court grant a motion to dismiss for lack of subject matter jurisdiction?

The leading case in this area is St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 58 S.Ct. 586, 82 L.Ed. 845 (1938), in which the Supreme Court set down the general rules applicable here:

The rule governing dismissal for want of jurisdiction in cases brought in the federal court is that, unless the law gives a different rule, the sum claimed by the plaintiff controls if the claim is apparently made in good faith. It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal. The inability of plaintiff to recover an amount adequate to give the court jurisdiction does not show his bad faith or oust the jurisdiction. Nor does the fact that the complaint discloses the existence of a valid defense to the claim. But if, from the face of the pleadings, it is apparent, to a legal certainty, that the plaintiff cannot recover the amount claimed or if, from the proofs, the court is satisfied to a like certainty that the plaintiff never was entitled to recover that amount, and that his claim was therefore colorable for the purpose of conferring jurisdiction, the suit will be dismissed. At 288-289, 58 S.Ct. at 590.

In most cases, then, when the plaintiff asserts that the claim is for more than TEN THOUSAND DOLLARS ($10,000.00), the question of subject matter jurisdiction is not seriously considered. Courts are reluctant to look into the merits of a case before trial in order to ascertain whether or not the plaintiff does, in fact, have an arguable claim in excess of the jurisdictional amount. Especially when damages are unliquidated and therefore uncertain, all that is generally required to obtain federal jurisdiction is that the plaintiff assert the claim in good faith. Jones v. Landry, 387 F.2d 102 (5th Cir. 1967).

While the defendant has made some suggestion in his proposed findings of fact that the claim was not made in good faith but was inflated merely for the purpose of acquiring federal jurisdiction, the court finds ample substantiation for plaintiff's assertion of subjective good faith. The amount claimed was arrived at by the use of an estimation formula for computing premiums due whenever certain records are not available. The affidavit of plaintiff's auditor explains that the calculation was based on the contract price between defendant and its subcontractors. The use of a standard company procedure indicates that the estimate of the amount claimed was not inflated merely to obtain federal jurisdiction.

However, as was held by the Fifth Circuit in Jones v. Landry, 387 F. 2d 102 (5th Cir. 1967), plaintiff's subjective good faith is not controlling; the appropriate legal test of plaintiff's good faith is not his subjective state of mind but a very strict objective standard. A showing that, as a legal certainty, plaintiff cannot recover the jurisdictional amount is evidence that the claim does not meet the standard of objective good faith. With an objective reading of the "good faith" requirement of St. Paul, the good faith test and the legal certainty test then become equivalent. Jones v. Landry, supra.

While in the majority of cases the amount recoverable is not ascertainable except after a trial on the merits, there are some...