Back Doctors Ltd. v. Metro. Prop.

• Decision Date: 01 April 2011
• Docket Number: No. 11–8003.,11–8003.
• Citation: 637 F.3d 827
• Parties: BACK DOCTORS LTD., individually and on behalf of a class, Plaintiff–Respondent,v.METROPOLITAN PROPERTY AND CASUALTY INSURANCE COMPANY, Defendant–Petitioner.
• Court: U.S. Court of Appeals — Seventh Circuit

637 F.3d 827

BACK DOCTORS LTD., individually and on behalf of a class, Plaintiff–Respondent,

v.METROPOLITAN PROPERTY AND CASUALTY INSURANCE COMPANY, Defendant–Petitioner.

No. 11–8003.

United States Court of Appeals, Seventh Circuit.

Submitted March 4, 2011.Decided April 1, 2011.

Lisa M. Lilly, Attorney, Chicago, IL, Troy A. Bozarth, Attorney, Hepler Broom, Edwardsville, IL, Steven M. Levy, Attorney, SNR Denton U.S. LLP, Chicago, IL, for Petitioner.Richard J. Burke, Attorney, St. Louis, MO, Kevin T. Hoerner, Attorney, Becker, Paulson, Hoerner & Thompson, Belleville, IL, Lisa M. Lilly, Attorney, Paul M. Weiss, Attorney, Freed & Weiss, Chicago, IL, for Respondent.Before EASTERBROOK, Chief Judge, and ROVNER and EVANS, Circuit Judges.

EASTERBROOK, Chief Judge.

Back Doctors filed a suit in a state court of Illinois, contending that defendant, an insurer, uses software that pays medical providers less than the policies require the insurer to pay. Back Doctors contended that using this software violates not only the contracts between insurer and insured but also the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/2. Back Doctors is a provider of services, rather than an insured, and the statutory claim may encounter difficulties under Avery v. State Farm Mutual Automobile Insurance Co., 216 Ill.2d 100, 296 Ill.Dec. 448, 835 N.E.2d 801 (2005), but the suit's merits do not concern us now.

The insurer removed the litigation to federal court under amendments that the Class Action Fairness Act of 2005 made to 28 U.S.C. §§ 1332(d) and 1453. These provisions allow the removal of class actions in which the stakes exceed $5 million, provided that at least minimal diversity of citizenship exists. Back Doctors asked the district court to remand the proceeding, contending that the amount in controversy is less than $5 million. That the stakes exceed $2.9 million is undisputed; the insurer contended that punitive damages make up the balance. Back Doctors replied that its complaint does not expressly request punitive damages or allege that the insurer acted wantonly or maliciously. The state judiciary therefore would not award punitive damages, Back Doctors insisted, and the amount in controversy required for federal jurisdiction has not been established.

The district court remanded, stating that removal is disfavored, that doubts are construed against removal, and that the insurer has not established a “reasonable probability” that the amount in controversy exceeds $5 million. The insurer has asked for our permission to appeal, a step authorized by § 1453(c). We grant that request and, because the papers already on file adequately present the parties' arguments, we resolve the appeal summarily.

References to a “reasonable probability” of recovering the amount in controversy entered this circuit's jurisprudence in 1993 and, we thought, departed in 2006 with Meridian Security Insurance Co. v. Sadowski, 441 F.3d 536 (7th Cir.2006). Our 2006 opinion traced the phrase's origin and evolution in connection with the amount-in-controversy requirement and concluded that it had been misunderstood so frequently that it had to go. The Supreme Court held in St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 293, 58 S.Ct. 586, 82 L.Ed. 845 (1938), that allegations about the amount in controversy must be accepted unless it is impossible for the plaintiff to recover the jurisdictional minimum. Jurisdictional facts must be alleged and proved by a preponderance of the evidence; the phrase “reasonable probability,” when introduced by Shaw v. Dow Brands, Inc., 994 F.2d 364, 366 (7th Cir.1993), was designed to express that point. But many judges misunderstood the phrase as requiring the proponent of federal jurisdiction to establish that it was likely that the plaintiff would obtain a judgment exceeding the amount-in-controversy requirement.

We tried in Brill v. Countrywide Home Loans, Inc., 427 F.3d 446 (7th Cir.2005), to end the misunderstanding and confine the phrase to a search for what the plaintiff actually sought: “part of the removing party's burden is to show not only what the stakes of the litigation could be, but also what they are given the plaintiff's actual demands. That's the point of statements in our decisions that the removing litigant must show a reasonable probability that the stakes exceed the minimum. The demonstration concerns what the plaintiff is claiming (and thus the amount in controversy between the parties), not whether plaintiff is likely to win or be awarded everything he seeks.” 427 F.3d at 449 (emphasis in original; citations omitted). When this clarification proved to be insufficient, we decided in Sadowski to ditch the phrase. Sadowski was circulated to all judges under Circuit Rule 40(e) and has the status of an en banc decision, but confusion has continued, so we publish this short opinion to drive the point home. The legal standard was established by the Supreme Court in St. Paul Mercury: unless recovery of an amount exceeding the jurisdictional minimum is legally impossible, the case belongs in federal court. Only jurisdictional facts, such as which state issued a party's certificate of incorporation, or where a corporation's headquarters are located, need be established by a preponderance of the evidence.

There is no presumption against federal jurisdiction in general, or removal in particular. The Class Action Fairness Act must be implemented according to its terms, rather than in a manner that disfavors removal of large-stakes, multi-state class actions. When removing a suit, the defendant as proponent of federal jurisdiction is entitled to present its own estimate of the stakes; it is not bound by the plaintiff's estimate. See, e.g., Oshana v. Coca–Cola Co., 472 F.3d 506, 510–11 (7th Cir.2006); Rubel v. Pfizer, Inc., 361 F.3d 1016, 1020 (7th Cir.2004). Once this has been done, and supported by proof of any contested jurisdictional facts, the presumption is the one stated in St. Paul Mercury: the estimate of the dispute's stakes advanced by the proponent of federal jurisdiction controls unless a recovery that large is legally impossible. So the question here is not whether the class is more likely than not to recover punitive damages, but whether Illinois law disallows such a recovery. (If the class should be awarded punitive damages, even a one-to-one ratio of punitive to actual damages would result in a total award exceeding $5 million, if the class's position about actual damages is right.)

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