Commercial Coverage, Inc. v. Paradigm Ins. Co.

• Decision Date: 19 March 1998
• Docket Number: No. 4:97CV2418SNL.,4:97CV2418SNL.
• Citation: 998 F.Supp. 1088
• Parties: COMMERCIAL COVERAGE, INC., Plaintiff, v. PARADIGM INSURANCE CO., Defendant.
• Court: U.S. District Court — Eastern District of Missouri

998 F.Supp. 1088

COMMERCIAL COVERAGE, INC., Plaintiff, v. PARADIGM INSURANCE CO., Defendant.

No. 4:97CV2418SNL.

United States District Court, E.D. Missouri, Eastern Division.

March 19, 1998.

Stanley M. Brandmeyer, St. Louis, MO, for Plaintiff.

W. Dudley McCarter, III, Christopher L. Kanzler, Behr and Mantovani, St. Louis, MO, for Defendant.

MEMORANDUM AND ORDER

LIMBAUGH, District Judge.

Plaintiff originally brought this declaratory judgment action in state court. Plaintiff, an insurance broker and general agent for various insurance companies, avers that it entered into a "General Agent Agreement" with defendant, a commercial insurance provider. Plaintiff further avers that in accordance with the terms of this Agreement, it formally tendered a notice of termination of agreement to defendant; and along with this notice of termination, a formal demand for the return of proprietary information and materials that plaintiff had given to defendant during the course of their contractual relationship. Plaintiff contends that defendant has refused to return this information and materials, and further refuses to provided an accounting of the business generated by Plaintiff on behalf of the defendant with regard to a program of insurance called the "Artisan Insurance Program". Plaintiff filed this action seeking a preliminary injunction, accounting, and attorneys' fees arising out of the "General Agent Agreement" allegedly entered into between the parties.

Defendant removed the lawsuit to federal court on the basis of diversity jurisdiction. Shortly thereafter, defendant filed a motion to dismiss, or in the alternative, to stay and compel arbitration (# 6), filed December 10, 1997. In lieu of a formal response to the defendant's motion, plaintiff filed a motion to remand (# 8), filed December 31, 1997. Defendant filed a responsive pleading to the motion to remand. Consequently, presently pending before the Court is the defendant's motion to dismiss, or in the alternative, to stay and compel arbitration (# 6); and the plaintiff's motion to remand (# 8).

At this time, the Court will address only the plaintiff's motion to remand (# 8). If the Court grants the motion, the defendant's motion to dismiss, or in the alternative, to stay and to compel arbitration is a moot matter. However, if the Court should deny the plaintiff's motion to remand, plaintiff intends to file a separate response to the motion to dismiss (which the Court has indicated to counsel that it would grant plaintiff leave to file such a response).

Plaintiff contends that this lawsuit should be remanded to state court because it fails to meet the "amount in controversy" requirement for federal diversity jurisdiction; i.e. seeks only equitable relief.¹ Defendant contends that although no specific amount in damages is pled, the jurisdictional amount requirement is met for two (2) reasons: firstly, punitives and attorneys' fees are included in the computation of the jurisdictional amount; and secondly, this lawsuit involves the same subject matter involving over $400,000.00 currently being arbitrated in Cleveland, Ohio.² After careful consideration of the matter, the Court determines that this cause of action was improperly removed and should be remanded because defendant has failed to meet its burden in establishing that the jurisdictional amount has been met.

Defendant removed this action from state court under 28 U.S.C. § 1441(a) on the ground that the federal court has original diversity jurisdiction pursuant to 28 U.S.C. § 1332. There is no dispute that the diversity of citizenship requirement of § 1332(a) has been met. The issue before the Court is whether the jurisdictional amount; i.e. "amount in controversy" requirement is met.

Generally, the party asserting federal jurisdiction has the burden of establishing federal jurisdiction; thus, in the instant case, defendant Paradigm, as the removing party, has the burden of proving the jurisdictional amount. What the standard of proof for meeting this burden appears to be a matter of differing opinions in this circuit, especially in cases wherein the state court complaint does not specify the amount of damages sought or only contains a claim for more than a specified amount (which is less than the requisite federal jurisdictional amount). One standard utilized by some courts requires the party asserting federal jurisdiction to show to "a legal certainty" that the amount sought exceeds $75,000.00.³ Larkin v. Brown, 41 F.3d 387, 388 (8th Cir.1994); Allison et al. v. Security Benefit Life Ins. Co., 980 F.2d 1213, 1215 (8th Cir.1992); Visintine v. Saab Automobile A.B., 891 F.Supp. 496, 497 (E.D.Mo. 1995). Another standard requires the party asserting federal jurisdiction to prove by "a preponderance of the evidence" that the jurisdictional amount has been met. Gilmer v. Walt Disney Co., 915 F.Supp. 1001, 1006 (W.D.Ark.1996) (citations omitted); McCorkindale v. American Home Assurance Co., 909 F.Supp. 646, 652-53 (N.D.Iowa 1995). Finally, the Eighth Circuit Court of Appeals (subsequent to its Larkin decision) confused the matter by setting forth a hybrid standard:

"However, when a federal complaint alleges a sufficient amount in controversy to establish diversity jurisdiction, but the opposing party or the court questions the amount alleged is legitimate, the party invoking federal jurisdiction must prove the requisite amount by a preponderance of the evidence. Once jurisdiction is challenged, `if, from the proofs, the court is satisfied to a [legal] 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.'"

State of Missouri ex. rel. Pemiscot County, Missouri v. Western Surety Co., 51 F.3d 170, 173 (8th Cir.1995).

After reviewing these cases and the application of the differing standards, the Court concurs with the Gilmer Court's findings that the "legal certainty" test is generally applied to actions originally filed in federal court (and the plaintiff is the party asserting federal jurisdiction), as well as to actions removed to federal court from state court wherein the plaintiff's prayer is for a specified amount of damages. This Court further concurs with the district courts' finding in Gilmer and McCorkindale that the Eighth Circuit appears not to have yet decided on the burden of proof to be applied in removal cases where the plaintiff has sought an unspecified amount of damages.⁴ The Gilmer and McCorkindale courts further found, however, that courts in other circuits have generally applied "a preponderance of the evidence" burden of proof in removal actions where the complaint has failed to specify the damages sought. They were persuaded by the reasoning of these courts and adopted the "preponderance of evidence" standard for cases removed to federal court in which the state court complaint fails to specify the damages sought. Gilmer, at 1005-1007; McCorkindale, at 652-53.

Although this Court concurs with the reasoning of courts adopting the "preponderance of evidence" standard of proof in removal actions wherein the state court complaint fails to specify the damages sought, it believes that the affirmative adoption of one standard over another is not necessary in this case (a matter best left to the appellate court to decide at a future time) because under either standard the defendant has failed to present any specific facts or evidence which demonstrates that the jurisdictional amount has been met.

In order for diversity jurisdiction to attach, the amount in controversy must exceed $75,000. 28 U.S.C. § 1332. In determining the requisite jurisdictional amount, both punitive damages and attorneys' fees are considered. State of Missouri, ex rel. Pemiscot County, Missouri v. Western Surety Co., at 173; Larkin v. Brown, at 388-89; Allison, et al. v. Security Benefit Life Ins. Co., at 1215; Capitol Indem. Corp. v. Miles, 978 F.2d 437, 438 (8th Cir.1992); Visintine v. Saab Automobile A.B., et al., at 487. In considering the inclusion of punitives in the computation of the jurisdictional amount, the "existence of the required amount must be supported by competent proof." Larkin, at 388-89 quoting Esler v. Northrop Corp., 86 F.R.D. 20, 28 (W.D.Mo.1979). A claim for punitive damages must be more closely scrutinized than a claim for actual damages in order to "ensure that Congress's [sic] limits on diversity jurisdiction are properly observed." Pemiscot County, at 173; see also, Larkin, at 389; Visintine, at 498.

Finally, the "well-pleaded complaint" rule requires that the basis of federal jurisdiction appear from the fact of the complaint and not from the plaintiff's anticipation of defenses or the defendant's responsive pleadings. Reding v. FDIC, 942 F.2d 1254, 1257 (8th Cir. 1991). Any doubts about the validity of removal jurisdiction must be resolved in favor of remand of the action to state court. In re Business Men's Assurance Co. of America, 992 F.2d 181, 183 (8th Cir.1993).

After careful consideration of the matter, in accordance with the afore-referenced legal principles, this Court determines that defendant...