Cross v. Bell Helmets, USA

• Decision Date: 18 April 1996
• Docket Number: No. 1:95-CV 0178.,1:95-CV 0178.
• Citation: 927 F. Supp. 209
• Parties: James Christopher CROSS, Plaintiff, v. BELL HELMETS, USA and Bell Helmets, Inc., Defendants.
• Court: U.S. District Court — Eastern District of Texas

927 F. Supp. 209

James Christopher CROSS, Plaintiff, v. BELL HELMETS, USA and Bell Helmets, Inc., Defendants.

No. 1:95-CV 0178.

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

April 18, 1996.

COPYRIGHT MATERIAL OMITTED

Jill Swearingen-Chatelain, Joe J. Fisher, II, Provost & Umphrey, Beaumont, TX, for plaintiff.

Kyle M. Rowley, Holloway & Rowley P.C., Houston, TX, for defendants.

MEMORANDUM

COBB, District Judge.

Today, the court considers two related motions: Plaintiffs Motion for Leave to Amend and Plaintiffs Motion for Remand. The plaintiff in this products liability case¹ wishes to amend his complaint "in effect capping" the defendant's liability at $50,000 exclusive of costs and interest. The only apparent reason for such a pleading strategy is to divest this court of jurisdiction.²

Plaintiffs pleading appears to resemble both the work of the tailor to the emperor who wore no clothes and the often varied and sometimes unusual remand strategies presented by certain attorneys practicing in the Eastern District bar who find themselves in this court. That said, today's clear ruling based upon settled principles of Fifth Circuit law might amaze some counsel in this district as much as it concerns this court to have to announce it one more time.

Since federal courts are courts of limited jurisdiction, for this court to have subject matter jurisdiction over this diversity action, some provision of the federal jurisdiction statute must confer upon the court such power. The present case implicates federal diversity jurisdiction analysis. If the parties are completely diverse in citizenship and the amount in controversy exceeds $50,000, then the dispute falls within the diversity jurisdiction of the federal courts.³

ANALYSIS

I. The Case Was Properly Removed.

Pursuant to 28 U.S.C. sections 1441 and 1446, the defendants timely⁴ removed the state action to this federal forum. A federal district court always must determine whether it has subject matter jurisdiction to hear a case. Thus, even in the absence of a timely motion for remand filed by the plaintiff, a court must independently examine whether it has the power to hear a case.

A. Burden is on defendant to prove proper removal.

In determining whether a case has been properly removed, it is the defendant who bears the burden of proving the jurisdiction of the court. Gaitor v. Peninsular & Occidental S.S. Co., 287 F.2d 252, 253-54 (5th Cir.1961); see also 14A Charles A. Wright, Arthur R. Miller, & Edward H. Cooper, FEDERAL PRACTICE AND PROCEDURE § 3739 (1985) ("The burden is on the party seeking to preserve the removal, not the party moving for remand.").

In this suit, the state court petition did not allege any specific damage amount. Under removal analysis, if the amount in controversy is unclear, the defendant must allege and "bears the burden of actually proving facts to support ... the requisite jurisdictional amount." Gaus v. Miles, Inc., 980 F.2d 564, 567 (9th Cir.1992); see also McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 785, 80 L.Ed. 1135 (1936).

B. Standard of proof depends on allegations in state petition.

There are different formulations of the defendant's burden of proof depending on the nature of the plaintiff's damage allegations in the state court petition. The following sections set forth the different tests in the Fifth Circuit for determining whether the amount in controversy meets the jurisdictional requisite.

1. Amount in controversy is specifically plead.

In resolving disputes regarding the appropriate amount in controversy when damages have been specifically plead in dollars, the plaintiff's petition controls unless the defendant demonstrates that the sum was claimed in bad faith. St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 294, 58 S.Ct. 586, 592, 82 L.Ed. 845 (1938).

a. Amount plead is below $50,000.

It is recognized that as general rule, a plaintiff may avoid federal diversity jurisdiction by pleading state court damages below the amount necessary to invoke diversity jurisdiction.⁵ However, in Texas where a plaintiff as a legal matter can recover more than the damages plead in its petition, a plaintiff who pleads less than the federal jurisdictional requisite cannot always foreclose removal.

b. Amount plead is above $50,000.

In situations where the plaintiff pleads for damages in excess of the jurisdictional requisite, a defendant bears its burden of proof regarding the propriety of removal by simply pointing this fact out in its removal petition.

2. Amount of controversy is not plead specifically.

When there is no total amount of dollar damages plead, as in the case sub judice, the defendant's burden of proof differs depending on the nature of the claims. The Fifth Circuit has adopted a two-step test when a plaintiff either pleads a specific sum under $50,000 or does not plead a dollar amount at all. Carnahan v. Southern Pacific Railroad Transportation Co., 914 F.Supp. 1430 (E.D.Tex.1995); First, if it is "facially apparent" from the state court petition that the amount in controversy is likely to exceed $50,000, then the defendant need only point this out to successfully bear its burden.⁶ On the other hand, if such a determination is not apparent, then the defendant must prove by a "preponderance of the evidence" the jurisdictional facts in question. De Aguilar v. Boeing Co., 11 F.3d 55, 58 (5th Cir.1993) (known as "De Aguilar I"); Allen v. R & H Oil & Gas Co., 63 F.3d. 1326, 1336 (5th Cir.), reh'g denied, 70 F.3d 26 (1995) (finding that "De Aguilar I established that a party seeking removal of action that does not allege a specific amount need only prove the jurisdictional facts by a preponderance of the evidence").⁷

C. No specific damage amount was plead in this case.

As stated above, in this case where no dollar amount of damages has been plead, one of two conditions must be met to find that the amount in controversy meets the jurisdictional requisite: either (1) it must be facially apparent that the damages sought likely exceed $50,000 or (2) the defendant must have proven by a preponderance of the evidence that the damages sought likely exceed $50,000.

There are cases in which the court's independent evaluation of jurisdiction reveals that jurisdiction exists on removal, even though the defendant makes only a conclusory assertion of jurisdiction and that assertion is contested in a motion to remand. Asociacion Nacional v. Dow Quimica, 988 F.2d 559, 566 n. 9 (5th Cir.1993), cert. denied, 510 U.S. 1041, 114 S.Ct. 685, 126 L.Ed.2d 653 (1994).

Although some outside the field of law may not believe that it is facially apparent in this case that the amount in controversy will be at least $50,000, common experience⁸ does inform the court that this case will involve an amount in controversy exceeding $50,000. In today's legal climate, whenever exemplary damages are sought in a products liability case from a corporate defendant, $50,000 certainly is not a high-end award. Furthermore, the compensatory damages alone in a case involving severe and permanent head injuries often will subject a tortfeasor to possible exposure well beyond the jurisdictional minimum of this court.

Because it is apparent from the face of the state court petition that the amount in controversy exceeds $50,000, it is unnecessary for the defendant to otherwise prove by a preponderance of the evidence this jurisdictional fact.

II. Effect of Damage Stipulations.

If a plaintiff binds itself to collect an amount in damages below the jurisdictional requisite necessary for federal removal by stipulation in state court, then a defendant cannot invoke federal removal jurisdiction because the amount in controversy requirement will not have been satisfied. The rationale behind this clear-cut rule is simple: it is legally certain that the action will not implicate an amount in controversy large enough to confer jurisdiction of the federal courts.⁹

On the other hand, a stipulation submitted subsequent to removal that damages do not exceed $50,000 does not affect jurisdiction when the original complaint satisfied the amount in controversy requirement.¹⁰ The plaintiff may not divest a court's jurisdiction by filing a post-removal amendment which reduces the amount of damages requested by the complaint below the jurisdictional requisite.¹¹

III. Amendment Stipulating Damages Will Not Be Permitted.

This court has found that the underlying state action was properly removed to this court. It is readily apparent that the amount in controversy will exceed $50,000 given the nature of the alleged injuries coupled with the request for punitive damages. The plaintiff now asks leave of court to amend his complaint to stipulate that the total amount of compensatory and punitive damages sought will be below $50,000.

Damage stipulations filed before a federal district court has passed upon its determination of jurisdiction are permissible if they clarify as opposed to amend an original petition.¹² Often is it impossible to judge from the plaintiffs petition what the scope of damages might be.¹³ It is the duty of a defendant who is contemplating removal to determine whether the amount in controversy meets the jurisdictional requirement for federal diversity jurisdiction.¹⁴ This can be accomplished through state court procedures¹⁵ or independent investigation.¹⁶ Of course, if a defendant does not bear its burden, then a post-removal stipulation may help clarify for the court the nature and extent of damages sought if it is truly unclear from the face of the state court petition.¹⁷ In general, however, a plaintiffs post-removal stipulation attempting to reduce the damages sought to an amount below the jurisdictional requisite will not operate to divest a federal court of removal jurisdiction pursuant to diversity.

The venerable and inveterate opinion of St. Paul Mercury plainly holds that plaintiff...