Durbois v. Deutsche Bank Nat'l Trust Co.

• Decision Date: 16 June 2022
• Docket Number: 20-11082
• Citation: 37 F.4th 1053
• Parties: Michael DURBOIS, Plaintiff—Appellant, v. DEUTSCHE BANK NATIONAL TRUST COMPANY, AS Indenture TRUSTEE, For the Benefit OF The HOLDERS OF AAMES MORTGAGE INVESTMENT TRUST 20054 MORTGAGE BACKED NOTES, Defendant—Appellee, v. Lori Ann Durbois, Third Party Defendant—Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

37 F.4th 1053

Michael DURBOIS, Plaintiff—Appellant,

v.DEUTSCHE BANK NATIONAL TRUST COMPANY, AS Indenture TRUSTEE, For the Benefit OF The HOLDERS OF AAMES MORTGAGE INVESTMENT TRUST 20054 MORTGAGE BACKED NOTES, Defendant—Appellee,

v.Lori Ann Durbois, Third Party Defendant—Appellant.

No. 20-11082

United States Court of Appeals, Fifth Circuit.

FILED June 16, 2022

Andrew S. Oldham, Circuit Judge:

The question presented in this diversity case is whether the amount in controversy exceeds $75,000. It does not. This case therefore must be remanded to state court.

I.

In 2005, Michael Durbois took out a home equity loan on a house in Texas ("Property"). Deutsche Bank National Trust Company ("Deutsche Bank") is the trustee of the loan. In March 2019, Deutsche Bank sought a non-judicial foreclosure order on the Property.

On December 2, 2019, Durbois sued Deutsche Bank in Texas state court, alleging violations of the Texas Debt Collection Act ("TDCA"), breach of the common-law duty of cooperation, fraud, and negligent misrepresentation. In his original petition and in a declaration, Durbois "stipulate[d]" that he is seeking total damages not to exceed $74,500.

Despite the stipulation, Deutsche Bank removed the case to federal district court. In the notice of removal, Deutsche Bank stated that Durbois's suit automatically stayed the bank's non-judicial foreclosure sale and hence put the value of the house—$427,662—in dispute. Deutsche Bank also provided evidence of the house's value.

Durbois then moved to remand the case back to Texas state court because, in his view, the amount in controversy could not exceed the stipulated maximum of $74,500. On February 19, 2020, the district court denied Durbois's motion to remand. The court recognized that, in state court, Durbois "state[d] that he seeks damages in ‘an amount less than $74,500.’ " But it concluded that statement was insufficient. That was because the court had to measure the amount in controversy "by the value of the object of the litigation," not what "the complaint states th[e] damages are ‘not to exceed.’ " The court determined that the house was the object of the litigation because Durbois's lawsuit triggered an automatic stay of the Property's non-judicial foreclosure. It then concluded that Deutsche Bank carried its burden by providing sufficient evidence that the Property's value was $427,662 and thus more than the jurisdictional threshold of $75,000.

The case moved forward. And eventually, the district court entered final judgment in favor of Deutsche Bank. Durbois timely appealed, challenging only the district court's denial of his motion to remand. We have appellate jurisdiction under 28 U.S.C. § 1291. Our review is de novo. Hoyt v. Lane Constr. Corp. , 927 F.3d 287, 292 (5th Cir. 2019).

II.

The general diversity-jurisdiction statute provides in relevant part that "[t]he district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs and is between ... citizens of different States." 28 U.S.C. § 1332(a). Section 1332 does not provide further guidance on how to determine the amount in controversy.

But other statutory provisions do. Most relevant here is § 1446(c)(2). It provides:

(c) Requirements; removal based on diversity of citizenship.—

...

(2) If removal of a civil action is sought on the basis of the jurisdiction conferred by section 1332(a), the sum demanded in good faith in the initial pleading shall be deemed to be the amount in controversy, except that—

(A) the notice of removal may assert the amount in controversy if the initial pleading seeks—

(i) nonmonetary relief; or

(ii) a money judgment, but the State practice either does not permit demand for a specific sum or permits recovery of damages in excess of the amount demanded; and

(B) removal of the action is proper on the basis of an amount in controversy asserted under subparagraph (A) if the district court finds, by the preponderance of the evidence, that the amount in controversy exceeds the amount specified in section 1332(a).

28 U.S.C. § 1446(c). Paragraph (2) thus sets a general rule that "the sum demanded in good faith in the initial pleading" is "the amount in controversy." Id. § 1446(c)(2). It then provides two exceptions to that general rule: (i) the plaintiff's operative state-court pleading at the time of removal seeks nonmonetary relief; or (ii) that pleading seeks a money judgment, and the State "does not permit demand for a specific sum or permits recovery of damages in excess of the amount demanded." Id. § 1446(c)(2)(A).

If either exception is shown, then "the defendant's [plausible] amount-in-controversy allegation should be accepted when not contested by the plaintiff or questioned by the court." Dart Cherokee Basin Operating Co., LLC v. Owens , 574 U.S. 81, 87, 135 S.Ct. 547, 190 L.Ed.2d 495 (2014) (interpreting 28 U.S.C. § 1446(c)(2)(B) ). When the defendant's allegation is questioned, "both sides submit proof and the court decides, by a preponderance of the evidence, whether the amount-in-controversy requirement has been satisfied." Id. at 88, 135 S.Ct. 547.

III.

The dispositive question is whether the amount in controversy exceeds $75,000. The answer is no. That's for two independent reasons: (A) Deutsche Bank failed to establish by a preponderance of the evidence that the amount in controversy exceeded $75,000. And (B) Durbois stipulated before removal that the amount in controversy was $74,500—i.e. , below the jurisdictional requirement.

A.

First, Deutsche Bank failed to establish by a preponderance of the evidence that the amount in controversy was over $75,000.^* Deutsche Bank submitted evidence of the Property's value, which obviously exceeded the jurisdictional threshold. But Deutsche Bank failed to show that the automatic stay at issue here put the house's value in controversy.

1.

The amount in controversy is "not proof of the amount the plaintiff will recover" but "an estimate of the amount that will be put at issue in the course of the litigation." McPhail v. Deere & Co. , 529 F.3d 947, 956 (10th Cir. 2008) (McConnell, J.). The amount is measured by the value of the object of the litigation. See, e.g. , 14AA CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 3702.5 (4th ed.) [hereinafter Wright & Miller] ("It is well-settled ... that the amount in controversy for jurisdiction purposes is measured by the direct pecuniary value of the right that the plaintiff seeks to enforce or protect or the value of the object that is the subject matter of the suit."); id. § 3708 (similar); Hunt v. Wash. State Apple Adver. Comm'n , 432 U.S. 333, 347, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977) ("[I]t is well established that the amount in controversy is measured by the value of the object of the litigation."); Farkas v. GMAC Mortg., LLC , 737 F.3d 338, 341 (5th Cir. 2013) (per curiam). Durbois seeks money damages not to exceed $74,500 for various violations of his rights under Texas state law; he does not seek specific relief. The object of Durbois's litigation is thus money damages, and those money damages are below the jurisdictional floor of $75,000. Deutsche Bank doesn't contest that if the suit's object is the money damages, the amount in controversy is insufficient to support federal jurisdiction.

Instead, Deutsche Bank notes that Durbois's suit triggered an automatic stay of its non-judicial foreclosure under state law; that stay, Deutsche Bank argues, put the value of the house in dispute, and hence made the house the real object of the litigation. Durbois responds that the stay is collateral to the object of his litigation and thus irrelevant to the amount in controversy. See, e.g., Garcia v. Koch Oil Co. of Tex. Inc. , 351 F.3d 636, 640 (5th Cir. 2003) (holding amounts "collateral to the true object of the litigation" do not affect amount in controversy); Healy v. Ratta , 292 U.S. 263, 268, 54 S.Ct. 700, 78 L.Ed. 1248 (1934) ("It has been said that it is the value of the object of the suit which determines the jurisdictional amount in the federal courts. But this does not mean objects which are merely collateral or incidental to the determination of the issue raised by the pleadings." (quotation omitted)). It is well-settled that neither the collateral effect of a suit nor the collateral effect of a judgment may count toward the amount in controversy. See, e.g., New England Mortg. Sec. Co. v. Gay , 145 U.S. 123, 130, 12 S.Ct. 815, 36 L.Ed. 646 (1892) ("It is well settled in this court that, when our jurisdiction depends upon the amount in controversy, it is determined by the amount involved in the particular case, and not by any contingent loss either one of the parties may sustain by the probative effect of the judgment, however certain it may be that such loss will occur."); Town of Elgin v. Marshall , 106 U.S. 578, 579, 1 S.Ct. 484, 27 L.Ed. 249 (1883) ; 14AA WRIGHT & MILLER § 3702.5 ("[W]hatever the collateral effects a decree or judgment might have by virtue of stare decisis, collateral estoppel, or any other impact on the rights or interests of third parties, those consequences cannot be taken into account in calculating the amount in controversy.").

We agree with Durbois and hold the automatic stay is collateral for three reasons. First is the way the stay is triggered. Under Texas Rule of Civil Procedure 736.11(a), a non-judicial foreclosure sale is automatically stayed when the relevant party in the foreclosure proceeding files a separate suit involving the matter. The automatic stay here is thus triggered by the filing of Durbois's suit itself—that is, the stay's issuance is detached from the suit's outcome. And if the collateral effect of a judgment may not count toward the amount in controversy, see New England Mortg. , 145 U.S. at 130, 12 S.Ct. 815, then the collateral effect of filing the suit certainly may not.

Second is what the stay does. The automatic...