Frederick v. Hartford Underwriters Ins. Co.

• Decision Date: 28 June 2012
• Docket Number: No. 12–1161.,12–1161.
• Citation: 683 F.3d 1242
• Parties: Larry D. FREDERICK, Plaintiff–Appellee, v. HARTFORD UNDERWRITERS INSURANCE COMPANY, Defendant–Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

683 F.3d 1242

Larry D. FREDERICK, Plaintiff–Appellee,

v.HARTFORD UNDERWRITERS INSURANCE COMPANY, Defendant–Appellant.

No. 12–1161.

United States Court of Appeals, Tenth Circuit.

June 28, 2012.

Submitted on the briefs: ^*

Paul Howard Schwartz (Cynthia A. Mitchell and Alice Warren–Gregory with him on the briefs), Shoemaker Ghiselli & Schwartz, LLC, Boulder, CO, for the Defendant–Appellant.

Matthew Gabriel McFarland, Evans & McFarland, LLC (Robert F. Hill, Hill & Robbins, PC with him on the briefs), Golden, CO, for the Plaintiff–Appellee.

Before BRISCOE, Chief Judge, McKAY, and LUCERO, Circuit Judges.

LUCERO, Circuit Judge.

Larry D. Frederick brought a putative class action suit against Hartford Underwriters Insurance Company (“Hartford”) in Colorado state court; Hartford removed the case to federal court. Looking to the face of the plaintiff's complaint, the district court concluded that the amount in controversy did not exceed $5,000,000—which is required for federal jurisdiction under the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d). Accordingly, the district court remanded the case to state court. In reaching its decision, the district court acknowledged that this circuit has not defined the burden a defendant must carry to prevent a remand in a CAFA suit. Faced squarely with this question, we hold that a defendant in these circumstances is entitled to present his own estimate of the amount at stake and must show by a preponderance of the evidence that the amount in controversy exceeds the amount in § 1332(d)(2)—currently $5,000,000. We further emphasize that this preponderance standard applies to punitive damages as well, and that such damages cannot be assumed when calculating the amount in controversy. Exercising jurisdiction under 28 U.S.C. § 1453, we reverse and remand for further proceedings.

I

Frederick's class action complaint was filed in March 2011 in Colorado state court. The complaint asserted that a putative class of consumers had purchased insurance from Hartford, and alleged that the company failed to disclose important information regarding the class's policies. Maintaining that the amount in controversy exceeded $5,000,000, Hartford invoked CAFA and removed the case to federal court.¹ Frederick initially sought a remand,but voluntarily dismissed the case before the court ruled on his motion.

Shortly thereafter, Frederick filed a nearly identical complaint in state court, this time seeking “a total award for compensatory and punitive damages [that] does not exceed $4,999,999.99.” Hartford again removed, arguing that Frederick was seeking at least $2,960,988 in compensatory damages based on the size of the class and the temporal period at issue. Because Frederick was also seeking punitive damages—which, under Colorado law, could equal up to the amount of compensatory damages awarded—Hartford asserted that the total amount in controversy was at least $5,921,996. SeeColo.Rev.Stat. § 13–21–102(1)(a). In support of its amount-in-controversy calculation, Hartford attached an affidavit of the Hartford employee who calculated the sum. Frederick moved to remand, asserting that the court lacked jurisdiction because, as “master of his complaint,” he “decided to limit total damages to an amount no more than $4,999,999.99.”

The district court granted Frederick's motion and remanded the case. In the order, the court acknowledged that there is a split among the circuits as to a defendant's burden to show potential damages over the jurisdictional amount when seeking removal under CAFA. However, the district court concluded that remand was warranted regardless of the appropriate standard. Specifically, the court agreed with the plaintiff that a complaint requesting damages of less than $5,000,000 should be taken at face value irrespective of the evidence advanced by the defendant. Interpreting Frederick's complaint as a binding limitation on damages, the court found that the amount in controversy did not exceed $5,000,000, and remanded the case for lack of jurisdiction.

II

We review the district court's ruling on the propriety of removal de novo. Lovell v. State Farm Mut. Auto. Ins. Co., 466 F.3d 893, 897 (10th Cir.2006). In order to determine if the district court erred, we must first consider the standard that Hartford is required to satisfy.

To establish jurisdiction under CAFA, a party must show, among other things, that “the matter in controversy exceed[ ] the sum or value of $5,000,000, exclusive of interest and costs.” 28 U.S.C. § 1332(d)(2). The amount in controversy, in turn, is not “the amount the plaintiff will recover,” but rather “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); see also Gibson v. Jeffers, 478 F.2d 216, 220 (10th Cir.1973) ( “The test to determine amount in controversy is not the sum ultimately found to be due, but the sum demanded in good faith.”).

In analyzing the propriety of removal, we have held that “[t]he burden is on the party requesting removal to set forth, in the notice of removal itself, the underlying facts supporting [the] assertion that the amount in controversy exceeds [the jurisdictional minimum].” Laughlin v. Kmart Corp., 50 F.3d 871, 873 (10th Cir.1995) (quotation omitted). “As a practical matter ... the burden is ‘rather light’ if the sum claimed by the plaintiff exceeds the jurisdictional amount.” Huffman v. Saul Holdings Ltd. P'ship, 194 F.3d 1072, 1079 (10th Cir.1999) (citation omitted). Defendants seeking to remove under the general diversity jurisdiction statute—28 U.S.C. § 1332(a)—face a more strenuous burden if the plaintiff requests undefined damages or damages below the jurisdictional minimum. In such cases, the defendant must “prove ... jurisdictional facts by a preponderance of the evidence” to remain in federal court.²McPhail, 529 F.3d at 955 (quotation and citation omitted). We have not, however, had opportunity to address the contours of the burden faced by a defendant seeking to remove a case under CAFA when the plaintiff has alleged an amount less than $5,000,000.

As the parties acknowledge, our sibling circuits have split over the proper standard in this context. In the Ninth Circuit, when a complaint alleges less than the jurisdictional amount, “the party seeking removal must prove with ‘legal certainty’ that the amount in controversy is satisfied, notwithstanding the prayer for relief in the complaint.” Lowdermilk v. U.S. Bank Nat'l Ass'n, 479 F.3d 994, 996 (9th Cir.2007). This stringent standard was adopted to “guard the presumption against federal jurisdiction and preserve the plaintiff's prerogative, subject to the good faith requirement, to forgo a potentially larger recovery to remain in state court.” Id. at 999;see also Morgan v. Gay, 471 F.3d 469, 474 (3d Cir.2006) (adopting the “legal certainty” standard). In contrast, the Eighth Circuit has held that “a party seeking to remove under CAFA must establish the amount in controversy by a preponderance of the evidence regardless of whether the complaint alleges an amount below the jurisdictional minimum.” Bell v. Hershey Co., 557 F.3d 953, 958 (8th Cir.2009); see also Back Doctors Ltd. v. Metro. Prop. & Cas. Ins. Co., 637 F.3d 827, 829 (7th Cir.2011) (clarifying that the preponderance standard applies to removing defendants); Pretka v. Kolter City Plaza II, Inc., 608 F.3d 744, 752 (11th Cir.2010) (“[T]he removing defendant must prove by a preponderance of the evidence that the amount in controversy exceeds the jurisdictional requirement.”); Amoche v. Guar. Trust Life Ins. Co., 556 F.3d 41, 50 (1st Cir.2009) (adopting a “reasonable probability” standard that is “for all practical purposes identical to the preponderance standard”); Bartnikowski v. NVR, Inc., 307 Fed.Appx. 730, 734 (4th Cir.2009) (unpublished) (“[T]he defendant's burden in these circumstances is to establish the jurisdictional amount by a preponderance of the evidence.”); Smith v. Nationwide Prop. & Cas. Ins. Co., 505 F.3d 401, 404 (6th Cir.2007) (“CAFA does not alter the fact that the removing defendant has the burden of demonstrating, by a preponderance of the evidence, that the amount in controversy requirement has been met” (quotation omitted)); Blockbuster, Inc. v. Galeno, 472 F.3d 53, 59 (2d Cir.2006) (“To satisfy its burden, defendant must prove to a reasonable probability that ... the amount in controversy exceeds $5 million.”). In adopting this standard, the Bell court explained that requiring a defendant “to establish jurisdictional facts by a legal certainty would force us to depart from our non CAFA precedent where we have only required a removing party to establish jurisdictional facts by a preponderance of the evidence.” 557 F.3d at 957.

We join the latter set of courts, and hold that a defendant seeking to remove under CAFA must show that the amount in controversy exceeds $5,000,000 by a preponderance of the evidence. In doing so, we extend our precedent in McPhail to the CAFA context and align ourselves with the majority of other circuits which have adopted the preponderance standard. See generally McPhail, 529 F.3d at 954–55 (explaining the rationale behind the preponderance standard). Specifically, we agree that there is “no logical reason why we should demand more from a CAFA defendant” than other parties invoking federal jurisdiction. Bell, 557 F.3d at 957. This is especially so in light of the recently passed JVCA, which largely codified the holding of McPhail. SeePub.L. No. 112–63, 125 Stat. 758 (2011). By adopting the preponderance standard, we ensure that defendants seeking removal face the same burden regardless of whether they are invoking simple diversity jurisdiction or CAFA jurisdiction. To hold otherwise would confuse courts and litigants alike, and contradict the clear weight of authority.

Under the preponderance standard, defendants seeking to remove must prove...