Garza v. Bettcher Industries, Inc., Civ. A. No. 90-CV-72647-DT.

• Citation: 752 F. Supp. 753
• Decision Date: 04 December 1990
• Docket Number: Civ. A. No. 90-CV-72647-DT.
• Parties: Juan GARZA, Plaintiff, v. BETTCHER INDUSTRIES, INC., Defendant.
• Court: U.S. District Court — Western District of Michigan

752 F. Supp. 753

Juan GARZA, Plaintiff, v. BETTCHER INDUSTRIES, INC., Defendant.

Civ. A. No. 90-CV-72647-DT.

United States District Court, E.D. Michigan, S.D.

December 4, 1990.

Albert J. Dib, Detroit, Mich., for plaintiff.

Thomas G. McNeill, Detroit, Mich., for defendant.

OPINION AND ORDER GRANTING DEFENDANT'S MOTION FOR RECONSIDERATION AND VACATING ORDER REMANDING CASE

AT A SESSION of said Court held in the Federal Building, Detroit, Michigan on Dec. 4 1990

ROSEN, District Judge.

This matter is before the Court on the Defendant's Motion for Reconsideration of the Court's sua sponte October 22, 1990 Order Remanding Case to the State of Michigan Circuit Court for the County of Wayne. The basis for remand was that the Court lacked federal diversity of citizenship jurisdiction, pursuant to 28 U.S.C. § 1332(a), because the amount in controversy did not appear to meet the minimum $50,000 "in controversy" requirement in Section 1332(a).

A. GROUNDS FOR RECONSIDERATION

In support of its Motion for Reconsideration, the Defendant proffers the Affidavit of its attorney, Thomas G. McNeill, which states, in pertinent part:

4. On August 27, 1990, I initiated another telephone conversation with Mr. Dib Plaintiff's counsel, in which I indicated that I had not yet received the medical records and that I wanted to review them in considering whether to remove the case. Mr. Dib again agreed to send the medical records. In addition, Mr. Dib affirmatively stated that he and his client would seek damages in excess of $50,000. However, Mr. Dib stated that although he might otherwise be willing to stipulate that Plaintiff seeks damages in excess of $50,000, he was concerned that such a stipulation might cause problems if he later recommended a settlement of any amount less than $50,000.

(McNeill Affidavit, Par. 4, p. 2, Exhibit 2 to Defendant's Brief in Support of Motion for Reconsideration).

Also, the Defendant submitted in support of its Motion for Reconsideration the Plaintiff's medical records which disclose that the Plaintiff underwent four separate surgical procedures for which he now seeks to recover medical expenses.

The Court is persuaded that the sworn affidavit testimony of Mr. McNeill and the medical records together provide a sufficient factual predicate for federal diversity of citizenship jurisdiction. Consequently, the Court will grant the Defendant's Motion for Reconsideration and vacate its previous Order Remanding Case. However, the Court expresses its disapproval of defense counsel's superficial and lax approach to its obligations under 28 U.S.C. § 1446 in that the factual information set forth in the Motion for Reconsideration and McNeill Affidavit could, and should, have been submitted to the Court in the first instance in support of the Defendant's removal petition. This information was clearly available to Defendant's counsel at the time the removal petition was filed September 4, 1990.

Because the Defendant's original removal petition, and now its Motion for Reconsideration, raises important questions relating to the standards federal courts should apply in determining federal diversity of citizenship jurisdiction issues, the Court will take this opportunity to set forth its view of what it hopes will be a useful analytical approach to an area of law that has spawned many and diverse opinions, not only in district and circuit courts around the nation, but also within this District.

B. APPLICABLE STANDARD FOR REMOVAL OF DIVERSITY OF CITIZENSHIP ACTIONS

1. The "Legal Certainty" Test

The Defendant, in its Motion for Reconsideration, has raised an issue of broad import to Defendants who seek to remove cases from state courts on the basis of diversity of citizenship jurisdiction. Essentially, the Defendant argues that, even if the Defendant were unable to state a factual predicate to establish the $50,000 jurisdictional amount, the Court would nevertheless be required to accept jurisdiction unless "it appears to a legal certainty that the amount in controversy is less than the jurisdictional amount," quoting Pakledinaz v. Consolidated Rail Corporation, 737 F.Supp. 47, 48 (E.D.Mich.1990) (emphasis added). Thus, Defendant argues, because this Court had insufficient evidence before it at the time it sua sponte remanded this case to state court to determine to a legal certainty whether the Plaintiff's damages are less than the jurisdictional amount, the Court was without authority to remand the case.

The "legal certainty" test has its genesis in St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 58 S.Ct. 586, 590-591, 82 L.Ed. 845 (1938). In that case, the Supreme Court considered whether a removed case could be remanded to state court even though the damages alleged in the state court complaint, $4,000, were greater than the $3,000 jurisdictional amount then in effect for diversity of citizenship cases. The plaintiffs amended the complaint after the case was removed to federal court. The damages claimed in the amended complaint again totalled $4,000, but the plaintiffs also attached as an exhibit to the complaint a schedule of damages which reflected that the actual loss was only $1,380.89. After a bench trial, the court awarded the plaintiffs damages in the amount of $1,162.98. On appeal the Seventh Circuit stated that the district court below should have remanded the case to state court once the district court found that the plaintiff's damages were less than the $3,000 federal jurisdictional amount.

The holding of the Supreme Court in St. Paul was that events subsequent to the removal of the case to federal court—the plaintiff's amending its complaint to reflect actual damages less than the jurisdictional amount and the $1,162.98 damage award by the district court—could not strip the district court of federal jurisdiction if the original claim for damages by the plaintiff in excess of the jurisdictional amount was made in good faith. Id., 58 S.Ct., at 592-594. The "legal certainty" test is set forth in the St. Paul decision's general discussion of federal jurisdiction:

The intent of Congress drastically to restrict federal jurisdiction in controversies between citizens of different states has always been rigorously enforced by the courts. The rule governing dismissal for want of jurisdiction in cases brought in the federal court is that, unless the law gives a different rule, the sum claimed by the plaintiff controls if the claim is apparently made in good faith. It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal. The inability of plaintiff to recover an amount adequate to give the court jurisdiction does not show his bad faith or oust the jurisdiction. Nor does the fact that the complaint discloses the existence of a valid defense to the claim. But if, from the face of the pleadings, it is apparent, to a legal certainty, that the plaintiff cannot recover the amount claimed or if, from the proofs, the court is satisfied to a like 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. Events occurring subsequent to the institution of suit which reduce the amount recoverable below the statutory limit do not oust jurisdiction.

What already has been said, and circumstances later to be discussed lead to the conclusion that a dismissal would not have been justified had the suit been brought in the federal court. The principles which govern remand of a removed cause, sic more urgently require that it should not have been remanded. In a cause instituted in the federal court the plaintiff chooses his forum. He knows or should know whether his claim is within the statutory requirement as to amount. His good faith in choosing the federal forum is open to challenge not only by resort to the face of his complaint, but by the facts disclosed at trial, and if from either source it is clear that his claim never could have amounted to the sum necessary to give jurisdiction there is no injustice in dismissing the suit. Indeed, this is the court's duty under the Act of 1975. In such original actions it may also well be that plaintiff and defendant have colluded to confer jurisdiction by the method of the one claiming a fictitious amount and the other failing to deny the veracity of the averment of amount in controversy. Upon disclosure of that state of facts the court should dismiss.

A different situation is presented in the case of a suit instituted in a state court and thence removed. There is a strong presumption that the plaintiff has not claimed a large amount in order to confer jurisdiction on a federal court or that the parties have colluded to that end. For if such were the purpose suit would not have been instituted in the state but in the federal court.

Id., at 590-591 (emphasis added).

This discussion is explicitly premised on the assumption that the amount in controversy is met by the express allegations of the plaintiff's complaint and is limited in utility to cases in which the plaintiff himself has placed the requisite jurisdictional amount in controversy by requesting damages in excess of the jurisdictional amount. In such cases, it would, of course, make sense to accord the plaintiff's own claim some weight in determining the actual amount in controversy. As noted by the Supreme Court, this is especially true where the complaint was originally filed in state court (with the requisite federal jurisdictional amount pleaded in the request for relief) because it is highly unlikely in that instance that the plaintiff would have inflated his request for damages solely to obtain federal jurisdiction. Consequently, where the state court complaint itself states damages in an amount sufficient to obtain federal diversity of citizenship jurisdiction, by way of removal, and the defendant does...