Gilmer v. Walt Disney Co., Civil No. 96-5012.

• Citation: 915 F. Supp. 1001
• Decision Date: 08 February 1996
• Docket Number: Civil No. 96-5012.
• Parties: Janet GILMER, and All others Similarly Situated, By Plaintiff, v. The WALT DISNEY COMPANY and Buena Vista Home Video, Defendants.
• Court: U.S. District Court — Western District of Arkansas

915 F. Supp. 1001

Janet GILMER, and All others Similarly Situated, By Plaintiff, v. The WALT DISNEY COMPANY and Buena Vista Home Video, Defendants.

Civil No. 96-5012.

United States District Court, W.D. Arkansas, Fayetteville Division.

February 8, 1996.

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Thomas Allan Mars, Everett, Shemin, Mars & Stills, Fayetteville, AR, for Plaintiff.

Larry W. Burks, Kevin Crass, William H. Sutton, Friday, Eldredge & Clark, Little Rock, AR, for Defendants.

MEMORANDUM OPINION

H. FRANKLIN WATERS, Chief Judge.

This matter is currently before the court on the plaintiff's motion to remand this action to the Circuit Court of Washington County, Arkansas, and the defendants' response thereto.

On December 15, 1995, Janet Gilmer, filed this putative class action¹ on behalf of herself and all other similarly situated individuals throughout the United States who have purchased home videos, namely "The Lion King" and "Little Mermaid," produced and distributed by the defendants. The second amended complaint filed on January 12, 1996, asserts the following causes of action: (1) common law fraud; (2) negligence; and (3) breach of warranties.

No specific award of damages is sought. Instead, the complaint requests an award of "all damages that are recoverable at law, including punitive damages, or, in the alternative, legal rescission and a return of the purchase price, attorney's fees, the costs of this action, and all other relief to which the class may be entitled." Second Amended Complaint p. 14.

On January 16, 1996, defendants removed the action to this court on the basis of diversity of citizenship and the existence of the requisite amount in controversy. 28 U.S.C. §§ 1332, 1441. Plaintiff concedes the existence of diversity of citizenship² and that the removal was procedurally correct. However, plaintiff contends this court lacks subject matter jurisdiction because the amount in controversy requirement of 28 U.S.C. § 1332(a) has not been met.

Burden of Proof.

The first issue raised by the parties is what burden of proof must a removing defendant face when a plaintiff seeks an unspecified amount of damages in her state court complaint. According to plaintiff, in the Eighth Circuit the defendants' burden is to prove the amount in controversy by a "legal certainty." In support, plaintiff cites Allison v. Security Benefit Life Ins. Co., 980 F.2d 1213 (8th Cir.1992). According to the defendants, this issue has yet to be resolved by the Eighth Circuit. It is the defendants' position that the applicable burden of proof is the preponderance of the evidence. Defendants rely primarily on Allen v. R & H Oil & Gas Co., 63 F.3d 1326 (5th Cir.1995).

We begin with the principle that federal courts are courts of limited jurisdiction. See e.g., Kokkonen v. Guardian Life Ins. Co. of America, ___ U.S. ___, ___, 114 S.Ct. 1673, 1675, 128 L.Ed.2d 391 (1994). As such, they have the power to hear only those cases that they have been authorized to hear by Congress or by the Constitution. Id. If the court lacks subject matter jurisdiction, any action it takes is a nullity. American Fire & Casualty Co. v. Finn, 341 U.S. 6, 17-18, 71 S.Ct. 534, 541-42, 95 L.Ed. 702 (1951). The lack of subject matter jurisdiction may be raised at any point including being raised on appeal by the party originally invoking the jurisdiction of the court. Id.

The party seeking to invoke the jurisdiction of the federal courts has the burden of proving the existence of jurisdiction. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 785, 80 L.Ed. 1135 (1936). See also 14A Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3702 at 18-19 (2d ed. 1985). Thus, in removal cases the burden is on the defendant. See Wilson v. Republic Iron & Steel Co., 257 U.S. 92, 97, 42 S.Ct. 35, 37, 66 L.Ed. 144 (1921). The determination is made on the basis of the record at the time of removal. Keene Corp. v. United States, 508 U.S. 200, 207-08, 113 S.Ct. 2035, 2040, 124 L.Ed.2d 118 (1993).

In making the determination in a diversity case, the court looks to state law to determine the nature and extent of the right to be enforced as well as the state measure of damages and the availability of special and punitive damages. Federal Practice and Procedure, § 3702 at 24-25. The court may also look to decisions rendered in cases involving the same type of suit. De Aguilar v. Boeing Co., 11 F.3d 55, 58 (5th Cir.1993); Bolling v. Union National Life Ins. Co., 900 F.Supp. 400, 404 (M.D.Ala.1995).

For cases originally filed in federal court the Supreme Court has developed the "legal certainty" test. In St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 58 S.Ct. 586, 82 L.Ed. 845 (1938), the Supreme Court described the test in this way:

The rule governing dismissal for want of jurisdiction in cases brought in federal court is that, unless the law gives a different rule, the sum claimed by the plaintiff controls if the claim is 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.... 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 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.

Id., 303 U.S. at 288-89, 58 S.Ct. at 590-91.

Thus, where plaintiff has alleged a sum certain that exceeds the amount in controversy requirement, that amount controls if made in good faith. Id. The court can refuse jurisdiction in such cases only if it appears to a legal certainty that the case is really for less than the jurisdictional amount. See also State of Missouri v. Western Surety Co., 51 F.3d 170, 173 (8th Cir.1995) ("When a federal complaint alleges a sufficient amount in controversy to establish diversity jurisdiction, but the opposing party or the court questions whether the amount alleged is legitimate, the party invoking federal jurisdiction must prove the requisite amount by a preponderance of the evidence.").

Plaintiff is generally regarded as the master of his or her complaint and can therefore bar removal if the complaint pleads damages in a specific amount less than the jurisdictional requisite for removal based on diversity of citizenship. Under such circumstances, the case should be remanded unless the defendant "can prove to a legal certainty that plaintiff's claim must exceed $50,000." Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095 (11th Cir.1994) (consideration given to attorney's integrity and duty of candor with the court when the attorney claims a specific amount of damages less than the jurisdictional amount). See also Visintine v. Saab Auto, A.B., 891 F.Supp. 496 (E.D.Mo.1995) (Where complaint states total actual and punitive damages sought by named plaintiff and each individual putative class member is under $50,000 defendants must show that it appears to a legal certainty that the amount in controversy exceeds $50,000.).

Thus, the legal certainty test has been applied to actions originally filed in federal court as well as to actions removed to federal court from state court where the plaintiff's prayer is for a specific sum. Whether the legal certainty test applies where the state court complaint does not contain a demand for a specific monetary amount or contains a claim only for more than a specified amount has been the subject of much debate.³ The courts have utilized a variety of tests under these types of cases.

As one well-known treatise states:

When the plaintiff fails to specify damages or specifies damages less than $50,000, the jurisdictionally sufficient amount, the defendant's burden for establishing jurisdiction for the purposes of removal varies according to the court. One standard asks the defendant to show to "a legal certainty" that the amount exceeds $50,000. Another standard asks the defendant to prove "by a preponderance of evidence" that the amount exceeds the jurisdictional threshold. A third standard asks the defendant to show "some reasonable probability" that the damages will exceed $50,000. Finally, some courts look at the facts of the case and make a decision without enunciating any particular standard at all.

14A Charles A. Wright, Arthur R. Miller, Edward H. Cooper, Federal Practice and Procedure § 3725 (Supp.1995).

Contrary to plaintiff's assertion, the Eighth Circuit appears not to have decided what burden of proof is to be applied in removal cases where the plaintiff has sought an unspecified amount of damages. The case of Allison v. Security Benefit Life Ins. Co., 980 F.2d 1213 (8th Cir.1992) involved a class action originally filed in federal court in which the defendant requested dismissal on the grounds that the requisite amount in controversy did not exist. The court naturally applied the legal certainty test to that case.

We are persuaded by the reasoning of courts adopting the preponderance of the evidence standard in cases such as this one where the complaint has failed to specify the damages sought. In such cases the "attorney's integrity and duty of candor with the court arising from signing the complaint are not implicated...." Bolling v. Union Nat. Life Ins. Co., 900 F.Supp. 400, 404 (M.D.Ala. 1995). See also Allen v. R. & H. Oil & Gas Co., 63 F.3d 1326 (5th Cir.1995); Burns v. Windsor Ins. Co., 31 F.3d 1092 (11th Cir. 1994); Gafford v. General Electric Co., 997 F.2d 150, 158 (6th...