Martin v. Franklin Capital Corp.

Decision Date29 May 2001
Citation251 F.3d 1284
CourtU.S. Court of Appeals — Tenth Circuit

Appeal from the United States District Court for the District of New Mexico (D.C. No. CIV-96-1480-LH) [Copyrighted Material Omitted] Michael P. Malakoff, Malakoff Doyle & Finberg, P.C., Pittsburgh, Pennsylvania (Richard N. Feferman, Albuquerque, New Mexico, with him on the briefs), for Plaintiffs-Appellants.

Jan T. Chilton, Severson & Werson, San Francisco, California (Jay D. Hertz, Sutin, Thayer & Browne, Albuquerque, New

Mexico, with her on the brief) for Defendants-Appellees.

Before Seymour and Murphy, Circuit Judges, and Kane, Senior District Judge. *

Seymour, Chief Judge.

Gerald and Juana Martin appeal the district court's order dismissing their complaint with prejudice. We conclude that we have jurisdiction over this appeal, and that the district court lacked subject matter jurisdiction. Accordingly, we reverse and remand with directions to remand this action to state court.


The Martins originally brought this proceeding in New Mexico state court, individually and on behalf of all persons similarly situated, seeking damages under state statutory and common law for alleged illegalities with respect to automotive financing and insurance contracts. The plaintiff class alleged defendant Franklin Capital Corporation, which purchased their installment sales contracts from car dealers, deliberately overcharged them for required insurance coverage purchased through defendant Century National Insurance. Invoking diversity of citizenship, Century removed the case to federal court with the consent of Franklin. The Martins then filed a motion to remand to state court for lack of subject matter jurisdiction, arguing their claims did not meet the $50,000 amount-in-controversy requirement for diversity jurisdiction.1

In orders entered the same day, the district court denied the Martins' motion to remand, denied the Martins' motion for class certification, and granted Century's motion to dismiss for failure to state a claim. This left the Martins with an individual case against Franklin in the federal district court. The Martins subsequently requested that the court certify the order denying remand for immediate appeal under 28 U.S.C. § 1292(b), which the court denied. The district court order denying the Martins' motion to remand contains virtually no comment or analysis supporting its decision. However, in its memorandum opinion and order denying the Martins' section 1292(b) motion, the court addressed the amount-in-controversy requirement by stating "[i]t does not appear to a legal certainty that [the Martins'] claims are for less than $50,000 and I conclude that they are colorable for the purposes of conferring jurisdiction." Aplt. App., doc. 13 at 3.

It thus appears that, in assessing the evidence, the court required the Martins to prove to a legal certainty that their claims were below the jurisdictional amount rather than placing the burden on defendants to show by a preponderance of the evidence that the amount was met. The court also appears to have attributed to the Martins all of the attorneys fees requested on behalf of the class. See id. at 6. The court held that any putative class members whose claims did not satisfy the jurisdictional amount were irrelevant because they had already been removed from the case by the court's order refusing to certify the class. Id.

The Martins reasserted their belief that the court lacked jurisdiction, and they requested an order dismissing their complaint with prejudice so they could immediately appeal the jurisdictional issue without expending further time and money in federal court. Noting that the Martins' dismissal request was motivated by their desire to take an immediate appeal and that defendants had failed to file a response, the district court granted a voluntary dismissal with prejudice.

On appeal, the Martins reassert their contention that the district court lacked subject matter jurisdiction over this action and therefore should have granted their motion to remand the case to state court. They contend that neither the complaint nor the notice of removal establishes by a preponderance of the evidence that the amount in controversy exceeds $50,000, and that the damages found by the district court reflect more than the amount claimed in their complaint. They also contend the court erred as a matter of law by failing to require each putative class member to independently meet the jurisdictional amount.

Defendants counter that the Martins waived their right to object to removal by failing to seek a remand within thirty days, citing 28 U.S.C. § 1447(c). They also maintain the Martins' individual claims satisfied the jurisdictional amount. Finally, they contend the class' punitive damages could be aggregated and attributed to each class member to meet the jurisdictional amount and, in any event, any failure by putative class members to satisfy individually the jurisdictional amount was cured by the court's denial of class certification. We address each argument in turn.

II. Appellate Jurisdiction

We first address whether we have appellate jurisdiction. We raised the issue sua sponte, requesting the parties to address whether a voluntary dismissal with prejudice under these circumstances constitutes a final, appealable order for purposes of 28 U.S.C. § 1291. In assessing whether appellate jurisdiction exists in these circumstances, our inquiry is twofold: is the order granting the voluntary dismissal final; and is there a case or controversy in light of the fact that plaintiff sought the dismissal. After considering authority from other circuits and the purposes of the final order rule, we conclude that we have jurisdiction over this appeal.

First, we are convinced the dismissal with prejudice here is a final order for purposes of appeal. Nothing is left pending in the district court and, because the dismissal is with prejudice, the Martins are precluded from filing another lawsuit. The dismissal did not reserve the Martins' right to return to district court to litigate any remaining issues. If they lose on their appeal of the order denying remand, the litigation is terminated entirely. We agree with those authorities holding that a dismissal order is final under these circumstances. See, e.g., Woodard v. STP Corp., 170 F.3d 1043, 1044 (11th Cir. 1999) (voluntary dismissal with prejudice final); John's Insulation, Inc. v. L. Addison & Assoc., 156 F.3d 101, 107 (1st Cir. 1998) ("most circuits hold that voluntary dismissals, and especially those with prejudice, are appealable final orders"); Concha v. London, 62 F.3d 1493, 1507 (9th Cir. 1995) (judgment final when it bars claims forever); see also 15A Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure § 3914.8 (2d ed. 1992), at 623 (approving rule that holds judgment final when plaintiff who voluntarily dismisses abandons all remaining issues).

Viewing such a judgment as final does not undermine the final judgment rule by encouraging quasi-interlocutory appeals. "[I]f the plaintiff is unsuccessful in challenging the district court's action, then the dismissal operates as an adjudication on the merits and the litigation is terminated." Concha, 62 F.3d at 1507. Judicial economy is furthered because when "the appellant voluntarily dismisses his action with prejudice and loses on appeal, the district court is saved the time and effort of conducting extended trial proceedings and there is in addition no possibility of piecemeal appeals." Id. at 1508 n.8.

We also conclude that, even though the Martins requested dismissal, the appeal presents a case or controversy sufficient to support jurisdiction. Because the Martins were convinced the district court lacked diversity jurisdiction, they did not want to expend the resources necessary to proceed in federal court to a judgment on the merits, only to have the case remanded to state court on appeal for lack of jurisdiction. While such a dismissal may be technically voluntary, as a practical matter the Martins did not acquiesce in the judgment but rather were using dismissal to challenge the underlying ruling. When, as here, a plaintiff believes a ruling is so prejudicial to his case he is willing to risk losing the right to litigate completely in order to challenge it, a case or controversy exists and he should be allowed to appeal. See John's Insulation, 156 F.3d at 107 (voluntary dismissal with prejudice proper course of action when interlocutory ruling so prejudicial that proceeding in district court would waste resources).

Because the Martins appealed a final order in a case or controversy, we have jurisdiction to address the appeal.

III. Diversity Jurisdiction

In their motion to remand, the Martins asserted a lack of federal diversity jurisdiction on the ground their action does not meet the $50,000 amount-in-controversy requirement imposed by 28 U.S.C. § 1332(a). We review de novo a district court's determination of the propriety of removal. See Huffman v. Saul Holdings Ltd. P'ship, 194 F.3d 1072, 1076 (10th Cir. 1999). In assessing the district court's ruling, we bear in mind that "[t]he courts must rigorously enforce Congress' intent to restrict federal jurisdiction in controversies between citizens of different states," Miera v. Dairyland Ins. Co., 143 F.3d 1337, 1339 (10th Cir. 1998), and that the presumption is therefore "against removal jurisdiction," Laughlin v. Kmart Corp., 50 F.3d 871, 873 (10th Cir. 1995).

A. The Burden of Establishing the Amount in Controversy.

When a case is originally brought in federal court, the plaintiff's...

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