McCarty v. Amoco Pipeline Co.

• Decision Date: 02 April 1979
• Docket Number: No. 78-2104,78-2104
• Citation: 595 F.2d 389
• Parties: Ray McCARTY and Genevieve McCarty, Plaintiffs-Appellants, v. AMOCO PIPELINE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 389

595 F.2d 389

Ray McCARTY and Genevieve McCarty, Plaintiffs-Appellants, v. AMOCO PIPELINE COMPANY, Defendant-Appellee.

No. 78-2104.

United States Court of Appeals, Seventh Circuit.

Argued Feb. 9, 1979.

Decided April 2, 1979.

Patrick L. Duffy, Terre Haute, Ind., for plaintiffs-appellants.

Benjamin G. Cox, Terre Haute, Ind., for defendant-appellee.

Before SWYGERT and BAUER, Circuit Judges, and GRADY, District Judge. ¹

SWYGERT, Circuit Judge.

The principal issue in this diversity case concerns the method of determining, for jurisdictional purposes, the amount in controversy in an action removed from a state court when plaintiff seeks injunctive relief. The district court first sustained its jurisdiction over this case by evaluating the matter in controversy from the defendant's viewpoint. It then ruled that, as to the merits, principles of res judicata barred the plaintiffs' claim. We affirm the district court's judgment.

I

Because of the questions presented for review, the procedural history of the case is important. On April 22, 1977 Amoco Pipeline Company filed a complaint in the Vigo Superior Court, Vigo County, Indiana, seeking to condemn an easement for a pipeline across real estate owned by Ray and Genevieve McCarty. Condemnation was sought under authority of Indiana Code Section 32-11-3-1, which allows certain corporations empowered by their articles of incorporation to transport petroleum products to the public to exercise the power of eminent domain. The McCartys filed no objections to Amoco's complaint, and on May 26, 1977 the state court entered an order condemning the easement sought by Amoco and appointing three appraisers to assess the property. No interlocutory appeal was taken from this order although such an appeal is authorized. Indiana Code Section 32-11-1-5.

The appraisers awarded compensation of $1,625.00, which sum was deposited with the state court by Amoco on June 23, 1977. The McCartys filed exceptions to this appraisal, which procedure entitled them to a jury trial on the value question under Indiana law. See Schnull v. Indianapolis RR, 190 Ind. 572, 131 N.E. 51 (1921). Amoco also, filed a petition to have the condemned easement vested in it, and, with no objections being filed, the state court ordered the easement so vested on July 13, 1977.

On November 21, 1977 the McCartys moved the state court to set aside its May 26 order of condemnation. The court received written arguments from both sides before ruling on the motion. The McCartys stated that the essence of their argument was that Amoco was not in fact using the pipeline for a public use and that the only right Amoco had to appropriate their property was predicated on public use. In support thereof, the McCartys called to the court's attention the facts that the pipeline's termini were at subsidiary plants owned by the same corporate entity which owned Amoco, that no entry or exit pipes existed apart from the termini, and that the pipeline transported a substance known as xylene "which may or may not be petroleum as contemplated by the legislature." After taking the motion under advisement, the state court overruled it on March 9, 1978. No appeal was taken from this March 9 ruling.

On April 7, 1978 the McCartys filed a new suit in Vigo Superior Court which was based on the same theory and facts of allegedly private use as had been presented to the state court in support of the November 21, 1977 motion. The McCartys asked the court to enjoin Amoco from using their land for its pipeline and to order Amoco to remove the pipeline. On April 25, 1978 Amoco removed the action to the United States District Court for the Southern District of Indiana and filed an answer setting up the defense of res judicata. The McCartys filed a motion to remand on May 15, stating that the matter in controversy did not exceed $10,000 as required by 28 U.S.C. § 1332 because they had not asked for any damages. The district court denied the motion on June 8 stating:

Part of the relief sought by plaintiffs in this action is the removal by defendant of defendant's pipeline from certain real estate allegedly owned by plaintiffs. By its brief and supporting affidavit on the instant motion, defendant has demonstrated that the cost of such removal, as well as the value to defendant of not removing such pipeline, is well in excess of the required jurisdictional amount. Plaintiffs have not contested defendant's assertions by any reply brief.

The principal purpose of the requirement of a minimum jurisdictional amount in controversy is to assure that an action is substantial. The Court is satisfied that the amount in controversy in this action is in excess of Ten Thousand Dollars, exclusive of interest and costs. Plaintiffs' challenge to this Court's jurisdiction over the subject-matter of this action is not well-taken.

The district court subsequently entertained Amoco's motion for summary judgment, and on July 13, 1978 the court granted it, concluding that the McCartys' present action was a collateral attack on the judgment of the Vigo Superior Court and was barred by the doctrine of res judicata.

II

The first issue on appeal is whether the federal court had jurisdiction to hear the case upon removal. The McCartys contend that because the value to them of the matter in controversy does not exceed $10,000 the jurisdictional minimum amount required by 28 U.S.C. § 1332 is not present. They point to the appraisal award of $1,625.00 as establishing the value of the object in litigation to them, ² and rely on this court's opinion in City of Milwaukee v. Saxbe, 546 F.2d 693 (7th Cir. 1976), for the proposition that the value from the plaintiff's viewpoint is the relevant and controlling one.

Valuation of the matter in controversy in suits for declaratory or injunctive relief is a complex task. The court must not only undertake to evaluate intangible rights as opposed to objects commonly found in the marketplace, but it must decide what rights are involved in the controversy and from whose viewpoint their value is to be measured. A review of the cases and commentary on the subject reveals that there is considerable disagreement as to how a court should accomplish this task.

The seminal case in this area was decided by the Supreme Court in 1862. A steamboat owner sued for abatement of a nuisance, a bridge over the Mississippi River. The Court disposed of the jurisdictional amount question by stating:

But the want of a sufficient amount of damage having been sustained to give the Federal Courts jurisdiction, will not defeat the remedy, as the removal of the obstruction is the matter of controversy, and the value of the object must govern.

Mississippi & Missouri RR v. Ward, 67 U.S. (2 Black) 485, 492, 17 L.Ed. 311 (1862). The difficulty with this passage lies in the cryptic use of the phrase "value of the object." In the context in which it was used, the term could mean the value of the plaintiff's steamboat business, the cost to the defendant of removing the bridge, the value of the bridge itself, or the value of the plaintiff's right to be free of the obstruction.

Some courts have resolved the difficulty by adopting the rule that only the value to the plaintiff may be used to determine the jurisdictional amount. ³ Support for this interpretation is principally garnered from the Supreme Court's opinion in Glenwood Light & Water Co. v. Mutual Light, Heat & Power Co., 239 U.S. 121, 36 S.Ct. 30, 60 L.Ed. 174 (1915). In that case the plaintiff sought to enjoin the defendant from erecting poles and wires that would interfere with those of the plaintiff. The trial court dismissed the case for lack of the jurisdictional amount in controversy because the cost to the defendant of removing its poles and wires would be less than the required amount. The Supreme Court reversed, saying:

The district court erred in testing the jurisdiction by the amount that it would cost defendant to remove its poles and wires where they conflict or interfere with those of complainant, and replacing them in such a position as to avoid the interference. Complainant sets up a right to maintain and operate its plant and conduct its business free from wrongful interference by defendant. This right is alleged to be of a value in excess of the jurisdictional amount, and at the hearing no question seems to have been made but that it has such value. The relief sought is the protection of that right, now and in the future, and the value of that protection is determinative of the jurisdiction.

Id. at 126, 36 S.Ct. at 32.

Although supportive of the "plaintiff viewpoint" rule, the holding in Glenwood is only that jurisdiction is present if the value to the plaintiff exceeds the required amount regardless of the value to the defendant. The Glenwood case does not exclude the possibility that jurisdiction would be present in a case where the value required was present from the defendant's viewpoint but not from the plaintiff's. See 14 Wright, Miller & Cooper, Federal Practice and Procedure § 3703, pp. 406-07 (1976).

Another approach taken by some courts is to view the amount in controversy from the point of view of the party seeking to invoke federal jurisdiction. ⁴ Under this rule, the court would look to the plaintiff's viewpoint in a case brought originally in federal court and to the defendant's viewpoint in a case removed to federal court from a state court.

Although this rule has certain attractive features such as tying the controlling viewpoint to the burden of proof as to jurisdiction, two problems with it arise. The first is the possibility of anomalous results. Under the rule, if a case originally brought in federal court were dismissed for failure to meet the jurisdictional amount from the plaintiff's viewpoint, it could yet end up in federal court if the plaintiff reinstituted the case in state court and the defendant from whose point of view the required amount was...