McCool v. State Farm Fire and Casualty Company, No. 4:98CV71-B-B (N.D. Miss. 7/__/1998)

• Decision Date: 01 July 1998
• Docket Number: No. 4:98CV71-B-B.,4:98CV71-B-B.
• Parties: HELEN S. McCOOL, PLAINTIFF, v. STATE FARM FIRE AND CASUALTY COMPANY, A FOREIGN INSURANCE CORPORATION, DEFENDANT.
• Court: U.S. District Court — Northern District of Mississippi

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HELEN S. McCOOL, PLAINTIFF, v. STATE FARM FIRE AND CASUALTY COMPANY, A FOREIGN INSURANCE CORPORATION, DEFENDANT.

No. 4:98CV71-B-B.

United States District Court, N.D. Mississippi, Greenville Division.

July __, 1998.

MEMORANDUM OPINION

NEAL B. BIGGERS, JR., District Judge.

This cause comes before the court on the plaintiff's motion for remand. The court has duly considered the parties' memoranda and exhibits and is ready to rule.

This cause was removed on the ground of diversity jurisdiction. The notice of removal alleges that the actual amount in controversy, exclusive of interest and costs, exceeds $75,000. The ad damnum clause in the complaint pleads contractual damages in the sum of $74,480. Therefore, the amount in controversy for federal jurisdiction purposes is in dispute.

"[T]he federal courts have limited subject matter jurisdiction and cannot entertain cases unless authorized by the Constitution and legislation." Coury v. Prot, 85 F.3d 244, 248 (5th Cir. 1996) (citation omitted). See Cross v. Bell Helmets, USA, 927 F. Supp. 209, 211 (E.D. Tex. 1996). It is well-settled that removal statutes must be strictly construed, resolving all doubts regarding removability in favor of remand to state court. Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 85 L. Ed. 1214 (1941), cited in York v. Horizon Federal Sav. & Loan Ass'n, 712 F. Supp. 85, 87 (E.D. La. 1989). "Accordingly, there is a presumption against subject matter jurisdiction that must be rebutted by the party bringing an action to federal court." Coury, 85 F.3d at 248 (citations omitted). Under 28 U.S.C. § 1441(a), "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed." See Cervantez v. Bexar County Civil Service Com'n, 99 F.3d 730, 732, 733 (5th Cir. 1996) (generally, "cases [filed in state court] that could have originally been filed in federal court" are removable) (citations omitted).¹ Section 1441(a) "must be construed narrowly in order to limit federal jurisdiction and avoid undue encroachment on a state's right to adjudicate a case filed in one of its courts," particularly in diversity cases. Gober v. Allstate Ins. Co., 855 F. Supp. 158, 159-60 (S.D. Miss. 1994) (citing Powers v. South Central United Food & Commercial Workers Unions & Employers Health & Welfare Trust, 719 F.2d 760, 762 (5th Cir. 1983) ("In construing the removal statutes, the Supreme Court has mandated a `strict construction' approach, in recognition of the congressional intent to restrict the jurisdiction of federal courts on removal.")) (other citations omitted).

"[It] is well settled that the removing party bears the burden of establishing the facts necessary to show that federal jurisdiction exists". Allen v. R & H Oil & Gas Co., 63 F.3d 1326, 1335 (5th Cir. 1995).² Removal jurisdiction is generally determined on the basis of the state court complaint at the time of removal. Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 265 (5th Cir. 1995).³ "The general federal rule has long been to decide what the amount in controversy is from the complaint itself, unless it appears or is in some way shown that the amount stated in the complaint is not claimed `in good faith.'" Horton v. Liberty Mut. Ins. Co, 367 U.S. 348, 353, 6 L. Ed. 2d 890, 894 (1961) (footnote omitted), quoted in Cross, 927 F. Supp. at 212-13 & n.5 ("as [a] general rule, a plaintiff may avoid federal diversity jurisdiction by pleading state court damages below the amount necessary to invoke diversity jurisdiction"). See Allen, 63 F.3d at 1335 ("if a plaintiff pleads damages less than the jurisdiction[al] amount, he generally can bar a defendant from removal").

The general rule "was premised on the notion that the plaintiff would not be able to recover more in state court than what was alleged in the state court complaint." De Aguilar v. Boeing Co. [De Aguilar II], 47 F.3d 1404, 1410 (5th Cir.), cert. denied, 516 U.S. 865, 133 L. Ed. 2d 119 (1995). Since the majority of states no longer limit damage awards to the amount specified in the state court pleading, the Fifth Circuit has held that

in cases where an exact amount has been pled, if a defendant can prove by a preponderance of the evidence that the amount in controversy exceeds the jurisdictional amount, removal is proper unless the plaintiff shows that at the time of removal he was legally certain not to be able to recover that amount. In other words, where the plaintiff's claims can be proved to be of the type that are worth more than $50,000⁴, they can be removed unless the plaintiff can show he is legally bound to accept less.

Allen, 63 F.3d at 1335 n.14 (citing De Aguilar II, 47 F.3d at 1410, 1412) (internal citation omitted). "[T]he plaintiff's claim remains presumptively correct unless the defendant can show by a preponderance of the evidence that the amount in controversy is greater than the jurisdictional amount." De Aguilar II, 47 F.3d at 1412. Mississippi limits the plaintiff's recovery to the amount plead but does not prohibit amendment of the initial ad damnum clause.⁵ Therefore, this standard of proof applies in the instant cause.

This cause arises out of the defendant's denial of payment of insurance proceeds under a homeowners' dwelling policy issued to the plaintiff. The complaint alleges one cause of action for breach of contract and seeks only contractual damages under three types of coverage: (1) $41,600 under dwelling coverage; (2) $22,880 under personal property coverage;⁶ and (3) $10,000 under loss of use coverage.⁷ Since the amount of damages specified in the complaint is less than the jurisdictional minimum⁸ and the defendant challenges the alleged amount, the defendant has the burden to establish by a preponderance of the evidence that the actual amount in controversy exceeds the jurisdictional threshold. Allen, 63 F.3d at 1335 n. 14; De Aguilar II, 47 F.3d at 1412; Prouty v. Home Buyers Warranty Corp, 930 F. Supp. 265, 266 (S.D. Miss. 1996).

The court rejects the defendant's argument that the 15% statutory penalty for an unsuccessful appeal under Miss. Code Ann. § 11-3-23 should be included in the calculation of the amount in controversy. The Fifth Circuit has held that a statutory penalty under Texas law "for failure timely to pay an insurance claim" is an element of damages. St. Paul Reinsurance Co. v. Greenberg, 134 F.3d 1250, 1254, 1255 (5th Cir. 1998) (declaratory judgment action filed by insurer). The court reasoned that the insurer's potential liability under the policy constitutes the amount in controversy. Id. at 1253, 1255. The court concluded that the penalty amount is automatically recoverable if the insured recovers under the policy and is therefore part of the amount in controversy. Id. at 1255. The court finds that Greenberg is distinguishable from the instant cause. Mississippi's statutory penalty for an unsuccessful appeal is not imposed for conduct giving rise to the cause of action and therefore cannot be reasonably considered as an element of damages recoverable for the plaintiff's breach of contract claim.

The court further rejects the defendant's argument that the complaint necessarily seeks to recover the 5% increase for debris removal expenses provided under the terms of the policy incorporated by reference in the complaint.⁹ A copy of the policy is attached to the complaint pursuant to Rule 10(d) of the Mississippi Rules of Civil Procedure and is made a part of the complaint under Rule 10(c).¹⁰ The court finds that the complaint does not effectively or implicitly assert a claim for debris removal expenses.

The defendant contends that the allegations that the plaintiff has "incurred extensive living expenses" and that the defendant has repeatedly refused to pay the claim¹¹ were made in order to lay the foundation for an amendment to the complaint seeking additional compensatory, extra-contractual and possibly punitive damages. As the master of the complaint,¹² the plaintiff has the right to forego a possible bad faith claim, as well as a claim for any additional living expenses, and thereby "resort to the expedient of suing for less than the jurisdictional amount...though [she] would be justly entitled to more." St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 294, 82 L. Ed. 845 (1938). See Prouty, 930 F. Supp. at 267 ("the court is aware of nothing that would require the plaintiffs to seek [punitive] damages even if the defendants' conduct might support a punitive damages award") (footnote omitted). However, in determining the propriety of removal, the court should consider the prospect of an amendment in state court, in light of the one-year limitations period for removal of a diversity action. 28 U.S.C. § 1446(b). If liberally construed,¹³ the allegations in the complaint, arguably contemplate a possible amendment to add a bad faith claim.¹⁴ In light of the plaintiff's right to amend under state law, the court assumes arguendo that the defendant has shown by a preponderance of the evidence the possibility of the plaintiff's recovery in excess of $75,000.

The district court may consider summary-judgment type of evidence to determine the amount in controversy at the time of removal. S.W.S. Erectors, Inc. v. Infax, Inc., 72 F.3d 489, 492 (5th Cir. 1996); Allen, 63 F.3d at 1336. Since the complaint does not assert a claim worth more than $75,000, only the prospect of an amendment places the actual amount in controversy in issue. Therefore, the court finds it appropriate to consider the affidavit of the plaintiff's attorney, attached as an exhibit to the instant motion.¹⁵ See De Aguilar II, 47 F.3d at 1406 ("Post-removal affidavits sometimes can be relevant where the jurisdictional amount question is unresolved.") (citing Asociacion Nacional De Pescadores a Pequena Escala o Artesanales De Colombia S.A. v. Dow Quimica De Colombia S.A. [ANPAC], 988 F.2d 559, 565 (5th Cir. 1993), cert....