Meritcare Inc. v. St. Paul Mercury Ins. Co.

• Citation: 166 F.3d 214
• Decision Date: 25 January 1999
• Docket Number: No. 98-3032,98-3032
• Parties: MERITCARE INCORPORATED; Meritcare Ventures, Inc.; Quinlan Medical, Inc., Appellants, v. ST. PAUL MERCURY INSURANCE COMPANY.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Page 214

166 F.3d 214

MERITCARE INCORPORATED; Meritcare Ventures, Inc.; Quinlan Medical, Inc., Appellants, v. ST. PAUL MERCURY INSURANCE COMPANY.

No. 98-3032.

United States Court of Appeals, Third Circuit.

Argued Nov. 18, 1998.

Decided Jan. 25, 1999.

Lawrence E. Flatley (Argued), Joseph W. Klein, Courtney C.T. Horrigan, Reed Smith Shaw & McClay, LLP, Pittsburgh, PA, for Appellants.

Ronald B. Hamilton (Argued), John J. Dwyer, Cozen and O'Connor, Philadelphia, PA, for Appellee.

Before: McKEE, RENDELL, and WEIS, Circuit Judges.

OPINION OF THE COURT

WEIS, Circuit Judge.

In this diversity case, we conclude that a plaintiff with claims less than the jurisdictional amount may not invoke supplemental jurisdiction under 28 U.S.C. § 1367 where a co-plaintiff's more substantial ones meet the requisite amount. We also decide that the District Court correctly held that the meaning of "collapse" in a property insurance policy requires a caving in or falling in of a structure and that the existence of serious impairment of structural integrity is insufficient to invoke coverage. Accordingly, we will remand the claims of one plaintiff to the state court from which it was removed, and affirm summary judgment in favor of the insurance carrier on the other plaintiff's claims.

Plaintiffs Meritcare, Inc. and Meritcare Ventures, Inc. operate a nursing home in Monroeville, Pennsylvania. They lease the structure from its owner Caring I, Ltd. ¹ Plaintiff Quinlan Medical, Inc. is a subsidiary of Meritcare and furnishes "liquefied" food and other products to the residents.

On December 27, 1994, Caring advised Meritcare that the roof on the nursing home was structurally unsound and posed a safety hazard. The facility was closed and all of its residents were moved to other institutions by January 6, 1995. They did not begin to return until after the roof replacement was completed on February 13, 1995. The nursing home did not obtain its previous occupancy level until June 15, 1995.

Defendant St. Paul Mercury Insurance Company had issued policies to Meritcare, Inc., Meritcare Ventures, Inc., and Quinlan that provided property damage and business interruption coverage. The insurance company denied plaintiffs' claims on the ground that the policies covered losses from a roof "collapse" and that in this instance the roof, although structurally unsound, did not fall in.

Meritcare, Inc., Meritcare Ventures, Inc., and Quinlan filed suit in Pennsylvania state court on June 6, 1995, claiming damages "exceed[ing] $25,000.00." St. Paul removed the case to the District Court for the Western District of Pennsylvania, and in its Notice of Removal alleged that the amount in controversy exceeded $50,000, the then-applicable amount. ²

Plaintiffs did not challenge the amount in controversy at that time, nor did they move for remand at anytime. They later amended their complaint to add a claim under the Pennsylvania Bad Faith Insurer statute, 42 Pa.C.S.A. § 8371, asking for punitive damages, costs, and attorneys' fees. Meritcare also requested damages for the loss of an opportunity to purchase the facility under an option in the lease. St. Paul filed counterclaims for misrepresentation, insurance fraud, and bad faith.

In their respective pretrial statements, both the plaintiffs and defendant stated that Quinlan's compensatory claims amounted to no more than $5,000. At that point, for the first time, St. Paul challenged the District Court's jurisdiction over Quinlan's claim.

The District Court granted summary judgment to St. Paul, holding that the deteriorated condition of the roof was not a "collapse" under the policy and Pennsylvania law. The Court did not discuss or rule on the jurisdictional objection to Quinlan's claim. After the Court issued an order under Fed.R.Civ.P. 54(b), the plaintiffs appealed. St. Paul's counterclaims are still pending in the District Court and are not before us in this appeal.

I.

We first address the rather complicated issues raised by the fact that Quinlan's claim does not appear to meet the amount in controversy required in diversity cases. We exercise plenary review over this question of subject matter jurisdiction. See Packard v. Provident Nat'l Bank, 994 F.2d 1039, 1044 (3d Cir.1993).

A federal court has the obligation to address a question of subject matter jurisdiction sua sponte. See Employers Ins. of Wausau v. Crown Cork & Seal Co., Inc., 905 F.2d 42, 45 (3d Cir.1990). In particular, in removal cases, "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. § 1447(c). As we said in Liberty Mutual Insurance Co. v. Ward Trucking Corp., 48 F.3d 742 (3d Cir.1995), this statute enables "a district court to address the question of jurisdiction, even if the parties do not raise the issue." Id. at 750. In assessing the amount in controversy, it is also important to bear in mind that the parties may not confer jurisdiction by consent, see United Indus. Workers v. Government of the Virgin Islands, 987 F.2d 162, 168 (3d Cir.1993), a principle that is equally applicable in removal as well as original jurisdiction cases. See Liberty Mutual, 48 F.3d at 750.

A defendant may remove a case in "any civil action brought in a State court of which the district courts of the United States have original jurisdiction." 28 U.S.C. § 1441(a). "The propriety of removal thus depends on whether the case originally could have been filed in federal court." City of Chicago v. International College of Surgeons, 522 U.S. 156, 118 S.Ct. 523, 529, 139 L.Ed.2d 525 (1997).

Jurisdiction under 28 U.S.C. § 1332(a) rests upon not only diversity of citizenship--which is not in doubt here--but also in meeting the requisite amount in controversy. Those constraints carry over to Section 1441, which is to be strictly construed against removal, see Boyer v. Snap-On Tools Corp., 913 F.2d 108, 111 (3d Cir.1990), so that the congressional intent to restrict federal diversity litigation is honored. See Nelson v. Keefer, 451 F.2d 289, 293-95 (3d Cir.1971) (federal judiciary has been "too timid" in eliminating the "plethora of cases which do not belong in federal courts").

The ad damnum clause in the complaint is often a convenient and customary reference point to ascertain the amount in controversy. However, the rules in many state courts place limits on the amounts that may be recited in ad damnum clauses. In this case, for example, in conformity with Pennsylvania state practice, the ad damnum clause states the damages requested "exceed[ ] $25,000.00," but does not specify actual damages. See Pa. R. Civ. P. 1021(b). This ad damnum clause, then, is little more than an open-ended claim that fails to answer the amount in controversy inquiry.

Even though actual damages may not be established until later in the litigation, the amount in controversy is measured as of the date of removal, a practice similar to that in original jurisdiction suits where the inquiry is directed to the time when the complaint is filed. See Pullman Co. v. Jenkins, 305 U.S. 534, 537, 59 S.Ct. 347, 83 L.Ed. 334 (1939); Abels v. State Farm Fire & Cas. Co., 770 F.2d 26, 29 (3d Cir.1985). When it appears to a legal certainty that the plaintiff was never entitled to recover the minimum amount set by Section 1332, the removed case must be remanded even if the jurisdictional deficiency becomes evident only after trial. See St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 289, 58 S.Ct. 586, 82 L.Ed. 845 (1938).

As we noted in State Farm Mutual Automobile Insurance Co. v. Powell, 87 F.3d 93 (3d Cir.1996), "[a] distinction must be made ... between subsequent events that change the amount in controversy and subsequent revelations that, in fact, the required amount was or was not in controversy at the commencement of the action." Id. at 97 (alterations in original). A respected treatise cautions that the "[f]ailure to satisfy the jurisdictional amount from the outset, although not recognized until later, is not a subsequent change that can be ignored." 15 James W. Moore et al., Moore's Federal Practice p 102.104, at 102-167 (3d ed.1998). Thus, if it develops that the requisite amount in controversy was never present, even if that fact is not established until the case is on appeal, the judgment of the District Court cannot stand. See American Fire & Casualty Co. v. Finn, 341 U.S. 6, 17-19, 71 S.Ct. 534, 95 L.Ed. 702 (1951); Knop v. McMahan, 872 F.2d 1132, 1139 (3d Cir.1989). ³

A.

In circumstances where two or more plaintiffs in state court have joined their claims, a question arises whether those claims may be aggregated to meet the required jurisdictional amount on removal. There is no dispute that Meritcare's claims exceed $50,000, and if combined with Quinlan's, would total more than $50,000, the minimum required by the diversity statute at the time.

As succinctly stated in a leading treatise, the rule is "long-standing and seemingly well-settled ... that the claims of several plaintiffs, if they are separate and distinct, cannot be aggregated for purposes of determining the amount in controversy." 14B Wright, Miller & Cooper, Federal Practice and Procedure § 3704, at 134 (1994). The rule applies even if the plaintiffs have a community of interest, but fall short of establishing a single title or right in which they have a common and undivided interest. See Thomson v. Gaskill, 315 U.S. 442, 446-47, 62 S.Ct. 673, 86 L.Ed. 951 (1942); Pinel v. Pinel, 240 U.S. 594, 596, 36 S.Ct. 416, 60 L.Ed. 817 (1916).

In such circumstances, the claims of those plaintiffs who fail to meet the amount in controversy must be remanded. See Clark v. Paul Gray, Inc., 306 U.S. 583, 590, 59 S.Ct. 744, 83 L.Ed. 1001 (1939); see also Pinel, 240 U.S. at 596, 36 S.Ct. 416 (joinder case). Similarly, in a class action, each member of a class who does not meet the jurisdictional amount must be dismissed...