Singer v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 21 May 1997
• Docket Number: No. 95-55441,95-55441
• Citation: 116 F.3d 373
• Parties: , 97 Cal. Daily Op. Serv. 3819, 97 Daily Journal D.A.R. 6468 David SINGER, Plaintiff-Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 373

116 F.3d 373

65 USLW 2764, 97 Cal. Daily Op. Serv. 3819,

97 Daily Journal D.A.R. 6468

David SINGER, Plaintiff-Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellee.

No. 95-55441.

United States Court of Appeals Ninth Circuit.

Argued and Submitted June 7, 1996.

Decided May 21, 1997.

Matthew B.F. Biren, Matthew B.F. Biren and Associates, Los Angeles, California, for plaintiff-appellant.

Edmont T. Barrett, Los Angeles, California, for plaintiff-appellant.

Gary Gleb, Horvitz & Levy, Encino, California, Lance Orloff, Daniels, Baratta & Fine, Los Angeles, California for defendant-appellee.

Appeal from the United States District Court for the Central District of California, William Matthew Byrne, Jr., District Judge, Presiding. D.C. No. CV-94-04669-WMB.

Before: FLETCHER, BEEZER, and KLEINFELD, Circuit Judges.

KLEINFELD, Circuit Judge:

We consider two issues: what constitutes compliance with the amount-in-controversy requirement where state law prohibits setting out of a monetary ad damnum in the complaint and whether judgment on the pleadings disallowing an insurance bad faith claim was proper.

I. FACTS

Mr. Singer was injured in an automobile accident with an uninsured driver. He owned a State Farm Mutual Automobile Insurance Company policy, with uninsured motorist coverage subject to a $30,000 policy limit.

Negotiations between Mr. Singer and State Farm on his uninsured motorist claim did not go well. Ultimately he sued State Farm in the Superior Court of the State of California for breach of contract and breach of the covenant of good faith and fair dealing. The gist of his complaint was that State Farm stonewalled him until the eve of arbitration, even though liability was clear and the insurer knew that damages exceeded his $30,000 policy limit.

The defendant removed the case to federal court, based on diversity. California prohibits plaintiffs from setting out a monetary ad damnum, Cal.Code Civ.Proc. § 425.10(b), so the basis for the removal could not be the amount stated in the complaint. The notice for removal recited that the amount in controversy exceeded $50,000.

On the motion for remand, defense counsel submitted declarations to show that the amount in controversy exceeded $50,000. Plaintiff expressly conceded that it did. Plaintiff's counsel told the judge that the case was "absolutely" worth "considerably more" than $50,000. The judge wondered why plaintiff was then moving for remand on the ground that the amount in controversy was insufficient. Plaintiff's counsel explained that "we are concerned under Gaus [v. Miles, Inc., 980 F.2d 564 (9th Cir.1992) ] that we can litigate the case here and have the Ninth Circuit remand the matter for lack of subject matter jurisdiction, as they did in Gaus."

The district judge denied the motion for remand. Subsequently, the district court granted judgment on the pleadings under Federal Rule of Civil Procedure 12(c) in favor of State Farm. The district court held that the complaint did not allege a final judicial determination that the uninsured motorist was liable to Mr. Singer, and without that, State Farm could not be liable to Mr. Singer for bad faith under California law.

II. ANALYSIS

1. Amount in Controversy.

The parties to this case were caught between the California statute prohibiting statement of an ad damnum, and the traditional federal removal framework, which bases removal on the amount stated in the ad damnum. Traditionally a complaint for money damages ends with the words, "Wherefore plaintiff demands judgment against defendant in the sum of ____ dollars and costs." Form 9, Appendix of Forms, Fed.R.Civ.P. At common law, a statement of the amount claimed was required, and was an upper limit on recovery. Benjamin J. Shipman, Common Law Pleading, 223, 487-89 (3d ed. 1923).

In a state following the common law rule, there is a mechanical test of whether the amount in controversy requirement is met when a case is removed. The district court simply reads the ad damnum clause of the complaint to determine whether the "matter in controversy exceeds the sum or value of $50,000, exclusive of interest and costs." 28 U.S.C. § 1332(a). ¹ If the claim was "apparently made in good faith," then the sum claimed by the plaintiff controls for removal purposes unless "it is apparent, to a legal certainty, that the plaintiff cannot recover the amount claimed."

The rule governing dismissal for want of jurisdiction in cases brought in the Federal court is that, unless the law gives a different rule, the sum claimed by the plaintiff controls if the claim is apparently 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. Nor does the fact that the complaint discloses the existence of a valid defense to the claim. 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 that 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.

St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-90, 58 S.Ct. 586, 589-91, 82 L.Ed. 845 (1938) (footnotes omitted). In a removed case, unlike a case instituted in federal court, the plaintiff chose a state rather than federal forum. Because the plaintiff instituted the case in state court, "[t]here is a strong presumption that the plaintiff has not claimed a large amount in order to confer jurisdiction on a federal court or that the parties have colluded to that end." Id. at 290, 58 S.Ct. at 591.

California law formerly codified the common law rule: "If the recovery of money or damages be demanded, the amount thereof shall be stated." Cal.Code Civ.Proc. § 425.10(b) as set out in statutes 1971, ch. 244 § 23. But the law changed in 1974. As amended, California law now expressly prohibits the plaintiff in a personal injury case from stating how much money he demands § 425.10 Statement of facts; demand for judgment

A complaint or cross-complaint shall contain both of the following:

(a)....

(b) A demand for judgment for the relief to which the pleader claims he is entitled. If the recovery of money or damages be demanded, the amount thereof shall be stated, unless the action is brought in the superior court to recover actual or punitive damages for personal injury or wrongful death, in which case the amount thereof shall not be stated.

Cal.Code Civ.Proc. § 425.10(b).

This amendment means that the mechanical system of St. Paul Mercury, for determining whether the amount in controversy exceeds $50,000 no longer works in California personal injury and wrongful death cases. The defendant's claim that the amount in controversy exceeds $50,000 does not enjoy the St. Paul Mercury presumption of accuracy that the plaintiff's does. The reason is that a plaintiff's ad damnum exceeding $50,000 causes him to lose his selected forum, but defendant's claim supports moving the case to his preferred forum.

In Gaus v. Miles, Inc., 980 F.2d 564 (9th Cir.1992), we held that a summary judgment obtained after removal had to be vacated because the amount in controversy requirement was not satisfied. There the Nevada statute prohibited a plaintiff from stating an amount in excess of $50,000 in the ad damnum clause. In Gaus, the plaintiff said in response to our order to show cause that damages sought were "in the millions of dollars," but the defendant who removed the case said that plaintiff's allegation "may be a procedural error" and apparently did not agree with it. Id. at 566. The defendant offered "no facts whatsoever" to support its claim that the matter in controversy exceeded $50,000. Id. at 567. We understand Gaus to mean that where the plaintiff does not claim damages in excess of $50,000 and the defendant offers "no facts whatsoever" to show that the amount in controversy exceeds $50,000, then the defendant has not borne the burden on removal of proving that the amount in controversy requirement is satisfied. Id.

Our interpretation of Gaus is consistent with and is based upon Sanchez v. Monumental Life Ins. Co., 102 F.3d 398 (9th Cir.1996). Where the complaint does not demand a dollar amount, the removing defendant bears the burden of proving by a preponderance of evidence that the amount in controversy exceeds $50,000. Id. at 404.

In the case at bar, the district judge was satisfied that the defendant had shown by a preponderance of evidence that the amount in controversy satisfied the jurisdictional requirement. Unlike Gaus, there were facts to show that it did. The court considered a formal judicial admission made in open court by the plaintiff's attorney, that the amount in controversy exceeds $50,000. A trial judge has discretion whether to accept a judicial admission. American Title Ins. Co. v. Lacelaw Corp., 861 F.2d 224, 227 (9th Cir.1988); 9 Wigmore on Evidence § 2590. The district judge in this case reasonably exercised his discretion to accept the admission.

This is not to say that a defect in jurisdiction can be avoided by waiver or stipulation to submit to federal jurisdiction. It cannot. Cripps v. Life Ins. Co. of North America, 980 F.2d 1261, 1264 (9th Cir.1992). But a judicial admission of a fact is not the same thing as a waiver or a stipulation. Where the plaintiff filed the case in state court, and did not seek the federal forum, then the plaintiff's formal judicial admission that the amount in controversy exceeds $50,000 has the effect of defeating ...