# Horton v. Liberty Mutual Insurance Company/Opinion of the Court

* Court Documents
* Case Syllabus
* Opinion of the Court
* Dissenting Opinion Clark
United States Supreme Court
367 U.S. 348
Horton v. Liberty Mutual Insurance Company
Argued: May 3, 1961. --- Decided: June 12, 1961
This case raises questions under that part of 28 U.S.C. § 1332, as amended in 1958, 28 U.S.C.A. § 1332, which grants jurisdiction to United States District Courts of all civil actions between citizens of different States 'where the matter in controversy exceeds the sum or value of $10,000, exclusive of interest and costs * * *.'
Petitioner, Horton, was injured while working for an employer in Texas insured by the respondent, liberty Mutual Insurance Company. Pursuant to the Texas Workmen's Compensation Law, petitioner filed a claim with the Texas Industrial Accident Board against his employer and the respondent insurance company alleging that he had been totally and permanently incapacitated and claiming the maximum recovery under the law of $35 per week for 401 weeks, or a total of $14,035. After administrative hearings the Board decided that petitioner would be disabled for only 30 weeks and accordingly made an award of only $1,050. Section 5 of Art. 8307 of the Texas Workmen's Compensation Law permits either the employee or the insurance company, if dissatisfied with an award, to 'bring suit in the county where the injury occurred to set asides aid final ruling,' in which event the issues shall be determined 'upon trial de novo, and the burden or (sic) proof shall be upon the party claiming compensation.' but in no event shall the court allow recovery in excess of the statutory maximum of $14,035. Acting under this provision of state law, the respondent, on April 30, 1959, the very day of the award, filed this diversity case in the United States District Court to set aside the award, alleging that petitioner had claimed, was claiming and would claim $14,035, but denying that petitioner was entitled to recover anything at all under Texas law. One week later the petitioner, who also was dissatisfied with the award, filed an action in the state court to set aside the Board's award and to recover in that court the full $14,035. After that, petitioner moved to dismiss the respondent's federal court suit on the ground that the value of the 'matter in controversy' was only the amount of the award, $1,050, and not the amount of his claim of $14,035, although he also contemporaneously filed, subject to his motion to dismiss, what he designated as a compulsory counterclaim for the full amount he had claimed before the Texas Board and in his Texas State Court suit. The District Court held that the 'matter in controversy' in the federal action was only the amount of the $1,050 award that the respondent company had asked the court to set aside. In so holding the District Court relied on National Surety Corp. v. Chamberlain, in which another District Court in Texas had reached the same conclusion as to jurisdiction largely on the basis of what it deemed to have been the purpose of Congress in enacting the 1958 amendment to 28 U.S.C. § 1332, 28 U.S.C.A. § 1332, which amendment rather severely cut down the jurisdiction of Federal District Courts, particularly in state workmen's compensation cases. The Court of Appeals reversed, and we granted certiorari to decide the important jurisdictional questions raised under the 1958 amendment.
For reasons to be stated, we hold that the District Court has jurisdiction of the controversy.
First. It is true, as the Chamberlain opinion pointed out, that the purpose and effect of the 1958 amendment were to reduce congestion in the Federal District Court's partially caused by the large number of civil cases that were being brought under the long-standing $3,000 jurisdictional rule. This effort to reduce District Court congestion followed years of study by the United States Judicial Conference and the Administrative Office of the United States Courts, as well as by the Congress. To accomplish this purpose the 1958 amendment took several different but related steps. It raised the requisite jurisdictional amount from $3,000 to $10,000 in diversity and federal question cases; it provided that a corporation is to be deemed a citizen not only of the State by which it was incorporated but also of the State where it has its principal place of business; and, most importantly here, it also for the first time forbade the removal of state workmen's compensation cases from state courts to United States District Courts. By granting district judges a discretionary power to impose costs on a federal court plaintiff if he should 'recover less than the sum or value of $10,000,' the amendment further manifested a congressional purpose to discourage the trying of suits involving less than $10,000 in federal courts. In discussing the question of state workmen's compensation cases, the Senate Report on the amendment evidenced a concern not only about the problem of congestion in the fedr al courts, but also about trial burdens that claimants might suffer by having to go to trial in federal rather than state courts due to the fact that the state courts are likely to be closer to an injured worker's home and may also provide him with special procedural advantages in workmen's compensation cases.
The foregoing are some of the appealing considerations that led the District Court to conclude that it would frustrate the congressional purpose to permit insurers to file workmen's compensation suits in federal courts when Congress had deliberately provided that such suits could not be removed to federal courts if filed by claimants in state courts. But after the most deliberate study of the whole problem by lawyers and judges and after its consideration by lawyers on the Senate Judiciary Committee in the light of statistics on both removals and original filings, Congress used language specifically barring removal of such cases from state to federal courts and at the same time left unchanged the old language which just as specifically permits civil suits to be filed in federal courts in cases where there are both diversity of citizenship and the prescribed jurisdictional amount. In this situation we must take the intent of Congress with regard to the filing of diversity cases in Federal District Courts to be that which its language clearly sets forth. Congress could very easily have used language to bar filing of workmen's compensation suits by the insurer as well as removal of such suits, and it could easily do so still. We therefore hold that under the present law the District Court has jurisdiction to try this civil case between citizens of different States if the matter in controversy is in excess of $10,000.
Second. We agree with petitioner that determination of the value of the matter in controversy for purposes of federal jurisdiction is a federal question to be decided under federal standards, although the federal courts must, of course, look to state law to determine the nature and extent of the right to be enforced in a diversity case. It therefore is not controlling here that Texas has held that the crucial factor for allocating its cases among different state courts on an amount-in-controversy basis is the amount originally claimed before its State Compensation Board.
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.' In deciding this question of good faith we have said that it 'must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal.' The complaint of the respondent company filed in the District Court, while denying any liability at all and asking that the award of $1,050 against it be set aside, also alleges that petitioner Horton has claimed, now claims and will claim that he has suffered total and permanent disability and is entitled to a maximum recovery of $14,035, which, of course, is in excess of the $10,000 requisite to give a federal court jurisdiction of this controversy. No denial of these al egations in the complaint has been made, no attempted disclaimer or surrender of any part of the original claim has been made by petitioner, and there has been no other showing, let alone a showing 'to a legal certainty,' of any lack of good faith on the part of the respondent in alleging that a $14,035 claim is in controversy. It would contradict the whole record as well as the allegations of the complaint to say that this dispute involves only $1,050. The claim before the Board was $14,035; the state court suit of petitioner asked that much; the conditional counterclaim in the federal court claims the same amount. Texas law under which this claim was created and has its being leaves the entire $14,035 claim open for adjudication in a de novo court trial, regardless of the award. Thus the record before us shows beyond a doubt that the award is challenged by both parties and is binding on neither; that petitioner claims more than $10,000 from the respondent and the respondent denies it should have to pay petitioner anything at all. No matter which party brings it into court, the controversy remains the same; it involves the same amount of money and is to be adjudicated and determined under the same rules. Unquestionably, therefore, the amount in controversy is in excess of $10,000.
Third. Petitioner contends, however that even though the amount in controversy is more than $10,000, the suit filed by the company is nothing more than an appeal from a state administrative order, that a Federal District Court has no appellate jurisdiction and that the dismissal of the case by the District Court therefore is supportable on that ground. This contention rests almost entirely on Chicago, R.I. & P.R. Co. v. Stude, 346 U.S. 574, 581, 74 S.Ct. 290, 295, 98 L.Ed. 317, which held that a United States District Court was without jurisdiction to consider an appeal 'taken administratively or judicially in a state proceeding.' Aside from many other relevant distinctions which need not be pointed out, the Stude case is without weight here because, as shown by the Texas Supreme Court's interpretation of its compensation act:
'The suit to set aside an award of the board is in fact a suit, not an appeal. It is filed as any other suit is filed and when filed the subject matter is withdrawn from the board.'
It is true that as conditions precedent to filing a suit a claim must have been filed with the Board and the Board must have made a final ruling and decision. But the trial in court is not an appellate proceeding. It is a trial de novo wholly without reference to what may have been decided by the Board.
The Court of Appeals was right in holding that the District Court had jurisdiction of this case and its judgment is affirmed.
Affirmed.
Mr. Justice CLARK, with whom THE CHIEF JUSTICE, M. Justice BRENNAN and Mr. Justice STEWART join, dissenting.

## Notes

* ↑ Act of July 25, 1958, 72 Stat. 415.
* ↑ Vernon's Tex.Ann.Civ.Stat. Arts. 8306-8309.
* ↑ With exceptions not here relevant, Rule 13(a) of the Federal Rules of Civil Procedure, 28 U.S.C.A. requires a party to file a counterclaim arising out of the transaction or occurrence that is the subject of the opposing party's claim.
* ↑ 171 F.Supp. 591.
* ↑ 275 F.2d 148.
* ↑ 364 U.S. 814, 81 S.Ct. 79, 5 L.Ed.2d 46.
* ↑ See H.R.Rep. No. 1706, 85th Cong., 2d Sess.; S.Rep. No. 1830, 85th Cong., 2d Sess., U.S.Code Cong. & Adm.News 1958, p. 3099; Hearings on H.R. 2516 and H.R. 4497, Subcommittee of House Committee on the Judiciary, 85th Cong., 1st Sess. With particular reference to the provision barring removal of state workmen's compensation cases, see 104 Cong.Rec. 12689-12690; S.Rep. No. 1830, supra, p. 9; Annual Report of the Proceedings of the Judicial Conference of the United States, 1957, p. 15.
* ↑ S.Rep. No. 1830, 85th Cong., 2d Sess., pp. 8-9.
* ↑ See, id., p. 8.
* ↑ See, e.g., Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 104, 61 S.Ct. 868, 870, 85 L.Ed. 1214.
* ↑ Booth v. Texas Employers' Ins. Ass'n, 132 Tex. 237, 252, 123 S.W.2d 322, 331.
* ↑ St. Paul Mercury Indemnity Co. v. Red Cob. Co., 303 U.S. 283, 288, 58 S.Ct. 586, 590, 82 L.Ed. 845, and cases there cited.
* ↑ Id., 303 U.S. at page 289, 58 S.Ct. at page 590. See also Bell v. Preferred Life Assurance Society, 320 U.S. 238, 240, 64 S.Ct. 5, 6, 88 L.Ed. 15; Aetna Casualty & Surety Co. v. Flowers, 330 U.S. 464, 468, 67 S.Ct. 798, 800, 91 L.Ed. 1024.
* ↑ Booth v. Texas Employers' Ins. Ass'n, 132 Tex. 237, 246, 123 S.W.2d 322, 328.
* ↑ The character of the lawfuit is further illuminated by decisions of the Texas Supreme Court holding that the administrative award becomes vacated and unenforceable once the court has acquired jurisdiction of the cause and the parties even if a voluntary nonsuit is taken and the case dismissed without judgment on the merits. Zurich General Accident & Liability Ins. Co. v. Rodgers, 128 Tex. 313, 97 S.W.2d 674; Texas Reciprocal Ins. Ass'n v. Leger. 128 Tex. 319, 97 S.W.2d 677. This makes it all the more clear that the matter in controversy between the parties to the suit is not merely whether the award will be set aside since the suit automatically sets it aside for determination of liability de novo.
This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
Public domainPublic domainfalsefalse