## REVISED, February 27, 1998

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

______________________________________

No. 97-20294

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ST. PAUL REINSURANCE COMPANY, LTD.,

Plaintiff-Appellant,

versus

LARRY GREENBERG,

Defendant-Appellee.

_______________________________________________

Appeal from the United States District Court

for the Southern District of Texas

_______________________________________________

February 10, 1998

Before DAVIS, WIENER and PARKER, Circuit Judges.

WIENER, Circuit Judge:

In this declaratory judgment action, Plaintiff-Appellant

St. Paul Reinsurance Company, Ltd. (St. Paul) appeals the district

court’s grant of Defendant-Appellee Lar ry Greenberg’s motion to

dismiss for lack of subject matter jurisdiction, finding that St.

Paul’s complaint failed to satisfy the amount in controversy

requir ement for diversity jurisdiction under 28 U.S.C. § 1332.

After reviewing the record and the arguments of counsel, and

applying the applicable law, we conclude that the di strict court

erred in dismissing the action. Accordingly, we reverse and

remand.2 I.

FACTS AND PROCEEDINGS

In August 1995, Greenberg purchased a homeowner’s policy from

St. Paul. In March 1996, the home covered by that policy was

destroyed by arson. After Greenberg filed a sworn proof of loss in

J uly 1996 in the amount of $35,000

—— the policy’s li mits of

coverage

—— St. Paul denied coverage. It asserted, i nter alia

,

that (1) Greenberg had increased the risk of hazard, (2) the

property was vacant for m ore than thirty days prior to the fire,

and (3) Greenberg had misrepresented material facts concerning the

property.

On September 20, 1996, Greenberg’s counsel wrote to St. Paul

demanding that it acknowledge coverage under the policy within ten

days or Greenberg would file suit seeking “all damages available to

him under the various common laws or statutes relative to this

case.” On October 10, 1996, Greenberg’s attorney wrote again,

demanding coverage and stati ng, “Obviously, if we file suit, we

will seek additional damages including any penalties and interest

to which Mr. Greenberg may be entitled.”

A week later St. Paul filed a complaint for declaratory relief

in federal district court. St. Paul pleaded the following facts in

its complaint:

1.01 Plaintiff, St. Paul Reinsura n ce Company, Ltd., is a foreign corporation, incorporated and having its

principal place of business in London, England.

1.02 Defendant, Larry Greenberg, is a citizen of Texas.

2.01 The jurisdiction of this Court is based on diversity of

citizenship pursuant to 28 U.S.C. § 1332. This is a1 Attorney’s fees for a valid claim for breach of an insurance

contract are recoverable pursuant to Tex. Civ. Prac. & Rem. Code

Ann. § 38.001(8) (West 1997). In addition, Tex. Ins. Code Ann.

art. 21.21 § 16(b)(1) (West Supp. 1997), Tex. Ins. Code Ann. art.

21.55 § (6) (West Supp. 1997), and Tex. Bus. & Com. Code Ann.

§ 17.50(d) (West Supp. 1997) allow a plaintiff prevailing in an

action brought un der any of those statutes to recover attorney’s

fees and costs.

2 At the time this action was filed, the amount in controversy

for diversity jurisdiction had to exceed $50,000, exclusi ve of

costs and interest.

3 Tex. Bus. & Com. Code Ann. §§ 17.41 to 17.63 (West 1987).

3 civil action in which the matter in controversy exceeds

the sum of $50,000.00, exclusive of interest and costs.

In response, Greenberg filed a Rule 12(b)(1) motion to dismiss

for lack of subject matter jurisdiction, ar guing that he was

seeking only $45,500 in the aggregate, comprising the $35,000

policy limits and attorney’s fees not to ex ceed $10,500, 1 so that

St. Paul’s claim did not meet the amount in controversy requirement

of § 1332. 2 Included with Greenberg’s Rule 12(b) motion was his

counterclaim for that amount. While Greenberg’s motion to dismiss

was pending in federal court, he filed a petition in state court

requesting the $35,000 limits of the policy plus $10,500 in

attorney’s fees and alleging that St . Paul violated the Texas

Deceptive Trade Practices Act (DTPA) 3 and the Texas Insurance Code.

The district court granted Greenberg’s motion, dismissing St.

Paul’s complaint for declaratory relief. In its order, the court

explained:

The plaintiff cannot bring a suit for declaratory relief

on a claim that does not exceed $ 50,000 and create

federal jurisdiction by stating all of the possible

claims for relief that a defendant may bring. There is

nothing in the plaintiff’s counterclaim that suggests4 I nternational Paper Co. v. Denkmann Assocs. , 116 F.3d 134,

136 n.4 (5th Cir. 1997). Both parties to this appeal urge that we

should review the trial court’s determination of the amount in

controversy for an abuse of discretion, citing Dassinger v. South

Central Bell Telephone Co.

, 505 F.2d 672 (5th Cir. 1974). In

Dassinger , we cited Gibbs v. Buck , 307 U.S. 66, 59 S. Ct. 725, 83

L. Ed. 1111 (1939), for the proposition that “discretion is vested

in the trial court to determine whether the claim meets the

jurisdictional amount.” I d. at 673. Our understanding of G ibbs is

that the trial court has discretion in the procedure it uses for

determining the jurisdictional amount when the statute is silent.

We need not and therefore do not resolve this apparent

inconsistency, however; given the district court’s erroneous view

of the law regarding the inclusion of statutory penalties in the

calculation of t he amount in controversy, s ee infra

, we would

reverse even under the more deferential ab use of discretion

standard. “A court abuses its discretion when its ruling is based

on an erroneous view of t he law.” C haves v. M/V Medina Star

, 47

F.3d 153, 156 (5th Cir. 1995) (citing C ooter & Gell v. Hart marx

Corp.

, 496 U.S. 384, 405, 110 S. Ct. 2447, 2461, 110 L. Ed. 2d 359

(1990)).

4 that the defendant’s claim will exceed $50,000.

After the court denied St. Paul’s motions for recon sideration,

rehearing, or, in the alternative, a new trial, St. Paul timely

appealed.

II.

DISCUSSION

A. Standard of Review

We review dismissals for lack of subject matter jurisdiction

de novo

, applying the same standard as that applied by the district

court. 4

B. Applicable Law

“The amount in controv ersy, in an action for declaratory or

injunctive relief, is the value of the right to be protected or the5 Leininger v. Leininger

, 705 F.2d 727, 729 (5th Cir. 1983).

See also Allstate Ins. Co. v. Hilbun , 692 F. Supp. 698, 700 (S.D.

Miss. 1988) (“In actions for declaratory or injunctive relief, the

amount in controversy is measured by the value of the object of the

litigation.”).

6 Hilbun

, 692 F. Supp. at 700 (quoting Leininger , 705 F.2d at

7 29). S ee, e.g.

, Stonewall Ins. Co. v. Lopez

, 544 F.2d 198, 199

(5th Cir. 1976) (holding that amount in controversy exceeded the

requisite $10,000, as the plaintiff i nsurer would be required to

provide a defense to its insured in a pending state court action if

the court found that the policy provided coverage).

7 See Foret v. South ern Farm Bureau Life Ins. Co. , 918 F.2d

534, 536 (5th Cir. 1990) (“[A]ttorney’s fees may be included in

determining the jurisdictional amount.”); Hilbun , 692 F. Supp. at

700 (“Punitive damages can be included to reach the amount in

controversy requirement if, under the governing law o f the suit,

they are recoverable.”) (citing Bell v. Preferred Life Assurance

Soc’y , 320 U.S. 238, 64 S. Ct. 5, 88 L. Ed 15 (1943)).

8 Gaitor v. Peninsular & Occidental Steams hip Co. , 287 F.2d

252, 253-54 (5th Cir. 1961).

5 extent of the injury to be prevented.” 5 When an insurer seeks a

declaratory judgment regarding the coverage provided by an

insurance policy, “the ‘object of the litigation’ is the policy and

the ‘value of the right to be protected’ is plaintiff’s potential

liability under that policy.” 6 Thus, in addition to policy limits

and potential attorney’s fees, items to be considered in

ascertaining the amount in controversy when the insurer could be

liable for those sums under state law are inter alia penalties,

statutory damages, and punitive damages

—— just not interest or

costs. 7 In this case, St. Paul contends that we should include the

penalties and treble damages available under the DTPA and the Texas

Insurance Code in determining the amount in controversy.

The burde n of establishing subject matter jurisdiction in

federal court rests on the party seeking to invoke it. 8 It has9 St. Paul Mercury Ind em. Co. v. Red Cab Co. , 303 U.S. 283,

288, 58 S. Ct. 586, 590, 82 L. Ed. 845 (1938); De Aguilar v. Boeing

Co. , 47 F.3d 1404, 1408 (5th Cir.), cert. denied , 116 S. Ct. 180,

133 L. Ed. 2d 119 (1995).

10 St. Paul Mercury , 303 U.S. at 289, 58 S. Ct. at 590.

11 De Aguilar , 47 F.3d at 1409.

1 2 Asociacion Nacional de Pescadores a Pequena Escala o Artesanales de Colombia v. Dow Quimica de Colombia S.A. , 988 F.2d

559, 566 (5th Cir. 1993), cert. denied , 570 U.S. 1041, 114 S. Ct.

685, 126 L. Ed. 2d 653 (1994) (discussing a removal petition which

“merely state s, without any elaboration, that ‘the matter in

controversy exceeds $50,000 . . . .’”).

6 long been recognized that “unless the law gives a different rule,

the sum claimed by the plaintiff controls if the claim is

a pparently made in good faith.” 9 To justify dismissal, “it must

appear to a legal certainty that the claim is really for less than

the jurisdict ional amount.” 1 0 We have previously indicated,

however, that this “legal certainty” test has limited utility

—— in

fact is inapplicable

—— when the pla intiff has alleged an

indeterminate amount of damages. 1 1 Furthermore, “bare allegations

[of jurisdictional facts] have been held insufficient to invest a

federal court with jurisdiction.” 12

Although most of our caselaw regarding § 1332's amount in

controversy requirement has arisen in the context of removal from

state to federal court, we find the procedures developed in those

cases to be instructive in the converse context of declaratory

judgment actions such as th e one now before us. In removal

practice, when a complaint does not allege a specific amount of

damages, the party invoking federal jurisdiction must pro ve by a

preponderance of the evidence that the amount in cont roversy1 3 Allen v. R&H Oil & Gas Co.

, 63 F.3d 1326, 1 335 (5th Cir.

1995). The test is whether it is more likely than not that the

amount of the claim will exceed $50,000. Id. at 1336.

14 Id. at 1335.

15 Id. at 1336.

1 6 St. Paul Mercury

, 303 U.S. at 292, 58 S. Ct. at 592; Seafoam,

Inc. v. Barrier Sys., Inc. , 830 F.2d 62, 66 (5th Cir. 1987).

17 Allen , 63 F.3d at 1335.

7 exceeds the jurisdictional amount. 13 The district court must first

examine the complaint to determine wh ether it is “facially

apparent” that the claims exceed the jurisdictional a mount. 1 4 If

it is not thus apparent, the court may rely on “summary judgmenttype” evidence to ascertain the amount in controversy. 15

Importantly, the jurisdictional facts must be judged as of the time

the complaint is filed; subsequent events cannot serve to deprive

the court of jurisdiction once it has attached. 16

Applying this test solely to the facts pleaded by St. Paul in

its complaint for declaratory relief, we cannot conclude that the

amount in controversy will likely exceed $50,000. St. Paul sets

out its reasons for denying coverage under the policy, but asserts

neither that Greenberg has expressly threatened to seek statutory

penalties or punitive damages nor that St. Paul has acted with bad

faith or intent. Similarly, St. Paul’s complaint contains no

prayer for a declaration of nonliability under the DTPA or the

Texas Insurance Code. Conclusional allegations are insufficient to

establish jurisdiction. 17

This is not the end of our inquiry, however. In addition to1 8 We have considered a post-removal affidavit when the

jurisdictiona l amount was ambiguous on the face of the state

petition. S ee Asociacion Nacional de Pescadores

, 988 F.2d at 565.

In doing so, however, we explained that the affidavit helped

clarify the jurisdictional facts “ as of the time of removal .” I d.

( emphasis added). We have nevertheless remained vigilant to the

potential for manipulation by the plaintiff who prays for damages

below the jurisdictional amount even though he knows that his claim

is actually worth more. This is one reason why we have held that

if a state court defendant can show that the amount in controversy

actually exceeds the jurisdictional amount, then the state court

plaintiff who is seeking to prevent removal m ust be able to show

that, as a matter of law, it is certain that he will not be able to

recover more than the damages for which he has prayed in his state

court complaint. DeAguilar , 47 F.3d at 1411. It would avail

Greenberg nothing t o argue that his counterclaim or subsequent

state petition would merely clarify ambiguity regarding the amount

in controversy, because

—— at least in Texas

—— “litigants who want

to prevent removal must file a binding stipulation or affidavit

with their complaints.” I d. at 1412. (citation omitted). No such

binding stipulation or affidavit was filed by Greenberg.

8 the complaint itself, we must look as well to other evidence

relevant at the time St. Paul filed its complaint for declaratory

relief.

The district court based its determination of th e amount in

controver sy on Greenberg’s counterclaim, in which he sought only

the $35,000 policy limits and attorney’s fees not to exceed

$10,500. But this was error as a matter of law, given that neither

this counterclaim nor Greenberg’s state court petition were filed

until after the filing of St. Paul’s declaratory judgment

complaint. 18 Thus, neither of these pleadings may be considered in

testing the amount here in controversy.

The only pre-complaint evidence of Greenberg’s potential claim

agai nst St. Paul are the letters from Greenberg’s attorney,

demanding cov erage under the policy and threatening to seek “all

damages available to [Greenberg] under the various common laws or1 9 Letter from Jim Alan Adams, counsel for Greenberg, to Peter

B. Thompson, Independent Surplus Underwriters, Inc., of September

20, 1996 (emphasis added).

2 0 Letter from Adam s to Edward Chatelain III, counsel for St.

Paul, of October 10, 1996 (emphasis added).

21 Section 6, entitled “Damages,” provides:

In all cases where a claim is made pursuant to a policy

of insurance and the insurer liable t herefor is not in

compliance with the requirements of this article, such

insurer shall be liable to pay the holder of the policy

. . . , in addition to the amount of the claim, 18

percent per annum of the amount of such claim, as

damages , together with reasonable attorney fees.

Tex. Ins. Code Ann. art 21.55 § 6 (West Supp. 1997)(emphasis

added). As long as the insurer is found to be liable under the

policy, this fee attaches, even if the insurer had a reasonable

basis for denying coverage. H igginbotham v. State Farm Mut. Auto.

Ins. Co. , 103 F.3d 456, 461 (5th Cir. 1997).

22 327 F.2d 238 (5th Cir. 1964).

9 statutes relative to this case” 19 and “any penal ties and interest

to which Mr. Greenberg may be entitled.” 20 One such penalty is

f ound in § 6 of Article 21.55 of the Texas Insurance Code, which

provides for statutory “damages” in the amount of “18 percent per

annum” for failure timely to pay an insurance claim. 21 The district

court and Greenberg summarily concluded that “a statutory penalty

that requires no adjudication cannot be used to establish threshold

jurisdiction.” But this is simply an incorrect statement of the

law in this circuit. Although not cited by either party or the

district court, this issue is controlled by our decision in B uras

v. Birmingham Fire Insurance Co. of Pennsylvania

. 22

In Buras

, we considered whether a “penalty” of six percent per

annum mandated under a Louisiana statute for the unjustified23 Id. at 238-39.

24 Tex. Ins. Code Ann. art. 21.55 § 8 (West Supp. 1997).

2 5 See Maryland Ins. Co. v. Head Indus. Coatings and Servs.,

Inc. , 938 S.W.2d 27, 28 (Tex. 1996); State Farm Fire and Cas. Co.

v. Gandy , 925 S.W.2d 696, 714 (Tex. 1996).

10 failure to pay a life insurance claim timely should be included in

the jurisdictional amount. Noting that the exaction was not due at

all if the claim settled within sixty days, we held that the charge

was “intended to be in the nature of a coercive pen alty towards

prompt settlement” as opposed to interest. 23 As such, the penalty

could serve to establish jurisdiction.

We discern no distinguishing characteristics between the

penalty assessed under the Louisiana statute analyzed in Buras and

the damages provided in § 6 of Article 21.55 of the Texas Insurance

Code. The latter impost is labeled “damages” in the statute and

applies over and above any other recovery. Moreover, the Texas

statute specifically states that its purpose is “to obtain prompt

payment of claims made pursuant to polici es of insurance.” 2 4 We

also find per suasive the fact that on no less than two occasions

the Texas Supreme Court has referred to § 6 of Article 21.55 as a

“penalty.” 25 And, like the Louisiana provision examined in B uras

,

the Texas penalty applies automatically if the claim is not paid

within the period allowed. Therefore, according to B uras

—— and

the inability of one panel of this court to overrule another

—— we

hold that here the statutory damages under Article 21.55 of the

Texas Insurance Code must be included in calculating the amount in

controversy for § 1332. Despite being described in terms of a per11

annum percentage for purposes of calculatio n, the statutory

exaction here is not “interest” within the contemplation of § 1332;

it clearly is an element of damages. Indeed, if Greenberg is

successful in recovering under the St. Paul policy, he will

automatically recover 18 percent per annum damages.

Compared to the highly conjectural element of punitive

damages, late set tlement damages under the Texas Insurance Code,

with no exception for excusable neglect or justifiable delay, is a

lay down hand. It would be ludicrous, then, to include something

as speculative as punitive damages —— which all agree is properly

includible

—— while excluding the automatic penalty provided in the

insurance code. Given the policy’s limits of $35,000, attorney’s

fees, and the 18 percent per annum statutory damages which have

been accruing ever since March 12, 1996, we conclude that

Greenberg’s claim —— and St. Paul’s potential liability under the

policy —— would likely exceed $50,000, exclusive of costs and

interest.

III.

CONCLUSION

Based on our de novo review of the record and applicable law,

we must conclude that the district court erred in dismissing St.

Paul’s complaint for declaratory relief for lack of subject matter

jurisdiction. This error resulted from failure to include in the

court’s calculation the statutory damages of 18 percent per annum

under the Texas Insurance Code. Consequently, the judgment of

dismissal by the district court is reversed and this action is12

remanded for further proceedings in that court.

REVERSED and REMANDED.