### FILED U.S. COURT OF APPEALS ELEVENTH CIRCUIT APRIL 28, 2003 THOMAS K. KAHN CLERK [PUBLISH] IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH

CIRCUIT

No. 02-14158 D. C. Docket No. 02-00454 CV-D-N FEDERATED MUTUAL INSURANCE COMPANY, Plaintiff-Appel

lant,

versus MCKINNON MOTORS, LLC., Defendant-Appellee.

Appeal from the United States District Court for th e Midd le Dis trict of Ala bama

(April 28, 2003) Before DUBINA and FAY, Circuit Judges, and DOW D*, District Judge. DUBINA, Circuit Judge:

_______________________________ *Honorable David D. Dowd, Jr., United States District Judge for the Northern District of Ohio, sitting by designation.2

Federated Mutual Insurance Company (“Federa ted”) appeals the district court’s dismissal of its declaratory judgment action, brought to resolve an insurance coverage

dispute, for lack o f subject ma tter jurisdiction b ased on a failure to mee

t the amount in co

ntroversy requi

rement of 28 U .S.C. § 1332. T he sole issue raised on a

ppeal is whether the

district court err

ed in calculating the amount in co ntroversy b y failing to consider M cKinnon Mo tors, LLC’s (“McKinnon’ s”) claim aga inst Federated for

bad faith. We d

o not reach this issue becau se we h old t hat, e ven if we were to con sider McKin non’s bad fa ith cl aim, Federated faile

d to meet its burd

en of proof in establi shing that the value of its claim sat isfied the amou nt in co ntrove rsy. I. BACKGROUND A. Facts McKinnon purchased an insurance policy from Federated that provided coverage up to $50,0 00 for acts of employee disho nesty. In August 1999, McKinnon filed a proof of loss with Federated for losses allegedly incurred becau se of the dishones ty of Jackie Ray Neeley (“Neeley”), a former gener

al manager of

a McKinnon dealer

ship. McKinnon file

d a second proof of loss arisi ng from Neeley’s alleged dishone sty in February 2000.3

Federated investig

ated each of McK

innon’s claim

s for employ

ee dishonesty and eventually de

nied both claims b ecause it found that t he policy language

did not cover the losses. Following the denial of the claims and the resolution of a lawsuit by Neeley against McKinnon, McKinnon demanded the $50,000 policy limits of the em

ployee dishonesty

provision from F ederated and threa tened to sue for bad faith failu

re to pay if Fe

derated did not tende

r the policy lim

its. B. Procedural History Federated filed a

declaratory j udgment action a gainst McKinnon in the Federal Distric

t Court for the Middle

District of Alab ama seeking a d eclaration of its rights and obligations under the employee dishonesty provision of its insurance contract with McKinnon. McKinnon filed a motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). The district court granted McK

innon’s motion to

dismiss on the grou

nd that Federated di

d not meet the am

ount in controversy

required by § 1332 . Federated then perfected this appeal. II. STANDARD OF REVIEW “We review a district court's dismissal of a com plaint for lack of subject matter jurisdiction under the de novo standard.” Digital Properties, Inc. v. City of Plantation , 121 F.3d 586, 589 (11th Cir. 1997).4 III. DISCUSSION “Federal courts are courts of limited jurisdiction.” Burns v. Windsor Ins., Co. , 31 F.3d 10 92, 1095 (1 1th Cir. 19 94). In ord er to invo ke a federal court’s diversity juri sdiction, a plaintif f must claim

, among other t

hings, that the am

ount in controversy e

xceeds $75,000. 28 U .S.C. §1332. “ When a plaintiff

seeks injunctive or decl

aratory reli

ef, the amoun

t in controversy is the monetary value of the object of the litigation from the plaintiff's perspective.” Cohen v. Office D epot, Inc. , 204 F.3d 1069, 1077 (11th Cir. 2000) (citation omitted). A plaintiff satisfies the amount in controve rsy requirement by claiming a sufficien t sum in good faith. St. Paul Mercury I

ndem. Co. v. R

ed Cab Co. , 303 U.S. 283, 288, 58 S. Ct. 586, 590, 82 L. Ed. 845 (1938 ). Generally,

“[i]t m ust appear to a lega

l certainty tha

t the claim is r

eally for less than the jurisdictional amount to justify dismissal.” Red Cab Co. , 303 U.S. at 289, 58 S. Ct. at 5 90. However, wher e jurisdiction is ba

sed on a claim f

or indeterminate damages, the Red Cab Co. “legal certa inty” test gives w

ay, and the party se eking t o invo ke fede ral juri sdicti on bear s the bu rden of provin g by a preponderance of t

he evidence that the

claim on which

it is basing jurisdic

tion meets the jurisdictional minimum. Tapscott v. MS De aler Serv. Corp. , 77 F.3d1 We note that Tapscott arose in the removal context, while this case involves a declaratory judgment. However, we find these two co ntexts an alogo us in this setting. Accord St. Paul ReinsuranceCo. v. Greenberg , 134 F.3d 1250, 125 3 (5th Cir. 1998) (“Altho

ugh 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 b e instr uctive in the conve

rse context of declaratory judgment actions....”).

2 We note that at the time the district court considered this case, McKinnon had only threatened

to sue Federated for bad faith, but had not yet filed a claim. Subsequent to the district court’s decision, McKinnon filed a complaint for bad faith against Federated in the Circuit Court of Chilton County, Alabama. Although this fact was not before the district court and, theref ore, is not a part of the record, we take judicial notice of McKinnon’s bad faith claim under Fed. R. Evid. 201.

3 We recognize tha

t support exists for th

is position. See Horton v. Libe rty Mut. Ins. Co. , 367 U.S. 348, 81 S. Ct. 1570, 6 L. Ed. 2d. 890 (1961) (finding that the amount in controversy was sat isfied where the plaintiff in a federal declaratory judg ment action sought less than t h e jurisdiction al minimum, but the defe ndant brought a c

ounter-claim tha

t satisfied the amo

unt in controversy). However, we also recognize that the Horton decision has bee n the subject of cr

iticism centered around the difficulty in discerning the principle f or which the case stands. See 14b 5 1353, 1356-57 (11 th Cir. 1996), abrogated on other grounds by Cohen v. Office Depot, Inc. , 204 F.3d 1069, 1072-77 (11th Cir. 2000). 1 Federated argues

that its claim s atisfies the am ount in controversy requirement be

cause the claim ’s value includes both the $50,000 policy limits and the potential liabilit

y it faces under

McKinnon’s bad fa

ith claim again

st it. 2 McKinnon responds by arguing that the amount in controversy cannot be satisfiedby reference to its claim for bad faith because it is improper to consider counterclaims in such an analysis. We assume,

without deciding, th

at Federated can

meet the am

ount in controversy by

reference to Mc

Kinnon’s claim

for bad faith. 3 Taking thisC HARLES A LAN W RIGHT , A RTHUR R. M ILLER & E DWA RD H

. C OOPER , F EDERAL P RACTICE AND

P ROCEDURE § 3706 (3d ed. 1998) . Because Fed erated would

not reach the jurisdictional minimum even if we extracted a

rule from Horton or elsewhere that consideration of counter-c laim s in determiningthe amount in contr oversy is proper, we decline to pass judgment today on whether such a method of calculation is proper.

4 Federated additionally argues that McKinnon’s demands for

attorneys fees and costs under its bad faith claim count towards the jurisdictional minimum. The gene

ral rule is that attorneys fees do not count

towards the amount in controversy unless they are allowed for

by statute or

contract. See Graham v. Henegar , 640 F.2d 732, 736 (5th Cir. 1981). The claim of bad faith failure to pay is a common law cause of action in Alabama. Weems v. Jefferson-Pilot Life Ins. Co., Inc. , 663 So.2d 905, 911 -91 2 (A la. 199 5). The refo re, M cKi nno n’s cla im f or at tor neys fees is neither statutory nor contractual and does not count towards t he jurisdi ctional mi nimum. Add

itionally , the very text of 28 U.S.C. § 1332 precludes consideration of McKinnon’s claim for costs in determining whether Federated satisfied the amount in controversy. 6 assumption into account, we turn to the question of whether Federated has satisfied its burden o f proving that its cla ims are in exce ss of $75,000. We hold that it has not. The employee dishonesty policy underlying this action only provides $50,000 in coverage,

which does not satisf

y the amount

in controversy st

anding by itself. Howeve

r, Federated ar

gues that the value of

its claim includ

es both the poli cy limit s and t he po tenti al lia bili ty it fa ces un der Mc Kinno n’s ba d fait h clai m. 4 But, McKinnon did not

and has not placed any

dollar amount on t

he various damages it is seeking under its bad fa ith claim. T

herefore, the da

mages McKinnon prays for under the bad fai th claim are indeterminate. See Greenberg , 134 F.3d at 1253 (explaining that a

prayer for da

mages is indete

rminate wher

e the “com

plaint does not allege a specific amount of damages”).5 We note that under Cooter & Gell v. Hartmarx Corp. , 496 U.S. 384, 396, 110 S. Ct. 2447,

2456, 110 L. Ed. 2d. 359 (1990), a motion for Rule 11 sanctions involves a collateral proceeding that can be initiated and decided after the case on which it is based i s finally resolv ed and no longer pending. 7 In fact, McKinn

on represented to the

district court in its Motion to Remand that it does not se ek and, more importantly, will not accept damages in exc ess of $74,000 exclusive of interest and costs. Because McKinnon’s lawyers are officers of this court and subj ect to sanctions under Federal Rule of C

ivil Procedure 11 f

or making a representation to the court for an improper purpose, 5 such as merely to defeat diversity

jurisdiction, we

give great defere

nce to such represe

ntations and presume them to be true. See Burns , 31 F.3d at 1095 (“Every lawyer is an officer of the cour t. And, in ad dition to his duty of d iligentl y researchin g his clien t’s case, he always has a duty of cando r to the tribunal.”). Federated has off

ered no evidence to r

ebut McKinnon’s r

epresentation and no evidence to show tha

t McKinnon’s bad f

aith claim wou

ld satisfy the am

ount in controversy. Federated does point to a number of A

labama cases

where courts have awarded puniti

ve damages we

ll in excess of $75,00 0 for bad faith fail ure to pay, Intercontinental Lif

e Insurance Co. v. Lindblom , 598 So. 2d 886 (Ala. 1992); United Services A utomobile Ass’n v. Wade , 544 So. 2d 906 (Ala. 1989); Nationwide Mutual Ins

urance Co. v. Clay

, 525 So. 2d 1339 (Ala. 1987), but mere8

citation to what has happened in the past doe s nothing to overcom e the indeterminate and specu lative nature of Federa ted’s assertion in th is case. Therefore, w

e conclude that even

if we were to consider McKinnon’ s bad faith claim in determin ing th e amount in cont rovers y, Federa ted has failed to prov e by a preponderance of t

he evidence that Mc

Kinnon’s claim

is in excess of $75,000 and, thus, the district court did not err in gra nting McKinnon’s R

ule 12(b)(1) m

otion to dismiss for lac

k of subject m

atter jurisdicti

on. For the foregoing re

asons, we affir

m the district court’s judgm ent of dismissal. AFFIRMED.