Source: http://ca10.washburnlaw.edu/cases/2001/05/99-2131.htm
Timestamp: 2019-06-16 00:36:42
Document Index: 257547284

Matched Legal Cases: ['§ 1367', '§ 1332', '§ 1367', '§ 1332', '§ 1332', '§ 205', '§ 3275', '§ 1447', '§ 1367']

99-2131 -- Martin v. Franklin Capital Corp. -- 05/29/2001
| Keyword | Case | Docket | Date: Filed / Added | (56934 bytes) (41978 bytes)
JUANA M. MARTIN; GERALD T. MARTIN, individually and on behalf of all persons similarly situated,
FRANKLIN CAPITAL CORPORA-TION, a Utah corporation; CENTURY-NATIONAL INSURANCE COMPANY, a California corporation,
Defendants-Appellees. No. 99-2131
Before SEYMOUR and MURPHY, Circuit Judges,and KANE, Senior District Judge.(*)
The Martins originally brought this proceeding in New Mexico state court, individually and on behalf of all persons similarly situated, seeking damages under state statutory and common law for alleged illegalities with respect to automotive financing and insurance contracts. The plaintiff class alleged defendant Franklin Capital Corporation, which purchased their installment sales contracts from car dealers, deliberately overcharged them for required insurance coverage purchased through defendant Century National Insurance. Invoking diversity of citizenship, Century removed the case to federal court with the consent of Franklin. The Martins then filed a motion to remand to state court for lack of subject matter jurisdiction, arguing their claims did not meet the $50,000 amount-in-controversy requirement for diversity jurisdiction.(1)
As the parties invoking the federal court's jurisdiction in this case, defendants bear the burden of establishing that the requirements for the exercise of diversity jurisdiction are present. See Huffman, 194 F.3d at 1079. We have held that "[t]he amount in controversy is ordinarily determined by the allegations of the complaint, or, where they are not dispositive, by the allegations in the notice of removal." Laughlin, 50 F.3d at 873. In this case, the complaint itself does not specify the amount of damages requested. Indeed, defendants in their notice of removal observe that "[t]he amount in controversy, exclusive of interest and costs, cannot be determined from the face of the complaint." Aplt. App., doc. 4 at 2. When, as here, the plaintiff's damages are unspecified, courts generally require that a defendant establish the jurisdictional amount by a preponderance of the evidence. See, e.g., St. Paul Reinsurance Co. v. Greenberg, 134 F.3d 1250, 1253 (5th Cir. 1998); Singer, 116 F.3d at 376; United Food & Commercial Workers Union, Local 919 v. CenterMark Prop. Meridan Square, Inc., 30 F.3d 298, 305 (2d Cir. 1994); Gafford v. General Elec. Co., 997 F.2d 150, 158 (6th Cir. 1993); Varella v. Wal-Mart Stores, East, Inc., 86 F. Supp.2d 1109, 1111 (D. N.M. 2000); see also McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189 (1936) (party asserting jurisdiction must prove jurisdictional prerequisites by a preponderance of evidence).(2)
We turn to a de novo review of the district court's conclusion that diversity jurisdiction is present here.(3) The complaint does not in any of its counts request a specific dollar amount. Nonetheless, the district court adopted defendants' construction of the Martins' pleading and concluded that the complaint itself established the requisite amount in controversy.(4) We have carefully reviewed the complaint and we agree with the Martins that it does not demonstrate by a preponderance of the evidence claims in excess of $50,000. For example, it appears defendants simply viewed every dollar amount mentioned in the complaint as an item of damages claimed by the Martins without regard to allegations making clear the Martins were not in fact seeking all those amounts.(5) In addition, while the Martins did seek treble damages under one state statute, defendants have failed to establish what specific damages were recoverable under that statute and instead merely assumed that all amounts mentioned in the complaint were subject to trebling.
Gilman, 104 F.3d at 1423 (quoting Bishop v. General Motors Corp., 925 F. Supp. 294, 298 (D. N.J. 1996)). The court pointed out that even though a class claim for punitive damages may create a single pool of recovery, "a common interest in a pool of funds is not the type of interest that permits aggregation of claims under the 'common fund' doctrine." Id. at 1430. Each class member could sue separately for punitive damages and have his right to recovery determined without implicating the rights of every other person claiming such damages. Id. Because a class member's right to punitive damages is separate, distinct, and independent from those of other class members, the class claim for such damages does not seek to enforce a single right in which the class has a common and undivided interest. Punitive damages therefore may not be aggregated in a class action and attributed in total to each member of the class. We agree with Gilman and the other courts, and we reject defendants' argument that the jurisdictional amount with respect to the Martins is satisfied on the basis of the aggregated claims of the class members to punitive damages.
Courts have generally held, under the same rationale applied to preclude the aggregation of puntive damages, that attorneys fees cannot be aggregated for purposes of diversity jurisdiction. See, e.g., Morrison, 228 F.3d at 1266-68 (when each class member could recover attorneys fees if he sued separately, right to recover fees was separate and distinct and could not be aggregated); see also Goldberg v. CPC Int'l, Inc., 678 F.2d 1365, 1367 (9th Cir. 1982) (aggregation of attorneys fees would conflict with Supreme Court authority requiring plaintiffs with separate and distinct claims to each meet jurisdictional amount).(6) We agree and conclude that potential attorneys fees requested on behalf of the class may not be aggregated and attributed entirely to the Martins in assessing whether they meet the amount in controversy.(7)
In view of our conclusions that neither the face of the complaint nor the removal notice demonstrate that the Martins' claims will exceed $50,000, and that neither the punitive damages nor the attorneys fees sought by the class can be attributed entirely to the Martins as class representatives, we hold defendants have failed to show by a preponderance of the evidence that the Martins' claims meet the amount in controversy necessary to the exercise of diversity jurisdiction.(8)
Because the Martins' claims do not meet the jurisdictional amount, the disposition of the class claims by the district court is irrelevant. Although we therefore need not address the remaining arguments with respect to the class, we make the following observations. This court has specifically rejected defendants' contention that so long as the class representatives meet the jurisdictional amount, all class members fall within the court's supplemental jurisdiction. See Leonhardt, 160 F.3d at 638-41 (rejecting argument that "the enactment of 28 U.S.C. § 1367, concerning supplemental jurisdiction, altered the historical aggregation rules under § 1332 for class actions," and concluding enactment of § 1367 did not overrule preexisting authority holding "each plaintiff in a diversity-based class action must meet the jurisdictional amount in controversy under § 1332").(9) In any event, because the class representatives here do not meet the jurisdictional amount, supplemental jurisdiction over class members would not be available.(10)
*. Honorable John L. Kane, Jr., Senior District Court Judge, District of Colorado, sitting by designation.
1. This action was filed in state court on September 13, 1996. At that time, 28 U.S.C.§ 1332 required the amount in controversy to exceed $50,000. Although Congress subsequently amended the statute to increase the jurisdictional amount to $75,000, the amendment applies only to cases filed on or after January 17, 1997. See Federal Courts Improvement Act of 1996, § 205, Pub. L. No. 104-317, 110 Stat. 3847, 3850 (Oct. 19, 1996).
2. A few courts have placed greater or lesser burdens on defendants asserting removal jurisdiction based on diversity. See generally 14C Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure § 3275 (3d ed. 1998), at 89-95 (discussing standards).
3. We give short shrift to defendants' argument that the Martins waived federal diversity jurisdiction by failing to challenge the amount in controversy within thirty days. The governing statute expressly provides to the contrary: "If 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 the Supreme Court has noted:
section [1447(c)] differentiates between removals that are
defective because of lack of subject-matter jurisdiction and
removals that are defective for some other reason . . . . For the
latter kind of case, there must be a motion to remand filed no
later than 30 days after the filing of the removal notice. For
the former kind of case, remand may take place without such
a motion and at any time.
4. We have held that a defendant's economic analysis of the plaintiff's claims for damages, "prepared after the motion for removal and purporting to demonstrate the jurisdictional minimum, does not establish the existence of jurisdiction at the time the motion was made. . . . [T]he requisite amount in controversy . . . must be affirmatively established on the face of either the petition or the removal notice." Laughlin, 50 F.3d at 873. At the hearing below, the district court recited and adopted the amounts set out by defendants' briefs in support of jurisdiction. See Aplt. App., doc. 20 at 46. The record on appeal does not include these briefs and it is arguable, given our holding in Laughlin, that they should not have been considered by the district court. We need not decide whether the court erred in this regard, however, in view of our conclusion that the Martins' complaint does not support the construction defendants placed upon it in those briefs.
5. Defendants apparently included in their calculation finance charges of over $8000 and insurance premiums of over $7000 despite allegations in the complaint that because the Martins defaulted on their installment contract, they made only a few payments on the finance charges and no payments on the insurance premiums, and sought to recover only the charges they actually paid. Defendants included two repossession charges as items of damages although the Martins did not allege that the first of these, in the amount of $420, was illegal. Defendants likewise included a down payment of almost $4000 which the Martins were not attempting to recover. On appeal, defendants also argue that the entire amount of the sales contract is to be included, notwithstanding that the Martins, while seeking rescission of the contract, sought as damages only the amounts they had actually paid under it.
6. In their removal notice, defendants cited In re Abbott Laboratories, 51 F.3d 524 (5th Cir. 1995), as support for their contention that attorneys fees can be aggregated. As the Fifth Circuit has observed, however, the holding in Abbott Laboratories is peculiar to a Louisiana statute and "[t]he standard approach to awards of attorney's fees in a class action context is to distribute them pro rata to all class members, both named and unnamed." Coghlan v. Wellcraft Marine Corp., 240 F.3d 449, 455 n.5 (5th Cir. 2001).
7. The result might be different if the state statute under which fees are sought expressly awards those fees solely to the class representatives. See, e.g., H & D Tire & Automotive-Hardware, Inc. v. Pitney Bowes, Inc., 227 F.3d 326, 330-31 (5th Cir. 2000). Defendants have made no showing that the statutes at issue in this case do so.
8. We reject the argument based on Caterpillar, Inc. v. Lewis, 519 U.S. 61 (1996), that diversity jurisdiction exists nonetheless because the district court refused to certify the class and the resulting deletion of the putative class members cured any jurisdictional defect their presence might earlier have created. Although the Supreme Court held in Caterpillar that "a district court's error in failing to remand a case improperly removed is not fatal to the ensuing adjudication if federal jurisdictional requirements are met at the time judgment is entered," id. at 64, the Court also observed that "if, at the end of the day and case, a jurisdictional defect remains uncured, the judgment must be vacated," id. at 76-77 (italics deleted). Because defendants failed to establish that diversity jurisdiction is present with respect to the Martins, the jurisdictional defect remained at the time of judgment. See Gilman, 104 F.3d at 1421 (when removing defendant fails to establish subject matter jurisdiction by the time judgment is entered, judgment must be vacated and remanded with instructions to remand to state court).
9. In Abbott Laboratories, 51 F.3d 524, the Fifth Circuit reached a result directly contrary to our holding in Leonhardt. The Supreme Court granted certiorari in Abbott Laboratories to address whether the supplemental jurisdiction statute, 28 U.S.C. § 1367, overruled the authority upon which this court relied in Leonhardt, see Free v. Abbott Labs., Inc., 528 U.S. 1018 (2000), and affirmed the Fifth Circuit's decision by an equally divided Court, see Free v. Abbott Labs., Inc., 529 U.S. 333 (2000) (per curiam). An unexplained affirmance by an equally divided court is not entitled to any precedential weight. See Rutledge v. United States, 517 U.S. 292, 304 (1996). Leonhardt accordingly remains controlling law in this circuit.
10. The only allegations in the complaint relevant to the putative class members are assertions that their individual damages "are too small in number to justify the expense and effort required to bring suit separately," Aplt. App., doc. 2 at 14, and that the "Martins claims are not only typical but identical to the claims of the members of the Class," id. at 16. These allegations do not establish individual claims in excess of $50,000, particularly given our holding that neither attorneys fees nor punitive damages may be aggregated and attributed in total to each class member. Accordingly, we conclude that defendants have failed to establish the amount in controversy with respect to any of the putative class members.
URL: http://ca10.washburnlaw.edu/cases/2001/05/99-2131.htm.