Source: https://casetext.com/case/martin-v-franklin-capital-corporation
Timestamp: 2020-08-15 04:43:11
Document Index: 4928716

Matched Legal Cases: ['§ 1332', '§ 205', '§ 3914', '§ 3275', '§ 1332', '§ 1367', '§ 1332', '§ 1367', '§ 1332', '§ 1367', '§ 1332']

Martin v. Franklin Capital Corporation, 251 F.3d 1284 | Casetext Search + Citator
Martin v. Franklin Capital Corporation
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Full title:Juana M. MARTIN; Gerald T. Martin, individually and on behalf of all…
251 F.3d 1284 (10th Cir. 2001)
holding burden is on party seeking removal to establish federal jurisdiction
Summary of this case from Kansas v. Price
No. 99-2131.
Michael P. Malakoff, Malakoff Doyle Finberg, P.C., Pittsburgh, Pennsylvania (Richard N. Feferman, Albuquerque, New Mexico, with him on the briefs), for Plaintiffs-Appellants.
Jan T. Chilton, Severson Werson, San Francisco, California (Jay D. Hertz, Sutin, Thayer Browne, Albuquerque, New Mexico, with her on the brief) for Defendants-Appellees.
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.
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).
First, we are convinced the dismissal with prejudice here is a final order for purposes of appeal. Nothing is left pending in the district court and, because the dismissal is with prejudice, the Martins are precluded from filing another lawsuit. The dismissal did not reserve the Martins' right to return to district court to litigate any remaining issues. If they lose on their appeal of the order denying remand, the litigation is terminated entirely. We agree with those authorities holding that a dismissal order is final under these circumstances. See, e.g., Woodard v. STP Corp., 170 F.3d 1043, 1044 (11th Cir. 1999) (voluntary dismissal with prejudice final); John's Insulation, Inc. v. L. Addison Assoc., 156 F.3d 101, 107 (1st Cir. 1998) ("most circuits hold that voluntary dismissals, and especially those with prejudice, are appealable final orders"); Concha v. London, 62 F.3d 1493, 1507 (9th Cir. 1995) (judgment final when it bars claims forever); see also 15A CHARLES A. WRIGHT, ARTHUR R. MILLER EDWARD H. COOPER, FEDERAL PRACTICE PROCEDURE § 3914.8 (2d ed. 1992), at 623 (approving rule that holds judgment final when plaintiff who voluntarily dismisses abandons all remaining issues).
Viewing such a judgment as final does not undermine the final judgment rule by encouraging quasi-interlocutory appeals. "[I]f the plaintiff is unsuccessful in challenging the district court's action, then the dismissal operates as an adjudication on the merits and the litigation is terminated." Concha, 62 F.3d at 1507. Judicial economy is furthered because when "the appellant voluntarily dismisses his action with prejudice and loses on appeal, the district court is saved the time and effort of conducting extended trial proceedings and there is in addition no possibility of piecemeal appeals." Id. at 1508 n. 8.
III Diversity Jurisdiction
When a case is originally brought in federal court, the plaintiff's claimed amount is presumed to support diversity jurisdiction. See St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89, 58 S.Ct. 586, 82 L.Ed. 845 (1938). The same is not true, however, when the case has been removed from state court.
Singer v. State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 375 (9th Cir. 1997) (quoting St. Paul Mercury, 303 U.S. at 290, 58 S.Ct. 586); see also Miera, 143 F.3d at 1340. Thus in a removed case, "[t]he 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." Singer, 116 F.3d at 376.
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. Center-Mark 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); Varela 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, 56 S.Ct. 780, 80 L.Ed. 1135 (1936) (party asserting jurisdiction must prove jurisdictional prerequisites by a preponderance of evidence).
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).
We turn to a de novo review of the district court's conclusion that diversity jurisdiction is present here. 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. 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. 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.
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.
Wisconsin Dep't of Corr. v. Schacht, 524 U.S. 381, 392, 118 S.Ct. 2047, 141 L.Ed.2d 364 (1998) (citations omitted). In Laughlin v. Kmart Corp., 50 F.3d 871 (10th Cir. 1995), for example, we raised the issue of diversity jurisdiction on appeal and concluded it was lacking, even though the plaintiff "neither objected to removal nor questioned the amount in controversy." Id.
Because we conclude that the amount-in-controversy requirement is not satisfied on the face of the complaint, we turn to the notice of removal. As mentioned above, defendants conceded in their removal notice that the amount in controversy could not be determined from the face of the complaint. Aplt.App., doc. 4 at 2. In contending that the requisite amount was nonetheless satisfied, defendants began by summarizing the allegations and the requested relief asserted by the Martins. This mere summary, of course, does not provide the requisite facts lacking in the complaint. Defendants also asserted that jurisdiction was satisfied because the attorneys fees and the punitive damages claimed by the entire class could be aggregated and attributed to the Martins in determining the amount in controversy, and that so long as the Martins as class representatives met the jurisdictional amount, the other class members fell within the court's supplemental jurisdiction regardless of the value of their claims. As we discuss below, none of these assertions supports the existence of diversity jurisdiction.
We turn first to defendants' contention, both in their removal notice and on appeal, that the punitive damage claims of the putative class members may be aggregated and attributed to the Martins and to each class member, and that these aggregated damages satisfy the jurisdictional amount with respect to each member of the putative class. In support of this argument, defendants rely on the cases of Tapscott v. MS Dealer Serv. Corp., 77 F.3d 1353 (11th Cir. 1996), and Allen v. R H Oil Gas Co., 63 F.3d 1326 (5th Cir. 1995), both of which have been disapproved by the circuits that decided them. See Cohen v. Office Depot, Inc., 204 F.3d 1069, 1073-77 (11th Cir. 2000) (explaining Tapscott not valid precedent because it conflicts with earlier ruling on same issue); Ard v. Transcont'l Pipe Line Corp., 138 F.3d 596, 601-02 (5th Cir. 1998) ( Allen decision due to peculiarity of Mississippi law and does not represent precedent for any other state). Indeed, all of the circuits considering the issue now hold that punitive damages cannot be aggregated and attributed in total to each member of a putative class for purposes of satisfying the amount-in-controversy requirement of diversity jurisdiction. See, e.g., Morrison v. Allstate Indem. Co., 228 F.3d 1255, 1264-65 (11th Cir. 2000); Ard, 138 F.3d at 600-02; Gilman v. BHC Securities, Inc., 104 F.3d 1418, 1430-31 (2d Cir. 1997); see also Anthony v. Security Pac. Fin. Servs., Inc., 75 F.3d 311, 315 (7th Cir. 1996) (implicitly rejecting aggregation of punitive damages by concluding that "[t]he plaintiffs in this case would have to recover on average at least $47,118.36 in punitive damages to satisfy 28 U.S.C. § 1332").
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.
In their removal notice, defendants also assert that "[t]he attorney fees of the entire class are attributable to the named plaintiffs for purposes of satisfying the jurisdictional amount." Aplt.App., doc 4 at 3. Although defendants do not present this argument directly on appeal, they contend that all of the fees requested by the Martins should be considered in determining whether their claims satisfy the amount in controversy, in effect attributing all the fees that will potentially be recovered in this putative class action to the class representatives.
Courts have generally held, under the same rationale applied to preclude the aggregation of punitive 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). 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.
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).
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.
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.
We reject the argument based on Caterpillar, Inc. v. Lewis, 519 U.S. 61, 117 S.Ct. 467, 136 L.Ed.2d 437 (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, 117 S.Ct. 467, 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, 117 S.Ct. 467 (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).
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"). In any event, because the class representatives here do not meet the jurisdictional amount, supplemental jurisdiction over class members would not be available.
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., 528 U.S. 1018, 120 S.Ct. 525, 145 L.Ed.2d 406 (2000), and affirmed the Fifth Circuit's decision by an equally divided Court, see Free v. Abbott Labs., Inc., 529 U.S. 333, 120 S.Ct. 1578, 146 L.Ed.2d 306 (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, 116 S.Ct. 1241, 134 L.Ed.2d 419 (1996). Leonhardt accordingly remains controlling law in this circuit.
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