Tuesday, August 10, 2010

Removal: Court uses common sense to determine amount in controversy

Faithful readers of this blog may avert their eyes when they see a new post about removal, one of our favorite topics (36 posts and counting). Not another post about fraudulent joinder of in-state defendants or, worse yet, pre-service removal! We can understand that some of you may want to say to us about removal what William Shatner said to the Trekkie convention: Get a life!

But believe it or not, we have not written much about determining the amount in controversy when cases are removed. The Eleventh Circuit just issued a very interesting recent decision on this topic in Roe v. Michelin North America, Inc., No. 09-15141 (11th Cir. Aug. 5, 2010).

The plaintiff’s decedent was a passenger in a Ford Explorer that rolled over when a Michelin tire allegedly failed. The estate representative brought a wrongful death claim against Michelin in Alabama state court seeking damages in an amount to be determined by the jury.

(An aside for those of you wondering whether an estate representative sued under the fictitious name Roe. The plaintiff in this case in not the famous Richard Roe, pseudonym of every anonymous male plaintiff who doesn’t like the name John Doe, but Donald Roe, which we assume is his real name.)

Michelin removed the case to federal court based on diversity of citizenship and alleged it was apparent from the face of the complaint that more than $75,000 was in controversy. In just about any other state, it would be obvious that a wrongful death claim put more than $75,000 in controversy. But Alabama’s Wrongful Death Act, according to the opinion, allows plaintiffs to recover punitive damages but not compensatory damages. Id. at 3.

And this is where it all gets a little weird, with ritualistic tap dancing by both sides. Plaintiff moved to remand, arguing that Michelin failed to prove by a preponderance of the evidence that more than $75,000 was at issue. But Plaintiff also did not deny that the amount in controversy exceeded $75,000. Id. at 3. In other words, Plaintiff was not arguing the claim was worth less than $75,000 or that he was seeking less than $75,000 but only that Michelin had failed to prove that the claim was worth more than $75,000.

For those of you who have not been involved in jurisdictional disputes over the amount in controversy, they have a certain backwards, alternate universe feel. The defendant, who in any other circumstance would say that the plaintiff’s claims are worthless, argues that the plaintiff’s claims have great value. And the plaintiff, who normally seeks as many millions as there are stars in the sky, tries to find some way to downplay the value of the claim without limiting a potential verdict. Plaintiffs really determined to avoid federal court will plead or stipulate that they are seeking less than $75,000.

Plaintiff Roe understandably did not want to do that. Instead, he argued that Eleventh Circuit law gave Michelin – the party seeking federal court jurisdiction – the burden of proving by a preponderance of the evidence that the amount in controversy exceeded $75,000. Roe said Michelin presented no such evidence.

That argument put Michelin in a bit of a pickle. What was it supposed to do, present evidence that its conduct was actually quite horrible and merited a punitive award in excess of $75,000? Instead, Michelin argued that the court could determine from the face of the complaint that more than $75,000 was at issue. The district court agreed.

The Eleventh Circuit eventually agreed. The court first had to tiptoe carefully around its own precedents saying that the defendant had the burden of establishing by a preponderance of the evidence that the amount in controversy more likely than not exceeds $75,000. Id. at 5-6. In some cases, the court had held, this requires additional evidence. Id. But when the defendant alleges that removability is apparent from the face of the complaint, the court can assess amount in controversy based solely on the complaint. Id. The court stressed that this decision was limited to cases removed under the first paragraph of 28 U.S.C. § 1446(b) because of some arguably conflicting authority on cases removed under the second paragraph of 1446(b). Id. at 5 n.4.

The court then considered how it could evaluate the amount in controversy from the face of the complaint and concluded that “courts may use their judicial experience and common sense in determining whether the case stated in a complaint meets federal jurisdictional requirements.” Id. at 7-8. The court surveyed the law of other circuits and found that they generally agreed. Id. at 8-12.

Common sense?!? What an innovation.

We’re certainly in favor of courts that have common sense using their common sense to make decisions such as the value of claims asserted in a complaint. Judges have spent their professional lives on the bench and most likely before the bench reviewing and evaluating complaints. Any competent judge should be able to assess from the face of a complaint whether the asserted claims are worth more or less than $75,000.

The court stressed that its common sense approach was necessary to protect defendants’ right to remove cases to federal court. Id. at 12-14. If a court could not make this assessment, the court reasoned, a skillful plaintiff could defeat removal by artful pleading and refusal to specify any details of the value of the claim. “Both policy and precedent counsel against rewarding such obfuscating tactics.” Id. at 13. Without the ability to cut through a plaintiff’s representation that the value of a claim is indeterminate, the Eleventh Circuit concluded, “a defendant could wrongly be denied the removal to which it is entitled.” Id. at 14.

Hear, hear! Those words are music to our ears. Some judges are eager to dispense with cases on their dockets by any means necessary and too willing to thwart removal and remand cases. The Eleventh Circuit’s opinion properly reinforces that removal is not some cat-and-mouse game that skillful plaintiffs can win through clever tactics. A defendant has a right to have certain cases heard in federal court and is entitled to remove those cases.

After establishing its power to make this assessment, the court’s conclusion on the amount in controversy was simple. The court evaluated the allegations in the complaint against the factors Alabama uses to assess wrongful death damages and concluded that the value of the claims more likely than not exceeded $75,000. Id. at 14-17. Even though we usually oppose punitive damages, it is hard to argue with that conclusion, especially when it supports the removal of a case to federal court.

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