28 U.S.C. § 1446: Removal Jurisdiction and the Amount in Controversy

Although not strictly a discovery issue, defense lawyers are often faced with the issue of whether a case meets the jurisdictional amount for removal to federal court.   Plaintiffs often intentionally understate the value of their claim in order to avoid federal jurisdiction. In many states, Plaintiffs do not or cannot state the amount in controversy in the Complaint.  Federal courts have developed a body of law addressing this issue. 

The removal statute allows a removing party to state the amount in controversy in the Notice of Removal if state practice does not permit a demand for a specific sum or permits recovery of damages in excess of the amount demanded.  28 U.S.C. § 1446(c)(2)(A)(ii). 

The amount in controversy is determined at the time of removal and subsequent events, including a plaintiff’s reduction of damages, do not deprive the federal court of jurisdiction. The United States Supreme Court established this principle nearly eighty years ago.

  “Events occurring subsequent to removal which reduce the amount recoverable, whether beyond the plaintiff's control or the result of his volition, do not oust the district court's jurisdiction   once it has attached”

St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 293, 58 S. Ct. 586, 592 (1938)(emphasis added)

 

And:

 

“And though, as here, the plaintiff after removal, by stipulation, by affidavit, or by amendment of his pleadings, reduces the claim below the requisite amount, this does not deprive the district court of jurisdiction.”

  Id.  at 292, 58 S. Ct.  at 592.(emphasis added)

 

This principle is applied today by federal district courts. Here is one example, from the Ninth Circuit:,

“However, defendant is correct that plaintiff's newly "stipulated-to" amount in controversy is not the operative amount in controversy.  The operative amount in controversy is that claimed by plaintiff in the Complaint.   … "[E]vents occurring subsequent to removal which reduce the amount recoverable, whether beyond the plaintiff's control or the result of his volition, do not oust the district court's jurisdiction once it has attached." [St. Paul Mercury Indem. Co. v. Red Cab Co.] 303 U.S. at 293.

 

. . . IPlaintiff's complaint will not now be remanded to state court based on his unilateral designation of a lesser amount.

Hill v. Hill-Love, No. CIV S-09-2713 KJM-DAD, 2011 U.S. Dist. LEXIS 55895, at *5-7 (E.D. Cal. May 20, 2011)(citations omitted)(emphasis added)

 

The Ninth Circuit affirmed the district court in Hill v. Hill-Love:

 

“There was no error in denying Hill's motion to remand to state court. The district court properly ignored Hill's belated attempt to avoid federal jurisdiction and adhered to this circuit's longstanding rule that the ‘propriety of removal is determined solely on the basis of the pleadings filed in state court,’” Williams v. Costco Wholesale Corp., 471 F.3d 975, 976 (9th Cir. 2006)

Hill v. Hill-Love, 509 F. App'x 605, 606 (9th Cir. 2013)(emphasis added)

 

          Other cases support this principle.

          In DeAquilar v. Boeing Co. 47 F. 3d 1404 (5^th Cir. 1995)[1], the Fifth Circuit made clear that a Plaintiff must establish that the amount in controversy is below the jurisdictional amount in the original Complaint; post-removal filings are not considered:

“In light of St. Paul Mercury, plaintiff must make all information known at the time he files the complaint. . .

 

Plaintiff's state complaint might cite, for example, to a state law that prohibits recovery of damages that exceed those requested in the ad damnum clause and that prohibits the initial ad damnum to be increased by amendment. Absent such a statute, "litigants who want to prevent removal must file a binding stipulation or affidavit with their complaints;   once a defendant has removed the case, St. Paul makes later filings irrelevant." In re Shell Oil Co., 970 F.2d 355, 356 (7th Cir. 1992) (per curiam)

 

De Aguilar v. Boeing Co., 47 F.3d 1404, 1412 (5th Cir. 1995)(emphasis added)

See also Rollwitz v. Burlington N. Railroad, 507 F. Supp. 582 (D. Mont. 1981)( District court based its remand analysis on the Complaint at the time of removal); Engstrom v. L-3 Communs. Gov't Servs., No. 04-2971, 2004 U.S. Dist. LEXIS 25786 (E.D. La. Dec. 23, 2004)(same) Porter v. Merck & Co., No. 04-2572-GTV, 2004 U.S. Dist. LEXIS 29232 (D. Kan. Dec. 28, 2004)(same)(Plaintiffs’ Remand Brief, p. 2)

Sometimes, plaintiffs cite Davidson v. Lefever, No. CA 13-00157-N, 2013 U.S. Dist. LEXIS 109311 (S.D. Ala. July 18, 2013) but neglect to mention that, in Davidson, the Defendant agreed to remand. 

Omni filed a response to the remand motion in which it

consents to this case being remanded to the Circuit Court of Mobile County, Alabama on the grounds stated by Plaintiffs in their Motion to Remand and supporting affidavit

Davidson v. Lefever, No. CA 13-00157-N, 2013 U.S. Dist. LEXIS 109311, at *6 (S.D. Ala. July 18, 2013)(emphasis added)

In sum,  the Amount in Controversy is established by the Complaint or by the Notice of Removal. If a defendant establishes a prima facie case that the amount in controversy is above the jurisdictional amount, the burden then shifts to the plaintiffs to establish that the amount in controversy is below the jurisdictional amount. However, the plaintiff cannot rely on post-removal affidavits to establish that the amount in controversy is below $ 75,000.

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Fed. R. Civ. Pro. 37(a)(1): How much "Meet and Confer" is Enough?

How much time and effort does a party have to expend to comply with the requirement, under Federal Rule of Civil Procedure 37(a)(1)

 Courts in the Fourth Circuit make clear that Rule 37(a)(1) requires meaningful and good faith efforts to avoid discovery disputes. “There is no need for the Court to reach the merits of Defendant’s Motion to Compel because Defendant failed to confer with [Dixon] prior to filing the Motion as required by Federal Rule of Civil Procedure 37.”  Patrick v. Teays Valley Trustees, LLC, 297 F.R.D. 248, 266 (N.D. W.Va. 2013).

  Rule 37(a)(1) mandates that any motion to compel discovery “must include a certification that the movant has in good faith conferred or attempted to confer with the person or party failing to make disclosure or discovery in an effort to obtain it without court action.” 

Good faith under Rule 37 “contemplates, among other things, honesty in one’s purpose to meaningfully discuss the discovery dispute, freedom from intention to defraud or abuse the discovery process, and faithfulness to one’s obligation to secure information without court action.... Accordingly, good faith cannot be shown merely through the perfunctory parroting of statutory language on the certificate to secure court intervention; rather it mandates a genuine attempt to resolve the discovery dispute through non-judicial means. Teays Valley 297 F.R.D. at 266-67.  

            Other federal courts ( favorably cited in the Fourth Circuit) have elaborated on the requirements for personal consultation under Rule 37:

“The good faith conferment language incorporated into Rule 37 was based in part due on the successful experience of this and other federal districts in resolving discovery disputes. Previously, the District of Nevada local rules required a party moving to compel discovery to initiate sincere, "personal consultation," either in person or by telephone.” 

Shuffle Master v. Progressive Games, 170 F.R.D. 166, 172 (D. Nev. 1996) discussed in Teays Valley supra and Tustin v. Motorists Mut. Ins. Co., 2009 U.S. Dist. LEXIS 95947 (N.D. W. Va. Oct. 14, 2009)

           

A draft Motion to Compel  (along with the terse cover letter)  does not meet the standard for a meaningful meet and confer on discovery. This is clear from the case law.

“The mere sending of a letter demanding supplemental responses to interrogatories was insufficient. Id. Moreover the personal consultation requirement had to be more than just a "formalistic prerequisite" to judicial resolution of a discovery dispute,    but rather a "sincere effort" where both parties presented the merits of their respective positions and meaningfully assessed the relative strengths” of each”Shuffle Master v. Progressive Games, 170 F.R.D.  at 172 see also Teays Valley 297 F.R.D. at 67 Those discussions must continue until the parties reach an impasse. Hasbro, Inc. v. Serafino, 168 F.R.D. 99, 101 (D. Mass. 1996) (“It is not up to the court to expend its energies when the parties have not sufficiently expended their own.”); Burton v. R.J. Reynolds Tobacco Co., 203 F.R.D. 624 (D. Kan. 2001) (denying motion to compel without prejudice until parties negotiated to impasse). If the movant has not satisfied this requirement, then its motion to compel should be denied. Shuffle Master, supra, at 173; Hasbro, supra, at 102; see also Doe v. National Hemophilia Foundation, 194 F.R.D. 516, 521 (D. Md. 2000) (motion to compel discovery denied due to movant’s failure to meet and confer).

In conclusion, Courts are not impressed with formalistic, perfunctory "meet and confer" efforts.  The efforts must be meaningful and open. 

Deposing Fact Witnesses Who Were Not Disclosed on Initial Disclosures

The Federal Rules of Civil Procedure require parties to identify the "names and if know, the address and telephone number of each individual likely to have discoverable information . .  .which the disclosing party may use to support its claims or defenses unless the use would be solely for impeachment." Rule 26(a)(1)(A)(I). 


Sometimes a party will try to depose a fact witness in order to memorialize fact testimony that is helpful to that party even though the deposing party never identified the fact witness on its Initial Disclosures. 


The federal rules prohibit this.  If a party intends to use fact testimony to support its claims or defenses, it must disclose that individual in the Initial Disclosure (or on an Supplemental Initial Disclosure). Failure to identify the witness on an Initial Disclosure or to supplement the Initial Disclosure with the witnesses name and identifying  information is a basis to quash a fact witness deposition of that witness.


Rule 26(a)(1)(A)(i) of the Federal Rules of Civil Procedure requires parties to disclose all fact witnesses that may have discoverable information.  . 
“If a party fails to provide information or identify a witness as required by Rule 26(a) . . .  the party is not allowed to use that information or witness”.  Fed. R. Civ. P. 37(c)(1).   Courts have previously excluded non-disclosed witnesses that presented a “surprise” to opposing parties and would, if allowed, disrupt the trial schedule.  See SMD Software, Inc. v. EMove, Inc., 2013 U.S. Dist. LEXIS 146864, at *21 (E.D.N.C. Oct. 10, 2013) (Flanagan, J.)


It is not enough that the undisclosed fact witness may have been identified in documents, depositions or even (collaterally) in interrogatory responses. A witness must be disclosed in an Initial Disclosure.


 
"To the extent that plaintiffs argue that they had already disclosed these witnesses in discovery, this argument is without merit. The fact that these witnesses names might have appeared within over 7,200 pages of call log notes or customer lists which were difficult to read and had thousands of names, see Defs. Mem. Supp. Exs. L & M, does not amount to proper disclosure under Rule 26(a)(1). See Hoyle v. Freightliner, LLC, 650 F.3d 321, 328-30 (4th Cir. 2011) (references to a witness in an interrogatory response and in deposition testimony did not prevent preclusion of the witness was not a substitute for actual Rule 26(a)(1) disclosure)."

SMD Software, Inc. v. EMove, Inc., 2013 U.S. Dist. LEXIS 146864, *10 (E.D.N.C. Oct. 10, 2013)

.  The Federal Rules of Civil Procedure clearly exclude the testimony of Parnell, Reynolds and Akers:

“If a party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial

Fed Rules Civ Proc R 37(c)(1)(emphasis added)

 

Courts apply this  Rule to exclude witnesses who were not disclosed in Initial Disclosures or in Supplemental Initial Disclosures:

 

A party is not "permitted to use as evidence at a trial … any witness or information" not disclosed pursuant to Rule 26(a). Fed. R. Civ. P. 37(c)(1). The only exceptions to this rule of exclusion are when the failure to disclose is substantially justified or when the nondisclosure is harmless

Wagoner v. Lewis Gale Med. Ctr., LLC, Civil Action No. 7:15-cv-00570, 2016 U.S. Dist. LEXIS 169892, at *9 (W.D. Va. Dec. 8, 2016) (Dillon, J.)

 

If a party fails to identify a person as required by Rules 26(a) or 26(e), that party is not permitted to call that person as a witness at trial unless such failure was substantially justified or harmless. Fed. R. Civ. P. 37(c)(1). The basic purpose of this exclusionary rule is to prevent "surprise and prejudice to the opposing party." It is not necessary that the nondisclosure be in "bad faith or callous disregard of the discovery rules" for the evidence to be excluded. Id. The burden is on the nondisclosing party to show harmlessness or justification.

Quesenberry v. Volvo Grp. N. Am., Inc., 267 F.R.D. 475, 478 (W.D. Va. 2010);citing S. States Rack & Fixture, Inc. v. Sherwin-Williams Co., 318 F.3d 592, 596 (4th Cir. 2003).(emphasis added)

 

The fact that a witness may be  identified in an interrogatory answer does not solve the problem . “disclosure in the right form (complete) and at the right time is critical to an opposing party” Kellington v. Bayer Healthcare Pharms., Inc., Civil Action No. 5:14-cv-2, 2016 U.S. Dist. LEXIS 116129, at *28 (W.D. Va. Aug. 30, 2016) (Dillon, J.)