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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