News & Events

Pendulum Swings On Issue Of Amount In Controversy In Removal Actions

Three recent decisions by two federal courts in Alabama appear to have set in motion the swing of the pendulum back in favor of insurers meeting their burden of proving amount in controversy in order to successfully remove a case to federal court and/or deflect attempts of remand.  The United States District Court for the Northern District of Alabama, Southern Division rendered rulings on this issue in Hutchison v. State Farm Fire and Cas. Co., 2:12-cv-651-AKK and Smith v. State Farm Fire and Cas. Co., 2:12-cv-00614-WMA and the Middle District of Alabama, Northern District in Exum v. State Farm Fire and Cas. Co., 2:11-cv-00206-MEF.

While Alabama courts do not require ab damnum clauses and the removing party still bears the burden of proof, these recent decisions show a clear window into the courts reasoning for rebuffing attempts at remand. The opinion in Exum cites numerous cases which have historically made it difficult for insurers to remove a matter with an ab damnum clause which sought no specified amount of damages.  The Exum opinion also cites Lowery v. Ala. Power Co., 483 F.3d 1184 (11th Cir. 2007) which seemed to hold a strict burden not only on procedural issues but specifically amount in controversy issues.

Although the Hutchison case was remanded, the Court acknowledged that reasonable judgment had to be applied by a court in determining if the insurer met its burden of proof as to the amount in controversy.  The opinion in Smith plainly showed the court’s no nonsense stance on determining the issue of amount in controversy in diversity cases:

This court is informed and verily believes that Congress amended 28 U.S.C. § 1446 in order to slow down, if not prevent, this court and others like it, from remanding diversity cases like this one, where there is no ab damnum clause, but where the parties and the court know from their experience that the claim exceeds $75,000.  There is no point in writing a law review article on the subject.  This court has written many opinions that sound like Smith’s argument.  That was then.  This is now.

The court is willing to go so far as to inform plaintiffs like Smith, who want to pursue claims against diverse parties in a state court seeking unspecified damages of various kinds, such as punitive damages and emotional distress, must formally and expressly disclaim any entitlement to more than $74,999.99, in their complaint, and that plaintiff will never accept more.  Otherwise, plaintiff will find themselves in federal court.

In rendering decisions on removal, a district court need not ignore reality or suspend common sense in the ultimate determination of whether the complaint establishes the jurisdictional amount and the case is properly removed.

Michael B. Beers