Be Careful What You Wish For

10.09.14

The situation is all too familiar: A lawsuit is filed by a personal injury or cargo plaintiff, and the complaint does not list the amount of the damages. In personal injury cases, particularly those involving interstate motor carriers, the amount of damages is critically important. In those cases, there is often diversity of citizenship between the personal injury plaintiff and the trucking company and its driver. Thus, the amount of damages will determine whether the case is eligible for removal under the federal court’s diversity jurisdiction (more than $75,000 exclusive of interest and costs). In cargo cases, removal to federal court based upon Carmack (49 U.S.C. 14706) may be possible if the amount at issue exceeds $10,000. Thus, the first step for defense counsel is to determine the amount in controversy.

In some cases, there is no dispute or issue as to the amount in controversy, and, in most cases, the plaintiff is well-aware that defense counsel seeks this information to determine if a case is, indeed, removable. What happens when a plaintiff’s attorney engages in puffery and submits an exaggerated claim for damages in response to such an initial request or statement of damages and, upon realizing that his puffery provided support for removal to federal court, tries to amend his inflated demand?  Can such a pull-back defeat removal? Or is the plaintiff stuck with his inflated demand?

A recent ruling by U. S. District Judge Katharine S. Hayden in the United States District Court for the District of New Jersey (Newark) answered the foregoing questions with clear answers that are quite favorable to defendant motor carriers in such cases. In Correas v. C.R. England-Global Transportation1, Judge Hayden ruled that the plaintiff’s attempt to rescind and reduce his inflated damage claim after removal was not permissible.

In the Correas case, C.R. England inadvertently removed plaintiff’s reefer trailer from a cold-storage facility and kept it in revenue service for a short period until it realized what had occurred. The plaintiff, despite being offered fair compensation for the loss of his trailer for the applicable period and despite being offered a replacement trailer 10 days after the mistake was noticed, demanded $44,000 from C.R. England.  When C.R.England refused to pay such exorbitant sums, the plaintiff filed suit in New Jersey State Court and simultaneously served a demand package upon the defendant and its attorney asserting an even-more preposterous demand of $83,414.43.

Since the parties were diverse, England removed the case to federal court based upon the new demand letter.  The plaintiff, then realizing the consequences of his overreaching, moved to remand the case and, in support of his remand efforts, submitted an “amended” demand for $74,000, which is just below the threshold for removal.

In response to the plaintiff’s motion to remand, we cited well-established Third-Circuit case law confirming that “a district court’s determination as to the amount in controversy must be based on the plaintiff’s complaint at the time the petition for removal was filed.”2 We argued that, on a motion to remand, the only consideration at issue is therefore the amount in controversy at the time of the original petition. We also argued that, once a case is removed, amendments offered to defeat the monetary requirements of diversity jurisdiction are not permitted, even if made in good faith.3 We also relied upon the United States Supreme Court’s ruling on this issue, in the Red Cab case.4 In Red Cab, the Supreme Court held that “events occurring subsequent to the institution of suit which reduce the amount recoverable below the statutory limit do not oust jurisdiction.” Id. at 289. “Events occurring subsequent to removal,” the High Court explained, “whether beyond the plaintiff’s control or the result of his volition, do not oust the district court’s jurisdiction once it has attached.”5 The Supreme Court noted that its holding was based not only upon settled law, but common sense.6 “If [a] plaintiff could, no matter how bona fide his original claim in the state court, reduce the amount of his demand to defeat federal jurisdiction,” the protections afforded defendants by diversity jurisdiction would be rendered a legal nullity.

Other federal Circuit Courts preclude the plaintiffs from revising their demands to defeat removal.  The Sixth Circuit, for example, rejected a plaintiff’s attempt to remand a case where he initially demanded $950,000 but, upon removal, tried to reduce his demand to defeat removal.7 Indeed, the plaintiff offered to stipulate that his award would be limited to less than $75,000 in order to defeat removal, but the Court rejected his strategy.  The Sixth Circuit ruled that “post-removal stipulations do not create an exception to the rule articulated [by the Supreme Court] in St. Paul.”8

The Third Circuit’s position on this issue is also well-settled.  The amount in controversy requirement need only be satisfied “at the time the petition for removal was filed.” 9 Moreover, attempts to stipulate to a demand below the jurisdictional requirement after removal “are of no legal significance.” 10 Even when a plaintiff succeeds in “amending a complaint,” they cannot “destroy federal jurisdiction” by backing away from a demand that “initially satisfied the monetary floor.” 11

Judge Hayden, citing the aforementioned authority, denied the plaintiff’s motion to remand.  She ruled that federal jurisdiction is assessed at the time of removal.  At that time, the plaintiff’s asserted damages were $83,414.43, above the amount in controversy requirement for federal jurisdiction. Therefore, Judge Hayden concluded that the plaintiff’s reduction was simply an impermissible attempt to avoid removal and divest the Court of jurisdiction. Judge Hayden, relying upon the long-standing line of cases on this issue, thwarted the plaintiff’s attempt to avoid federal court by arbitrarily amending his damage claim.

Judge Hayden’s ruling prohibits the plaintiffs in diversity cases from forum shopping by reducing damages in response to removal. In order to succeed on a motion for remand, the plaintiffs must provide some legal or factual reasons for their reduction of damages. An unsupported reduction of damages by the plaintiff, like that filed by the plaintiff in Correas, will not deprive the Court of established diversity jurisdiction.  The lesson to greedy plaintiffs and their attorneys is clear:  Be careful what you wish for, as you may just get it.

For more information, please contact James A. Wescoe at jwescoe@wglaw.com or 267.765.4123.

1 Correas v. C.R. England-Global Transportation, Civ. No. 13-4907 (D. NJ 2014
2 Werwinski v. Ford Motor Co., 286 F.3d 661, 666 (3d Cir. 2002) (citing Valley Auth. v. Union Switch Div., 809 F.2d 1006, 1010 (3d Cir. 1987) (emphasis added). Such a petition is properly based upon a plaintiff’s “statement of damages” as filed prior to removal. Rahwar v. Nootz, 863 F.Supp. 191, 192 (D. New Jersey 1994) (citing 28 U.S.C. 1446(b)’s direction that “other papers” may be considered in determining that amount in controversy as plainly including “statements of damages.”).
3 Ciecka v. Rosen, 908 F.Supp.2d 545, 549 (D. New Jersey 2012).
4 St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283 (1038).
5Id. at 293. 
6Id. at 294.
7 Rogers v. Wal-Mart Stores, Inc., 230 F.3d 868, 872.11111111111111111111
8 Id.  872.
9 Werwinski, 286 F.3d at 666 (3d Cir. 2002) (citing Valley Auth. v. Union Switch Div., 809 F.2d 1006, 1010 (3d Cir. 1987)).
10 Angus v. Shiley Inc., 989 F.2d 142, 145 (3d Cir. 1993)..
11 Id. (citing St. Paul Mercury Indemnity Co., 303 U.S. at 293-4; Albright v. R.J. Reynolds Tobacco Co., 531 F.2d 132, 135 (3d Cir 1976), cert. denied, 426 U.S. 907, 96 S.Ct. 2229).

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