In Case You Were Wondering About Amount in Controversy...

PDF

Probably every practitioner has faced the situation. The goal is to remove the case to the United States District Court. There is complete diversity, but the amount in controversy is ambiguous; plaintiff seeks actual and punitive damages and maybe attorney’s fees, but does not specify an amount being sought. What is the next step?

Generally, the court determines the amount in controversy based upon the allegations of the complaint at the time of commencement of the state court action and at the time of removal. Following removal, a defendant has the burden of establishing the court’s jurisdiction upon a plaintiff’s motion to remand. Because federal courts are courts of limited jurisdiction, motions to remand are strictly construed in favor of state court jurisdiction.

The Fourth Circuit has not adopted a rule relative to the burden of proof on the removing party. Despite the lack of guidance from the Fourth Circuit, courts within the District of South Carolina have favored requiring defendants to show either to a ‘legal certainty’ or at least within a ‘reasonable probability’ that the amount in controversy is satisfied. Once established, events subsequent to the filing of the complaint that reduce the amount recoverable below the statutory limit do not defeat jurisdiction. 

Recently, the court broke from the general rule. In Clifton v. Allen, 2018 WL 3095026 (June 22, 2018), Plaintiff sought actual and punitive damages in an unspecified amount. Following removal, Plaintiff moved to remand and submitted a stipulation declaring the entire amount being sought did not and would not exceed $75,000. He further stipulated he would never seek to recover more than that amount and would consent to limit damages to no more than $75,000 if awarded in excess of that by verdict. In response, Defendant argued such a post-removal amendment did not defeat diversity. Rejecting Defendant’s argument, the court determined it could consider the stipulation, because of the ambiguous and indeterminate claim for damages. The court found the stipulation sufficient basis upon which  to remand the case.

This practitioner has struggled with this subject, exploring interrogatory answers and admissions in an effort to secure a binding limitation of damages from a plaintiff. Clifton suggests that can be efficiently accomplished through a stipulation, particularly one as limiting as the one at issue.

Cheryl D. Shoun is a trial attorney and certified mediator whose experience includes construction law, insurance defense, personal injury defense, employment litigation and medical malpractice. As a frequent writer, she serves as editor for Nexsen Pruet's TIPS: Torts, Insurance and Products Blog.