If a dispute does not exceed $75,000 it should not remain in federal court

Minnesota attorneys know that the amount in controversy needs to exceed $75,000 Court will not permit them to now rely on self-serving, contradictory affidavits in an attempt to justify jurisdiction

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Richard and Patricia Martin,
Plaintiffs,
v.
State Fann Fire and Casualty Company,
Defendant.

MEMORANDUM OPINION
AND ORDER

This matter is before the Court sua sponte.
This action arises out of a fire at the home of Plaintiffs Richard and Patricia
Martin on August 21,2008. The Martins fIled a claim with their insurer, Defendant State
Fann Fire and Casualty Company (“State Fann”), which denied it. Seeking to recover
the proceeds of their policy, the Martins commenced the instant action on August 17,
2010, invoking diversity jurisdiction. They asserted claims for breach of contract and
unjust enrichment and sought unspecifIed damages “in excess of’ $75,000, plus costs,
attorneys’ fees, and statutory interest under Minnesota Statutes § 60A.0811. The
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Complaint also sought leave “to add additional claims that could not be brought initially,”
such as “those provided by Minn. Stat. § 604.18.,,1
The parties proceeded with discovery and, on January 28,2011, the Martins
moved for leave to amend their Complaint to assert a bad-faith-denial claim. After full
briefmg, Magistrate Judge Noel denied that Motion on March 31, 2011, finding that the
Martins had “fail[ed] to establish a prima facie showing that [State Farm] lacked a
reasonable basis for denying the benefits of the insurance policy.” (Doc. No. 26 at 1.)
The Martins did not object to that ruling.
On October 6, 2011, with discovery complete, State Farm filed a Motion for
Summary Judgment, arguing inter alia that the Court lacks diversity jurisdiction over this
action because the $75,000 amount-in-controversy requirement has not been satisfied.
(See Doc. Nos. 45, 47.) In accordance with the well-settled principle that it is
inappropriate to “reach a merits question when there is no Article III jurisdiction ,” Steel
Co. v. Citizens for a Better Env’t, 523 U.S. 83, 97 n.2 (1998), the Court directed the
parties to brief the jurisdictional issue and stayed the remainder of the sunnnary-judgment
Motion. (See Doc. No. 49.) The parties complied with that directive and, having now
reviewed their submissions, the Court agrees with State Farm that the amount-incontroversy
requirement has not been satisfied here.
1 Section 604.18 permits an insured to recover certain costs when he can show that his claim was
denied in bad faith, that is, when the insurer knew it lacked “a reasonable basis for denying [it].”
Minn. Stat. § 604.18, subd. 2(a). A claim seeking such statutory costs may not be included in the
insured’s complaint; rather, “[a]fter filing the suit, [the insured] may make a motion to amend the
pleadings to claim recovery of taxable costs under this section.” Id. subd. 4. In this sense, relief
under Section 604.18 is similar to a claim for punitive damages under Minnesota law, which also
requires leave of court before being asserted. See Friedberg v. Chubb & Son, Inc., F. Supp.
2d —,2011 WL 3347850, at *3 (D. Minn. May 26,2011) (Keyes, M.J.).
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The Martins, as the parties invoking the Court’s jurisdiction, bear the burden of
establishing diversity jurisdiction. E.g., OnePoint Solutions. LLC v. Borchert, 486 F.3d
342,347 (8th Cir. 2007). Diversity jurisdiction exists when the plaintiff and defendant
are citizens of different states and the amount in controversy exceeds $75,000. 28 U.S.C.
§ 1332(a). It is undisputed that the parties here are citizens of different states and,
accordingly, only the amount in controversy is at issue.
To detennine the amount in controversy, the Court must look to the claims
asserted in the Complaint (breach of contract and unjust enrichment) and assess what
damages the Martins could potentially recover on those claims. See. e.g., Rasmussen v.
State Farm Mut. Auto. Ins. Co., 410 F.3d 1029, 1031 (8th Cir. 2005).2 While the
Complaint alleges that the Martins are entitled to recover more than $75,000 without
further specifying the nature of their damages, “[g]enerally speaking, a complaint that
alleges the jurisdictional amount in good faith will be sufficient to confer jurisdiction.”
OnePoint, 486 F.3d at 348 (quoting Larkin v. Brown, 41 F.3d 387,388 (8th Cir. 1994)).
But where, as here, “the defendant challenges the plaintiffs allegations of the
amount in controversy, … the plaintiff must establish jurisdiction by a preponderance of
the evidence.” Kopp v. KoPD, 280 F.3d 883,884-85 (8th Cir. 2002) (citation omitted);
2 The Martins argue that they seek “additional damages for tortuous [sic] interference with
contract” (Doc. No. 50 at 2), although they recognize no such claim is in the Complaint (id. at 2
n.I). Unasserted claims cannot be considered when determining the amount in controversy, see.
~, James Neff Kramper FamilyP’ship v. mp. Inc., 393 F.3d 828, 831 (8th Cir. 2005) (focus is
on ”the claims originally asserted”); Unitrin Auto & Home Ins. Co. v. Bastida, No. 3:09-cr-
00217,2009 WL 3591190, at *2 (W.D.N.C. Oct. 26, 2009), particularly where, as here, the
deadline for amending the pleadings has long since passed. In any event, the Martins have
nowhere explained how their damages would differ if they were permitted to add a tortiousinterference
claim.
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accord. e.g., James Neff Kramper Family P’ship v. IBP. Inc., 393 F.3d 828, 831 (8th Cir.
2005); State of Mo. ex reI. Pemiscot Cnty .. Mo. v. W. Sur. Co., 51 F.3d 170, 173 (8th
Cir. 1995) (“[T]he plaintiff’s allegations of requisite jurisdictional amount are not
necessarily dispositive of the issue.”). Stated differently, “[0 ]nce jurisdiction is
challenged, ‘if, from the proofs, the court is satisfied to a [legal] certainty that the
plaintiff never was entitled to recover that amount, … the suit will be dismissed.'”
Pemiscot Cnty., 51 F.3d at 173 (quoting St. Paul Mercury Indem. Co. v. Red Cab Co.,
303 U.S. 283, 289 (1938)). The term “proofs,” as used in St. Paul Mercury, means
“summary-judgment-type evidence.” Allen v. R&H Oil & Gas. Co., 63 F.3d 1326, 1336
(5th Cir. 1995); accord. e.g., Pemiscot Cntv., 51 F.3d at 173-74 (“we must determine
whether the summary judgment proofs establish to a legal certainty that the County did
not have a valid claim” in excess of the jurisdictional minimum) (emphasis in original).
At bottom, the question is whether the plaintiff’s evidence shows to a “legal certainty that
the claim is really for less than the jurisdictional amount.” St. Paul Mercury, 303 U.S. at
289; accord. e.g., Scottsdale Ins. Co. v. Universal Crop Prot. Alliance. LLC, 620 F.3d
926,931 (8th Cir. 2010); James Neff Kramper, 393 F.3d at 831 (once jurisdiction was
challenged, “[ t ]he burden thereafter fell upon … the party invoking federal jurisdiction[]
to show by a preponderance of the evidence the claims originally asserted … could, that
is might, legally satisfy the amount in controversy requirement”).
Here, the Martins assert they are entitled to damages for all personal property
destroyed or damaged in the fire (Doc. No. 50 at 1), and the Court agrees this is the
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appropriate measure of damages for the claims asserted in the Complaint. 3 The
dispositive question, therefore, is whether the Martins have proffered sufficient “proofs”
to permit a “fact finder [to] legally conclude” that their personal-property damages
exceed $75,000. KODO, 280 F.3d at 885. In the Court’s view, the answer to that question
is, ”No.”
Notably, the Martins have proffered little evidence to support their assertion that
their damages exceed the jurisdictional minimum. While they argue that they “have
always maintained that they have claims for damages in excess of $75,000″ (Doc. No. 50
at 1 (emphasis added», they cannot rely on mere allegations or beliefs at this juncture.
Pemiscot Cnty., 51 F.3d at 173-74. The issue, rather, is one of proof, they must submit
evidence that would permit a jury to conclude they have suffered sufficient damages.
James Neff Kramper, 393 F.3d at 833 (“A mere allegation made at the beginning of the
3 The Complaint also seeks attorneys’ fees, costs, and statutory interest. Yet, neither costs nor
statutory interest may be considered, as 28 U.S.C. § 1332(a) expressly states that the amount in
controversy must exceed $75,000 “exclusive of interest and costs.” (emphasis added). (Some
courts, nevertheless, have included statutory interest in the amount in controversy. See. e.g.,
Watson v. Provident Life & Accident Ins. Co., No. 3:08-CV-2065, 2009 WL 1437823, at *4-5
(N.D. Tex. May 22,2009). This Court declines to do so in light of the express text of Section
1332. Accord Home Buyers Warranty Corp. v. Leightv. No. CV 07-177, 2007 WL 4616687, at
*7 (D. Ariz. Dec. 28, 2007).) Nor may attomeys’ fees be considered. While such fees are part
of the amount in controversy when an award thereof would be permitted by statute, Rasmussen,
410 F.3d at 1031, here fees would be permitted only under the bad-faith-denial statute (Minn.
Stat. § 604.18). Yet, Magistrate Judge Noel denied the Martins’ request to add a claim under
that statute because they failed to make even a prima facie showing that State Farm denied their
claim in bad faith, and the Martins did not object to that determination. Moreover, as discussed
above, bad-faith claims are treated like punitive-damage claims under Minnesota law. And
although punitive damages may be considered as part of the amount in controversy, such claims
must be “closely scrutinized” and excluded when the facts do not support an award thereof.
Larkin, 41 F.3d at 388-89. That is precisely the case here, as Magistrate Judge Noel has already
determined (without challenge). See Rasmussen, 410 F.3d at 1031. Simply put, the Court does
not believe the Martins ever had a viable bad-faith claim.
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action is insufficient when, after extensive discovery, the amount in controversy is
challenged.”); Kopp, 280 F.3d at 885. And yet, they have proffered only two items in an
attempt to satisfy their burden, neither of which is availing.
First, the Martins have each submitted an Affidavit “estirnat[ing] that the value of
[the] personal property items lost in the fire and unpaid for by State Farm exceed[s]
$100,000.” (Doc. No. 52 Ex. C, ‘If 8; Id. Ex. D, ‘If 5.) Putting aside whether “estimates”
are sufficient to discharge their burden at this stage, the Court need not – and will not –
rely on these assertions, because they contradict answers the Martins previously provided
in discovery. In particular, they itemized their alleged damages in their Rule 26(a)
disclosures, attaching a 24-page document listing 715 items supposedly lost or damaged
in the fire, along with each item’s value. (See Doc. No. 48 Ex. E.) The total value of
those items, however, was only $71,643.27 (id.),4 a calculation the Martins subsequently
reaffirmed in their answers to State Farm’s interrogatories. (Doc. No. 55 Ex. A.) The
Court will not permit them to now rely on self-serving, contradictory Affidavits in an
attempt to justify jurisdiction. See Frevert v. Ford Motor Co., 614 F.3d 466,474 (8th Cir.
2010) (affidavit contradicting prior response to interrogatories is “self-serving” and need
not be considered); OnePoint, 486 F.3d at 349 (“[T]he existence of the required amount
in controversy … must … be supported by competent proof.”) (emphasis added); see
also Larkin, 41 F.3d at 389 (“In determining the amount in controversy … , answers to
4 The itemization also included $6,271.05 for ”restorationldryc1eaning,” yet Richard Martin
testified in his deposition that this had already been paid by State Farm and was not, in fact,
being claimed as damages. (Doc. No. 48 Ex. B at 280-81.) Accordingly, it is not part of the
amount in controversy. Schubert v. Auto Owners Ins. Co., 649 F.3d 817,821-22 (8th Cir. 2011).
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interrogatories serve as the equivalent of affidavits to either support or defeat diversity
jurisdiction.,,).5
Second, the Martins point to the Sworn Statement in Proof of Loss they filed with
State Farm in September 2009. (Doc. No. 52 Ex. B.) Yet, that statement does not
disclose any dollar amount for their claimed losses. In fact, in the space provided for the
Martins to list the value of their damaged property, they simply wrote “per insurance
allowance.” This tells the Court absolutely nothing about the damages the Martins
allegedly have sustained.
To be sure, the Martins assert that they have been unable to prepare a full
inventory of the items damaged or destroyed in the fire. (Doc. No. 50 at 3-4.) That
assertion, of course, flies in the face of the detailed and specific itemization – on 24 pages
and over 700 lines – of the items ostensibly damaged in the fire. But regardless, the
Martins would be unable to recover at trial based on a “best guess” as to how much
damage they sustained. See, e.g., US Salt, Inc. v. Broken Arrow, Inc., Civ. No. 07-1988,
5 This is not to suggest that the Court enjoyed diversity jurisdiction when this action was filed
but subsequently lost it via the Martins’ discovery responses. It has long been recognized that
events occurring after a lawsuit has been filed “do not oust jurisdiction” once it has attached. St.
Paul Mercury, 303 U.S. at 290; accord. e.g., Schubert v. Auto Owners Ins. Co., 649 F.3d 817,
822-23 (8th Cir. 2011). The question is whether the amount in controversy ever was satisfied,
and although the referenced discovery materials were created after this action was filed, they are
properly considered when answering that question. Schubert, 649 F.3d at 823 (“Subsequent
events may … be relevant to prove the existence or nonexistence of diversity jurisdiction at the
time of filing, and a distinction must be made … between subsequent events that change the
amount in controversy and subsequent revelations that, in fact, the required amount was or was
not in controversy at the co=encement of the action …. [RJ esort to materials developed in
discovery is allowed . .. to amplifY the meaning o/the complaint{‘sJ allegations.”) (emphasis
added) (internal quotation marks and citations omitted); Kopp, 280 F.3d at 885 (court assesses
whether jurisdiction existed at time lawsuit was filed “based on the information known to the
court at the time jurisdiction [is] challenged”).
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2008 WL 2277602, at *1 (D. Minn. May 30,2008) (Kyle, J.) (“Damages that are remote,
speculative, or conjectural are not recoverable as a matter oflaw.”), aff’d, 563 F.3d 687
(8th Cir. 2009). While the Martins were not required to prove with mathematical
certainty that their damages exceed $75,000, KoPO, 280 F.3d at 885, they were required
to show a sufficient amount in controversy based on what a fact fmder could actually
award under the evidence, id., and no damages can be recovered for “speculation or guess
work,” Oro. Health Plan, Inc. v. Philip Morris USA, Inc., 344 F.3d 753, 757 (8th Cir.
2003). Simply put, the only “competent proof’ the Martins have submitted regarding
their alleged damages indicates that such damages fall below $75,000. OnePoint, 486
F.3d at 349 (emphasis added).
To reiterate, it was the Martins’ obligation to prove the existence of diversity
jurisdiction by proffering evidence that would permit a fact fmder to conclude the
damages they suffered exceed $75,000. In an attempt to discharge that burden, they have
pointed to two meager pieces of evidence, neither of which is sufficient. Hence, “even
assuming [the Martins] can prove [their] claim[s], a fact fmder could not legally award
damages [exceeding] $75,000 … because there is simply no competent evidence the
damages were … more than” that amount. James Neff Kramper, 393 F.3d at 833. The
amount-in-controversy requirement, therefore, has not been satisfied. And where, as
here, a court concludes that the plaintiff has failed to establish the existence of diversity
jurisdiction, the action must be dismissed without prejudice. See Fed. R. Civ. P. 12(h)(3)
(“If the court determines at any time that it lacks subject-matter jurisdiction, the court
must dismiss the action.”).
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Based on the foregoing, and all the files, records, and proceedings herein, IT IS
ORDERED that the Martins’ Complaint (Doc. No.1) is DISMISSED WITHOUT
PREJUDICE for lack of subject-matter jurisdiction.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Date: November 21,2011
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slRichard H. Kyle
RICHARD H. KYLE
United States District Judge