Opinion
No. 7:99CV5002
May 1999.
ORDER
This matter is before me pursuant to 28 U.S.C. § 636 and the general order of referral on plaintiff's motion to remand this case to the District Court of Sheridan County, Nebraska (#6). For the reasons explained below, I find that the motion should be denied.
In this insurance coverage dispute, plaintiff seeks $61,031 from the defendant insurer for the loss of certain farm equipment. Plaintiff also seeks an award of attorney's fees under Neb. Rev. Stat. § 44-359. Defendant timely removed the case to federal court, arguing that the court has diversity jurisdiction pursuant to 28 U.S.C. § 1332(a). Plaintiff contends that this court does not have jurisdiction under § 1332(a) because the amount in controversy does not exceed the sum or value of $75,000. Defendant contends the potential attorney's fee award under § 44-359 brings the amount in controversy to a total exceeding $75,000.
LEGAL ANALYSIS
In general, the party invoking federal jurisdiction (here, the defendant) bears the burden of proving the jurisdictional requirements. See Middleton v. City of Blue Springs, 145 F.3d 993 (8th Cir. 1998); Iowa Lamb Corp. v. Kalene Industries, Inc., 871 F. Supp. 1149, 1154 (N.D.Iowa 1994); Bergstrom v. Burlington N. R.R. Co., 895 F. Supp. 257, 258 (D.N.D. 1995). The sum claimed by the plaintiff generally controls if the claim is apparently made in good faith. See St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 288 (1938). In this case, however, plaintiff has specifically claimed $61,031, but any attorney fee award under Neb. Rev. Stat. § 44-359 cannot be quantified unless and until judgment is entered for the insured. The narrow question presented is whether defendant has proven the jurisdictional requirement that the amount in controversy exceeds $75,000.
1. Inclusion of Claim for Attorney Fees in Computing Amount in Controversy
In diversity cases, state law creating a right to attorney fees is applied by the federal courts of the applicable district if the state law does not run counter to a federal statute or rule and when the state law reflects a substantial policy of the state.Alyeska Pipeline Serv. Co. v. The Wilderness Soc'y, 421 U.S. 240, 259 n. 31 (1975); accord Lamb Eng'g Constr. Co. v. Nebraska Pub. Power Dist., 103 F.3d 1422, 1434 (8th Cir. 1997). The Nebraska courts have characterized § 44-359 as "procedural" rather than "substantive." See Hawkeye Cas. Co. v. Stoker, 154 Neb. 466, 48 N.W.2d 623, 634 (1951); Johnson Int'l Co. v. Jackson Nat'l Life Ins. Co., 19 F.3d 431, 437 (8th Cir. 1994).
Under § 44-359, however, a prevailing plaintiff is entitled to attorney fees as a matter of right. See Paxton Vierling Steel Co. v. Great Am. Ins. Co., 497 F. Supp. 573, 582 (D.Neb. 1980). While § 44-359 speaks of an attorney's fee "to be taxed as part of the costs," such language is not conclusive as to the nature of the award. The United States Supreme Court, in construing the predecessor of § 44-359, noted that the attorney fees contemplated by the statute are "not costs in the ordinary sense" and are "not within the field of costs legislation" covered by federal statute. As a result, "[s]ince the right exists the federal courts may follow their own appropriate procedure for its enforcement by including the amount of the fee in the judgment." People of Sioux County, Nebraska v. Nat. Surety Co., 276 U.S. 238, 244 (1928). Thus, state rules governing awardability of attorney fees are deemed "substantive" because they serve specific state policy governing litigation. See Alyeska Pipeline Serv. Co., 421 U.S. at 259 n. 31; Tanker Management, Inc. v. Brunson, 918 F.2d 1524, 1527 (11th Cir. 1990).
For these reasons, even though § 1332(a) requires that the amount in controversy be computed "exclusive of interest and costs," and the Nebraska courts characterize § 44-359 as a "procedural" statute, and § 44-359 itself characterizes fee awards as "costs," the statute does reflect a substantial policy of the State of Nebraska. The right in question is "substantive" for purposes of federal jurisdictional analysis. A claim for attorney's fees under § 44-359, therefore, may be included in calculating the federal jurisdictional amount under § 1332(a) so long as the claim does not appear fictitious or in bad faith. Mutual Ben. Health Accident Ass'n v. Bowman, 96 F.2d 7, 9 (8th Cir. 1938), vacated on other grounds, 304 U.S. 549 (1938).
2. Burden of Proof
Although its position is unclear, the Eighth Circuit's decisions in Middleton and State v. Western Surety Co., 51 F.3d 170 (8th Cir. 1995), suggest that a preponderance standard is the appropriate burden of proof. In diversity cases within the Eighth Circuit, removing parties have been required to prove by a preponderance of the evidence that the amount in controversy exceeds the jurisdictional amount required by § 1332(a). See,e.g., Peterson v. BASF Corp., 12 F. Supp.2d 964, 968 (D.Minn. 1998) (where a complaint fails to specify the amount of damages claimed, the party opposing remand must prove the requisite amount in controversy by a preponderance of the evidence); Bergstrom v. Burlington N. R.R. Co., 895 F. Supp. at 258; Gilmer v. Walt Disney Co., 915 F. Supp. 1001, 1006 (W.D.Ark. 1996) (adopting a "preponderance of the evidence" standard in cases where the complaint does not to specify damages); Collins v. Duckwall Alco Stores, Case No. 8:CV96-00243 (D.Neb., June 13, 1996) (followingBergstrom and Gilmer and applying preponderance standard).
In order for the amount in controversy to exceed $75,000 in this case, defendant must claim $13,970 in attorney's fees pursuant to § 44-359. The affidavit of defense counsel (#3, filed at the time of removal), states that counsel has been practicing trial law in Nebraska since 1976.
Based upon cases that I have tried in the past concerning insurance policy coverage, including discovery, briefs to the Court, and court appearances, attorneys fees, plus the amount of actual damages will exceed $75,000. In other words, the stated amount in the petition of $61,031 plus reasonable attorneys fees through hourly billing or contingent fees may easily exceed $75,000.
Citing Control Specialists Co., Inc. v. State Farm Mut. Auto. Ins. Co., 228 Neb. 642, 423 N.W.2d 775 (1988), National Am. Ins. v. Continental W. Ins., 243 Neb. 766, 502 N.W.2d 817 (1993), and Dale Elec. v. Federal Ins., 205 Neb. 115, 286 N.W.2d 437 (1979), plaintiff argues that the possibility of a $13,970 fee award in this case is remote.
This court has considered recent Nebraska decisions which have been published and involve fee awards pursuant to § 44-359. That information is summarized below:
1. Johnson Int'l Co. v. Jackson Nat. Life Ins. Co., 812 F. Supp. 966 (D.Neb. 1993). Action on "key man" life insurance policy; 6-day trial with 31 exhibits and 18 witnesses; 18 depositions, including discovery in Taiwan. Jury verdict was $250,000. Plaintiff requested fees of $125,000. Judge Kopf awarded attorney fees of $95,000 pursuant to § 44-359.
2. Koehler v. Farmers Alliance Mut. Ins. Co., 252 Neb. 712, 566 N.W.2d 750 (1998). Uninsured motorist claim on traffic fatality. Jury verdict for $25,000; trial court awarded fees of $29,511.41. On appeal, the fee award was reduced to $17,134.59 and the court awarded an additional $2,520 for fees on appeal.
3. Muller v. Tri-State Ins. Co., 252 Neb. 1, 560 N.W.2d 130 (1997). Declaratory judgment action; wrongful death claim made on underinsured motorist policy with $250,000 limit. Judgment for $150,000 (policy limit minus $100,000 workers compensation payment). On appeal, Supreme Court affirmed $12,000 attorney fee award.
4. Standard Fed. Sav. Bank v. State Farm Fire Cas. Co., 248 Neb. 552, 537 N.W.2d 333 (1995). Declaratory judgment on fire insurance policy. Supreme Court affirmed judgment for $55,200 and $4,800 attorney fee award. Supreme Court granted an additional $3,600 for services on appeal.
5. Curtis O. Griess Sons, Inc. v. Farm Bureau Ins. Co., 247 Neb. 526, 528 N.W.2d 329 (1995): Liability insurance policy covered swine herd infected by pseudorabies. Granting summary judgment for the insured, the district court found that the loss was covered and awarded an unknown amount for the dead animals, plus $1287,732.38 in veterinarian expenses and $19,900 to purchasers of infected animals. District court fee award unknown. Supreme Court awarded appellate attorney fee of $3,373 pursuant to § 44-359.
6. Brodersen v. Traders Ins. Co., 246 Neb. 688, 523 N.W.2d 24 (1994): Jury rendered verdict in favor of plaintiff in uninsured motorist coverage dispute. Trial court awarded attorney fees "in excess of" insurer's contractual obligation ($25,000 under Neb. Rev. Stat. § 60-509). Supreme Court affirmed verdict and fee award, and awarded additional fee of $3,480 for services in Supreme Court.
7. Adams Bank Trust v. Empire Fire Marine Ins. Co., 244 Neb. 262, 506 N.W.2d 52 (1993). Action on surety bond. Supreme Court affirmed $2,000 fee award and awarded awarding an additional $3,000 for services in the Supreme Court.
8. National Am. Ins. Co. v. Continental W. Ins. Co., 243 Neb. 766, 502 N.W.2d 817 (1993): Declaratory judgment action involving two insureds. Trial court granted $16,174 and $32,770 fee awards in favor of insureds and against their insurers. Supreme Court reduced fee awards to $10,000 to each insured and awarded each insured an additional $2,500 for services in the Supreme Court.
9. First United Bank of Bellevue v. First American Title Ins. Co., 242 Neb. 640, 496 N.W.2d 474 (1993). Supreme Court reversed summary judgment for insurer, awarded $3,800 toward insured's attorney fees for services in the Supreme Court, and remanded the case to district court.
10. Bailey v. Farmers Union Co-Operative Ins. Co., 1 Neb. App. 408, 498 N.W.2d 591 (1992). Bench trial on bad faith claim involving homeowner's policy. Insured was awarded $69,450 for benefits due under the policy and $150,000 for mental suffering. Attorney fee award unknown. The Nebraska Court of Appeals affirmed the judgment and awarded $5,000 for services in that court.
11. Craig v. Farmers Mut. Ins. Co., 239 Neb. 271, 476 N.W.2d 529 (1991). Bench trial on property damage policy. Evidence supported award of $15,000 attorney fee against insurer, although damages recoverable under policy were found to be only $21,824. Recovery of attorney fees was based upon documentation regarding time spent, air travel expenses incurred, and rates charged by attorney, although insurer argued that recovery for fees should have been limited to one-third of actual final recovery. Insured was granted an additional $3,500 to be applied on his attorney fees in the Supreme Court.
12. Mahoney v. Union Pacific R.R. Employe's Hosp. Ass'n, 238 Neb. 531, 471 N.W.2d 438 (1991). District court granted summary judgment of $83,736.53 in favor of plaintiffs on medical policy and awarded $18,000 in attorney fees pursuant to § 44-359. Supreme Court affirmed the judgment and the $18,000 attorney fee award and awarded plaintiffs another $5,000 as an attorney fee for costs on appeal.
13. Brown v. Farmers Mut. Ins. Co., 237 Neb. 855, 468 N.W.2d 105 (1991). Affirming $16,636.70 jury verdict on policy covering theft of sheep. District court fee award unknown. Plaintiffs were awarded $2,500 to apply toward their attorney fees incurred on appeal.
14. Control Specialists Co., Inc. v. State Farm Mut. Auto. Ins. Co., 228 Neb. 642, 423 N.W.2d 775 (1988). Plaintiff's vehicle was involved in a two-vehicle collision while both drivers were covered by policies issued by State Farm. District court entered judgment for plaintiff. Amount of judgment and attorney's fee award unknown. Supreme Court affirmed the judgment and granted an additional $2,000 for attorney's fees.
15. Dale Elec., Inc. v. Federal Ins. Co., 205 Neb. 115, 286 N.W.2d 437 (1979). After a bench trial, district court awarded insured $242,265.53 in coverage dispute for loss of an airplane. The district court awarded $39,560 in attorney's fees. The Supreme Court reduced the $18,075 for because in-house counsel was not entitled to additional compensation for testifying as an expert witness.
16. Omaha Paper Stock Co. v. California Union Ins. Co., 200 Neb. 31, 262 N.W.2d 175 (1978). District court entered judgment of $121,806.25 for the insured on fire insurance policy and awarded $21,000 in attorney's fees. The Supreme Court affirmed the judgment and awarded an additional $3,000 on appeal.
17. Omaha Home for Boys v. Stitt Constr. Co., Inc., 195 Neb. 422, 238 N.W.2d 470 (1976): Supreme Court affirmed $23,414.73 jury verdict for plaintiff on performance bond. Trial court awarded $5,000 in attorney fees. Supreme Court did not award additional fees on appeal.
As discussed above, the party invoking federal jurisdiction must prove the requisite jurisdictional amount by a preponderance of the evidence. However, in order for a federal court to decline jurisdiction in a case where the plaintiff names a figure satisfying the jurisdictional amount "[i]t must appear to a legal certainty that the claim is really for less than the jurisdictional amount." St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. at 289.
In de Aguilar v. Boeing Co., 47 F.3d 1404 (5th Cir. 1995), the plaintiffs moved to remand the case to state court because their Texas state court petition described the amount of the claim by specifically alleging that their damages did not exceed $50,000. The plaintiffs also attached to the state court petition an affidavit of their attorney stating that plaintiffs had agreed to an irrevocable cap on the amount of damages that could be awarded. The district court denied the motion for remand but dismissed the suit on the ground of forum non conveniens.
On appeal, the de Aguilar court observed, "As a functional matter, plaintiffs are attempting to avoid federal jurisdiction. This goal is the same whether they pick a number such as $49,999 or merely announce a ceiling that, conveniently, is barely within the statutory limit." 47 F.3d at 1408. To avoid that sort of "manipulation," the Court of Appeals held that "if a defendant can show that the amount in controversy actually exceeds the jurisdictional amount, the plaintiff must be able to show that, as a matter of law, it is certain that he will not be able to recover more than the damages for which he has prayed in the state court complaint." 47 F.3d at 1411.
Under this test, "the plaintiff's claim remains presumptively correct unless the defendant can show by a preponderance of the evidence that the amount in controversy is greater than the jurisdictional amount. The preponderance burden forces the defendant to do more than point to a state law that might allow the plaintiff to recover more than what is pled. The defendant must produce evidence that establishes that the actual amount in controversy exceeds $50,000." 47 F.3d at 1412. Thereafter, "once a defendant is able to show that the amount in controversy exceeds the jurisdictional amount, removal is proper, provided plaintiff has not shown that it is legally certain that his recovery will not exceed the amount stated in the state complaint." Id. This is not a "burden-shifting exercise," as plaintiff must make all information known at the time he files the complaint. Id. Cf.Halsne v. Liberty Mut. Group, ___ F. Supp.2d ___, 1999 WL 178772 (N.D.Iowa, March 26, 1999) (bad faith claim was remanded when plaintiff stipulated on the record that he would accept less than the federal jurisdictional amount).
In determining the amount in controversy, the court must look to state law to determine the nature and extent of the right to be enforced, as well as the state measure of damages and the availability of special and punitive damages. See Gilmer v. Walt Disney Co., 915 F. Supp. 1001, 1005 (W.D.Ark. 1996). The court may also consider decisions rendered in cases involving the same type of suit. Id.
In awarding costs and fees under Fed.R.Civ.P. 37, this court has often been called upon to determine whether specific fee requests are fair and reasonable for professional legal services in Nebraska by lawyers regularly employed to perform like services. Based on the court's experience in setting fee awards, the affidavit of defense counsel, and my review of published Nebraska cases, I conclude that defendant has proven by a preponderance of the evidence that federal jurisdiction is warranted under § 1332(a). If plaintiff's petition had specifically demanded an award of $13,970 in attorney's fees, this court could not find "to a legal certainty" that federal jurisdiction should be declined in this matter.
IT THEREFORE IS ORDERED that plaintiff's motion to remand this case to the District Court of Sheridan County, Nebraska (#6) is denied.
Pursuant to NELR 72.3 any appeal of this order shall be filed with the Clerk of the Court within ten (10) days after being served with a copy of this order. Failure to timely appeal may constitute a waiver of any such objection. The brief in support of any appeal shall be delivered to the Hon. Joseph F. Bataillon at the time of filing such appeal. Failure to submit a brief in support of any appeal may be deemed an abandonment of the appeal.