Opinion
No. 3:01-CV-1342-M.
October 23, 2001.
MEMORANDUM ORDER AND OPINION
Before the Court is Plaintiffs' Motion to Remand, filed on August 13, 2001. Having considered the Motion and the applicable case law, the Court is of the opinion that the amount in controversy requirement for diversity jurisdiction has been met by Defendant Southern Farm Bureau Casualty ("Southern"), but more information is necessary for a determination of Southern's citizenship under 28 U.S.C. § 1332.
This case arises from an insurance dispute over an automobile insurance policy covering personal injuries and property damage on a pickup truck, owned by the insureds, Stephanie and Tom Parker (the "Plaintiffs"). On May 13, 1999, Stephanie Parker was involved in an automobile accident. Southern apparently denied Plaintiffs' claims, invoking a driver exclusion clause.
Plaintiffs sued Southern in state court on July 2, 2001, claiming breach of contract, breach of the duty of good faith and fair dealing, fraud, negligence, violations of the Texas Insurance Code, and violations of the Texas Deceptive Trade Practices Act ("DTPA").
Southern removed the case on July 12, 2001, alleging diversity jurisdiction under 28 U.S.C. § 1332. On August 13, 2001, Plaintiffs moved to remand, claiming: (1) Southern's Notice of Removal fails to state facts sufficient to satisfy the amount in controversy requirement; and (2) Southern's principal place of business is in Texas, not Mississippi, so diversity jurisdiction does not exist.
ANALYSIS
A defendant may generally remove an action if the federal court would have had original jurisdiction over it. See 28 U.S.C. § 1441(a). Removal on the basis of diversity of citizenship is proper where the case involves citizens of different states and the amount in controversy, exclusive of interest and costs, exceeds $75,000. See 28 U.S.C. § 1332(a). Plaintiffs claim Southern has failed to meet both prongs of § 1332(a). Each is taken in turn.
A. Amount in Controversy
The Fifth Circuit, in De Aguilar v. Boeing Co., 47 F.3d 1404, 1407 (5th Cir. 1995), clearly presented the burden requisites in removal actions where a dispute arises over the amount in controversy requirement. Under this scheme, Southern must meet its burden of proving, by a preponderance of the evidence, the jurisdictional amount is exceeded, Gaitor v. Peninsular Occidental Steamship Co., 287 F.2d 252, 253 (5th Cir. 1961), and Plaintiffs must show, through a "legal certainty," that the jurisdictional amount is not exceeded. De Aguilar, 47 F.3d at 1404.
Attorney's fees are includible in the jurisdictional amount. St. Paul Reinsurance Co., Ltd. v. Greenberg, 134F.3d 1250, 1253 (5th Cir. 1998); Velez v. Crown Life Ins. Co., 599 F.2d 471,474 (1st Cir. 1979). Further, "the sum claimed by the plaintiff controls if the claim is apparently made in good faith." St. Paul Reinsurance Co., 134 F.3d at 1253. On the face of their Petition, Plaintiffs allege attorney's fees in excess of $100,000:
Plaintiffs are, therefore, entitled to recover from Defendant an additional sum to compensate Plaintiffs for a reasonable and necessary fee for such attorney's services in the preparation and prosecution of this action, as well as a reasonable fee for any and all appeals to other courts, which sum Plaintiffs allege to be at least $100,000.00.
Pl's Pet. at 10. If Plaintiffs were to prevail on one or more of the several claims in their Petition, attorney's fees could be recovered, and the jurisdictional threshold would be met. Tex. Civ. Prac. Rem. Code Ann. § 38.001(8) (reasonable attorney's fees for prevailing party in a breach of contract action); Tex. Ins. Code, art. 21.21 (reasonable and necessary attorney's fees); Tex. Bus. Com. Code § 17.50 (mandatory attorney's fees to a prevailing consumer under the DTPA). Further, as set out in Southern's removal papers, Plaintiffs' Petition alleges Southern improperly handled Plaintiffs' first and third party insurance claims. If they were to prevail, they would be entitled to damages for breach of contract, breach of the duty of good faith and fair dealing, negligence, statutory violations, punitive damages, and treble damages, as well as attorney's fees. See United States Fire Ins. Co. v. Villegas, 242 F.3d 279, 283 (5th Cir. 2001) (punitive damages can help establish the jurisdictional amount). Southern thus satisfies its burden of proving the jurisdictional amount is exceeded. As stated by the De Aguilar court, when it is "facially apparent that the damages rise to a level above [$75,000]," there is "no question" that the preponderance burden "easily would be met by the defendants." Id. at 1412.
Plaintiffs have failed to show, through a "legal certainty," that the jurisdictional amount is not exceeded. St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 290 (1938). Though Plaintiffs now claim that their attorney's fees estimate is necessarily speculative and subject to conjecture, the affidavit of Plaintiffs' attorney Ronald E. Harden that "Plaintiffs have incurred . . . [fees which] do not approach $100,000.00, much less $3,000.00," cannot strip the federal court of jurisdiction. Harden Aff. at 1. See St. Paul Mercury, 303 U.S. at 289-90 ("[e]vents occurring subsequent to the institution of suit which reduce the amount recoverable below the statutory limit do not oust jurisdiction."); de Aguilar, 47 F.3d at 1412 ("`[l]itigants who want to prevent removal must file a binding stipulation or affidavit with their complaints; once a defendant has removed the case, St. Paul makes later filings irrelevant'") (quoting In re Shell Oil, 970 F.2d 355, 356 (7th Cir. 1992) (per curiam))). In their Petition, Plaintiffs made a good faith estimate of attorney's fees. See Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 264 (5th Cir. 1995). It does not appear to a "legal certainty" that the Plaintiffs could never recover more than $75,000. Their own Petition expressly seeks attorney's fees in excess of $100,000, and Mr. Harden's affidavit, even if relevant, does not belie that. Even if the alleged attorney's fees were cut in half and the only alleged number in the Petition — that of the outstanding bank lien of $12,240.95 on Plaintiffs' truck — was trebled, the amount in controversy would still exceed $75,000. Such an analysis would not account for any damages for medical care and treatment, lost wages, punitive damages, indemnity damages for the third party suit, or payment attributable to the total value of the truck. The Court, therefore, finds the jurisdictional amount satisfied.
B. Principal Place of Business
Pursuant to 28 U.S.C. § 1332(c)(1), "a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business." Plaintiffs do not contest that Southern was and is chartered under the laws of the State of Mississippi. Rather, they claim that because Texas' branch of Southern comprises the largest percentage of gross premiums realized by Southern and was the fifth largest writer of auto insurance for Texas, its principal place of business should be determined to be Texas, not Mississippi. If its principal place of business is found to be in Texas, complete diversity is lacking. If it is found to be in Mississippi, the parties are diverse.
In this Circuit, the "total activity" test, which is comprised of the "nerve center" and "place o of activity" tests, is applied to determine a corporation's principal place of business. Nauru Phosphate Royalties v. Drago Daic Interests, 138 F.3d 160, 164 (5th Cir. 1998), cert. denied, 525 U.S. 876. Neither party provides much information to assess the principal place of business. While Southern is in a position to provide evidentiary support for its assertion that the principal place of business is in Mississippi, its evidence is limited. It narrows the principal place of business analysis to the "nerve center" test:
[u]nder the applicable `total activity' test, Southern Farm Bureau's principal place of business is in Mississippi. This is because Southern Farm Bureau's `nerve center' is undoubtedly in Mississippi, and because Southern Farm Bureau is a corporation with far flung business activities in several states. Southern Farm Bureau writes insurance business in Arkansas, Louisiana, Mississippi, South Carolina, and Texas. Texas is therefore not the company's principal place of business under the `total activity' test.
Southern's Response at 7 (internal citations omitted). Likewise, Plaintiffs' abbreviated principal place of business analysis does little more than raise the issue of whether Mississippi or Texas is the principal place of business. There can only be one principal place of business. See J.A. Olson, 818 F.2d at 406 ("every corporation has one and only one principal place of business"). The applicable statute describes a "principal place of business," not "principal places of business." 28 U.S.C. § 1332(c). With this in mind, an analysis of the "nerve center" and "place of activity" tests within the "total activity" test framework cannot be accomplished by the Court without more information. See J.A. Olson, 818 F.2d at 408 (while, in a "far flung" fact situation, the "nerve center" analysis may give rise to an inference that the locus of a party's headquarters is the principal place of business, other factors, including the company's activities, must be considered).
Southern has provided no evidence demonstrating where the offers, vice presidents, and directors or trustees, whose names are included in an exhibit to Southern's Response, conduct their decision making. See J.A. Olson, 818 F.2d at 412 ("[w]e therefore consider substance over form in determining the nerve center."); Toms v. Country Quality Meats, Inc., 610 F.2d 313, 315 (5th Cir. 1980) (holding a nerve center does not have to be located within the corporate shell, but can be found wherever the nerve center of decision making truly exists). It has not provided evidence that any financial or management decisions are made in Mississippi. In fact, Southern has offered no evidence that any decision making activity is conducted in Mississippi.
The Fifth Circuit has repeatedly remarked that the "total activity" test should concentrate primarily on the facts of a particular case. See Harris v. Black Clawson Co., 961 F.2d 547, 549 (5th Cir. 1992) (finding the court should consider "the general rules of the two tests in light of the particular circumstances of a corporation's organization [and] balance the facts" present in a particular case). See also J.A. Olson, 818 F.2d at 408; Nauru Phosphate Royalties, 138 F.3d at 160. Yet, the facts necessary to make a fully informed decision are lacking in the case before the Court. As found in Tubbs v. Southwestern Bell Tele. Co., 846 F. Supp. 551, 552 (S.D. Tex. 1994), nerve cells in the form of top executives and directors in Texas may shift the principal place of business from Mississippi to Texas. While the administrative office may be a nucleus of activity for the company, it just as easily may be a passive P.O. box. Mississippi's gross premiums undoubtedly account for the lowest percentage of Southern's business. See Industrial Tectonics, Inc. v. Aero Alloy, 912 F.2d 1090, 1094 (9th Cir. 1990). See also Langford v. Santa Fe Drilling Co., 50 F. Supp.2d 631, 633-34 (E.D. Tex. 1999) ("[n]ot only are assets and employees probative" in the principal place of business analysis "but so too are revenues" reported from different areas). The evidence before the Court is simply insufficient to allow the Court to apply the facts to the applicable law.
CONCLUSION
The Court finds the amount in controversy sufficient to support removal. The Court will allow the parties a brief opportunity to conduct discovery and to supplement the record only on the limited issue of Southern's principal place of business. The Court orders the parties to cooperate in discovery directed to this discrete issue, including answering, within fifteen days of service, any interrogatories directed by the opposing party. The Court will then receive up to ten pages of supplemental briefing on Plaintiffs' Motion to Remand in conformity with the following schedule:
Plaintiffs' Supplemental Brief, filed by December 3, 2001;
Southern's Supplemental Response, filed by December 10, 2001.