Summary
Holding amount in controversy satisfied in ladder-fall cases where plaintiff sought to recover for medical expenses, pain and suffering, mental anguish and lost income and prior compensatory damage awards in similar cases were in excess of $75,000
Summary of this case from Haynes v. Louisville Ladder Group, LLCOpinion
Cause No. IP02-0031-C-T/K
June 26, 2002
REPORT AND RECOMMENDATION
Removing a case from state to federal court should be a relatively straightforward endeavor. And yet the federal reporters — replete with cases in which jurisdictional defects were found after improper removals — suggest the removal statute may be a trap for the unwary, particularly when jurisdiction for removal is premised on 28 U.S.C. § 1332(a).
Sometimes in these cases the citizenship of the parties is not properly alleged. Other times the amount in controversy appears lacking, particularly where state pleading rules prohibit plaintiffs from asserting a damage figure. This case presents both shortcomings. The Court sua sponte noted jurisdictional problems and ordered the parties to either stipulate to the remand of this action to state court or brief the bases of jurisdiction. For the reasons set forth below, the Magistrate Judge recommends that Defendant Werner Ladder Company ("Werner") be given 20 days to cure these defects.
I. Background
Plaintiff Robert Lee Tate, II alleges that he fell and injured himself December 18, 1999, while using a Werner ladder. Tate sued Werner in Marion Superior Court, alleging that Werner negligently designed, sold, distributed, and manufactured a "defective and unreasonably dangerous" ladder. [Def.'s Brief, Ex. A, ¶¶ 3-4]. Tate seeks to recover for medical expenses, pain and suffering, mental anguish, and lost income incurred as a result of his fall. [Def.'s Brief, Ex. A, ¶ 4].
Werner filed a timely notice of removal alleging federal subject matter jurisdiction pursuant to 28 U.S.C. § 1332. During an initial pretrial conference, the Court sua sponte questioned whether it had subject matter jurisdiction, noting that Werner's notice of removal failed to set forth any facts or allegations that the amount in controversy exceeds $75,000. 28 U.S.C. § 1332(a). The Court ordered the parties to either: (1) stipulate to the remand of the action to state court; or (2) brief the bases of subject matter jurisdiction, or the lack thereof. The parties briefed the issue, with each asserting that damages exceed $75,000.
Although Werner technically filed a "petition" for removal, the removal statute as amended in 1988 states that parties need now file only a "notice" of removal rather than a "petition." See 28 U.S.C. § 1446(a).
Upon further inspection of Werner's removal notice, the Court also found that Werner failed to properly allege the parties' citizenship pursuant to § 1332. This shortcoming is addressed infra.
The foregoing scenario raises the following issues: (1) whether this Court may consider supplementary evidence of the grounds for removal after the removal notice has been submitted, and, if so; (2) whether a party may amend its removal notice beyond the 30-day filing limit imposed by 28 U.S.C. § 1446(b).
II. Discussion
A. Consideration of Post-Removal Evidence
1. Standard of Review
The first issue is whether this Court may consider evidence of the grounds for removal after the notice has been submitted. Unlike state courts, federal courts are of limited jurisdiction. As such, they are obligated to "inquire sua sponte whenever a doubt arises as to the existence of federal jurisdiction." Mt. Healthy City Bd. of Educ. v. Doyle, 429 U.S. 274, 278 (1977). The exercise of federal subject matter jurisdiction is appropriate in two instances. First, the action must regard a federal question, or arise under the Constitution, laws, or treaties of the United States. See Int'l Ins. Co. v. Caja Nacional De Ahorroy Seguro, 2002 WL 1274129, at *3 (7th Cir. June 7, 2002), quoting 28 U.S.C. § 1331. Second, subject matter jurisdiction is appropriate if the parties meet the requirements of diversity.
Diversity requires that a civil action exceed "the sum or value of $75,000, exclusive of interest and costs," and be between citizens of different states. See JP Morgan Chase Bank v. Traffic Stream (BVI) Infrastructure Ltd., ___ U.S. ___, 2002 WL 1270591, at *3 (U.S. June 10, 2002), quoting 28 U.S.C. § 1332(a). Though an individual has but one state of citizenship, a corporation is a citizen of both the "state in which it is incorporated and the state in which its principal place of business is located." Wild v. Subscription Plus, Inc., ___ F.3d ___, 2002 WL 1076748, at *1 (7th Cir. May 31, 2002), citing 28 U.S.C. § 1332(c)(1). Furthermore, if an entity is not incorporated, then "its citizenship is determined by the citizenship of its proprietor, partners, members, or other principals." Id., citing Carden v. Arkoma Assocs., 494 U.S. 185, 195 (1990).
Sections 1332(a)(2)-(4) authorize additional relationships between citizens for diversity purposes. Section (a)(1), establishing diversity when citizens are of different states, is the provision pursuant to which Werner purports to assert jurisdiction.
If the action is originally brought in state court, it may be removed to a federal district court of original jurisdiction by any defendant who is not a citizen of that state within 30 days of the defendant's receipt of a copy of the complaint. See Bebble v. Nat'l Air Traffic Controllers' Ass'n, 2001 WL 128241, at *1 (N.D.Ill. 2001), citing 28 U.S.C. § 1441(a), (b); 28 U.S.C. § 1446(b). The notice of removal submitted to the district court must contain "a short and plain statement of the grounds for removal." See Tylka v. Gerber Prods. Co., 211 F.3d 445, 446 (7th Cir. 2000), quoting 28 U.S.C. § 1446(a).
Despite this seemingly plain requirement, at times the allegations setting forth the grounds for jurisdiction are partially or totally absent from the removal notice. When this is the case, a court must first look to the pleadings to determine if the elements of jurisdiction are present. Brewer v. State Farm Mut. Auto. Ins. Co., 101 F. Supp.2d 737, 739 (S.D.Ind. 2000) (Barker, J.). However, if the missing elements are also absent from the pleadings, a court is permitted to examine outside evidence. Id. at 741, citing Chase v. Shop `N Save Warehouse Foods, Inc., 110 F.3d 424, 427-28 (7th Cir. 1997)
("[T]he district court may look outside the pleadings to other evidence of jurisdictional amount. . . .").
In this capacity, a court's scope of review is limited; it may only evaluate evidence available at the time the notice of removal was filed. Id. at 741. Furthermore, once a defendant has removed the case, any later filings by a party attempting to divest federal jurisdiction are irrelevant. Id. at 741, citing Matter of Shell Oil Co., 970 F.2d 355, 356 (7th Cir. 1992) ("Litigants who want to prevent removal must file a binding stipulation or affidavit with their complaints; once a defendant has removed the case, . . . later filings [are] irrelevant."). However, a defendant may use evidence discovered after removal to show the existence of jurisdiction, as long as the evidence reflects the parties' jurisdictional posture at the time of removal. See Bush v. Roadway Express, Inc., 152 F. Supp.2d 1123, 1126 (S.D.Ind. 2001) (Barker, J.); See also Harmon v. OKI Sys., 115 F.3d 477, 479-80 (7th Cir. 1997) ("The test should simply be whether the evidence sheds light on the situation which existed when the case was removed."). Finally, any doubt regarding jurisdiction should be resolved in favor of remanding the action to state court. Bush, 152 F. Supp.2d at 1125.
The burden of providing evidence of jurisdiction falls upon the party seeking to invoke it. In the Seventh Circuit, the party must provide "competent proof" by a "preponderance of the evidence" that a "reasonable probability" of jurisdiction exists. Id. at 1125, citing Shaw v. Dow Brands, Inc., 994 F.2d 364, 366-67 (7th Cir. 1993) (holding that defendant in a removal action must show to a reasonable probability that more than the required jurisdictional amount is in controversy). Ultimately, if the party fails to meet this burden, then remand is appropriate. See Allstate Life Ins. Co. v. Hanson, 2002 WL 949160, at *1 (E.D.Wis. May 3, 2002), quoting 28 U.S.C. § 1447(c) ("If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.").
2. Analysis
Werner filed its deficient notice of removal on January 7, 2002, failing to properly allege the parties' citizenship and the requisite jurisdictional amount. [Def.'s Removal Notice, Docket #1]. Tate himself did not oppose Werner's removal notice or seek remand; in fact, he welcomed Werner's efforts to fix the amount in controversy at greater than $75,000. [Pl.'s Brief, p. 1]. The Court took notice sua sponte of Werner's failure to allege an amount in controversy, and Werner accepted the Court's invitation to brief the issue. As the petitioner, Werner bears the burden of demonstrating a "reasonable probability of jurisdiction." Bush v. Roadway Express, Inc., 152 F. Supp.2d 1123, 1125 (S.D.Ind. 2001) (Barker, J.).
Because Indiana Trial Rule 8(A)(2) prohibits a personal injury claimant from demanding a damage figure, Werner could not rely on the pleadings as evidence establishing the requisite amount in controversy. To reach the required amount in controversy, in its brief Werner provides evidence of a lien held by the worker's compensation carrier of Tate's employer. [Def.'s Brief, Exs. B, C].
Numerous cases have recognized that due to Indiana Trial Rule 8(A)(2), removal from an Indiana state court presents pitfalls for defense counsel. See, e.g., Bush, 152 F. Supp.2d at 1125; Wethington v. State Farm Mutual Auto. Ins. Co., 2000 WL 1911886 (S.D.Ind. 2000), slip op., p. 2; Reason v. General Motors Corp., 896 F. Supp. 829, 830 (S.D.Ind. 1995). The Court points out the acknowledged frequency of jurisdictional amount omissions in this state not to condone Werner's omission, but rather as added reason why Werner should not simply be excused for submission of careless work products.
Comprised of Tate's weekly worker's compensation payments, permanent partial impairment rating, and other medical expenses, the value of the worker's compensation lien is documented to be $65,099.10. [Id.]. Although the details of the lien were requested by and provided to Werner on April 10, 2002, they reflect the lien's status as of December 12, 2001 (prior to removal). [Def.'s Brief, Ex. C]. The Court is permitted to examine evidence not in the record, even if not available at the time of removal, as long as it represents the amount in controversy at the time of removal. See Brewer, 101 F. Supp.2d at 739-41; Bush, 152 F. Supp.2d at 1126. Therefore, despite the fact that evidence of the lien was not in the record at the time of removal, the evidence is relevant to the state of affairs at that time. Thus, the Court is permitted to consider it.
The lien alone does not meet the required amount in controversy. Applying the Bush standard, however, Werner claims that it is "reasonably probable" that Tate will claim damages in excess of $10,000 for pain and suffering and for lost wages not covered by worker's compensation. [Def.'s Brief, pp. 4-5]. Although Werner has not provided evidence validating this claim, he alleges that his compensation as a painter was "much more than $233 per week," the amount of the worker's compensation payments he received for 26 weeks. [Def.'s Brief, p. 3]. While this speculative amount may or may not push the amount in controversy beyond $75,000, based upon prior compensatory damage awards in similar cases, the Court believes that a minimum request of $10,000 is likely.
See, e.g., Roy v. Werner Ladder Co., 16 NJ. J.V. Review Anal. 8:C4, 2002 WL 431432 (New Jersey plaintiff hairdresser who fractured wrist after fall from defective ladder awarded damages of $250,000, primarily compensatory.); Miller v. Reynolds, 5 Nat. J.V. Review Anal. 5:23, 1989 WL 1100187 (Illinois plaintiff housekeeper who fractured leg after fall from ladder on defendant's premises awarded $750,000 gross verdict.); Yoo v. Too, 12 Nat. J.V. Review Anal. 11:36, 2002 WL 430126 (California plaintiff tailor who fractured heel after fall from defective ladder awarded gross verdict of $513,487, only $80,000 of which were medicals.).
Accordingly, Werner has met its burden of providing "competent proof" to establish by a "preponderance of the evidence" a "reasonable probability" that the jurisdictional amount of $75,000 is at stake. Bush, 152 F. Supp.2d at 1125, citing Shaw v. Dow Brands, Inc., 994 F.2d 364, 366-67 (7th Cir. 1993).
Werner is not out of the jurisdictional woods yet. As previously noted, Werner failed to properly allege the parties' diversity of citizenship pursuant to 28 U.S.C. § 1332. All that Werner's removal notice alleges is that Werner's principal place of business is in Pennsylvania and that Werner conducts business within Indiana. [Def.'s Removal Notice, ¶ 6]. Werner does not allege that it is a corporation, but appears to have attempted to do so. Assuming that Werner is a corporation, it is deemed a citizen of both the "state in which it is incorporated and the state in which its principal place of business is located." Wild v. Subscription Plus, Inc., ___ F.3d ___, 2002 WL 1076748, at *1 (7th Cir. May 31, 2002), citing 28 U.S.C. § 1332(c)(1). Furthermore, Werner alleges that Tate's state of residency is Indiana. However, "residency" is not equal to "citizenship." See Freeborn Peters v. Jacobsen, 43 F. Supp.2d 931, 933 (N.D.Ill. 1999) ("[I]n every diversity action, it is critical that the citizenship of the parties be clearly established from the onset. Allegations of residency are not sufficient. . . .") (original emphasis). To properly establish the Court's diversity jurisdiction, Werner must provide "competent proof" by a "preponderance of the evidence" of a "reasonable probability" that Tate is a citizen of Indiana and that Werner's principal place of business and state of incorporation are states other than Indiana. See Bush, 152 F. Supp.2d at 1125, citing Shaw, 994 F.2d at 366-67.
B. Amendment of Removal Notice
Even if evidence supporting subject matter jurisdiction is established, the question remains whether the notice of removal is eligible for amendment in light of 28 U.S.C. § 1446, which establishes a 30-day filing limit after a defendant's receipt of a complaint. Title 28 U.S.C. § 1653 specifies that "[d]efective allegations of jurisdiction may be amended, upon terms, in the trial or appellate courts." See Nilssen v. Motorola, Inc., 255 F.3d 410, 412 (7th Cir. 2001), citing 28 U.S.C. § 1653. However, § 1653 has limitations. "[W]here the jurisdictional base is not apparent from the face of the notice of removal, an amendment to add new jurisdictional allegations concerning that jurisdictional base will be considered untimely." Stein v. Sprint Communications Co., L.P., 968 F. Supp. 371, 375-76 (N.D.Ill. 1997); see also 32A Am. Jur.2d Federal Courts § 1670 (2002) ("[N]o amendment to a notice of removal may be made that will set forth totally new facts, as opposed to merely clarifying ambiguities in the original document."). In other words, as long as the removal petition's defect is procedural, not jurisdictional, amendment beyond § 1446's 30-day filing period is permitted.
Section 1653 has been held to apply to removal petitions, as well as to complaints. Park v. Hopkins, 179 F. Supp. 671, 672 (D. Ind. 1960). See also McMahon v. Bunn-O-Matic Corp., 150 F.3d 651, 654 (7th Cir. 1998) (allowing amendment of defective allegations of citizenship in notice of removal).
Werner's failure to properly allege the parties' citizenship and the jurisdictional amount in its notice of removal can plainly be characterized as a procedural defect. If permitted to amend its notice, Werner would merely be provided the opportunity to correctly state his original jurisdictional grounds that the amount in controversy is sufficient and the parties are sufficiently diverse. As such, allowing Werner to correct its procedural deficiencies and properly allege the elements of diversity jurisdiction by amendment is appropriate. See, e.g., Harmon v. OKI Sys., 902 F. Supp. 176, 177 (S.D.Ind. 1995) (Hamilton, J.) (allowing amendment of removal petition when required jurisdictional amount was omitted and allegations of citizenship were deficient), aff'd, 115 F.3d 477 (7th Cir. 1997); Poulos v. Naas Foods, Inc., 959 F.2d 69, 70 n. 1 (7th Cir. 1992) (allowing amendment of removal petition to correct a deficient allegation of the citizenship of the parties); Pickett v. Allstate Ins. Co., 2000 WL 33125130, at *1 (S.D.Ind. 2000) (Tinder, J.) (allowing amendment when "defects in the removal notice were procedural and, thus, did not undermine jurisdiction").
III. Conclusion
Werner makes a sufficient showing that Tate's claims exceed $75,000. Werner's allegations of diversity of citizenship are deficient. The Magistrate Judge recommends that Werner be permitted 20 days to amend its notice of removal to correctly allege the elements of subject matter jurisdiction, consistent with the guidelines set forth. The Magistrate Judge further recommends that this action be dismissed without prejudice if Werner fails to properly amend its notice of removal within 20 days.
Any objections to the Magistrate Judge's Report and Recommendation shall be filed with the Clerk in accordance with 28 U.S.C. § 636(b)(1), and failure to file timely objections within ten days after service shall constitute a waiver of subsequent review absent a showing of good cause for such failure.