Summary
holding that class representative's waiver of right to recover attorney's fees was invalid and could not be used to bind class members
Summary of this case from Bertucci v. Lafayette Insurance Co.Opinion
Civil Action No. 00-2736, Section "T"(1).
December 7, 2000.
Before the Court is a Motion to Remand filed by the Plaintiff on behalf of herself and others similarly situated. The matter was considered before this Court on December 6, 2000, without oral argument. The Court, having considered the memoranda filed, the Court record, the law and applicable jurisprudence, is fully advised in the premises and ready to rule.
ORDER AND REASONS
I. BACKGROUND:
On September 15, 2000, the Defendants in the above-captioned matter filed a Notice of Removal pursuant to 28 U.S.C. § 1441 and 1446. The Defendants claim that this Court has original jurisdiction over the present action pursuant to 28 U.S.C. § 1332. Specifically, the Defendants assert that the action is between citizens of different states and that the amount in controversy exceeds $75,000, exclusive of interests and costs; therefore, diversity jurisdiction exists over the matter. The Plaintiffs assert that this Court does not have subject matter jurisdiction over the present action and insist that remand to state court is proper.
In their state court complaint, the Plaintiffs submit that their "causes of action sound in contract and redhibition" and that "[n]o individual class member's damages specifically pleaded and enumerated herein exceed the sum of $50,000." (Plaintiffs' Complaint, page 3, paragraph 4; page 2, paragraph 3). In addition, the Plaintiffs filed a Supplemental and Amended Petition in which the Plaintiffs aver that they "are not seeking attorneys' fees under Louisiana Civil Code article 2545 or any other Louisiana statute . . . that makes attorney fees an element of damages." (Plaintiffs' Supplemental and Amended Petition, page 2, paragraph 4a).
The Plaintiffs claim that removal is improper in this case because the jurisdictional amount has not been satisfied. Specifically, the Plaintiffs argue that they are the masters of their own claims and because they chose to seek less than the jurisdictional amount in their petition, only the sum actually demanded is in controversy. Therefore, since they state in their petition that no claim exceeds $50,000, then only that amount may be deemed in controversy. They further assert that such a limitation in their petition is legally binding and wholly appropriate under Louisiana law. Accordingly, the Plaintiffs contend that the jurisdictional amount has not been met in this case, which warrants a remand to state court.
In opposition to the Plaintiffs' Motion to Remand, the Defendants argue that the jurisdictional amount has been satisfied in this case primarily because the Louisiana Redhibition Statute provides for the recovery of reasonable attorneys' fees in addition to the recovery of actual damages. See La. C. C. Art. 2545. The Defendants assert that because said statutory provision awarding attorney fees is not discretionary, such attorney fees are included in the calculation of the amount in controversy for diversity jurisdiction purposes. Furthermore, those attorney fees are to be allocated among the class representatives, rather than pro rata to the entire class, in determining whether the federal jurisdictional amount has been met. Therefore, the Defendants contend that when such attorney fees are allocated only among the ten representative parties, the amount in controversy surely exceeds the jurisdictional limit required for removal.
In addressing the Plaintiffs' Supplemental and Amended Petition in which the Plaintiffs specifically state that they are not seeking attorney fees pursuant to Article 2545, the Defendants argue that such an averment is ineffective to deprive this Court of diversity jurisdiction because there is no assurance that the Plaintiffs will not later increase the amount of damages sought through a further amendment. The Defendants claim that in order for such an averment to be effective, the Plaintiffs must file a binding stipulation or affidavit with their complaint to prevent removal. Furthermore, the Defendants contend that even if the Plaintiffs' averment that they are not seeking recovery of attorneys' fees under Article 2545 is binding under Louisiana law, such a waiver is only binding upon those Plaintiffs who actually consented to the waiver. They assert that the Plaintiffs must obtain the consent or authority of all members of the putative class in order to waive such a right on behalf of the class as a whole. Because the Plaintiffs have failed to do so, the Defendants argue that the waiver is not binding upon the entire class and that the statutory amount to invoke federal jurisdiction is thus met.
II. DISCUSSION:
A. The Law on Removal and Remand:
Pursuant to 28 U.S.C. § 1441, any civil action maybe removed from state court to federal court if it is proven that the federal court has original jurisdiction. See 28 U.S.C. § 1441. In the instant action, the Defendants claim that removal to federal court is proper based upon 28 U.S.C. § 1332, diversity of citizenship. In removal actions, the removing party bears the burden of establishing that federal jurisdiction exists. See De Aguilar v. Boeing Co., 47 F.3d 1404, 1408 (5th Cir. 1995), cert. denied, 516 U.S. 865, 116 S.Ct. 180, L.Ed.2d 119 (1995). In order to do so under 28 U.S.C. § 1332, the removing party must prove that complete diversity of citizenship exists between the parties and that the amount in controversy exceeds $75,000, exclusive of attorney fees and costs. See 28 U.S.C. § 1332. In the present action, the dispute between the parties concerns the amount in controversy requirement for diversity jurisdiction.
The Plaintiffs in this case state that no claim exceeds $50,000 as to any one Plaintiff. While Plaintiffs in Louisiana are prohibited from praying for a specific amount of damages, for removal and remand purposes, this Court will treat such a statement as a prayer for a specific amount of damages. See LA. Code Civ. Proc. Ann. art. 893(A)(1);See also De Aguilar, 47 F.3d at 1408 (stating that such a complaint is more like a claim for one sum rather than a claim for an unlimited or unspecified sum). It is a general rule that "the sum claimed by the plaintiff controls if the claim is apparently made in good faith." De Aguilar, 47 F.3d at 1408 (quoting St. Paul Mercury Indem Co. v. Red Cab Co., 303 U.S. 283, 288, 58 S.Ct 586, 590, 82 L.Ed. 845 (1938)). However, "[t]he face of the plaintiff's pleading will not control if made in bad faith." Id. at 1410.
In De Aguilar v. Boeing Co., the Court of Appeals for the Fifth Circuit addressed a situation similar to the instant action. In De Aguilar, the plaintiffs stated that their damages did not exceed $50,000, but the state law precluded plaintiff's from praying for a specific amount of damages.See id. at 1407. The Fifth Circuit explained that in such situations there is the "potential for abusive manipulation by plaintiff's, who may plead for damages below the jurisdictional amount in state court with the knowledge that the claim is actually worth more, but also with the knowledge that they may be able to evade federal jurisdiction by virtue of the pleading." Id. at 1410. The Fifth Circuit characterized such tactics as bad faith and 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. Such a rule is necessary to avoid . . . manipulation.Id. at 1411.
Therefore, "the removing defendant must prove by a preponderance of the evidence that the amount in controversy exceeds [the jurisdictional amount.]" Id. at 1409 (quoting De Aguilar v. Boeing Co. ("De Aguilar I"), 11 F.3d 55, 58 (5th Cir. 1993)). A removing defendant can make such a showing in one of two ways. See Luckett v. Delta Airlines, Inc., 171 F.3d 295, 298 (5th Cir. 1999). First, a defendant may demonstrate that it is "facially apparent" that the Plaintiff's claims are likely above the $75,000 jurisdictional limit. See id. Second, a defendant may set forth the facts in controversy that support a finding of the requisite jurisdictional amount. See id. This requires a defendant to submit "summary judgment type evidence" to support the claim that the actual amount in controversy exceeds the jurisdictional limit. See De Aguilar, 47 F.3d at 1412.
If a defendant is successful in proving that the amount in controversy exceeds the jurisdictional limit, the burden shifts to the plaintiff to show with legal certainty that he or she will not be able to recover more than $75,000. See De Aguilar, 47 F.3d at 1411-12. If a plaintiff is able to do so, then the case will be remanded to state court. See id. A plaintiff may do so by citing to a state law that prohibits the recovery of damages in excess of the amount prayed for in the complaint. See id. at 1412. In the absence of such a statute, a plaintiff must file a binding stipulation or affidavit with the complaint in order to defeat removal of the action to federal court. See id.
B. Application to the Facts:
As stated above, Louisiana law prohibits plaintiff's from praying for a specific amount of monetary damages in their complaints. See LA. Code Civ. Proc. Ann. art. 893(A)(1) (West 1999). However, the law does allow plaintiff's to include in their complaints a general allegation that the claim exceeds or is less than the requisite amount to establish jurisdiction of the court, the right to a jury trial, or the lack of federal jurisdiction over the action. See id. In the present action, the Plaintiffs stipulate in their complaint that no claim exceeds $50,000. (Plaintiffs' Complaint, page 2, paragraph 3). Such a stipulation as to the amount of damages in controversy is not in derogation of Louisiana law, even though it is treated as a demand for a specific amount of damages for removal and remand purposes. See De Aguilar, 47 F.3d at 1408.
While a plaintiff is "to some extent, still the master of his own claim," the inquiry does not end simply because the plaintiff stipulates that his damages do not exceed the threshold amount for removal. Id. at 1411-12, 1410. "The face of the Plaintiffs' pleading will not control if made in bad faith." Id. at 1410. Therefore, the Defendant can still seek removal of the action to federal court despite the plaintiff's stipulation as to the amount in controversy. See id. at 1411. To do so, the Defendant must prove by a preponderance of the evidence that the amount in controversy exceeds the jurisdictional amount. See De Aguilar, 47 F.3d at 1409.
In the present action, just as in De Aguilar, the Plaintiffs claimed that their claims were worth less than $50,000 presumably in order to avoid both a state jury trial as well as federal jurisdiction over the matter. Such tactics were characterized as bad faith by the Fifth Circuit in De Aguilar. See id. at 1410-11. However, under Louisiana law, the Plaintiffs here would be bound by their pleadings and their recovery would be limited to $50,000 as long as the stipulation is not in derogation of the law. See La.C.C.P. art 5.; See also Bullock v. Graham 681 So.2d 1248, 1250-52 (La. 1996); Roblins v. Allstate Ins., 711 So.2d 780, 786-87 (La.App. 1st Cir. 1998); Stevens v. Winn-Dixie of Louisiana, 664 So.2d 1207, 1212 (La.App. 1st Cir. 1995); Cortez v. NYT Television, No. Civ. A. 99-1803, 1999 W: 615177, at *1 (E.D.L.A. Aug. 12, 1999). Therefore, the Plaintiffs in this case would not be able to later amend their complaint to change the amount of damages sought above the jurisdictional amount and still avoid federal jurisdiction. Furthermore, "[c]ourts in this district recognize that a plaintiff's invocation of the Louisiana Civil Code provision permitting the pleading of damages below this Court'sjurisdictional limit weighs against finding it facially apparent that the amount in controversy exceeds $75,000."Williams v. Great West Casualty Ins. Co., No. Civ.A. 99-542, 1999 WL 1044333, at *2 (E.D.L.A. Nov. 17, 1999). Accordingly, the Court finds that because of the stipulation that damages do not exceed $50,000, it is not facially apparent that the Plaintiffs' claims are likely above the $75,000 jurisdictional limit.
However, our inquiry does not end there, for the Defendants in the instant action have presented the Court with several pieces of evidence in support of the notion that the amount in controversy is actually greater than the jurisdictional amount. First, the Defendants argue that because the Plaintiffs claim violations of the Louisiana Redhibition statute, the Plaintiffs are entitled to recovery of actual damages as well as reasonable attorney fees. See LSA -C.C. art. 2545 (stating that buyer is entitled to reimbursement of the reasonable expenses occasioned by the sale as well as damages and reasonable attorney fees). Such attorney fees are included in calculating the amount in controversy for federal jurisdictional purposes because they are mandatory, rather than merely discretionary under the Redhibition statute. See HD Tire and Automotive-Hardware Inc. v. Pitney Bowes Inc., 227 F.3d 326, 330 (5th Cir. 2000) (citing Graham v. Henegar, 640 F.2d 732, 736 (5th Cir. 1981)). Furthermore, those attorney fees are to be attributed only to the representative parties for the purpose of calculating the amount in controversy. See In re Abbott Laboratories. 51 F.3d 524, 526-27 (5th Cir. 1995); Edwards v. Chrystler Motor Co., Inc., No. CIV.A. 00-1733, 2000 WL 1532906, at * 3 (E.D.L.A. Oct. 13, 2000). Therefore, the Defendants assert that when those attorney fees are added to actual damages incurred by the named parties, the amount in controversy exceeds $75,000.
In support of this argument, the Defendants have submitted a detailed description of the amount of legal work required to adequately prosecute a class action with a putative class composed of nearly two million class members. (See Defendant's Memorandum in Opposition to Plaintiffs' Motion to Remand, Doc. 5, page 11). In addition, the Defendants cite other class action cases in which attorney fees of several million dollars were awarded in Louisiana. The Defendants argue that such evidence supports the notion that the attorney fees incurred in the instant action will be substantial enough to bring the amount in controversy above the jurisdictional limit when allocated among only the representative parties.
The Plaintiffs, however, expressly waived their rights to recover attorney fees under Article 2545 in their supplemental and amended petition. Yet, the Defendant argues that such a waiver is invalid and cannot be used to bind the unnamed class members. Therefore, the attorney fees recoverable under Article 2545 must be included in calculating the amount in controversy in the present case. In De Aguilar v. Boeing, the Plaintiffs attempted to limit the amount of damages recoverable by the class members through the use of an attorney affidavit attached to the petition. See De Aguilar, 47 F.3d 1404, 1413 (5th Cir. 1995). However, because the attorney did not represent all of the estates involved, the court reasoned that they did not have the authority to bind all of the estates by limiting damages. See id. at 1413, 1415. In the present action, the Plaintiffs are attempting to waive the right to recover attorney fees under Article 2545 on behalf of the entire putative class, including the unnamed class members. However, as the Defendants point out, no evidence has been presented to this Court to show that the representative parties or their attorneys have obtained the requisite authority from each putative class member to waive this statutory right to attorney fees.
Furthermore, such a waiver is not in the best interest of the class as a whole. Attorney fees recoverable under Article 2545 are in addition to actual damages and are paid directly to the Plaintiffs by the Defendants in the event that the Plaintiffs prevail. If this right is waived, then attorney fees will only be awarded under Article 595, the Class Action Statute. Consequently, said attorney fees will be paid out of the damages recovered by the Plaintiffs, thereby reducing the amount of damages that each class member actually receives. As the Defendants stated in their Opposition Memorandum, "[t]he representative plaintiff's cannot purport to take such action to deprive class members of their mandated recovery of attorney's fees beyond the damage recovery and to pay attorney's fees out of their recovery." (Defendant's Memorandum in Opposition to Plaintiffs' Motion to Remand, Doc. 5, page 3). Such action is not in the best interest of the class members whom the named parties and their attorneys purport to represent. The Court finds that said waiver is merely a bad faith tactic used by the Plaintiffs in an attempt to evade federal jurisdiction. The Plaintiffs cannot waive the right to attorney fees under Article 2545 on behalf of the class as a whole absent a showing that the putative class members gave the representative parties or their attorneys the requisite authority to do so. The waiver in question is, thus, invalid.
Because said attorney fees must be included in calculating the amount in controversy, this Court must determine whether or not the addition of those attorney fees increases the amount in controversy to a sum above the jurisdictional limit. As stated above, the Defendants presented evidence demonstrating the likelihood that attorney fees in the present action will be quite substantial. Not only have the Defendants presented evidence outlining the type and the volume of legal work required to prosecute a class action lawsuit with a putative class made up of nearly two million class members, but the Defendants have also cited other Louisiana class action cases in which the plaintiff's were awarded several million dollars. This Court finds that evidence persuasive in evaluating the potential value of the attorney fees recoverable in the present case. Furthermore, because such an award is only allocated among the ten representative parties for purposes of calculating the amount in controversy, this Court finds that it is more likely than not that the amount in controversy exceeds $75,000 as to each representative party. Therefore, this Court concludes that the Defendants have proven by a preponderance of the evidence that the amount in controversy exceeds the jurisdictional limit required to invoke federal subject matter jurisdiction.
Finally, this Court notes that the Plaintiffs cannot and have not shown with legal certainty that they will not be able to recover greater than $75,000. First, while Louisiana law allows a Plaintiff to limit the amount of damages prayed for in his pleading and binds the plaintiff to his pleading, such a stipulation will not control if made in bad faith or in derogation of the law. As discussed above, the Court finds that the Plaintiffs' attempt to limit damages in the present action below the jurisdictional amount was one made in bad faith. Thus, such a stipulation is not binding. Second, although a plaintiff can defeat removal by filing a binding stipulation or affidavit with the complaint, the Plaintiffs' attempted waiver of the right to attorney fees under Article 2545 is also invalid. The waiver in question is not binding upon all of the putative plaintiffs and is also not in the best interest of the class as a whole. For these reasons, this Court finds that the Plaintiffs have not shown with legal certainty that they will not be able to recovermore than the jurisdictional limit.
III. CONCLUSION:
For the foregoing reasons, the Court finds that Defendant has proven that it is more likely than not that the amount in controversy exceeds the jurisdictional amount required for removal.
Accordingly,
IT IS ORDERED that the Plaintiffs' Motion to Remand (Doc. 3) be, and the same is hereby, DENIED.