“Federal courts are courts of limited subject matter jurisdiction,” is the mantra my Civil Procedure professor impressed upon me on the first day of class. In a nutshell, federal courts won’t hear every case, but only cases that they have jurisdiction to hear. One way to get into federal court is with diversity of citizenship. 28 USC § 1332 grants federal courts jurisdiction to hear cases between parties from different states as long as the amount in controversy exceeds $75,000. If a lawsuit is brought in state court against an out of state defendant, and the amount in controversy is over $75,000, the out of state defendant can have the case removed to federal court. If for some reason the removal was improper, the plaintiff can seek to have the case remanded back to the state court. Over the past few weeks, several hurricane related property insurance lawsuit decisions discussing removal have been published.
In D’Souza v. Peerless Indem. Ins. Co., No. 10-4431, 2011 WL 285154 (S.D. Tex. Jan. 25, 2011) and Centaurus Unity v. Lexington Ins. Co., No. 10-4114, 2011 WL 338817 (S.D. Tex. Feb. 1, 2011), the insureds sued both in-state insurance adjusters and out-of-state insurance companies for improper conduct in the handling of the insureds’ claim. The insurers removed the cases to federal court and the insureds sought remand back to state court. The courts remanded the cases back to state court because at least one defendant was a resident of the same state as the plaintiffs, which destroyed “complete diversity.” However, a different result was reached in Browning v. Sentinel Ins. Co., No. 10-4478, 2011 WL 240338 (S.D. Tex. Jan. 24, 2011), when the federal court found that the in-state insurance estimator defendant was improperly joined, the court denied the insured’s motion to remand.
In Potts v. Southern Fidelity Ins. Co., No. 10-3039, 2011 WL 289239 (E.D. La. Jan. 25, 2011), the insured sued an out-of-state insurance company for failure to fully compensate it for hurricane damage. The insurer removed the case to federal court and the insured sought to remand back to state court. The court remanded the case back to state court because the defendant could not prove that the insured was seeking over $75,000 in damages. However, in Weston v. Liberty Mut. Fire Ins. Co., No. 10-4540, 2011 WL 290341 (E.D. La. Jan. 25, 2011), the court did not remand the case back to state court because the defendant showed that damages could exceed $75,000, and the plaintiff did not prove “to a reasonable certainty” that the damages would not exceed $75,000.
In Morse v. American Security Ins. Co., No. 10-4606, 2011 WL 332544 (S.D. Tex. Jan. 28, 2011), the insured sued an out-of-state insurer in state court for damages from Hurricane Ike, and the insurer removed the case to federal court. The insured sought to remand on the basis that the removal was “not timely” because the notice of removal was filed over 30 days after the lawsuit was filed. The court held that the notice of removal was filed within 30 days of the defendant’s receipt of the pleading that showed that the amount in controversy ($75,000) was met, and kept the case in federal court.
The decision of where to file a lawsuit is an important one, and plaintiffs should consider whether they want the case in state or federal court. Even if plaintiffs choose state court, they may need to prepare themselves to go to federal court. For those currently in the position to make this difficult decision, I offer a little music to contemplate by: