I had the honor of clerking for a federal judge out of law school. For that reason, I have no problem being in federal court. However, many plaintiffs like to avoid federal court for various reasons. Certainly in a small case it would be better to remain in state court. The threshold for diversity of citizenship jurisdiction to remove a case to federal court is $75,000. (As an aside, I think the amount should be at least $100,000, if not more.) In any event, there are times when the amount in controversy is small and the plaintiff’s lawyer wants to stipulate that the amount is less than $75,000, as a way to avoid federal court.
The recent Cantu case out of the Southern District of Texas1 reminds us that if you are going to stipulate to the amount in controversy, you have to do it prior to the case being removed.
In Cantu, the insurer removed the state court action to federal court. The plaintiff first argued that the amount in controversy was $23,945.43, because that was the amount of actual damages alleged. However, the plaintiff also alleged exemplary damages. The federal court held that exemplary damages are to be considered when determining the amount in controversy and the $75,000 threshold would be easily met if plaintiff’s claim for exemplary damages were successful.
The removal was filed on February 19, 2016. The plaintiff offered a binding stipulation (unsigned) dated March 1, 2016, that the amount in controversy was less than $75,000. Citing De Aguilar v. Boeing Company,2 the trial court held that it may not consider a post-removal stipulation once jurisdiction has been properly established and such a stipulation would be irrelevant to the amount in controversy determination. The Aguilar case intimates that any stipulation that the amount in controversy is less than $75,000 must be filed with the original complaint (petition in Texas state court). Because the stipulation in Cantu was filed after removal, the court did not consider it. The remand motion was denied.
Therefore, plaintiffs’ attorneys must decide before filing suit in state court if they want to stipulate that damages do not exceed $75,000. If so, they must file a stipulation with the original petition in state court stipulating that the amount in controversy is less than $75,000. The Aguilar court talked about filing a “binding stipulation or affidavit” with the state court petition. An affidavit from the plaintiff would be the easiest way to go. However, under Rule 11 of the Texas Rules of Civil Procedure, it would seem that a stipulation within the original petition, or attached separately as an exhibit to the original petition, would suffice. You can’t wait until after the case has been removed.
1 Cantu v. Allstate Vehicle and Prop. Ins. Co., No. 7:16-CV-084, 2016 WL 1695284 (S.D. Tex. April 28, 2016).
2 Aguilar v. Boeing Co., 47 F.3d 1404, 1412 (5th Cir. 1995).