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St. Paul Mercury Indemnity Co. v. Red Cab Co.

Supreme Court of the United States · 1938 · Civil Procedure

Civil ProcedureRemovalAmount in ControversyDiversity Jurisdictionremovaldiversity jurisdictionamount in controversylegal certainty test

Facts

Red Cab Co., an Indiana corporation, sued St. Paul Mercury Indemnity Co., a Minnesota corporation, in Indiana state court for breach of an insurance binder and demanded $4,000 in damages. St. Paul timely removed the case to federal district court based on diversity and the amount alleged in the complaint. After removal, Red Cab filed amended pleadings, and an attached exhibit listed injury-related expenditures totaling $1,380.89. The district court entered judgment for Red Cab for $1,162.98, and the court of appeals concluded that because the record showed a claim below the jurisdictional amount, the case should have been remanded.

Issue

When a state-court complaint alleges the jurisdictional amount necessary for diversity removal, does a later amendment or later developments showing a smaller recoverable amount require remand to state court? More generally, when is the amount in controversy sufficient to support federal jurisdiction?

Rule

Unless a different rule is provided by law, the sum claimed by the plaintiff controls if the claim is apparently made in good faith. Dismissal or remand for failure to satisfy the amount in controversy is proper only when it appears to a legal certainty that the claim is really for less than the jurisdictional amount, or that the plaintiff never was entitled to recover that amount and the claim was merely colorable. Events occurring after suit is filed or after removal that reduce the amount recoverable below the statutory minimum do not oust jurisdiction once it has attached, including a plaintiff's post-removal amendment reducing the demand.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Nora Patel, a citizen of Ohio, sued Lakefront Equipment Leasing, Inc., a citizen of Michigan, in an Ohio state court in Cleveland for breach of contract, demanding $90,000. Lakefront timely removed on diversity grounds. Two weeks later, Nora filed an amended complaint expressly limiting her damages to $60,000 to avoid federal court.

What is the best ruling on Nora's motion to remand?

Explanation. The governing rule is that the sum claimed by the plaintiff controls if apparently made in good faith. In a removed case, the status of the complaint at the time of removal is controlling, and later events—including a voluntary amendment reducing the demand—do not oust jurisdiction once it has attached. The defendant need not prove the plaintiff will ultimately recover the jurisdictional amount.