HOUSTON FEDERAL COURT REMANDS CASE EVEN THOUGH ALL PARTIES AGREE AMOUNT IN CONTROVERSY MEETS JURISDICTIONAL MINIMUM

March 1, 2019

In an unusual and surprising ruling, a federal judge in Houston remanded a case to state court even though both sides agreed and argued to the court that the amount in controversy satisfied the $75,000 minimum required to establish federal diversity jurisdiction.  Delgado v. Allstate Texas Lloyds, CV H-18-1059, 2019 WL 668109 (S.D. Tex. Feb. 19, 2019) originally involved four different properties owned by four different plaintiffs that were allegedly damaged on four different dates. After removal to federal court, a federal magistrate judge severed the four plaintiffs’ claims into four independent lawsuits, ordered each plaintiff to file an amended complaint relating solely to that plaintiff’s claims and damages, and ordered Allstate to show the basis for federal jurisdiction as to each resulting lawsuit.

In Delgado’s case, the original pleading stated that “Plaintiff” sought damages exceeding $200,000, but because the original pleading involved four plaintiffs who were later severed, and because Delgado did not file an amended pleading as ordered, the court treated the pleading as one that had not specified the amount in controversy and required the parties to show that Delgado’s individual damages met the $75,000 jurisdictional minimum.  Surprisingly, both parties argued in favor of remaining in federal court.  Delgado had made a pre-suit demand of $11,700, but argued that he had an expert who would show his actual damages exceeded $35,000 and he sought treble damages, which took the total amount in controversy over $75,000. The court rejected this argument, pointing out that Delgado had never actually pleaded $35,000 in actual damages, nor had he put on any evidence to show that his damages were $35,000. 

Editor’s Note: This outcome highlights the important point, repeated by the court in its opinion, that federal jurisdiction cannot be created by consent of the parties. While this is a well-established rule, this scenario is unusual in that both sides attempted to support diversity jurisdiction, and still failed despite the existence of some evidence supporting jurisdiction.