Recently, the Southern District of Texas, Houston Division, concluded that it had diversity jurisdiction despite the plaintiff seeking less than $75,000 in damages.  In Martinez v. Liberty Ins. Corp., No. H-19-3956, 2019 WL 6894497 (S.D. Texas, Houston Division, December 18, 2019, mem. op.), Martinez sued Liberty Insurance Corporation (“Liberty”) in state court. Liberty removed the suit to federal court based on diversity jurisdiction (civil actions between citizens of different states where the amount in controversy exceeds $75,000, exclusive of interest and costs). Martinez subsequently filed a motion to remand, arguing the action should be remanded because (1) his state court petition alleged that he sought a maximum of $74,000, (2) his pre-suit demand letter to Liberty ($29,460.55 for damages, plus $3,850 for attorney’s fees and other expenses) showed that the amount in controversy was less than $75,000, and (3) he filed a binding stipulation that he and his attorney would not seek or recover more than $75,000. Liberty responded that Martinez’s allegations and stipulation did not effectively defeat federal jurisdiction and that the preponderance of the evidence supported an amount in controversy over $75,000.

The court concluded that Martinez’s allegation in his Texas state court petition that his claim did not exceed $75,000 (1) contravened Texas Rule of Civil Procedure 47 (requiring plaintiffs to state in an original petition the range of monetary relief sought among five pre-defined ranges, the lowest range being monetary relief of $100,000 or less), (2) would not have bound Martinez to recover less than $75,000, and (3) was an improper attempt to circumvent federal diversity jurisdiction.  The court further concluded that the alleged maximum of $74,000 was not made in good faith and therefore did not control the action’s amount in controversy. The court reasoned that damages alleged in Texas state court petitions cannot prove that the amount in controversy does not exceed that amount as a legal certainty because plaintiffs may supersede those allegations with amended pleadings. Further, the demand letter included a claim for treble damages plus attorney’s fees, which exceed $75,000. Further, Martinez’s signed stipulation that he was not seeking an award exceeding $75,000 was filed after removal, when it should have been filed in state court before removal because federal courts determine removal jurisdiction on the basis of the claims in state court as they existed at the time of removal.  Lastly, a subsequent event that would reduce the amount in controversy to less than $75,000, such as a binding stipulation executed after removal, generally does not divest the court of diversity jurisdiction.

In sum, the court held that it had diversity jurisdiction over the action because the parties were diverse and the amount in controversy exceeded $75,000 at the time of removal.

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