Diversity jurisdiction removal in Florida.

• Author: Lucas, Matthew C.

There can be a certain allure about proceeding in federal court when an opposing party initiates its lawsuit in state court. The decision whether to remove a lawsuit, however, cannot be made without first giving careful consideration to the mechanism and process of removal. A maelstrom of potential issues--from the mundane to the occasionally esoteric--await the practitioner who seeks to remove a lawsuit from a Florida court to a federal court based upon diversity of citizenship. Federal courts in Florida and throughout the country have struggled with the competing policy values enmeshed within a litigant's right to remove a lawsuit. A body of jurisprudence spanning hundreds of years has arisen from this device that has been simultaneously haled as a hallmark of America's judicial system while, at times, derided as forum shopping. What follows is an exposition of the underlying procedure, the statutory mechanics, and some of the more notable issues relating to diversity jurisdiction removal with an emphasis on 11th Circuit case law.

Background of Diversity Jurisdiction Removal

The genesis of diversity jurisdiction in federal courts and, hence, diversity removal, is found in the U.S. Constitution, Art. III, [section] 2: "The judicial Power shall extend ... to Controversies ... between Citizens of different States, ... and between a State, or the Citizens thereof, and foreign States, Citizens or Subjects." Promulgated against a backdrop of marked interstate bickering and the recognition that a state's judiciary may inadvertently (or deliberately) favor its own citizens over those of another state, (1) the framers provided federal courts concurrent jurisdiction along with their state court counterparts over civil actions between citizens of different states. At bottom, then, diversity removal was seen as a way to avoid the potential for hometown favoritism.

Although removal to federal court is a "right," it is a right subordinate to the boundaries of federal jurisdiction--a sharply confined territory:

The dominant note in the successive enactments of Congress relating to diversity jurisdiction is one of jealous restriction, of avoiding offense to state sensitiveness, and of relieving the federal courts of the overwhelming burden of "business that intrinsically belongs to the state courts" in order to keep them free for their distinctive federal business. (2)

Whether motivated by the pressures of docket control or out of deference to state sovereignty, the right of removal has come to be narrowly circumscribed, and any doubts about federal jurisdiction are going to be construed in favor of remanding the action to the state court. (3) As one district judge noted in Klempner v. Northwestern Mutual Life Ins. Co., 2001 WL 1844227 (S.D. Fla. Dec. 17, 2001): "Flowing naturally from the judicial favoritism shown remand, which in turn stems from deeply embedded principles of federalism, is the idea that a defendant seeking removal bears a not insignificant burden." In that light, a party seeking removal bears the burden of proving its entitlement to have the case heard in federal court, (4) and must scrupulously comply with a number of statutory requirements, the first and foremost of which is proving the existence of federal jurisdiction. A cursory overview of diversity federal jurisdiction follows.

Removal Under 28 U.S.C. [subsection] 1441(a) and 1332

An action is only removable if it could have been originally filed in a federal court possessing jurisdiction. (5) The existence of federal jurisdiction is, therefore, a critical and preliminary requirement that must be proven in order to remove a case based on diversity. Two sections of the U.S. Code form the substantive backdrop of diversity jurisdiction. Subsection (a) of 28 U.S.C. [section] 1441 provides that:

[a]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.

"Original jurisdiction," in turn, can arise in a number of contexts, including lawsuits between diverse parties. In that regard, 28 U.S.C. [section] 1332(a) states:

The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between--

(1) citizens of different States;

(2) citizens of a State and citizens or subjects of a foreign state;

(3) citizens of different States and in which citizens or subjects of a foreign state are additional parties;

(4) a foreign state, defined in [section] 1603(a) of this title, as plaintiff and citizens of a State or of different States.

The three jurisdictional prerequisites for diversity removal, then, are: a civil lawsuit, an appropriate amount in controversy, and diversity of citizenship between the parties. The first requirement, the existence of a "civil action," is not a particularly litigious issue. The remaining requirements, however, have yielded a broad patchwork of various legal rules.

Controversy Requirement

Seldom is it the case that a plaintiff will limit himself to a specified sum of money within his complaint for damages, the common practice being to seek recovery of various types of damages, such as physical pain, mental anguish, hospitalization and medical costs, lost wages, loss of consortium, and so on. Often, the only mention of an amount of damages comes by way of a passing reference to the effect that, whatever the damages may be, they exceed the state court's jurisdictional minimum. Even where a sum certain is at issue--say, for example, in a breach of contract action to recover an installment payment--often, additional damages for lost business opportunities, lost profits, and attorneys' fees (where appropriate), may be included. Pinning an exact dollar figure on what the plaintiff seeks to recover may be impossible, particularly at the early stages of litigation before any discovery has taken place. Yet, the removing defendant is faced with the dilemma of having to show, by a preponderance of the evidence, facts supporting the existence of jurisdiction. (6)

The courts have approached this problem by analyzing the amount in controversy requirement in a fairly broad light. To begin with, a district court is not bound to the four corners of the complaint: "The mere fact that the plaintiff's complaint is silent as to some fact necessary to establish federal jurisdiction, such as the amount in controversy, does not preclude removal of the case by defendant." (7) A district court may look to the notice of removal to make an independent evaluation of the monetary value of the claims asserted. (8) In calculating the amount in controversy, the courts have considered, among other factors, affidavit testimony, the plaintiff's initial demand letter, an offer of settlement, prayers for punitive damages and requests for attorneys' fees found in the complaint, and even a valuation assessment made by plaintiff's counsel during a class certification hearing in a different (but factually similar) lawsuit. (9)

If, however, a plaintiff prays for a precise sum of money less than the jurisdictional minimum, the removing defendant faces a heavy burden of proof. As the 11th Circuit reasoned in Burns v. Windsor Insurance Co., 31 F.3d 1092 (11th Cir. 1994), where the court confronted the "atypical" situation of a plaintiff specifically requesting $45,000 in damages: "We will assume that plaintiff's counsel best knows the value of his client's case and that counsel is engaging in no deception." Therefore, in such an instance, the defendant must prove "to a legal certainty" that, in fact, plaintiff's claim will exceed the jurisdictional minimum. Id. at 1095. When the jurisdictional amount is challenged, a defendant may engage in limited discovery for the purpose of ascertaining the amount in controversy. (10)

By no means is federal diversity jurisdiction limited to actions for damages. An action seeking equitable relief simply requires a different calculus to determine whether the jurisdictional amount is present. In such instances, the court looks to the "value of the object of the litigation." (11) For example, in Occidental Chemical Corp. v. Bullard, 995 F.2d 1046 (11th Cir. 1993), a phosphate company that held a mineral lease on property in north Florida sued the property owner for specific performance of a purchase option contained in the lease agreement. Reversing the district court's finding that the company failed to demonstrate an adequate amount in controversy, the 11th Circuit equated the affidavit of a real estate appraiser setting the value of the property at $98,350 to the "value of the object of the litigation," and concluded that the jurisdictional threshold had been met. Id. at 1047.

In practice, establishing the jurisdictional threshold may very well be the easiest hurtle to overcome for diversity removal. However, the defendant must also prove diversity of citizenship between the parties.

Complete Diversity Requirement

The Constitution provides concurrent federal jurisdiction in actions...