Guy et al v. State Farm Automobile Insurance Co et al
OPINION that State Farm has not met its burden of proving that the amount in controversy exceeds the minimum amount for federal jurisdiction. Therefore, Plaintiffs' 12 MOTION to Remand to State Court is granted. Signed by Judge J. Leon Holmes on 12/12/2013. (jak)
IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
ADRIAN GUY; GABRIELLE GUY;
and ESTELLA GUY
No. 3:13CV00229 JLH
STATE FARM AUTOMOBILE
INSURANCE COMPANY; and
WELLS FARGO BANK, N.A.
This is the second action that Adrian Guy, Gabrielle Guy, and Estella Guy have commenced
in the Circuit Court of Crittenden County, Arkansas, against State Farm Mutual Automobile
Insurance Co., alleging, among other things, that State Farm breached its insurance contract when
it denied a claim for theft of an automobile insured by State Farm. In both instances, State Farm
removed the action to this Court.1 In the earlier action, the Court denied the Guys’ motion to
remand, granted partial summary judgment in favor of State Farm, and granted the Guys’ motion to
dismiss the remaining claims without prejudice. Now the Guys have moved to remand this action.
The resolution of the motion to remand depends on whether the jurisdictional amount for federal
diversity jurisdiction is met.
The Guys’ complaint in the earlier action alleged counts of breach of contract, bad faith, and
fraud. The prayer for relief sought punitive damages in addition to compensatory damages and the
statutory penalty of twelve percent pursuant to Ark. Code Ann. § 23-79-208, attorneys’ fees, and
costs. The allegations in the complaint in the instant action are substantially the same, except that the
The earlier action was Case No. 3:10CV00255-JMM.
bad faith and fraud claims have been omitted and replaced by a claim for negligence,2 and the prayer
for relief omits any claim for punitive damages. The complaint does not state the amount that the
Guys are claiming as damages, but it does state that the amount is less than the amount required for
federal diversity jurisdiction for each plaintiff. State Farm contends that the Guys are still asserting
claims for bad faith and fraud and still seeking punitive damages but are doing so surreptitiously in
order to avoid exceeding the minimum amount for federal diversity jurisdiction. In response, the
Guys point out that this Court granted partial summary judgment on the bad faith claim in the earlier
action and, according to the plaintiffs, therefore disposed of any claims for punitive damages; and they
have expressly disclaimed any claim for punitive damages.
The amount in controversy is determined by examining “the situation at the time of removal.”
Hatridge v. Aetna Cas. & Sur. Co., 415 F.2d 809, 814 (8th Cir. 1969). In reviewing a motion to
remand, the Court must resolve all doubts in favor of remand to state court. In re Bus. Men’s
Assurance Co. of Am., 992 F.2d 181, 183 (8th Cir. 1993). The party seeking to invoke federal
jurisdiction has the burden of proving that the requisite amount in controversy has been met.
Hatridge, 415 F.2d at 814. When the complaint “alleges no specific amount of damages or an
amount under the jurisdictional minimum,” the removing party must prove by a preponderance of the
evidence that the amount in controversy requirement is met. In re Minn. Mut. Life Ins. Co. Sales
Practices Litig., 346 F.3d 830, 834 (8th Cir. 2003); see also James Neff Kramper Family Farm
P’ship v. IBP, Inc., 393 F.3d 828, 831 (8th Cir. 2005); Haynes v. Louisville Ladder Grp., LLC, 341
The negligence count seems to allege negligence in the investigation of the claim and
defamation. Arkansas does not recognize a tort of negligent investigation of a claim. First
Marine Ins. Co. v. Booth, 317 Ark. 91, 95, 876 S.W.2d 255, 257 (1994); Aetna Cas. & Sur. Co.
v. Broadway Arms, 281 Ark. 128, 133, 664 S.W.2d 463, 465 (1984).
F. Supp. 2d 1064, 1066-67 (E.D. Ark. 2004); Moriconi v. AT & T Wireless PCS, LLC, 280 F. Supp.
2d 867, 878 (E.D. Ark. 2003); Gilmer v. Walt Disney Co., 915 F. Supp. 1001, 1007 (W.D. Ark.
Rule 8(a) of the Arkansas Rules of Civil Procedure provides, in pertinent part, “In claims for
unliquidated damage, a demand containing no specified amount of money shall limit recovery to an
amount less than required for federal court jurisdiction in diversity of citizenship cases, unless
language of the demand indicates that the recovery sought is in excess of that amount.” The
Reporter’s Notes to Rule 8 say, “The obvious purpose of this section is to prevent a plaintiff from
using unliquidated demands to avoid removal of diversity of citizenship cases to federal court.” See
also Interstate Oil & Supply Co. v. Troutman Oil Co., 334 Ark. 1, 5, 972 S.W.2d 941, 943 (1998)
(recognizing this portion of the Reporter’s Notes as an accurate statement of the rule’s purpose); Cox
v. Vernon, 94 Ark. App. 112, 114, 226 S.W.3d 24, 26 (2006).
While state rules of civil procedure do not determine federal jurisdiction, Haynes, 341 F.
Supp. 2d at 1068, the plaintiffs are the masters of their complaint and may limit their claims to avoid
federal jurisdiction. See St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 294, 58 S. Ct.
586, 593, 82 L. Ed. 2d 845 (1938) (“If [a plaintiff] does not desire to try his case in the federal court
he may resort to the expedient of suing for less than the jurisdictional amount, and though he would
be justly entitled to more, the defendant cannot remove”). “[T]he key characteristic about those
stipulations is that they are legally binding on all plaintiffs.” Standard Fire Ins. Co. v. Knowles, 133
S. Ct. 1345, 1350, 185 L. Ed. 2d 439 (2013). “We note the potential availability of judicial estoppel
arguments by the defendants should the plaintiffs in the future change legal positions in an attempt
to achieve an award in excess of [the minimum amount for federal jurisdiction].” Morgan v. Gay,
471 F.3d 469, 477 n.9 (3rd Cir. 2006). The Supreme Court of Arkansas recognizes the doctrine of
judicial estoppel. Dupwe v. Wallace, 355 Ark. 521, 533-34, 140 S.W.3d 464, 471-72 (2004).
Judicial estoppel in Arkansas requires the following elements:
A party must assume a position clearly inconsistent with a position taken in
an earlier case, or with a position taken in the same case;
A party must assume the inconsistent position with the intent to manipulate
the judicial process to gain an unfair advantage;
A party must have successfully maintained the position in an earlier proceeding
such that the court relied upon the position taken; and
The integrity of the judicial process of at least one court must be impaired or
injured by the inconsistent positions taken.
Here, the plaintiffs have expressly disclaimed a claim for fraud or bad faith and any claim for
punitive damages, and they have done so over the signature of a lawyer who represents all of them.
Cf. Entertainer, Inc. v. Duffy, 2012 Ark. 202, at 6, 407 S.W.3d 514, 518 (2012) (a client is generally
bound by the acts of his counsel). The complaint does not specify an amount of damages that the
plaintiffs are seeking, other than to say that it is less than the minimum amount for federal diversity
jurisdiction, but in their brief provided the following estimate of the damages that they reasonably
could expect to recover:
$25,000 for the pickup truck;
$5,000 for the loss of the use of the pickup truck for a reasonable amount of time
needed to find a replacement vehicle;
$10,000 for damage to Adrian’s reputation;
$4,800 for the statutory twelve percent penalty; and
attorneys’ fees of $14,933 (one-third of $44,800).
While these amounts are not specified in the complaint, neither are they inconsistent with anything
alleged in the complaint. More importantly, State Farm has the burden of proving that the amount
in controversy exceeds the minimum amount for federal diversity jurisdiction, and State Farm has
offered nothing to show that these estimates presented by the plaintiffs are unreasonable estimates
of the amounts that could be claimed based upon the allegations in the complaint. If, on remand, the
plaintiffs seek punitive damages or other damages that would cause the amount claimed to exceed
the minimum amount for federal jurisdiction, all of the elements of judicial estoppel as recognized by
the Supreme Court of Arkansas would be present.
Consequently, State Farm has not met its burden of proving that the amount in controversy
exceeds the minimum amount for federal jurisdiction. Therefore, plaintiffs’ motion to remand is
granted. Document #12.
IT IS SO ORDERED this 12th day of December, 2013.
J. LEON HOLMES
UNITED STATES DISTRICT JUDGE
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?