Middlebrook v. SLM Financial Corporation et al
ORDER DENYING WITHOUT PREJUDICE AS MOOT 5 Motion to Dismiss ; DENYING 14 Motion to Remand to State Court. Signed by Judge David A. Ezra. (wg)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
SLM FINANCIAL CORPORATION §
d/b/a SALLIE MAE, NAVIENT
SOLUTIONS, INC. and NATIONAL §
ENTERPRISE SYSTEMS, INC.,
CV NO. 5:15-CV-237-DAE
ORDER: (1) DENYING PLAINTIFF’S MOTION TO REMAND; (2) DENYING
WITHOUT PREJUDICE AS MOOT DEFENDANTS’ MOTION TO DISMISS
Before the Court are a Motion for Remand filed by Plaintiff Patsy
Middlebrook (“Plaintiff” or “Middlebrook”) (“Mot.,” Dkt. # 14) and a Motion to
Dismiss filed by Defendants SLM Financial Corporation d/b/a Sallie Mae (“Sallie
Mae”), Navient Solutions, Inc., and National Enterprise Systems, Inc. (collectively,
“Defendants”) (Dkt. # 5). On May 20, 2015, the Court held a hearing on the
motions. Robert D. Dabaghian, Esq., represented Plaintiff; Adam C. Ragan, Alan
F. Arnold, and C. Charles Townsend, Esqs., represented Defendants.
At the outset, the Court DENIES WITHOUT PREJUDICE AS
MOOT the Defendants’ Motion to Dismiss (Dkt. # 5), as Plaintiff has since filed
an Amended Complaint (see Dkt. # 16).
After careful consideration of the memoranda in support of and in
opposition to the Motion to Remand, and in light of the parties’ arguments at the
hearing, the Court, for the reasons that follow, DENIES Plaintiff’s Motion to
Remand (Dkt. # 14).
On December 14, 2005, Plaintiff agreed to cosign a student loan (the
“Loan”) for her son, Bryce Middlebrook, and guaranteed the debt in the amount of
$21,000 plus accrued interest. (“Mot.,” Dkt. # 14, Ex. A ¶ 7.) In late 2013, she
received notice from Defendants that the Loan was in default. (Id. ¶ 8.) On
November 29, 2013, Plaintiff made arrangements to pay Sallie Mae $14,003 to
satisfy the obligations outstanding on the Loan. (Id.)
Plaintiff alleges that, thereafter, Defendants continued to demand
additional payment on separately cosigned loans, which Plaintiff’s counsel
clarified at the hearing were in excess of $100,000. (Id. ¶ 9.) Plaintiff alleges that
she immediately contacted Defendants to dispute that she had ever cosigned the
additional loans, but has been unable to obtain written confirmation of the monies
allegedly owed. (Id.)
On February 23, 2015, Plaintiff filed a petition in the Bexar County
Court, alleging claims under the Deceptive Trade Practices Act (“DTPA”) against
Defendants. (Id.) The petition indicates that she seeks damages over $100,000 but
less than $200,000, additional damages because the conduct was knowing and
intentional, and attorney’s fees. (Id. ¶¶ 16–18.)
On April 17, 2015, Plaintiff filed the instant Motion to Remand. 1
(Mot.) On April 24, 2015, Sallie Mae and Navient Solutions, Inc. filed their
Response (Dkt. # 19), and on April 28, 2015, National Enterprise Systems, Inc.
filed its Response (Dkt. # 21).
“It is axiomatic that the federal courts have limited subject matter
jurisdiction and cannot entertain cases unless authorized by the Constitution and
legislation.” Coury v. Prot, 85 F.3d 244, 248 (5th Cir. 1996). Accordingly, a
defendant may only remove a case over which the district court has original
jurisdiction, either because of diversity of citizenship or the existence of a federal
Plaintiff filed a First Amended Petition on April 17, 2015 (Dkt. # 16). Because
post-removal amendments do not affect the Court’s jurisdiction once jurisdiction
has attached, the Court does not address the Amended Petition herein. See St. Paul
v. Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 293 (1938) (“[E]vents
occurring subsequent to removal which reduce the amount recoverable, whether
beyond the plaintiff's control or the result of his volition, do not oust the district
court's jurisdiction once it has attached.”); Gebbia v. Wal-Mart Stores, Inc., 233
F.3d 880, 883 (5th Cir. 2000) (“[O]nce the district court’s jurisdiction is
established, subsequent events that reduce the amount in controversy to less than
$75,000 generally do not divest the court of diversity jurisdiction.”); see also 14C
Charles Alan Wright, Arthur R. Miller & Edward Cooper, Federal Practice and
Procedure § 3725.2 (4th ed. 2015) (“[O]nce a case that was initiated in state court
has been removed properly, subsequent events that reduce the amount
recoverable—such as the plaintiff’s amendment of the complaint—will not defeat
the federal court’s subject-matter jurisdiction.”).
question. Halmekangas v. State Farm Fire & Cas. Co., 603 F.3d 290, 295 (5th Cir.
On a motion to remand, the removing party bears the burden of
establishing that one of these bases of jurisdiction exists. Shearer v. Sw. Serv. Life
Ins. Co., 516 F.3d 276, 278 (5th Cir. 2008). Diversity jurisdiction exists where the
amount in controversy exceeds $75,000 and there is complete diversity of
citizenship between the parties. 28 U.S.C. § 1332(a); Harvey v. Grey Wolf
Drilling Co., 542 F.3d 1077, 1079 (5th Cir. 2008); Caterpillar Inc. v. Lewis, 519
U.S. 61, 68 (1996).
To determine whether jurisdiction is present, the court considers the
claims in the state court petition as they existed at the time of removal. Louisiana
v. Am. Nat’l Prop. Cas. Co., 746 F.3d 633, 637 (5th Cir. 2014) (citing Cavallini v.
State Farm Mut. Auto Ins. Co., 44 F.3d 256, 264 (5th Cir. 1995)). Because
removal jurisdiction implicates federalism concerns, “[a]ny doubts regarding
whether removal jurisdiction is proper should be resolved against federal
jurisdiction.” African Methodist Episcopal Church v. Lucien, 756 F.3d 788, 793
(5th Cir. 2014) (internal quotation marks omitted) (quoting Acuna v. Brown &
Root Inc., 200 F.3d 335, 339 (5th Cir. 2000)); Frank v. Bear Stearns & Co., 128
F.3d 919, 922 (5th Cir. 1997).
Plaintiff argues that remand is appropriate because the amount in
controversy is, at most, $9,000, which is insufficient to meet the $75,000 amount
in controversy requirement. (Mot. at 2.) Specifically, Plaintiff contends that
because the petition is ambiguous as to the damages requested and Plaintiff
provided pre-suit notice of the prospective damages to Defendants, Defendants
cannot meet their burden of showing that the amount in controversy exceeds
$75,000 by a preponderance of the evidence. (Id. at 3.)
Determining the Amount of Damages
“While it is well settled that the removing party bears the burden of
establishing facts necessary to show that federal jurisdiction exists, we have
applied different standards of proof depending upon whether the complaint alleges
a dollar amount of damages.” Allen v. R & H Oil & Gas Co., 63 F.3d 1326, 1335
(5th Cir. 1995).
When a complaint alleges a specific amount of damages, courts
follow the legal certainty test: the court presumes that the plaintiff’s claim for
damages is correct unless the party contesting jurisdiction can demonstrate that the
amount was pled in bad faith. Horton v. Liberty Mut. Ins. Co., 367 U.S. 348, 353
(1961); St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288–89
(1938); St. Paul Reinsurance Co., Ltd. v. Greenberg, 134 F.3d 1250, 1253 (5th Cir.
1998). To show a claim was pled in bad faith, “it must appear to a legal certainty
that the claim is really for less than the jurisdictional amount.” Horton, 367 U.S. at
353 (internal quotation marks omitted) (quoting St. Paul Mercury, 303 U.S. at
Plaintiff’s legal certainty obligation might be met in various ways; we
can only speculate, without intimating how we might rule in such a
case. Plaintiff’s state complaint might cite, for example, to a state law
that prohibits recovery of a statute . . . . Absent such a statute, litigants
who want to prevent removal must file a binding stipulation or
affidavit with their complaints; once a defendant has removed the
case, St. Paul makes later filings irrelevant.
De Aguilar v. Boeing Co., 47 F.3d 1404, 1412 (5th Cir. 1995) (internal quotation
When a complaint alleges an indeterminate amount of damages, the
removing party carries the burden of showing that, by a preponderance of the
evidence, the amount in controversy exceeds $75,000. Gebbia v. Wal-Mart Stores,
Inc., 233 F.3d 880, 882 (5th Cir. 2000). The defendant can do so in one of two
ways: “(1) by demonstrating that it is ‘facially apparent’ that the claims are likely
above $75,000, or (2) ‘by setting forth facts in controversy—preferably in the
removal petition, but sometimes by affidavit—that support a finding of the
requisite amount.’” Simon v. Wal-Mart Stores, Inc., 193 F.3d 848, 850 (5th Cir.
1999) (internal quotation marks omitted) (quoting Luckett v. Delta Airlines, Inc.,
171 F.3d 295, 298 (5th Cir. 1999)). Courts are only to consider summary
judgment proof if the face of the complaint does not resolve the question. Allen,
63 F.3d at 1336 n.16.
[O]nce the defendant has pointed to an adequate jurisdictional
amount, the situation becomes analogous to the “typical”
circumstances in which the St. Paul Mercury “legal certainty” test is
applicable: The defendant has established, by a preponderance, that
federal jurisdiction is warranted. At this point, “it must appear to a
legal certainty that the claim is really for less than the jurisdictional
amount to justify dismissal.”
De Aguilar, 47 F.3d at 1412 (editing marks omitted) (quoting St. Paul Mercury,
303 U.S. at 289).
In accordance with the 2013 amendments to the Texas Rules of Civil
Procedure, Plaintiff’s complaint alleges damages over $100,000 but under
$200,000. (Dkt. # 1-2 at 6.) Plaintiff contends that this is an indeterminate amount
of damages, and that Defendant bears the burden of demonstrating that the amount
in controversy exceeds $75,000 by a preponderance of the evidence. (Mot. at 3.)
Defendants argue that they have met the burden because it is facially apparent from
Plaintiff’s complaint that she alleges damages over $75,000 and she cannot
demonstrate to a legal certainty that she will not recover damages in excess of
$9,000. (Dkt. # 19 at 2–6.)
Assuming the parties are correct in asserting that Plaintiff has failed to
allege a specific amount of damages in her complaint,2 the Court finds that
Defendant has met its burden in demonstrating that, by a preponderance of the
evidence, Plaintiff asserts claims in excess of $75,000. As is apparent from the
face of Plaintiff’s complaint, she asserts damages in some amount between
$100,000 and $200,000, which clearly exceeds $75,000. See, e.g., Arriaga v.
Midland Funding LLC, No. 3:14-CV-4044-M, 2015 WL 567264, at *3 (N.D. Tex.
Feb. 11, 2015) (finding that defendants showed that it was facially apparent from
the complaint that the plaintiff sought damages in excess of $75,000 where the
plaintiff alleged damages over $100,000 but less than $200,000); TFHSP LLC
Series 605 v. Lakeview Loan Servicing, LLC, No. 3:14-CV-1782-B, 2014 WL
5786949, at *4 (N.D. Tex. Nov. 3, 2014) (“Had Plaintiff clearly selected a form of
relief enumerated in Texas Rule of Civil Procedure 47(c) that exceeds $75,000 it
Historically, courts have found that complaints pled in accordance with Texas
Rule of Civil Procedure 47 allege indeterminate amounts of damages because the
pre-2013 version of Rule 47 prohibited plaintiffs from specifying a specific amount
of damages. Tex. R. Civ. P. 47(b) (1990) (“[I]n all claims for unliquidated
damages [the complaint shall contain] only the statement that the damages sought
are within the jurisdictional limits of the court”); Allen, 63 F.3d at 1335 (“This
situation [that the plaintiff fails to specify the amount in controversy is] not
unusual in this circuit, as both Texas and Louisiana state civil procedure disallows
damage claims for specific amounts.”). However, Rule 47 was amended in 2013,
and now requires plaintiffs to state that they seek damages within one of the ranges
set forth therein. Tex. R. Civ. P. 47(c). Accordingly, the rule that complaints pled
in accordance with Texas state law should automatically be analyzed under the
standard for complaints alleging indeterminate amounts of damages is no longer
would have been facially apparent that the damages requested satisfy the
jurisdictional requirement. For example, if Plaintiff had designated the option
listed under Rule 47(c)(3), which calls for ‘monetary relief over $100,000 but not
more than $200,000,’ the Court would have been able to conclude that the amount
in controversy exceeds the $75,000 requirement, assuming Plaintiff stated its
request for damages in good faith.”).
Accordingly, the Court retains jurisdiction over Plaintiff’s complaint
unless the claim for damages was made in bad faith—in other words, if it appears
to a legal certainty that the claim is really for less than the jurisdictional amount.3
Plaintiff contends that the claim is really for less than the jurisdictional amount,
arguing that (1) Plaintiff only selected the $100,000 to $200,000 damage range so
that she would not be limited to “the stringent restrictions of discovery in the lower
tiers” and so that the case would not be placed on an expedited docket; (2) prior to
filing suit, Plaintiff provided a pre-suit notice alleging damages in the amount of
$3,000; and (3) at best, Plaintiff could only be awarded a maximum of $9,000
(three times the economic damages incurred). (Mot. at 2.)
Because the question turns back to whether the complaint meets the legal
certainty test, the result would be the same if the Court had not assumed that the
damages were indeterminate, and instead had considered the range of $100,000 to
$200,000 as a specific damage amount and analyzed the complaint under that
framework. See De Aguilar, 47 F.3d at 1412.
Under Texas Rule of Civil Procedure 169, plaintiffs who plead
$100,000 or less in damages are subject to expedited actions process, unless a party
to the suit can demonstrate that there is good cause to remove the case from the
expedited actions process. The expedited actions process creates an expedited trial
schedule, as well as time limits on trial. Tex. R. Civ. P. 169(d). The parties are
also subject to the most limited discovery control plan, unless the parties agree to
or the court orders a higher level discovery control plan. Tex. R. Civ. P. 190.2(2).
Although Plaintiff’s argument about the rationale underlying her
damages pleading may or may not be relevant to “bad faith” in the general sense of
the word, it is irrelevant to the “bad faith” definition under St. Paul Mercury.
Under St. Paul Mercury, the relevant inquiry in determining whether a plaintiff
pled damages in bad faith is whether the plaintiff can show that she could not, at
the time of filing, recover in excess of $75,000.
The facts, as pled in the complaint, do not indicate how much
additional payment Defendants continued to demand from Plaintiff after she paid
off the $14,003 4 or whether she paid that amount, nor does the Plaintiff specify
how much she seeks in mental anguish damages. Because Plaintiff has alleged that
Defendant violated the DTPA knowingly and intentionally, she is entitled to up to
three times the economic and mental anguish damages. See Tex. Bus. & Com.
The Court does note that Plaintiff’s counsel verbally relayed this information to
the Court at the hearing.
Code § 17.50(b)(1) (permitting up to three times the economic damages and mental
anguish when the conduct was committed knowingly and intentionally).
Additionally, in circumstances like the one here, where the statute expressly
includes attorney’s fees in the allowable expenses, Tex. Bus. & Com. Code
§ 17.50(d), attorney’s fees are includable in the court’s calculation of the amount in
controversy. Grant v. Chevron Phillips Chem. Co., 309 F.3d 864, 874 (5th Cir.
Instead, in support of her legal certainty argument, Plaintiff presents a
pre-litigation demand letter indicating that her actual economic loss was $3,000.
(Mot., Ex. B.) Although the Fifth Circuit has not addressed whether pre-litigation
demand letters can be used to evaluate the amount in controversy at the time of
removal, the Fifth Circuit has accepted such evidence as the type of summary
judgment proof that a defendant can present to show that the amount in
controversy exceeds $75,000. See, e.g., Hartford Ins. Grp. v. Lou-Con Inc., 293
F.3d 908, 910, 912 (5th Cir. 2002) (per curiam) (affirming the district court’s
finding that the damages specified in the demand letter demonstrated that the
amount in controversy was insufficient to give rise to federal jurisdiction). Such
evidence would be reflective of the damages sought at the inception of litigation—
and in this case, at the time of removal. Accordingly, in light of the Fifth Circuit’s
pronouncement in De Aguilar that its suggestions for proof of legal certainty were
nonexclusive, the Court finds that a pre-litigation demand letter is an acceptable
way for a plaintiff to meet her “legal certainty obligation.” See De Aguilar, 47
F.3d at 1412.
Here, the only relevant claim in the pre-litigation demand letter is the
claim for actual economic damages in the amount of $3,000. The claim for
attorney’s fees therein is irrelevant; that figure will change as the litigation
progresses. As Plaintiff contends, her economic damage award—in light of the
knowing and intentional violation alleged in her complaint—could not exceed
three times her actual economic damages, or $9,000. However, she is also eligible
for up to three times her mental anguish damages, as well as attorney’s fees.
Without any information as to the amount of these claims, the Court cannot find, as
a legal certainty, that Plaintiff could not recover in excess of $75,000 at the time of
filing the complaint. Given the strong presumption that the damages claimed by
the Plaintiff are correct, see St. Paul Mercury, 303 U.S. at 290, the Court must
accept the damages that are facially apparent from Plaintiff’s complaint. These
damages are clearly in excess of $75,000. Accordingly, the Court DENIES
Plaintiff’s Motion to Remand.
For the foregoing reasons, the Court DENIES Plaintiff’s Motion to
Remand (Dkt. # 14) and DENIES WITHOUT PREJUDICE AS MOOT
Defendants’ Motion to Dismiss (Dkt. # 5).
IT IS SO ORDERED.
DATED: San Antonio, Texas, May 20, 2015.
David Alan Ezra
Senior United States Distict Judge
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