MARCH 2015 BAD FAITH CASES: (1) FOLLOWING UNITED STATES SUPREME COURT PRECEDENT THAT A PLAINTIFF CAN CONTROL REMOVAL TO FEDERAL COURT BY LIMITING DAMAGES BELOW $75,000, AND (2) THAT UNDER THIRD CIRCUIT PRECEDENT THIS WOULD ACT AS AN ESTOPPEL, THE INSURED’S BAD FAITH CASE REMANDED TO STATE COURT (PHILADELPHIA FEDERAL)
In Petrille Wind P.C. v. Liberty Insurance Underwriters, Inc., the insured lost a $50,000 judgment, which the carrier refused to defend. The insured brought a statutory bad faith claim, later removed to federal court. The complaint sought actual damages of $50,000, as well as punitive damages and attorney fees. The complaint further stated that the insured would limit the sum of any award at an “amount not to exceed $74,999.99, which limitation on damages shall bind Plaintiff, so that any decision or verdict in favor of Plaintiff, on Counts I or II of this Complaint, or a combination thereof, shall be the subject of molding and reduction to a figure close[s]t to the sum of $75,000, without reaching or exceeding that amount.”
The court observed that the Third Circuit held in 2006 that “[e]ven if a plaintiff states that her claims fall below the threshold, this Court must look to see if the plaintiff’s actual monetary demands in the aggregate exceed the threshold, irrespective of whether the plaintiff states that the demands do not.” Further, under the Federal Courts Jurisdiction and Venue Clarification Act of 2011, removal is proper where the district court finds by a mere preponderance of the evidence that the amount in controversy exceeds the jurisdictional minimum. Further, “[i]n diversity cases courts must look to state law to determine the nature and extent of the right to be enforced.”
However, the court observed that Third Circuit cases cited by the carrier were decided before the U.S. Supreme Court’s 2013 Opinion in Standard Fire Insurance Co. v. Knowles. The court stated: “Though that case dealt with the jurisdictional threshold for class action lawsuits, the Court confirmed that ‘federal courts permit individual plaintiffs, who are the masters of their complaints, to avoid removal to federal court, and to obtain a remand to state court, by stipulating to amounts at issue that fall below the federal jurisdictional requirement.’”
The Supreme Court stated “that where 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.’”
Finally, the court observed that the insurer could not later be whipsawed by plaintiff because “the Third Circuit has addressed the concern over possible gamesmanship in such a situation, noting ‘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 jurisdictional amount].’”
The court summarized its position as follows: “Third Circuit jurisprudence and the federal removal statute itself encourage a district court not simply to take plaintiff’s word for it when calculating an amount in controversy. But the Supreme Court suggests that an individual plaintiff can make a binding statement to fix the amount in controversy below the jurisdictional threshold, and the Third Circuit has advised that such a plaintiff can be held to that self-imposed limit by way of the court’s equitable powers.” It then remanded the case.