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The insured brought breach of contract and bad faith claims, for a sum not in excess of $75,000.  The carrier removed the case to federal court. Discovery was complete and the insurer’s summary judgment motion was pending when Middle District Judge Mannion sua sponte remanded the matter to the Court of Common Pleas for failing to meet the jurisdictional minimum.

The court applied the following principles.

  1. “In any case removed from a state court to a federal court, the district court is obligated to remand a case sua sponte for lack of subject matter jurisdiction.”
  2. “If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.”
  3. “[28 U.S.C. 1447(c)] allows and indeed compels a district court to address the question of jurisdiction, even if the parties do not raise the issue.”
  4. “It is settled that the removal statutes are to be strictly construed against removal and all doubts should be resolved in favor of remand.”
  5. The party opposing remand carries the burden to establish to a legal certainty that the sum at issue exceeds $75,000, the diversity jurisdictional minimum.

In this case, the breach of contract claim was for $69,430.07.  While there was a bad faith claim in the Complaint, the pleadings did not adequately set forth a plausible claim for bad faith, making damages from such a claim too speculative to meet the legal certainty required to prevent remand.

As Judge Mannion observed: “Initially, it appears the Plaintiffs are not certain to recover punitive damages as their complaint does not allege any fact suggesting bad faith on the part of [the insurer] other than that [the insurer] should not have rejected the full amount of Plaintiffs’ insurance claim.” Further, the carrier did not cite any evidence developed in discovery that could support a plausible bad faith claim.

In sum, any bad faith was inadequately pleaded, making damages from a bad faith claim speculative. Such speculative damages could not reach the level of a legal certainty required to support removal. Thus, the insurer could not invoke the potential for punitive damages, attorney’s fees, and super interest available under the bad faith statute to make up the other $5,569.93 needed to reach the jurisdictional minimum.

Date of Decision:  March 31, 2022

ACHACH v. TRAVELERS INDEMNITY COMPANY, U.S. District Court Middle District Pennsylvania No. CV 3:20-1669, 2022 WL 987885 (M.D. Pa. Mar. 31, 2022) (Mannion, J.)