Diversity Jurisdiction, the Amount in Controversy, and Removal: A Defendant’s Burden

Legal Alert

March 20, 2024

In a lawsuit between parties located in different states, a plaintiff sometimes try to keep the case in the state court by being cagey about defining their damages to prevent the defendant from removing the case to federal court. Unless the defendant can show that the “amount in controversy” is at least $75,000, that defendant cannot invoke federal court jurisdiction where the parties have diverse citizenship. In Wal-Mart Stores East, LP v. Howell, Case No. A23A1198 (decided March 12, 2024), the Georgia Court of Appeals wrestled with a case where the plaintiff successfully stayed out of federal court despite recovering a six-figure verdict. The case informs defendants about how to deal with a plaintiff who seeks to obscure the amount in controversy.

The plaintiff in Howell alleged a slip and fall case. Wal-Mart initially removed the case to federal court. It relied on the plaintiff’s $400,000 settlement demand to establish the amount in controversy. Opinion at 5. The federal court remanded the case to state court, concluding that Wal-Mart had not sufficiently proven the amount in controversy. However, the federal court limited the plaintiff’s damages to $75,000 unless the trial judge found that circumstances had changed after the plaintiff moved to remand. Opinion at 5.

Years later, the case proceeded to trial. A jury awarded the plaintiff $300,000. Opinion at 8. Wal-Mart argued on appeal that circumstances had not changed and that the doctrine of judicial estoppel limited the plaintiff’s damages to $75,000.

The Court of Appeals upheld the verdict. The Court of Appeals concluded that the trial court had not abused its discretion in concluding that circumstances had changed. The Court of Appeals noted that the plaintiff had rejected Wal-Mart’s post-remand settlement offer in excess of $75,000. Also, the plaintiff had disclosed additional information about her injuries and additional information bearing on Wal-Mart’s liability had been discovered.

Howell teaches defendants that if the amount in controversy is unclear or obscure, the defendant has the burden to press the issue and create clarity. The Court noted that Wal-Mart had not followed up with additional discovery to clarify plaintiff’s damage claims or removed the case again after plaintiff rejected a settlement in excess of $75,000. Opinion at 13-14.

A defendant has only one year after a case is filed in state court to uncover the amount in controversy and remove the case to federal court. If a plaintiff can remain ambiguous about the amount at issue, a defendant can lose the ability to remove the case.

Howell instructs defendants wishing to remove a case to federal court based on diversity jurisdiction to exercise diligence to press a plaintiff to specify his damages and remove uncertainty about the amount in controversy.

The opinion is available at https://efast.gaappeals.us/download?filingId=0b244536-f3a9-46f6-9560-283b5135f713