Federal Court And Stipulation

Insurance disputes involving smaller claims can properly be handled in a State or County courts if the insurance lawyer knows how to keep the case from being removed to Federal court.  This is illustrated in the 2019, opinion styled, Michael Ihekoronye v. United Property & Casualty Insurance Company.  Plaintiff, Michael Ihekoronye, filed the case in State court and United removed the case to Federal court.  Plaintiff filed a motion to remand the case back to the State court.

Pursuant to 28 U.S.C., Section 1332(a), Federal district courts have original jurisdiction over civil actions between citizens of different states where the amount in controversy exceeds $75,000, exclusive of interest and costs.  A state-court plaintiff seeking to avoid federal jurisdiction may do so by filing a binding stipulation with the original complaint that limits recovery to an amount below the jurisdictional threshold.

In this case, United argues that removal was proper because the parties are completely diverse and the amount in controversy exceeds $75,000.  Plaintiff seeks remand based on a stipulation attached as Exhibit E to the state court petition, which states that “the total sum or value in controversy in this cause of action does not exceed $75,000 exclusive of interest and costs” and that “neither Plaintiff nor his/her attorney will accept an amount that exceeds $75,000 exclusive of interest and costs.”

Defendant argues the Exhibit E Stipulation is invalid because it contradicts the remedies prayed for in the Original Complaint.  United points to the Original Complaint’s lack of specificity as to the damages sought and the fact that Plaintiff sent a pre-suit demand letter valuing the cost of repairs as $61,383.40 and asking for $10,000 in attorney’s fees.  United also argues that remand is improper because Plaintiff refused to sign “a valid, binding stipulation” presented by United that would expressly include attorney’s fees in the $75,000 limit.

Plaintiff filed the Exhibit E Stipulation with his Original Petition to avoid federal jurisdiction by limiting recovery to an amount below the jurisdictional threshold.  District courts in this Circuit, including this court, have consistently held that stipulations like the Exhibit E Stipulation are capable of defeating federal jurisdiction.  Plaintiff is bound by the Exhibit E Stipulation not to accept an award of damages in excess of $75,000.  United points to no binding authority that a stipulation is invalid because the Original Petition does not specify the amount of damages prayed for or a pre-suit demand letter estimated damages and attorney’s fees near $75,000.  Any vagueness in the Original Petition or amount estimated in a pre­-suit demand letter is irrelevant because the Exhibit E Stipulation prevents Plaintiff from recovering in excess of the federal jurisdictional limit.

Nor does United point to any authority holding that documents like the Exhibit E Stipulation are not binding under Fifth Circuit precedent unless they expressly include attorney’s fees in the amount capped at $75,000.  Attorney’s fees are part of the total amount in controversy.  The Exhibit E Stipulation states “the total sum or value in controversy in this cause of action does not exceed $75,000.”  Attorney’s fees are necessarily included in that amount and accordingly would not raise the amount in controversy above $75,000.

The motion to remand was granted.