One Way Of Staying Out Of Federal Court

Insurance lawyers can generally get better out-comes for their clients when a case is litigated in a State or County Court versus in Federal Court.  There are ways of staying out of Federal Court but the way tried in this September 2019, opinion from the Southern District of Texas, Houston Division, seems unusual.  The opinion is styled, Phan VM Holding, LLC v. Evanston Insurance Company.

Phan sued Evanston in County Court and Evanston removed the case to Federal Court citing 28 U.S.C., Section 1332(a)(1), i.e., that the parties were diverse and that the amount in controversy exceeds $75,000, exclusive or interest and costs.  Phan filed a motion to remand arguing that the amount in controversy does not exceed $75,000.  When a defendant can show the amount in controversy exceeds the jurisdictional amount, then the burden is on the plaintiff to show that, as a matter of law, it is certain that he will not be able to recover more than the damages for which he has prayed.  This can be shown by Phan filing a binding stipulation or affidavit with the complaint that limits recovery to an amount below the jurisdictional threshold.  The law is clear that any ambiguities are construed against removal because the removal statute should be strictly construed in favor or remand.

In this case, Evanston claims the actual amount in controversy is Phan’s estimate of $848,972.11 which Phan seeks to be determined by appraisal.  Evanston says that Phan’s binding stipulation is misleading because Phan’s pleadings do not bar an appraisal award within the constraints of the stipulation.  The Court points out that a statement in the that Phan and counsel will neither seek nor accept more than $75,000 in state court after remand establishes to a legal certainty that Phan will not be able to recover more than $75,000.  In this case, Phan’s stipulation contains both such provisions.  Thus, Phan’s binding stipulation contains both such provisions and the case was remanded.

This case makes one wonder what the strategy is with Phan and his attorneys.  There is a big difference between an estimate of $848,972.11 and $75,000.  Maybe we will see more on this case.