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Plaintiff Isn't the Only Master of a Complaint

By Robyn Hagan Cain | Last updated on

The plaintiff in a lawsuit is generally the master of his complaint, but the Tenth Circuit Court of Appeals ruled last week that the defendant can have a say regarding the amount in controversy when it becomes clear that a plaintiff is simply trying to evade federal jurisdiction.

Larry D. Frederick brought a putative class action suit against Hartford Underwriters Insurance Company (Hartford) in Colorado state court; Hartford removed the case to federal court. That's clearly not where Frederick wanted to litigate.

Frederick's first complaint, filed in Colorado state court, asserted that a putative class of consumers had purchased insurance from Hartford, and alleged that the company failed to disclose important information regarding the class's policies. When Hartford invoked the Class Action Fairness Act (CAFA), (arguing that the amount in controversy exceeded $5 million) and removed the case to federal court, Frederick voluntarily dismissed the case before the court ruled on his motion. Then he filed a nearly-identical complaint in state court seeking "a total award for compensatory and punitive damages [that] does not exceed $4,999,999.99."

Hartford again removed the suit, arguing that Frederick was seeking at least $2,960,988 in compensatory damages based on the size of the class and the temporal period at issue. Because Frederick was also seeking punitive damages — which, under Colorado Rev.Stat. § 13-21-102(1)(a), could equal up to the amount of compensatory damages awarded — Hartford asserted that the total amount in controversy was at least $5,921,996.

In support of its amount-in-controversy calculation, Hartford attached an affidavit of the Hartford employee who calculated the sum. Frederick moved to remand, asserting that the court lacked jurisdiction because, as "master of his complaint," he "decided to limit total damages to an amount no more than $4,999,999.99."

In a case of first impression for the Tenth Circuit Court of Appeals, the appellate court concluded that a defendant in these circumstances is entitled to present his own estimate of the amount at stake and must show by a preponderance of the evidence that the amount in controversy exceeds the CAFA -- currently $5 million.

The Tenth Circuit further emphasized that this preponderance standard applies to punitive damages as well, and that such damages cannot be assumed when calculating the amount in controversy.

According to the Tenth Circuit, a defendant seeking to remove because of a claim for punitive damages "must affirmatively establish jurisdiction by proving jurisdictional facts that make it possible" that punitive damages are in play. The defendant does not have to prove that the plaintiff is more likely than not to ultimately recover punitive damages, but merely that: (1) state law permits a punitive damages award for the claims in question; and (2) the total award, including compensatory and punitive damages, could exceed $5 million.

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