UNITED STATES COURT OF APPEALS For the Fifth Circuit
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No. 01-30411
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MERLE MANGUNO, Individually and as a representative of all persons similarly situated, Plaintiff-Appellant,
VERSUS
PRUDENTIAL PROPERTY AND CASUALTY INSURANCE COMPANY,
Defendant-Appellee.
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Appeal from the United States District Court for the Middle District of Louisiana ________________________________________________
January 8, 2002
Before JONES and DeMOSS, Circuit Judges, and FELDMAN, District Judge.*
FELDMAN, District Judge:
In November, 1993, Merle Manguno's 1990 Lincoln Towncar
was damaged in an accident. Manguno's insurer, Prudential Property
and Casualty Insurance Company, paid her for the repair of the car,
but not for the difference between the car's pre-loss value and its
value after the repairs (its "diminished value"). Manguno's
* District Judge for the Eastern District of Louisiana, sitting by designation.
1 insurance policy provides that Prudential's liability is limited to
the least of (1) the actual cash value of the damaged car, (2) the
amount necessary to repair or replace the car with one of like kind
and quality, or (3) the amount stated in certain declarations.
In September 1999, Manguno filed a putative class action in
Louisiana state court against Prudential, on behalf of herself and
other Prudential policyholders who were not compensated for the
post-repair diminished value of their damaged vehicles. Manguno's
complaint charged that because Prudential refused to compensate her
for the car's diminished value, it had knowingly, intentionally,
and deceitfully breached its contract with Manguno and others
similarly situated. Manguno's petition also asserted that
Prudential had hidden and concealed its obligations to its
insureds. The petition added that "the amount in controversy does
not exceed $75,000" and "plaintiffs are not seeking attorneys fees
under La.R.S. 22:658." Prudential removed the case to federal
court based on diversity jurisdiction. See 28 U.S.C. § 1332.
Prudential asserted that the amount in controversy likely exceeds
the $75,000 jurisdictional threshold because potential attorney's
fees for the entire class should be aggregated and assigned to the
class representative for purposes of determining diversity
jurisdiction. Prudential submitted an uncontradicted affidavit
stating that, if aggregated, the class attorney's fees would likely
exceed $75,000. Manguno moved to remand the case to state court.
2 The motion was referred to a magistrate, who found that Manguno's
petition contained facts which, if proved, would require an award
of attorney's fees under Louisiana Revised Statute § 22:658.1 The
magistrate determined that the statutory attorney's fees should be
aggregated and attributed to Manguno as the class representative
under Louisiana Code of Civil Procedure article 595.2 The
magistrate disregarded Manguno's stated waiver of statutory fees
because Manguno had neither verified her petition nor submitted a
binding stipulation waiving a claim for such fees. Thus, the
magistrate denied Manguno's motion to remand. The district court
affirmed the magistrate's ruling and retained jurisdiction.
Prudential moved to dismiss, contending that Manguno's policy
1 Louisiana Rev. Stat. 22:658 provides:
A.(1) All insurers issuing any type of contract . . . shall pay the amount of any claim due any insured within thirty days after receipt of satisfactory proofs of loss from the insured or any party of interest. . . B.(1) Failure to make such payment within thirty days after receipt of such satisfactory written proofs . . . when such failure is found to be arbitrary, capricious, or without probable cause, shall subject the insurer to a penalty, in addition to the amount of loss, of ten percent damages on the amount found to be due from the insurer to the insured, or one thousand dollars, whichever is greater, together with all reasonable attorney fees for the prosecution and collection of such loss. 2 Louisiana Code of Civil Procedure Article 595 provides:
The court may allow the representative parties their reasonable expenses of litigation, including attorney's fees, when as a result of the class action a fund is made available, or a recovery or compromise is had which is beneficial, to the class.
3 did not require Prudential to compensate her for the post-repair
diminished value of her car. This motion was also referred to the
magistrate, who found that the "repair or replace" language in the
"limitation of liability" provision of Manguno's policy limited
Prudential's obligation to compensating Manguno for the repairs to
her car, and did not require the company to pay for post-repair
diminished value. The magistrate recommended granting Prudential's
motion, and the district court adopted the recommendation and
dismissed the case. Manguno appeals the district court's failure
to remand and its dismissal of her case. We affirm.
I. Standard of Review
The district court's orders denying remand and dismissing
Manguno's complaint are both reviewed de novo. See, e.g., Gebbia
v. Wal-Mart Stores, Inc., 233 F.3d 880, 882 (5th Cir. 2000); St.
Paul Mercury Ins. Co. v. Williamson, 224 F.3d 425, 439-40 n.8 (5th
Cir. 2000).
II. Removal
A party may remove an action from state court to federal court
if the action is one over which the federal court possesses subject
matter jurisdiction. See 28 U.S.C. § 1441(a). The removing party
bears the burden of showing that federal jurisdiction exists and
that removal was proper. De Aguilar v. Boeing Co., 47 F.3d
1404, 1408 (5th Cir. 1995); Jernigan v. Ashland Oil Inc., 989 F.2d
812, 815 (5th Cir. 1993) (per curiam); Willy v. Coastal Corp., 855
4 F.2d 1160, 1164 (5th Cir. 1988). To determine whether jurisdiction
is present for removal, we consider the claims in the state court
petition as they existed at the time of removal. Cavallini v.
State Farm Mut. Auto Ins. Co., 44 F.3d 256, 264 (5th Cir. 1995).
Any ambiguities are construed against removal because the removal
statute should be strictly construed in favor of remand. Acuna v.
Brown & Root, Inc., 200 F.3d 335, 339 (5th Cir. 2000).
In this case, Prudential asserted federal jurisdiction on the
basis of diversity jurisdiction, which, in a class action, requires
complete diversity of citizenship of the named parties and an
amount in controversy in excess of $75,000, exclusive of interest
and costs. 28 U.S.C. § 1332(a)(1). Both parties concede that
complete diversity exists, and that the jurisdictional issue this
appeal focuses on is whether the case meets the $75,000
requirement.
We ordinarily consult the state court petition to determine
the amount in controversy. St. Paul Reins. Co. Ltd. v. Greenberg,
134 F.3d 1250, 1253 (5th Cir. 1998). However, Louisiana prohibits
plaintiffs from petitioning for a specific monetary amount. See
La. Code Civ. P. art. 893(A)(1). Therefore, where, as here, the
petition does not include a specific monetary demand, Prudential
must establish by a preponderance of the evidence that the amount
in controversy exceeds $75,000. See De Aguilar, 47 F.3d at 1412
(5th Cir. 1995). This requirement is met if (1) it is apparent from
5 the face of the petition that the claims are likely to exceed
$75,000, or, alternatively, (2) the defendant sets forth "summary
judgment type evidence" of facts in controversy that support a
finding of the requisite amount. See Simon v. Wal-Mart Stores,
Inc., 193 F.3d 848, 850 (5 th Cir. 1999); Allen v. R & H Oil & Gas
Co., 63 F.3d 1326, 1335 (5th Cir. 1995); see also Luckett v. Delta
Airlines, Inc., 171 F.3d 295, 298 (5th Cir. 1999). If a state
statute provides for attorney's fees, such fees are included as
part of the amount in controversy. Foret v. State Farm Bureau Life
Ins. Co., 918 F.2d 534, 537 (5th Cir. 1990); see also 14A C. Wright
& A. Miller, Federal Practice & Procedure § 3712, at 176 (2d ed.
1985).
For purposes of determining the amount in controversy in a
Louisiana class action, it has been the belief of some courts that
Louisiana Code of Civil Procedure article 595 allocates to the
class representative the aggregate attorney's fees sought for the
entire class if a separate statute provides for recovery of
attorney's fees as an element of damages. In re Abbott
Laboratories, 51 F.3d 524, 526-27 (5th Cir. 1995), aff'd in part by
an equally divided court, 120 S.Ct. 1578 (2000).3 If the class
3 District courts after Abbott have disagreed on whether article 595 can be the basis for aggregating attorney's fees absent an additional statute allowing for the recovery of such fees. See Grant v. Chevron Chemical Co., 2001 WL 839010, *2 (E.D.La. 2001) (explaining the split among district courts). Some cases have interpreted Abbott to mean that attorney's fees may be aggregated only if a separate statute allows recovery of
6 representative's claims, including the aggregated attorney's fees,
exceeds the jurisdictional minimum, then the district court may
exercise supplemental jurisdiction over the claims of all class
members. Id. at 529.
Manguno's petition alleges facts that, if proven, would give
rise to a claim for attorney's fees under La.R.S. 22:658, which
requires that an insurer pay any claim due to an insured within
thirty days of receipt of proof of loss or face the possibility of
penalties and fees. Manguno's allegations that Prudential
knowingly, intentionally, and deceitfully failed to pay her
according to her policy state a claim under this statute. See
Louisiana Maintenance Services, Inc. v. Certain Underwriters at
Lloyd's of London, 616 So.2d 1250 (La.1993)(stating that
"arbitrary, capricious, or without probable cause" refers to
insurers acting in bad faith); Steadman v. Pearl Assur. Co., 167
attorney's fees as an element of damages. See, e.g., Cooper v. Koch Pipeline, Inc., 1995 WL 931091 (E.D.La.1997) (Fallon, J.); Vaughn v. Mitsubishi Acceptance Corp., 1999 WL 1277541 (E.D.La.1999) (Sear, J.). Others have held that article 595, by its own force, allows for the aggregation of attorney's fees and does not require the support of a separate authorizing statute. See, e.g., Millet v. Marathon Oil Co., 1995 WL 396313 (E.D.La.1995) (Clement, J.); Kimball v. Modern Woodmen of America, 939 F.Supp. 479 (M.D.La.1996) (Parker, J.); In re Gas Water Heater Products Liability Litigation, 1996 WL 732525 (E.D.La.1996) (Duval, J.). This issue is pending on appeal, Grant v. Chevron Chemical Co., 2001 WL 839010 (E.D.La. 2001), appeal docketed, No. 01-30939 (5th Cir. August 13, 2001). Because Manguno has pled facts sufficient to sustain a cause of action under La.R.S. 22:658, which provides for an award of attorney's fees, this Court need not reach the issue of whether article 595 by itself supports the aggregation of potential fees.
7 So.2d 527 (La.App.Ct.1964)(defining "arbitrary" and "capricious" as
without reasonable cause). Under Abbott, then, the district court
was correct in aggregating attorney's fees for determining the
jurisdictional amount as article 595 instructs.
Prudential carried its burden of proving the jurisdictional
amount by submitting an undisputed affidavit stating (based on the
number and value of claims submitted to Prudential during the
relevant period) that the aggregate attorney's fees for the
putative class would likely exceed $75,000. Thus, the case should
be remanded only if Manguno can prove to a legal certainty that her
recovery will fall below $75,000. Manguno may establish this by
identifying a statute, or by filing a binding stipulation, that so
limits her recovery. See De Aguilar, 47 F.3d at 1412.
Manguno's purported waiver of attorney's fees is ineffective.
Louisiana Code of Civil Procedure article 862 provides that state
courts will grant to a successful plaintiff the relief to which she
is entitled, even if she has not demanded such relief. Likewise,
in De Aguilar, state law did not limit the plaintiff's recovery to
the amount specified in the ad damnum clause. This Court has
expressed its concern about the possibility of "abusive
manipulation by plaintiffs, who may plead for damages below the
jurisdictional amount in state court with the knowledge that the
claim is actually worth more, but also with the knowledge that they
may be able to evade federal jurisdiction by virtue of the
8 pleading." De Aguilar at 1410.
Moreover, it is improbable that Manguno can ethically
unilaterally waive the rights of the putative class members to
attorney's fees without their authorization. See De Aguilar, 47
F.3d at 1413 (holding that representative plaintiffs had no
authority to limit class members' recovery); see also Pendleton v.
Parke-Davis, 2000 WL 1808500, *5 (E.D.La. 2000). Thus, Manguno
failed to demonstrate to a legal certainty that the amount in
controversy did not exceed the jurisdictional amount. The district
court properly denied Manguno's motion to remand.
III. Dismissal
Federal Rule of Civil Procedure 12(b)(6) allows a party to
move for dismissal of a complaint for failure to state a claim upon
which relief can be granted. Such a motion "is viewed with
disfavor and is rarely granted." See Kaiser Aluminum & Chem. Sales
v. Avondale Shipyards, 677 F.2d 1045, 1050 (5th Cir. 1982), cert.
denied, 459 U.S. 1105 (1983). The complaint must be liberally
construed in the plaintiff’s favor, and all facts pleaded in the
complaint must be taken as true. See Campbell v. Wells Fargo Bank,
781 F.2d 440, 442 (5th Cir.), cert. denied, 476 U.S. 1159 (1986).
A complaint should be dismissed under Rule 12(b)(6) if "it appears
beyond doubt that the plaintiff can prove no set of facts in
support of his claim which would entitle him to relief." Lowrey v.
Texas A&M University System, 117 F.3d 242, 247 (5th Cir.
9 1997)(quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)).
Although the Louisiana Supreme Court has not yet ruled on the
issue of diminished value losses, two Louisiana appeals courts have
recently held that almost identical "repair or replace" policy
language does not require the insurer to pay for diminished value
losses. See Townsend v. State Farm Mut. Auto Ins. Co., 793 So.2d
473 (La.Ct.App. 2001); Campbell v. Markel Amer. Ins. Co., 2001 WL
1105312 (La.Ct.App. 2001). In Townsend, for example, the Louisiana
Court of Appeals for the Second Circuit pointedly said:
[W]here an insurer has paid for full and adequate physical repair to a damaged vehicle when a first party claim is made, its obligation under the policy is satisfied and it is not required to pay for any reduction in market value of the vehicle . . . The policy provision requiring the insurer to pay the cost of repair or replacement limits the insurer's liability to the cost of restoring the vehicle to substantially the same physical condition as before the accident so that it is as fit for operation as it was prior to the occurrence of the damage.
Townsend, 793 So.2d at 480. Townsend and Campbell guide this
Court's Erie guess that the Louisiana Supreme Court would also find
that the "repair or replace" language in Manguno's policy limits
Prudential's liability to the cost of the actual and appropriate
restoration of her car only, and it is not required to compensate
her for the car's diminished value. Thus, Manguno does not state
a claim under Louisiana law upon which relief can be granted, and
the district court's dismissal was proper.
10 The district court's rulings are, in all respects,
AFFIRMED.
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