District Court’s Examination of Validity of Underlying Claims in Determining Amount in Controversy is Improper
On March 14, 2014, we wrote about a district court examining the merits of a plaintiff’s claims when addressing the amount in controversy requirement upon removal of a case from state to federal court. [Click here to view]. McDaniel v. Fifth Third Bank (M.D. Fla. Feb. 28, 2014). To recap, the plaintiff filed a class action complaint against Fifth Third Bank alleging, among other things, statutory violations and fraud. Fifth Third removed the case pursuant to the Class Action Fairness Act. The district court remanded the case finding that the amount in controversy requirement was not satisfied because plaintiff’s claims for punitive damages based on his fraud allegations were not at issue because the “fraud claims were deficient on their face.” Fifth Third appealed claiming that it was error for the district court to refuse to consider the amount of the punitive damages related to the plaintiff’s fraud claims. The Eleventh Circuit agreed. McDaniel v. Fifth Third Bank_June 5, Case No. 14-11615, 2014 WL 2525192 (11th Cir. June 5, 2014).
Specifically, the Court found that “the district court erred when it refused to consider the amount of damages flowing from [Plaintiff’s] fraud claims based on its determination that those claims failed as a matter of law.” Id. at * 2. “While a court may decide that some of a plaintiff’s claims lack merit in the context of a motion to dismiss, such considerations are inappropriate as part of jurisdictional analysis.” Id. Further, the Court explained that “the district court’s decision was based on the premise that the amount of damages flowing from facially deficient claims should not be considered when determining the amount in controversy. Were this correct, district courts would be required to consider the merits of a plaintiff’s claims before deciding whether jurisdiction exists…. [s]uch inquiry constitutes error.” Id. The Court reminds district courts that they can ignore the damages claimed by a plaintiff where the action is brought in bad faith, of course. However, under any other circumstances, “[a]ny inquiry into whether [a plaintiff] would actually recover these amounts in unnecessary and inappropriate. For the purposes of establishing jurisdiction, it is enough to show that he could.”