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Posted: September 4, 2018

Recent Rulings By Judges Johnson And Feuerstein Highlight The Jurisdictional Pitfalls When Removing Personal Injury Cases Based On Diversity

Posted by Solomon N. Klein, Litigation Partner

Two rulings on the same day by District Judges Sterling Johnson and Sandra J. Feuerstein highlight the jurisdictional difficulties that can arise when removing personal injury cases to federal court on diversity grounds. Rita Alvarado v. New England Motor Freight, Inc. et al., 18 CV 2027 (E.D.N.Y. Aug. 24, 2018) (SJ) (RML). Mekhi v. Area Storage & Transfer, Inc. et al., 18-cv-4654 (E.D.N.Y. Aug. 24, 2018) (SJF) (AYS).

In the ruling by Judge Feuerstein, the Court sua sponte remanded the case back to state court because defendant jumped the gun by removing the case before the amount in controversy threshold was established. Mekhi v. Area Storage & Transfer, Inc. et al., 18-cv-4654 (E.D.N.Y. Aug. 24, 2018) (SJF) (AYS). In the ruling by Judge Johnson, the Court denied plaintiff’s motion to remand the case to state court where plaintiff argued that defendants waited too long before removing the case to federal court. Rita Alvarado v. New England Motor Freight, Inc. et al., 18 CV 2027 (E.D.N.Y. Aug. 24, 2018) (SJ) (RML).

Some background: Most attorneys are aware that removal based on diversity jurisdiction is only available if the amount at issue is more than $75,000. But New York CPLR 3017(c) prohibits personal injury plaintiffs from stating an amount of damages in the complaint – meaning the complaint will usually not establish the jurisdictional minimum of $75,000.

Timing is also an issue. The removal statute (U.S.C. § 1446) provides that defendant has 30 days from the date of service to remove the case. However, where the complaint does not evident the existence of diversity jurisdiction, defendant has 30 days “from which it may first be ascertained” that diversity jurisdiction exists to remove the case to federal court. In any event, the ability to remove to federal court normally ends one year after commencement of the action.

In Mekhi, one of defendants removed the case soon after it was served with the complaint, asserting that “there is a ‘reasonable probability’ that Plaintiff’s claim is in excess of the jurisdictional limit of $75,000, exclusive of interest and costs.” Judge Feuerstein sua sponte determined that defendant failed to establish that the amount in controversy exceeds $75,000.

The complaint here does not specify the damages sought since New York law prohibits statements regarding “the amount of damages to which the pleader deems himself entitled” in a personal injury action. N.Y. C.P.L.R. §3107(c). . . . [Defendant] notes that since Plaintiff has alleged “serious injury” within the meaning of New York Insurance Law §§5102(a) and 5104(a), she is seeking damages in excess of $50,000 for economic loss, plus pain and suffering. Notice ¶11. Coupling this threshold economic loss with Plaintiff’s generalized allegation of pain and suffering, Area Storage summarily concludes that “[c]onsequently, there is a reasonable probability” that the amount in controversy exceeds $75,000. Id. ¶13. The Court disagrees.

[Defendant’s] arguments are speculative and are extrapolated from boilerplate allegations of injury. In considering whether remand is appropriate, “boilerplate pleadings do not suffice to establish that this action involves an amount in controversy adequate to support federal diversity jurisdiction.” [citations omitted] . . . Defendant has provided no other basis upon which the Court can conclude that the jurisdictional limit has been met. Given its conclusory assertions and the lack of any detail regarding Plaintiff’s specific damages, there is simply insufficient information to “intelligently ascertain removability.” DeMarco v. MGM Transp., Inc., No. CV 06-0307, 2006 WL 463504, at *1 (E.D.N.Y. Feb. 24, 2006) (quotation marks and citations omitted). As this Court lacks subject matter jurisdiction, remand is required.

[Defendant] is not without recourse. Although New York law prohibits inclusion of an ad damnum clause in a personal injury complaint, it also allows a defendant to “at any time request a supplemental demand setting forth the total damages to which the pleader deems himself entitled.” N.Y. C.P.L.R. § 3017(c). A plaintiff is required to provide the supplemental demand within fifteen (15) days of the request, and may be compelled by the court to comply. Id. The Second Circuit, recognizing a defendant’s dilemma where the complaint fails to specify the amount of damages sought has held that “the removal clock does not start to run until the plaintiff serves the defendant with a paper that explicitly specifies the amount of money damages sought.” Moltner v. Starbucks Coffee Co., 624 F.3d 34, 38 (2d Cir. 2010) (per curiam). Defendant should have availed itself of the supplemental demand procedure rather than prematurely removing the action to this court.

Mekhi v. Area Storage & Transfer, Inc. et al., 18-cv-4654 (E.D.N.Y. Aug. 24, 2018) (SJF) (AYS).

In Alvarado, defendants almost waited too long to remove. The action was commenced on January 19, 2018. Plaintiff served a bill of particulars identifying $44,140 in special damages plus pain and suffering. On March 9, 2018, Plaintiff served a statement of damages alleging $1 million in damages. Defendants removed on April 5, 2018 – less than 30 days after the statement of damages but more than 30 days from the bill of particulars.

Plaintiff moved to remand the case back to state court, arguing that the removal was untimely because had Defendant used a “reasonable amount of intelligence” the bill of particulars would have evidenced the existence of diversity jurisdiction.

Judge Johnson disagreed and denied the motion to remand:

Plaintiff argues that Defendants’ removal was untimely and that the notice of removal failed to show complete diversity of the parties. Plaintiff contends that the first paper from which removability could be ascertained was Plaintiff’s bill of particulars, served on Defendants on February 16, 2018, which contains allegations referencing special damages in an amount not less than $44,140.00, and an unspecified amount of damages for pain and suffering. . . Defendants contend that the first paper from which removability could be ascertained was Plaintiff’s statement of damages, served on Defendants on or about March 9, 2018. If Plaintiff’s statement of damages is the “motion, order or other paper from which it [might] first be ascertained that the case is one which is or has become removable,” then removal was timely. See 28 U.S.C. § 1446(b)(3). The issue, therefore, is whether the case was removable on February 16, 2018.

In determining whether the thirty-day removal clock has begun to run, courts in this circuit have declined to impose on defendants an affirmative duty to investigate the possible federal features of a poorly drafted pleading. See Soto v. Apple Towing, 111 F. Supp. 2d 222, 224–26 (E.D.N.Y. 2000). But defendants may not willfully ignore grounds for removal that can be “intelligently ascertain[ed].” Id. at 226. “‘[A]scertained’ as used in section 1446(b) means a statement that should not be ambiguous or one which requires an extensive investigation to determine the truth.” Id. (quotation marks and internal citation omitted). Further, “the facts warranting removability” must be “explicit,” and “the elements of removability must be specifically indicated in official papers.” Id. at 225 (quoting Riggs v. Cont’l Baking Co., 678 F. Supp. 236, 238 (N.D. Cal. 1988). Put another way, a “defendant need not guess as to whether the Plaintiff’s claim reaches the $75,000 threshold for . . . diversity jurisdiction purposes, and may wait to file a notice of removal until the Plaintiff provides specific information about the amount in controversy.” Moltner v. Starbucks Coffee Co., 2009 WL 510879, at *1 (S.D.N.Y. June 18, 2007).

In the bill of particulars, Plaintiff specifies damages that are less than the jurisdictional threshold, but argues that its unspecified request for compensatory damages related to pain and suffering put Defendants on notice that the amount of Plaintiff’s claim exceeds $75,000. But Plaintiff’s position that Defendants could have utilized a “reasonable amount of intelligence” to ascertain that its claim for pain and suffering exceeds the jurisdictional threshold asks this Court to impose upon Defendants a duty to speculate as to the amount of those unspecified damages. This heightened standard would require Defendants to risk remand by removing an action where the amount in controversy has not been clearly established. As Defendants are not authorized to prematurely remove an action, such a result would effectively allow Plaintiff to have it both ways. . . . Accordingly, the Court finds that the action was not removable based on Plaintiff’s bill of particulars.

. . .

The Court finds that the statement of damages is the first paper from which removability could be ascertained, as it claimed an amount in controversy above the jurisdictional threshold. Defendant’s removal on April 5, 2018 was therefore timely.

Rita Alvarado v. New England Motor Freight, Inc. et al., 18 CV 2027 (E.D.N.Y. Aug. 24, 2018) (SJ) (RML).

Posted by Solomon N. Klein, Litigation Partner

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