Rex T. Morrison v. Allstate Indemnity Co.

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________ FILED
U.S. COURT OF APPEALS
No. 99-14141 ELEVENTH CIRCUIT
_______________________ 09/26/00
THOMAS K. KAHN
CLERK
D.C. Docket No. 98-00377-CIV-J-20C
REX T. MORRISON, HAROLD HIGHLEY, et al.,
Plaintiffs-Appellants,
versus
ALLSTATE INDEMNITY COMPANY, NATIONWIDE MUTUAL FIRE
INSURANCE COMPANY, et al.,
Defendants-Appellees.
__________________________
Appeal from the United States District Court
for the Middle District of Florida
_________________________
(September 26, 2000)
Before CARNES, HILL, and KRAVITCH, Circuit Judges.
CARNES, Circuit Judge:
This putative diversity class action suit arises out of a dispute over insurance
coverage for the diminished value of a vehicle after it sustains physical damage
and is repaired. The district court dismissed the suit, concluding that the plaintiffs
failed to state a claim upon which relief can be granted, and the plaintiffs appealed.
However, we do not reach the merits of the plaintiffs’ arguments on appeal because
it appears that the district court lacked subject matter jurisdiction over this lawsuit.
For the following reasons, we remand the case to the district court to allow the
plaintiffs an opportunity to prove that jurisdiction is present.
I. BACKGROUND
The named plaintiffs in this case brought this suit against nine insurance
companies in the United States District Court for the Middle District of Florida.1
1
Each of the named plaintiffs (six couples and three individuals) owned vehicles insured
during the relevant times by one of the nine defendants. Listed below are the named plaintiffs
and their respective insurers:
Plaintiff Defendant
Rex T. Morrison Allstate Indemnity Company
Harold and Gael Highley Nationwide Mutual Fire Insurance Company
Pamela M. Wilcox State Farm Mutual Automobile Insurance Company
Robert and Edith Brown Hartford Insurance Company of the Midwest
Berlie and Flora Caudill Integon General Insurance Corporation
James E. Williams GEICO General Insurance Company
William and Gael Moten Atlanta Casualty Company
Samuel and Frances Perry Allstate Insurance Company
Bradley and Kendra Emerson State Farm Fire and Casualty Company.
2
In their Second amended complaint, the plaintiffs sought to invoke the district
court’s diversity jurisdiction pursuant to U.S.C. § 1332(a), alleging that the matter
in controversy exceeded $75,000 and that diversity of citizenship existed between
the plaintiffs, who are all citizens of Florida, and the nine non-Florida insurers.
The plaintiffs brought suit on behalf of themselves and all other persons or entities
similarly situated.
Each plaintiff owned a vehicle insured by one of the defendants. The
insurance policies provide coverage for physical damage to the vehicle, subject to
specified limitations of liability. For example, the policy for Allstate Indemnity
Company involved in this case provides that “Allstate will pay for direct and
accidental loss to your insured auto or a non-owned auto . . . from a collision with
another object or by upset of that auto . . . .” This coverage for loss is limited by
the following policy language: “Allstate’s limit of liability is the actual cash value
of the property or damaged part of the property at the time of loss . . . . However,
our liability will not exceed what it would cost to repair or replace the property or
part with other of like kind and quality.” In other words, the policies limit the
3
defendants’ liability to the lesser of (1) the cash value of the vehicle, or (2) the cost
to repair the vehicle.2
The dispute in this case centers on whether, under Florida law, this policy
language requires the defendants to compensate the plaintiffs for the diminished
value of their vehicle after its has been repaired – the difference between the pre-
accident market value of the vehicle and its market value after it has been repaired.
The plaintiffs say it does, the defendants say it does not. The dispute matters
because there is a difference in value between pre-wrecked value and fully repaired
post-wreck value. For whatever reason (probably skepticism about the efficacy of
automobile repairs) people generally will pay more for a used vehicle that has
never been wrecked than they will for what is otherwise the same vehicle that has
been wrecked and fully repaired. The difference is what the plaintiffs refer to as the
“diminished value” of a repaired vehicle.
The plaintiffs filed this class action, alleging that the defendants have failed
to pay them for the diminished value of their wrecked but repaired vehicles as they
contend is required by the policy language and Florida law. They further allege
that the defendants “knowingly, intentionally, and wrongfully charged and
2
Each of the nine plaintiffs has a different insurance policy provided by one of the nine
defendants, none of which materially differ with respect to the coverage for loss to the vehicle
and the limitation of liability clauses at issue in this case.
4
received premiums for full coverage . . . with no intent to provide Diminished
Value Coverage and have established a practice of not paying diminished value
loss.” The plaintiffs seek to certify the following class and subclass:
(a) a “Policyholder Class” consisting of all persons residing in the
Sate of Florida, who during the Class Period . . . have or had
purchased motor vehicle insurance policies from one or more of the
Defendants providing ‘first party’ motor vehicle physical damage
coverage . . . but whom Defendants have deprived and are depriving
of the benefit of ‘Diminished Value’ coverage (i.e., coverage for the
risk of diminution in value to their vehicles in the event their vehicles
are physically damaged and later fully repaired, but still have a lower
market value after repairs have been completed due to the seriousness
of the physical damage); and (b) a “Damaged Vehicle Subclass”
consisting of all persons residing in the State of Florida who have not
been paid Diminished Value compensation by respective Defendants
as their ‘first party’ insurer after their insured vehicle has actually
been damaged and suffered Diminished Value and has been repaired.3
According to the plaintiffs’ allegations, the size of the policyholder class
exceeds one million, but they do not allege a specific number of members in the
Damaged Vehicle Subclass. Each of the named plaintiffs is a member of the
subclass.
3
The plaintiffs further defined the “Damaged Vehicle Subclass” as “consist[ing] of all
Policyholder Class Members that have or had a vehicle damaged during the applicable coverage
period, and where: (a) the vehicle was repaired at a cost of $3,000 or more, or has incurred
damages of 20% or more of the vehicle’s fair market pre-accident value; (b) the vehicle was no
more than five years old at the time of the incident causing the damage; (c) the policyholder has
not been paid or received Diminished Value compensation from their respective Defendant
insurer.”
5
On behalf of the entire Policyholder Class, the plaintiffs assert three claims:
(1) breach of contract, (2) unjust enrichment, and (3) injunctive relief. Although
styled as separate claims, both the breach of contract and unjust enrichment claims
are based on the theory that the class members have paid premiums for diminished
value coverage which the defendants have not provided, and have no intention of
providing, and thus, the defendants have been unjustly enriched by the amount of
the premiums attributable to diminished value coverage. In both claims, the
plaintiffs allege that they “suffered damages including the actuarial value of the
Diminished Value Coverage.”
In the claim for injunctive relief, the plaintiffs request that the defendants be
permanently enjoined from: (1) depriving their insureds of diminished value
coverage required by the insurance policies, (2) failing to disclose to insureds,
whose vehicles have been damaged and repaired, the defendants’ obligation to pay
for diminished value, and (3) failing to pay for diminished value loss on vehicles
actually damaged. The plaintiffs also request that the defendants be required to
provide written notice to class members, and future insureds, disclosing to them
that diminished value coverage is provided by their insurance policies.
In addition to the three claims asserted on behalf of the entire class, the
plaintiffs also assert a claim for breach of contract on behalf of the Damaged
6
Vehicle Subclass. Under this claim, the plaintiffs maintain the defendants
breached the terms of the policies by failing to pay compensation for the
diminished value incurred by the policyholders who have filed claims. They seek
damages for the uncompensated diminished value to their vehicles and attorney’s
fees and costs pursuant to Fla. Stat. § 627.428.
The defendants filed separate motions to dismiss. The district court granted
the defendants’ motions to dismiss, holding that the plaintiffs failed to state a
claim upon which relief can be granted. The court reasoned that Florida law did
not automatically impose diminished value coverage absent a specific agreement,
and therefore, the plaintiffs’ complaint did not sufficiently allege a breach of
contract. The plaintiffs appealed.
On appeal, we raised the issue of whether the putative class action involved
a sufficient amount in controversy to sustain federal diversity jurisdiction under 28
U.S.C. § 1332. At our request, the parties submitted supplemental briefs on that
issue. Having reviewed the supplemental briefs and the record in this case, as well
as having discussed the the issue extensively at oral argument, we conclude that the
jurisdictional issue is dispositive of the case – at least for the time being – and
accordingly, we do not address the merits of the plaintiffs’ contention that the
district court erred in dismissing the complaint for failure to state a claim.
7
II. DISCUSSION
Federal courts have limited subject matter jurisdiction, or in other words,
they have the power to decide only certain types of cases. See University of South
Alabama v. American Tobacco Co., 168 F.3d 405, 410 (11th Cir. 1999). While
Article III of the Constitution sets the outer boundaries of that power, it also vests
Congress with the discretion to determine whether, and to what extent, that power
may be exercised by lower federal courts. See Palmore v. United States, 411 U.S.
389, 400-01, 93 S. Ct. 1670, 1678 (1973). Consequently, lower federal courts are
empowered to hear only cases for which there has been a congressional grant of
jurisdiction, and once a court determines that there has been no grant that covers a
particular case, the court’s sole remaining act is to dismiss the case for lack of
jurisdiction. See University of South Alabama, 168 F.3d at 409-10.
In the present case, the plaintiffs contend that subject matter jurisdiction
exists pursuant to 28 U.S.C. § 1332, the diversity jurisdiction statute. Under §
1332, a district court has jurisdiction over any civil case if (1) the parties are
“citizens of different States” and (2) “the matter in controversy exceeds the sum or
value of $75,000, exclusive of interests and costs.” 28 U.S.C. § 1332. It is the
latter requirement – an amount in controversy exceeding $75,000 – that poses the
jurisdictional hurdle in this case. This is true even though the defendants do not
8
dispute that this case involves the requisite amount in controversy for diversity
jurisdiction.4
Subject matter jurisdiction is conferred and defined by statute. It cannot be
created by the consent of the parties, see Fitzgerald v. Seaboard Sys. R.R., Inc.,
760 F.2d 1249, 1251 (11th Cir. 1985) (per curiam), nor supplanted by
considerations of convenience and efficiency, see, e.g., E.R. Squibb & Sons, Inc. v.
Accident & Cas. Ins. Co., 160 F.3d 925, 929 (2d Cir. 1998) (raising sua sponte,
after sixteen years of federal court litigation, the issue of whether diversity
jurisdiction existed). Thus, a federal court must inquire sua sponte into the issue
whenever it appears that jurisdiction may be lacking. See Fitzgerald, 760 F.2d at
1251 (“A federal court not only has the power but also the obligation at any time to
inquire into jurisdiction whenever the possibility that jurisdiction does not exist
arises.”). It is not unusual, at least at the appellate stage of a proceeding, for a
federal court to reject the joint jurisdictional blandishments of the parties. See
Swint v. Chambers County Com’n., 514 U.S. 35, 115 S. Ct. 1203, 1209 (1995).
4
After the plaintiffs filed their first amended complaint, Hartford filed a motion to
dismiss as to it, contending that the Browns, the named plaintiffs insured by Hartford, had not
alleged a sufficient amount in controversy. However, after the plaintiffs filed their second
amended complaint, it appears that neither Hartford nor the other defendants disputed the
amount in controversy allegation. Now all of the parties seem contented to be in federal instead
of state court.
9
The responsibility for keeping federal courts within their jurisdictional boundaries
ultimately lies with those courts.
When jurisdiction is premised on the diversity of the parties, the court is
obligated to assure itself that the case involves the requisite amount in controversy.
See, e.g., Laughlin v. K-Mart Corp., 50 F.3d 871, 873-74 (10th Cir. 1995)
(dismissing case sua sponte based on an insufficient amount in controversy); see
also Meritcare, Inc. v. St. Paul Mercury, Inc., 166 F.3d 214, 218 (3d Cir. 1999)
(“[I]f it develops that the requisite amount in controversy was never present, even
if that fact is not established until the case is on appeal, the judgment of the District
Court cannot stand.”).
In their complaint, the plaintiffs allege simply that “[t]he matter in
controversy exceeds the sum or value of $75,000, exclusive of interests and costs.”
(Pls.’ Second Amend. Compl. at ¶ 1). The complaint does not request a specific
amount of damages nor does it otherwise explain the basis for this jurisdictional
allegation. Responding to our inquiry on appeal, the parties argue that diversity
jurisdiction exists because: (1) at least one of the class members has a claim for
more than $75,000, which would establish diversity jurisdiction over that claim,
and then the court would have supplemental jurisdiction over the claims of the
10
entire class pursuant to 28 U.S.C. § 1367,5 or, (2) if no individual claim is valued at
more than $75,000, the class claims should be valued in the aggregate – the total
value of the class claims should be attributed to each class member for purposes of
measuring the amount in controversy.
Because the requisite amount in controversy undoubtedly is present if the
class members’ claims may be viewed in the aggregate, we address this argument
first.
A. AGGREGATION OF CLAIMS
Generally, if no single plaintiff’s claim satisfies the requisite amount in
controversy, there can be no diversity jurisdiction. However, there are situations
in which multiple plaintiffs have a unified, indivisible interest in some common
fund that is the object of litigation, permitting them to add together, or “aggregate,”
5
In Zahn v. International Paper Co., 414 U.S. 291, 94 S. Ct. 505 (1974), the Supreme
Court held that each member of a putative class must satisfy the requisite amount in controversy
to avoid being dismissed from a class action. In 1990, Congress amended 28 U.S.C. § 1367 to
extend the supplemental jurisdiction of federal courts “to include claims that involve the joinder
or intervention of additional parties.” See 28 U.S.C. § 1367(a). The issue of whether the 1990
amendments extend supplemental jurisdiction to the claims of an entire class once the claim of at
least one class member satisfies the requisite amount in controversy, thereby overruling Zahn,
has resulted in an even circuit split. Compare Stromberg Metal Works v. Press Mechanical, Inc.,
77 F.3d 928, 930-33 (7th Cir. 1996) (holding § 1367 overruled Zahn); In re Abbott Lab., Inc., 51
F.3d 524, 527-29 (5th Cir. 1995) (same), aff’d by an equally divided court sub. nom Free v.
Abbot Labs., 120 S. Ct. 1578 (2000) (see infra note 19), with Meritcare, Inc. v. St. Paul Mercury
Ins. Co., 166 F.3d 214, 218-22 (3d Cir. 1998) (holding § 1367 did not overrule Zahn); Leonhardt
v. Western Sugar Co., 160 F.3d 631, 638-41 (10th Cir. 1998) (same).
11
their individual stakes to reach the amount in controversy threshold. As explained
by the Supreme Court in Zahn v. International Paper Co.:
When two or more plaintiffs, having separate and distinct demands,
unite for convenience and economy in a single suit, it is essential that
the demand of each be of the requisite jurisdictional amount; but when
several plaintiffs unite to enforce a single title or right, in which they
have a common and undivided interest, it is enough if their interests
collectively equal the jurisdictional amount.
Zahn, 4141 U.S. at 295, 94 S.Ct. at 508 (quoting Troy Bank of Troy, Indiana v.
G.A. Whitehead & Co., 222 U.S. 39, 40-41, 32 S. Ct. 9 (1911)) (emphasis added).
Despite pervasive criticism of the “separate and distinct” versus “common
and undivided” distinction as arcane and confusing, there appears to be a common
thread in the relevant case law – the presence of a “common and undivided
interest” is rather uncommon, existing only when the defendant owes an obligation
to the group of plaintiffs as a group and not to the individuals severally. See Eagle
v. American Tel. and Tel. Co., 769 F.2d 541, 546 (9th Cir. 1985) (“[T]he character
of the interest asserted depends on the source of plaintiffs’ claims. If the claims are
derived from rights that they hold in group status, then the claims are common and
undivided. If not, the claims are separate and distinct.”); National Org. for
Women v. Mutual of Omaha Ins. Co., 612 F. Supp. 100, 107 (D.D.C. 1985)
(“[T]he cases that allow aggregation often speak of the presence of some fund to
12
which a plaintiff class is seeking access [, and] ... they often involve an attempt to
enforce a right that belongs to a group.”).
Our predecessor court elucidated this point further in Eagle Star Ins. Co. v.
Maltes, 313 F.2d 778 (5th Cir. 1963),6 stating: “[T]he Supreme Court has evinced a
desire to give a strict construction to allegations of the jurisdictional amount in
controversy, so as to allow aggregation only in those situations where there is not
only a common fund from which the plaintiffs seek relief, but where the plaintiffs
also have a joint interest in that fund, such that if plaintiffs’ rights are not affected
by the rights of co-plaintiffs, then there can be no aggregation. ... In other words,
the obligation to the plaintiffs must be a joint one.” Id. at 781; see also Gilman v.
BHC Secs., Inc., 104 F.3d 1418, 1424 (2d Cir. 1997) (“Plaintiffs in paradigm
‘common fund’ cases assert claims to a piece of land, a trust fund, an estate, an
insurance policy, a lien, or an item of collateral, which they claim as common
owners or in which they share a common interest arising under a single title or
right.”).
In addition, the unequivocal mandate from the Supreme Court is that the
modern class action procedure does not alter the well-settled limitation on
6
Decisions of the Fifth Circuit issued prior to October 1, 1981 are binding precedent on
this Court. See Bonner v. City of Prichard, 661 F.2d 1206, 1207 (11th Cir. 1981) (en banc).
13
aggregating the claims of multiple plaintiffs. See Snyder v. Harris, 394 U.S. 332,
89 S. Ct. 1053 (1969). In Snyder v. Harris, the named plaintiff’s damages claim
was less than the $10,000 then required for diversity jurisdiction, but the claims of
the entire class approached $1.2 million. See id. at 333, 89 S.Ct. at 1055.
However, because the class members’ damages claims were separate and distinct,
the Court held that the claims could not be aggregated and affirmed the dismissal
of the case for lack of subject matter jurisdiction. Id. at 335-39; 89 S. Ct. 1056-58
(“The doctrine that separate and distinct claims could not be aggregated was never,
and is not now, based upon the categories of old Rule 23 or of any rule of
procedure. That doctrine is based rather upon this Court’s interpretation of the
statutory phrase ‘matter in controversy.’”). Consequently, the claims of putative
class members may only be aggregated to satisfy the amount in controversy
requirement if the class members are suing to “enforce a single title or right, in
which they have a common and undivided interest.” Zahn, 414 U.S. at 295, 94
S. Ct. at 508; Snyder, 394 U.S. at 335, 89 S.Ct. at 1056.7
7
Although no class has been certified yet, we treat the suit as a class action for present
purposes. See 3B J. Moore, Moore's Federal Practice, ¶ 23.50 (2d ed. 1985) ("In the interim
between the commencement of the suit as a class action and the court's determination as to
whether it may be so maintained it should be treated as a class suit.")
In this case, there are essentially nine “mini-classes” within the Policyholder Class and
Damaged Vehicle Subclass, i.e., classes of insureds who own policies with one of the nine
defendant insurers with each “mini-class” being represented by one of the named plaintiffs. See
14
Against this backdrop of the law of aggregation, we now consider whether
the various claims for relief in this class action may be aggregated to satisfy the
jurisdictional amount in controversy in this case.
1. Compensatory Damages
While most class members in this case appear to have relatively small
compensatory damages claims, see infra Part II.B.1, it is clear that if aggregated,
those claims exceed $75,000. But it is also clear that the damages sought in this
case may not be aggregated.
As evident from the Supreme Court’s decision in Snyder, class members
generally may not aggregate their individual claims for compensatory damages to
establish the requisite amount of controversy. Snyder, 394 U.S. at 335, 89 S.Ct. at
1056. More specifically, when multiple plaintiffs assert rights arising from
individual insurance policies, their claims are separate and distinct, and
accordingly, may not be aggregated. See Alvarez v. Pan American Life Ins. Co.,
375 F.2d 992, 993-994 (5th Cir. 1967); Troup v. McCart, 238 F.2d 289, 295-96
supra note 1. Claims against multiple defendants can only be aggregated when the defendants
are jointly liable to the plaintiff. See Jewell v. Grain Dealers Mut. Ins. Co., 290 F.2d 11, 13 (5th
Cir. 1961). The various defendants here are not jointly liable to the class members, and
therefore, if aggregation of the class members’ claims is permissible, only the claims within each
“mini-class” may be aggregated against the corresponding defendant. In other words,
aggregation of all of the class members’ claims would be insufficient to establish jurisdiction in
this case. Instead, each “mini-class” must separately establish the requisite jurisdictional amount
between its members and the particular defendant.
15
(5th Cir. 1957). Because each member of the Policyholder Class, as well as each
member of the Damaged Vehicle Subclass, seeks damages resulting from the
defendants’ alleged breach of individual insurance policies, the compensatory
damages in this case may not be aggregated to establish diversity jurisdiction.
The fact that the breach of contract claim asserted on behalf of the
Policyholder Class is alternatively characterized as one for unjust enrichment does
not change the result of the aggregation analysis. In Count II of their complaint,
the plaintiffs seek to compel the defendants to disgorge the amount of the collected
premiums allegedly attributable to the diminished value coverage the defendants
refuse to provide, thereby creating a common fund of recovery on behalf of the
class.
For amount in controversy purposes, however, it is the nature of the right
asserted, not that of the relief requested, that determines whether the claims of
multiple plaintiffs may be aggregated. See Gilman, 104 F.3d at 1427 (explaining
cogently the difference between a common fund permitting aggregation and the
common fund that is usually generated in any class action); Snow v. Ford Motor
Co., 561 F.2d 787, 790 (9th Cir. 1977). The members of the Policyholder Class
are asserting rights arising from their individual insurance policies, and if
successful, they will recover the amount of excessive premiums each paid under
16
his own policy. The fact that this recovery may be obtained under an equitable
theory of unjust enrichment does not convert separate and distinct claims for
damages into a fund in which the class members have a common and undivided
interest. See, e.g., Alvarez, 375 F.2d at 993; Crawford v. American Bankers Ins.
Co. of Florida, 987 F. Supp. 1408, 1412 (M.D. Ala. 1997); Pierson v. Source
Perrier, S.A., 848 F. Supp. 1186, 1188-89 (E.D. Pa. 1994) (refusing to aggregate
disgorgement of profits under unjust enrichment claim because “claims cannot be
aggregated simply because [plaintiffs] frame their prayer for damages as equitable,
rather than legal, relief”).
2. Punitive Damages
In their complaint, the plaintiffs did not request punitive damages because, at
the time the complaint was filed, Florida Statute § 768.72 prohibited a plaintiff
from pleading punitive damages without first obtaining leave of court and
proffering evidence to support that pleading. See Cohen v. Office Depot, Inc., 184
F.3d 1292, 1294-95 (11th Cir. 1999) (“Cohen I”). In Cohen I, which was decided
only a few weeks before the district court dismissed the present lawsuit, this Court
held that § 768.72 was inapplicable to federal court proceedings because it was
preempted by Rule 8(a)(2) of the Federal Rules of Civil Procedure. See Cohen I,
184 F.3d at 1295-99. In their supplemental brief, the plaintiffs contend that they
17
will amend their complaint, if the case is remanded, to include a prayer for punitive
damages, thereby further increasing the amount in controversy.
However, Cohen is a double-edged sword for the plaintiffs. On petition for
rehearing, the Cohen Court held that prior binding precedent prohibited the
aggregation of a class claim for punitive damages. See Cohen v. Office Depot,
Inc., 204 F.3d 1069, 1076-77 (11th Cir. 2000) (“Cohen II”). Instead of being
aggregated, the Court explained, the amount of punitive damages must be divided
equally among all of the class members to determine the proper amount in
controversy for each member. See id. In the present case, the complaint alleges
that the size of the Policyholder Class “exceeds one million” and maintains that the
size of the Damaged Vehicle Subclass is also “large.”
As a result, even if the plaintiffs were able to amend their complaint and
plead a substantial sum of punitive damages on remand, the pro rata amount of
those damages for such a large class and subclass would have little effect on
establishing the requisite amount in controversy. For example, with the
Policyholder Class exceeding one million members, a “good faith” punitive
damages claim of one hundred million dollars would amount to less than a $100
for each member of the class. Even a one billion dollar punitive damages claim,
18
which could hardly be asserted in good faith, would amount to less than $10,000
for each class member.
Because neither the claims for compensatory damages or the potential claim
for punitive damages may be aggregated in this case, we now consider the possible
aggregation of the class claim for attorney’s fees.
3. Attorney’s Fees
On behalf of the Damaged Vehicle Subclass, the plaintiffs request, if they
are successful, attorney’s fees pursuant to Florida Statute § 627.428, which
provides:
(1) Upon the rendition of a judgment or decree by any of the
courts of this state against an insurer and in favor of any named
or omnibus insured or the named beneficiary under a policy or
contract executed by the insurer, the trial court or, in the event
of an appeal in which the insured or beneficiary prevails, the
appellate court shall adjudge or decree against the insurer and in
favor of the insured or beneficiary a reasonable sum as fees or
compensation for the insured's or beneficiary's attorney
prosecuting the suit in which the recovery is had.
***
(3) When so awarded, compensation or fees of the attorney
shall be included in the judgment or decree rendered in the case.
When a statute authorizes the recovery of attorney’s fees, a reasonable
amount of those fees is included in the amount in controversy. See Cohen II, 204
F.3d at 1079 (citing Missouri State Life Ins. Co. v. Jones, 290 U.S. 199, 202, 54
S. Ct. 133, 134 (1933)). However, on the question of whether a claim for statutory
19
attorney’s fees may be aggregated in a class action, two recent decisions by this
Court indicate the answer is “no.” See id. at 1079-1083; Darden v. Ford Consumer
Fin. Co., 200 F.3d 753, 757-59 (11th Cir. 2000); cf. Davis v. Carl Cannon
Chevrolet-Olds, Inc., 182 F.3d 792, 796-97 (11th Cir. 1999) (disallowing
aggregation of class claim for non-statutory attorney’s fees).
In Cohen II, we read Darden – the first case in our Circuit to address the
issue – to preclude aggregation of a statutory award of attorney’s fees when at least
two factors were present: “(1) the class members have a ‘separate and distinct’
right to recover attorney[’s] fees under the relevant statute; and (2) state law
provides that the ... fees serve to compensate the class members for their injuries.”
Cohen II, 204 F.3d at 1081-82. Contending neither Darden factor is present with
respect to § 627.428, the parties argue that aggregation of attorney’s fees is
permissible in this case.
Addressing the second Darden factor, the parties stress that unlike the
statutes in Cohen II and Darden, section 627.428 does not serve to compensate the
plaintiff but instead serves to punish insurers for wrongfully denying claims. In
support, they cite cases from this Court and from the Florida District Courts of
Appeal noting the punitive and deterrent purposes of the statute. See, e.g., Meeks
v. State Farm Mut. Auto. Ins. Co., 460 F.2d 776, 780 (5th Cir. 1972); Government
20
Employees Ins. Co. v. Banaglia, 503 So. 2d 358, 360 (Fla. Dist. Ct. App. 1987)
(“The purpose of section 627.428 is to penalize a carrier for wrongfully causing its
insured to resort to litigation to resolve a conflict when it was reasonably within
the carrier’s power to do so.”). The plaintiffs maintain that, because the award of
attorney’s fees under the statute is intended to deter the wrongful denials of policy
claims and to punish insurers for such denials, the award benefits the public and
class members as a whole, and thereby grants the class members a “common and
undivided” interest in the fees. Cf. Tapscott v. MS Dealer Serv. Corp., 77 F.3d
1353, 1358 (11th Cir. 1996) (reasoning that plaintiffs have a common and
undivided interest in Alabama punitive damages because the “punitive damages are
awarded for the public benefit – the collective good”), abrogated by Cohen II, 204
F.3d at 1073-77.
But the Florida Supreme Court has noted, “Florida courts have consistently
held that the purpose of section 627.428 and its predecessor is to discourage the
contesting of valid claims against insurance companies and to reimburse successful
insureds for their attorney's fees when they are compelled to defend or sue to
enforce their insurance contracts.” Insurance Co. of North Amer. v. Lexow, 602
So. 2d 528, 531 (Fla. 1992) (emphasis added); see Wilder v. Wright, 278 So. 2d 1,
3 (Fla. 1973) (noting that one of the purposes of § 627.428 is “to reimburse
21
successful insureds reasonably for their outlays for attorney’s fees ... .”). Because
the Florida Supreme Court has said that, it is Florida law. See Blue Cross & Blue
Shield of Alabama, Inc. v. Nielsen, 116 F.3d 1406, 1413 (11th Cir. 1997) (“The
final arbiter of state law is the state supreme court, which is another way of saying
that [a state’s] law is what the [state’s] Supreme Court says it is.”). As a result, we
must take it as given that one of the principal objectives of § 627.428 is to
compensate the insured for the expenses of litigating a dispute over the terms of an
insurance policy. See Lexow, 602 So. 2d at 531; Wilder, 278 So. 2d at 3.
So, while the attorney’s fees awarded under § 627.428 serve punitive and
deterrent purposes, they also “serve a significant compensatory purpose.” Cohen II,
204 F.3d at 1082. And as explained by the Darden Court, aggregation of such
attorney’s fees would be inconsistent with Snyder’s general prohibition against the
aggregation of compensatory damages. See Darden, 200 F.3d at 758.
Moreover, even if the sole purpose of § 627.428 were punitive in nature,
meaning that the second factor in Darden was not present, aggregation would not
necessarily be permissible. We think it apparent from Snyder, as well as from the
Supreme Court cases applying the aggregation standard, that the first factor in
Darden – whether the plaintiffs have separate and distinct rights to recover the
22
attorney’s fees – remains the paramount issue with respect to the aggregation of
attorney’s fees, as it is with respect to the aggregation of any claim.
Applying the well-settled aggregation standard to statutory awards of
attorney’s fees, the Darden Court reasoned that the rights of class members to
recover attorney’s fees are separate and distinct whenever each class member is
individually entitled to recover attorney’s fees under the relevant statute. See
Darden, 200 F.3d at 758. As is clear from the discussion in Cohen II, a necessary
corollary to the reasoning in Darden is that each class member has a separate and
distinct right to statutory attorney’s fees, thus precluding aggregation, whenever
each class member could recover attorney’s fees if he sued individually. See
Cohen II, 204 F.3d at 1082. The fact that the class members pursue their
substantive claims through the procedural mechanism of a class action does not
transform their separate and distinct rights to attorney’s fees into a single right in
which each member has a common and undivided interest. See Cohen II, 204 F.3d
at 1079-83; Darden, 200 F.3d at 757-59; see also Snyder, 394 U.S. at 338, 89 S.Ct.
at 1058 (explaining that the 1966 amendments to Rule 23 did not expand the
ability to aggregate claims to establish diversity jurisdiction).
Under the standards set forth in Cohen II and Darden, the individual
members of the Damaged Vehicle Subclass (the only ones claiming a right to
23
statutory attorney’s fees) assert a right to recover attorney’s fees under § 627.428
that is separate and distinct, and thus, the second Darden factor precluding
aggregation is present. According to the plain language of § 627.428, whenever
“any named or omnibus insured” prevails in a policy dispute, the statute awards
attorney’s fees “against the insurer and in favor of the insured ... .” Fla. Stat. §
627.428(1) (emphasis added). Because any member of the Damaged Vehicle
Subclass could individually sue to enforce the terms of the policy, and if
successful, would recover attorney’s fees under § 627.428, the subclass members
have separate and distinct statutory rights to recover attorney’s fees.
Attempting to distinguish § 627.428 from the statutes involved in Cohen II
and Darden, the parties argue that the subclass members have no separate and
distinct rights to the fees provided by § 627.428, because the statute is intended to
compensate the attorney instead of the prevailing party. According to the parties, it
is the attorney who is entitled to the § 627.428 fees and, because the class attorney
represents the class as a whole, they maintain that the attorney’s fees should be
viewed in the aggregate. This conclusion was reached by the district court in
Howard v. Globe Life Ins. Co., 973 F. Supp. 1412 (N.D. Fla. 1996), a case decided
before both Cohen II and Darden. In Howard, the court allowed the aggregation of
a class claim for attorney’s fees under § 627.428, reasoning that “[i]f the putative
24
class prevails in this case, the class’s attorney will be entitled to an award of
attorney’s fees under this statute; it will not be paid to the plaintiffs.” Id. at 1420.
Although it is true that the benefit of § 627.428 ultimately flows to the
attorney who is compensated for his services, that was also true with the statutes at
issue in Cohen II and Darden. That fact does not address the question posed by the
aggregation standard as it is reflected in the second Darden factor – whether the
class members have separate and distinct rights to recover attorney’s fees under the
relevant statute. See Cohen II, 204 F.3d at 1081-82 (citing Darden, 200 F.3d at
758). Contrary to the parties’ characterization of the statute, we read § 627.428 to
have the same function and effect as the attorney’s fees statutes at issue in Cohen
II and Darden.
First, as discussed above, one of the primary purposes of the § 627.428 is to
compensate the insured for his litigation expenses, see, e.g., Lexow, 602 So. 2d at
531, something also true of the statutes at issue in Cohen II and Darden. Second,
this statute awards the attorney’s fees to the insured, not his attorney. As the
statutory language unambiguously states, the fee award is adjudged “in favor of the
insured,” Fla. Stat. § 627.428(1), and it is made part of the judgment entered in
favor of the insured. See id. § 627.428(3); see also Danis Indus. Corp. v. Ground
Improvement Techniques, Inc., 645 So. 2d 420, 421 (Fla. 1994) (“Under [Fla. Stat.
25
§ 627.428], an insured or beneficiary who prevails is entitled to attorney[’s]
fees.”); State Farm Fire & Cas. Co. v. Palma, 629 So.2d, 830, 832-33 (Fla. 1993)
(holding that § 627.428 requires the insurer to pay for fees incurred by the
insured’s attorney in litigating the “insured’s entitlement to attorney’s fees”
because “such services are rendered in procuring full payment of the judgment ...
.”) (emphasis modified).8 Thus, even though the attorney for the insured benefits
from an award of fees under § 627.428 in the same way that an attorney benefits
from every award of attorney’s fees, section 627.428 entitles the insured and not
the attorney to the recovery of those fees.
Accordingly, as in Darden and Cohen II, the basis for the class claim for
attorney’s fees in this case is the individual right of each class member to recover
attorney’s fees. Also as in Cohen II and Darden, each class member in this case
could recover the statutory attorney’s fees if that member brought a separate
lawsuit to enforce the terms of the policy. Therefore, the rights of the class
members to recover attorney’s fees under Fla. Stat. § 627.428 are separate and
8
Moreover, in Palma, the Florida Supreme Court explained that “[§ 627.428] applies in
virtually all suits arising under insurance contracts ... [and, thus,] the terms of [the statute] are an
implicit part of every insurance policy issue in Florida.” Palma, 629 So. 2d at 832. Thus, the
insured’s right to attorney’s fees essentially is derived from his individual insurance policy,
further indicating that the right is separate and distinct from that of other policyholders. See
Alvarez, 375 F.2d at 993-94 (explaining that claims against an insurer based on the individual
policies of insureds are separate and distinct).
26
distinct, and the amount of attorney’s fees may not be aggregated to establish the
requisite amount in controversy. See Cohen II, 204 F.3d at 1081-82; Darden, 200
F.3d at 758. Instead, the attorney’s fees must be attributed pro rata among each
member of the Damaged Vehicle Subclass, see Cohen II, 204 F.3d at 1082-82, and
given the plaintiffs’ allegations regarding the size of the subclass, the portion
attributed to each member would be minimal.
4. Injunctive Relief
For amount in controversy purposes, the value of injunctive or declaratory
relief is the “value of the object of the litigation” measured from the plaintiff’s
perspective. Ericsson GE Mobile Communications, Inc. v. Motorola
Communications & Elecs., Inc., 120 F.3d 216, 218-20 (11th Cir. 1997) (citations
omitted). “In other words, the value of the requested injunctive relief is the
monetary value of the benefit that would flow to the plaintiff if the injunction were
granted.” Cohen II, 204 F.3d at 1077 (citing Ericsson, 120 F.3d at 218-20).
In this case, the requested injunction essentially requires the defendants to
compensate the class members for diminished value on any future damaged vehicle
claims and to inform the class members of their entitlement to this compensation.
If this injunction were issued, the benefit obtained by the members of the
Policyholder Class would be the payment of any future claims for diminished
27
value, at least for as long as the policies at issue remain in effect, and thus, the
value of the injunction would be the present value of those future payments.9 But
before we address whether this value may be viewed in the aggregate, we first
explain why the value of the injunctive relief with respect to an individual class
member is too speculative to satisfy the amount in controversy requirement.
Although a diversity suit should not be dismissed unless “it is apparent, to a
legal certainty, that the plaintiff cannot recover [the requisite amount in
controversy],” see St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289,
58 S. Ct. 586, 590 (1938), this liberal standard for jurisdictional pleading is not a
license for conjecture. In light of the federalism and separation of powers concerns
implicated by diversity jurisdiction, federal courts are obligated to strictly construe
the statutory grant of diversity jurisdiction, or as the Supreme Court has put it, to
“scrupulously confine their own jurisdiction to the precise limits which the statute
has defined.” Snyder, 394 U.S. at 340, 89 S.Ct. at 1059 (quoting Healy v. Ratta,
292 U.S. 263, 270, 54 S. Ct. 700, 703 (1934)). We think this obligation requires a
9
Although the requested injunction would require the defendants to notify their
policyholders of the obligation to pay for diminished value, the plaintiffs benefit from this notice
only to the extent that the defendants are required to pay for future diminished value claims.
Therefore, the real value of the injunction to the plaintiffs is the potential future payments of
diminished value claims. Moreover, while the defendants would certainly incur costs in
providing this notice, the value of an injunction for amount in controversy purposes must be
measured by what the plaintiff stands to gain, and therefore, the costs borne by the defendant in
complying with the injunction are irrelevant. See Cohen II, 204 F.3d at 1079 n.8.
28
court to insure that the benefits resulting from an injunction are not counted where
they are so uncertain that the court cannot reasonably determine whether the
amount of money placed in controversy by the present suit exceeds $75,000.
Accordingly, a plaintiff who bases diversity jurisdiction on the value of injunctive
relief must show that the benefit to be obtained from the injunction is “sufficiently
measurable and certain to satisfy the ... amount in controversy requirement ... .”
Ericsson, 120 F.3d at 221.10
In this case, it is mere speculation as to whether any particular class member
will benefit monetarily, and if so to what extent, from an injunction requiring the
defendants to pay any future claims for diminished value. See Cohen II, 204 F.3d
at 1078-79 (explaining that “the injunctive relief in this case involves too many
contingencies” to satisfy the amount in controversy requirement). One significant
uncertainty in valuing the injunctive benefit is that the requested injunction would
10
In Ericsson, this Court held that the value of an injunction was “too speculative and
immeasurable” to establish the requisite amount in controversy. Ericsson, 120 F.3d at 221-22.
The only remedy available to Ericsson was an injunction invalidating Motorola’s contract to
provide a communications system to the City of Birmingham, and thus, the benefit of this
injunction to Ericsson was simply the chance to rebid on the contract. See id. at 221. Because all
the injunction could do was void Motorola’s contract, Ericsson would benefit monetarily from
the injunction only if (1) the City elected to rebid the contract, which it apparently was not
required to do, and (2) after the contract was rebid, the City selected Ericsson’s communications
system. See id. Based on these contingencies, the Ericsson Court concluded that the value of
the injunctive relief was not “sufficiently measurable and certain to satisfy the . . . amount in
controversy requirement of the diversity statute.” Id.
29
not prevent the defendants from changing the language of their policies to exclude
explicitly any obligation to pay diminished value, thereby preventing any future
payments once the current policies were no longer in effect. See id. at 1077
(reasoning that amount in controversy could not be founded upon a requested
injunction where the defendant could comply in a manner that resulted in no
monetary benefit to the class members).11
Even if the defendants did not alter the policy language, the injunction has
no reasonably certain monetary value to any individual class member because it is
simply impossible to know which class members will be involved in automobile
accidents and assert claims for diminished value. Cf. Burns v. Massachusetts Mut.
Life Ins. Co., 820 F.2d 246, 249 (8th Cir. 1987) (affirming dismissal for failure to
establish requisite amount in controversy based, in part, on the fact that plaintiff’s
claimed future losses to be avoided by injunctive relief, namely lesser amounts of
dividends, were “highly speculative” as the defendant was not contractually
obligated to pay dividends at all). Equally uncertain is the amount of those
potential diminished value claims. An accident may be so minor as to result in
11
At oral argument, counsel for the insurers pointed out that in order to effect that change
in the policy language the insurers would have to secure the approval of the appropriate state
agency. But there is nothing to indicate that approval would be withheld.
30
virtually no diminished value or so severe that the vehicle is totaled and the insured
is paid the full pre-accident market value.12
We therefore conclude that, with respect to individual class members, the
value of injunctive relief here is “too speculative and immeasurable” to be included
in determining the amount in controversy. Ericsson, 120 F.3d at 221-22; cf.
Vicksburg, S. & P. Ry. Co.v. Nattin, 58 F.2d 979, 980 (5th Cir. 1932)
(“Jurisdiction is based on actuality, not prophecy, the pressure of a grievance
immediately felt and presently measurable in money of the jurisdictional amount.
Speculative anticipation that conditions, from which present ills, not now sufficient
in amount to give jurisdiction, flow, may in time aggregate the necessary amount,
will not support jurisdiction.”).13
12
A similar rationale is found in decisions involving suits to enjoin the collection of
taxes. In those cases, courts have consistently held that the amount in controversy is measured
by the amount of taxes owed at the time of litigation, not the present value of future tax
obligations. See, e.g., Healy, 292 U.S. at 270-71, 54 S.Ct at 703-04. “The reasons given for this
rule of measurement are that it cannot be assumed that the defendant will continue to enforce the
tax, or that the plaintiff will continue to be subject to the tax, or that the taxing statute will
remain in effect and not be modified by legislation.” 14B Charles Alan Wright & Arthur R.
Miller, Federal Practice and Procedure § 3708, at 251 (3d ed. 1998) (citing Healy); see also M &
M Transp. Co. v. City of New York, 186 F.2d 157, 158 (2d Cir. 1950) (Hand, J.); Vicksburg, S.
& P. Ry. Co.v. Nattin, 58 F.2d 979, 980 (5th Cir. 1932) (“To assume, as appellant asks the court
to do, that there will be an assessment each year against the property sufficient to aggregate in
the twenty-five years the bonds have to run more than $3,000 is to indulge in speculation and
prophecy. Many things, all problematical, may occur to make the assessment for the next year
and for future years wholly different.”).
13
The decision in Opelika Nursing Home, Inc. v. Richardson, 448 F.2d 658 (5th Cir.
1971), does not suggest a different result. In that case the plaintiff filed a putative class seeking
to enjoin the enforcement of federal regulations that potentially limited the amount of payments
31
Although we conclude that, as to any individual class member, the value of
the class could obtain on behalf of Medicaid patients. See id. at 660-62. At the time, federal
question cases also were subject to an amount in controversy requirement, and because the
plaintiffs admitted in their complaint that they might suffer no pecuniary loss as a result of the
enforcement of the regulation, the district court concluded that the benefit of the injunction was
too speculative to establish the requisite amount in controversy and dismissed the case for lack
of jurisdiction. See id. at 662.
On appeal, the Fifth Circuit reversed, stating:
The speculativeness of the jurisdictional claim in this case does not warrant
dismissal, for the fact the plaintiffs admitted that they may or may not suffer
losses as a result of the enforcement of the ... regulation does not show to a legal
certainty that plaintiffs’ claim is really for less than the jurisdictional amount.
While such an admission may have evidential value as tending to show an
absence of good faith on the part of the plaintiffs, it is by no means conclusive,
for the very fact that plaintiffs stated that they may suffer losses negates the
existence of any ‘legal certainty.’”
Id. at 663. The Richardson Court did not suggest that speculative benefits will sustain diversity
jurisdiction but instead concluded that “the pleadings alone [were] not so conclusive that the
plaintiffs should have been denied an opportunity to present facts in support of their
jurisdictional claim.” Id. at 662. In the words of the Ericsson Court, the plaintiffs in Richardson
may have been able to prove that their losses from enforcement of the injunction were
“sufficiently measurable and certain to satisfy the ... amount in controversy requirement ... .”
Ericsson, 120 F.3d at 221. However, on the basis of the contingencies noted in the text, we
conclude that the plaintiffs in this case could not.
There is a more basic distinction between this case and the Richardson case – it
involved federal question jurisdiction. As several courts have noted, when there was still an
amount in controversy requirement for federal question cases, courts often were more indulgent
of speculative claims so that the courts could address the merits of significant federal law issues.
See, e.g., National Org. for Women v. Mutual of Omaha Ins. Co., 612 F. Supp. 100, 107 (D.D.C.
1985). Clearly, such indulgence is not warranted when only state law issues are presented. Cf.
Snyder, 394 U.S. at 341, 89 S.Ct. at 1059 (“Suits involving issues of state law and brought on the
basis of diversity can often be most appropriately tried in state courts.”). That is the basis on
which Richardson can be squared with Snyder’s direction that where jurisdiction is founded
upon diversity of citizenship, “[d]ue regard for the rightful independence of state governments,
which should actuate federal courts, requires that they scrupulously confine their own
jurisdiction to the precise limits which the statute has defined.” Id., 394 U.S. at 340, 89 S. Ct. at
1059 (quoting Healy, 292 U.S. at 270, 54 S.Ct. at 703).
32
the injunctive relief is too speculative to satisfy the amount in controversy
requirement, we agree with the parties that, if it may be viewed in the aggregate,
the value of the injunctive relief satisfies the requisite amount in controversy. The
plaintiffs have alleged the Policyholder Class consists of over one million
members. What is only merely possible with respect to one policyholder – a sum
of future claims for diminished value with a present value of $75,000 – becomes
quite probable with respect to over a million policyholders. With that many
policies alleged to be in effect, we clearly cannot conclude to a legal certainty that
the value of the injunction sought in this case, if viewed in the aggregate, is too
uncertain to satisfy the amount in controversy requirement
However, as we have explained previously, aggregation is determined by the
right asserted, not the relief requested. See Gilman, 104 F.3d at 1427.
Accordingly, when an injunction protects rights that are separate and distinct
among the plaintiffs, the value of the injunction to the individual plaintiffs may not
be aggregated to sustain diversity jurisdiction. See Alfonso v. Hillsborough
County Aviation Auth., 308 F.2d 724 (5th Cir. 1962);14 see also Burns, 820 F.2d at
14
In Alfonso, a group of homeowners alleged that the expansion of an airport
constituted an unconstitutional taking of their property and sought to enjoin the airport’s use of
the new approach way until condemnation proceedings could be initiated. See Alphonso, 308
F.2d at 725. The homeowners alleged that some of the homes had been damaged by more than
$4,000 each, while others alleged unspecified amounts of damages. See id.
33
250-51; Snow v. Ford Motor Co., 561 F.2d 787, 790-91 (9th Cir. 1977); Lonnquist
v. J.C. Penney Co., 421 F.2d 597, 599 (10th Cir. 1970).
This rule against aggregating the value of an injunction where it protects
rights that are separate and distinct among the plaintiffs clearly applies to the
claims of insureds who sue to enforce the separate and distinct rights arising from
their respective insurance policies with an insurer. See Alvarez v. Pan American
Life Ins. Co., 375 F.2d 992, 993 (5th Cir. 1967); see also Burns, 820 F.2d at 250-
51. And thus, for purposes of aggregation, it is irrelevant that multiple insureds
choose to remedy the alleged violation of their separate and distinct rights through
a joint request for injunctive or declaratory relief. See Alvarez, 375 F.2d at 993
(“[The insured] sought an accounting, and an injunction requiring that [the insurer]
re-establish his interest and that of the class on its books, and that all claims be
honored. This too was nothing more than a claim on behalf of each contract holder
After noting that “[u]nless the claims of the [homeowners] can be aggregated, it is
apparent that the minimum jurisdictional requirement [$10,000 at the time] is not satisfied,” id.
at 726, and also that separate distinct claims may not be aggregated, the Court affirmed the
district court’s dismissal for lack of subject matter jurisdiction. See id. at 726-28. Even though
the homeowners sought only declaratory and injunctive relief, see id. at 725, the Alphonso Court
applied the well-settled standard for aggregation to their claims. See 14B Charles Alan Wright
& Arthur R. Miller, Federal Practice and Procedure § 3704, at 134 & n.11 (3d ed. 1998) (citing
Alphonso as a “[r]epresentative case ... illustrating the separate-and-distinct claim rule ... .”).
34
in the class for whatever might be due under the respective contracts.”); Burns,
820 F.2d at 250-51.
In this case, the rights asserted arise from the class members individual
insurance policies with one of the defendants, and the requested injunction seeks to
protect against future violations of those individual rights. Thus, the claims for
injunctive relief are separate and distinct, and they may not be aggregated to
establish the requisite amount in controversy. Concluding that none of the claims
in this class action may be viewed in the aggregate, we now consider whether any
individual class member has asserted a claim satisfying the requisite amount in
controversy.
B. SUFFICIENCY OF AMOUNT IN CONTROVERSY FOR
INDIVIDUAL CLASS MEMBER’S CLAIMS
If there is an individual class member whose claim for compensatory
damages, combined with a pro rata share of attorney’s fees and the potential claim
for punitive damages, exceeds $75,000, then diversity jurisdiction exists over that
individual’s claim against his respective insurer.15 If there are such class members,
we must then decide whether 28 U.S.C. § 1367 statutorily overruled the Supreme
Court’s decision in Zahn to extend a federal court’s supplemental jurisdiction over
15
Because there are nine “mini-classes” in this case, see supra note 7, there must be at
least one individual within each “mini-class” that has a claim sufficient to satisfy the requisite
amount in controversy.
35
the claims of the entire class when at least one class member has a claim which
satisfied the jurisdictional amount in controversy requirement. See supra note 5.
1. Compensatory Damages
On behalf of the Damaged Vehicle Subclass, the plaintiffs seek
compensation for the diminished value of their damaged vehicles. While the
named plaintiffs do not allege the specific amounts of uncompensated diminished
value, the sparse record evidence concerning those amounts indicates that they do
not approach the $75,000 threshold for diversity jurisdiction.
From our review of the record, there is information concerning the pre-
accident value and costs of repairs for only two of the named plaintiffs, the Motens
and the Highleys. In their response to Atlanta Casualty’s Motion for Summary
Judgment, the Motens indicated that the pre-accident market value of their vehicle
was $6,450. Obviously, if the pre-accident value was $6,450, the amount of
diminished value after Atlanta Casualty paid for repairs falls far short of $75,000.
The amount of the diminished value claim of the Highleys similarly appears to be
well below $75,000. In its Motion to Dismiss, Nationwide indicated that the cost
of repair to the Highleys’ vehicle was $2,105.92. Under the definition of the
Damaged Vehicle Subclass, see supra note 3, the Highleys would be members only
if the repair costs of their vehicle were at least 20% of the pre-accident value of
36
their car. It follows that the pre-accident value of their car could not have been
more than $10,500, and as a result, it is evident the Highleys’ damages claim for
diminished value would also be far below the $75,000 threshold.16
Although we recognize that a court owes some deference to a diversity
plaintiff’s amount in controversy allegations, and should dismiss the suit for lack
of jurisdiction only when “it is apparent, to a legal certainty, that the plaintiff
cannot recover [the requisite amount in controversy],” see St. Paul Mercury
Indem., 303 US. at 289, 58 S. Ct. at 590, that deference does not eviscerate the
court’s obligation to scrupulously enforce its jurisdictional limitations. “While a
federal court must of course give due credit to the good faith claims of the plaintiff,
a court would be remiss in its obligations if it accepted every claim of damages at
face value, no matter how trivial the underlying injury.” Diefenthal v. Civil
Aeronautics Bd., 681 F.2d 1039, 1052 (5th Cir. 1982); see also Opelika Nursing
Home, 448 F.2d at 664-65.17 Moreover, legal certainty is “a very strict objective
16
A survey of reported cases with claims for the diminished value of vehicles reveals that
the typical claim involves only a few thousand dollars. See, e.g., Boyd Motors, Inc. v.
Employers Ins. Co. of Wausau, 1990 WL 126983 at *2 (D. Kan. 1990) (diminished value claim
for fourteen cars totaling $40, 609.48 for an average of about $2,900 per car); Johnson v. State
Farm Mut. Auto. Ins. Co., 754 P.2d 330, 331 (Ariz. Ct. App. 1988) (diminished value claim of
$3,000); Hartford Fire Ins. Co. v. Rowland, 351 S.E.2d 650, 652 (Ga. Ct. App. 1986)
(diminished value claim of $2,500); Delledonne v. State Farm Mut. Auto. Ins. Co., 621 A.2d
350, 351 (Del. Super. Ct. 1992) (diminished value claim of $8,000).
17
Not only is a conclusory allegation that the amount in controversy requirement is
satisfied insufficient to sustain jurisdiction once that allegation is challenged, see St. Paul
37
standard,” Jones v. Landry, 387 F.2d 102, 104 (5th Cir. 1967), and “once it is clear
that as a matter of law the claim is for less than [$75,000], the [court] is required to
dismiss.” Burns v. Anderson, 502 F.2d 970, 972 (5th Cir. 1974). On the record
before us, we conclude to a legal certainty that the named plaintiffs’ individual
claims for compensatory damages claims could not satisfy the $75,000 amount in
controversy requirement.
Notably, in their supplemental briefs addressing the jurisdictional issue,
none of the parties suggest that any of the named plaintiffs’ claims for
compensatory damages would even approach the $75,000 threshold. Instead, in
addition to relying on the claims for attorney’s fees and injunctive relief, the
plaintiffs look to the claims of other, unidentified class members. They assert that:
“Within the class are members who have either (1) a very expensive luxury vehicle
(Rolls Royce, etc.), which by the nature of the car has suffered significant
diminished value or (2) had multiple cars that have suffered diminished value
during the class period. Therefore, there are class members that have suffered
significant compensatory damage nearing, if not exceeding the $75,000
jurisdictional amount.” (Pls.’ Supp. Br. at 10).
Reinsurance Co., Ltd. v. Greenberg, 134 F.3d 1250, 1254 (5th Cir. 1998), we think that, if
anything, such an allegation is entitled to even less consideration in the context of a class action.
This is so because the named plaintiff’s unstated basis for his jurisdictional allegation might be
the erroneous position that the claims of the class members may be aggregated.
38
However, if there are such class members, their existence must be
demonstrated not supposed. Jurisdiction cannot be established by a hypothetical.
See Diefenthal, 681 F.2d at 1052 (“Jurisdiction is not conferred by the stroke of a
lawyer's pen. When challenged, it must be adequately founded in fact.”); see also
Thomson v. Gaskill, 315 U.S. 442, 446, 62 S. Ct. 673, 675 (1942) (noting that when
the plaintiff’s jurisdictional allegations are challenged, he “bears the burden of
supporting the allegations by competent proof”). “It is the plaintiff’s burden both
to allege with sufficient particularity the facts creating jurisdiction, in view of the
nature of the right asserted, and, if appropriately challenged, or if inquiry be made
by the court of its own motion, to support the allegation.” St. Paul Mercury
Indem., 303 U.S. at 287 n. 10, 58 S. Ct. at 590 n.10 (citations omitted); see also
McNutt v. General Motors Acceptance Corp. of Indiana, 298 U.S. 178, 189, 56
S. Ct. 780, 785 (1936) (explaining that a court may require “that the jurisdictional
facts be established ... and for that purpose [it] may demand that the party alleging
jurisdiction justify his allegations by a preponderance of evidence”).
However, “a plaintiff must have ample opportunity to present evidence
bearing on the existence of jurisdiction.” Colonial Pipeline Co. v. Collins, 921
F.2d 1237, 1243 (11th Cir. 1991); see also Majd-Pour v. Georgiana Community
Hosp, Inc., 724 F.2d 901, 903 (11th Cir. 1984) (“Although the plaintiff bears the
39
burden of proving the court’s jurisdiction, the plaintiff should be given the
opportunity to discover facts that would support his allegations of jurisdiction.”).
In this case, the issue of a sufficient amount in controversy was not raised until
appeal, which limited the plaintiffs’ opportunity to show whether there are other
class members who may make a “good faith” allegation that they have incurred
close to $75,000 in damages.
Consequently, the plaintiffs are entitled to an opportunity to make that
showing on remand .18 If they make that showing on remand, then the issue of
whether 28 U.S.C. § 1367 overruled the Zahn decision, see supra note 5, will be
presented for decision. However, because remand might be rendered unnecessary
if, as the parties contend, the potential attorney’s fees award under Florida Statute
18
Also, the compensatory damages claim for the Policyholder Class may not fare any
better for jurisdictional purposes. The plaintiffs contend that the defendants have damaged the
class members, including depriving them of the “actuarial value”of the diminished value
coverage. Again, the theory appears to be that the policyholders paid premiums which had been
calculated on the assumption that the defendants would compensate for diminished value and,
because the defendants intend not to provide such compensation, the policyholders have
overpaid for their policies and seek compensation for that overpayment. Assuming that these
“overpayments” are recoverable, it seems highly unlikely that the amount of an individual class
member’s overpayments would approach $75,000. Nevertheless, the plaintiffs will have an
opportunity to prove on remand that, in addition to the purported members of the Damaged
Vehicle Subclass, there are members of the Policyholder Class who are entitled to recover such a
substantial amount of compensatory damages.
40
§ 627.428 may be attributed solely to the named plaintiffs, which would itself
present the Zahn and § 1367 issue, we briefly address that contention.
2. Attorney’s Fees
The parties argue that if the potential award of attorney’s fees under Florida
Statute § 627.428 may not be viewed in the aggregate, see supra Part II.A.3, then
the statutory language suggests that the fees should be attributed only to the named
plaintiffs. In support of this argument, the parties point to In re Abbott Labs., 51
F.3d 524 (5th Cir. 1995), aff’d by equally divided court sub nom., Free v. Abbott
Lab., Inc., 120 S. Ct. 1578 (2000),19 in which the Fifth Circuit addressed a
Louisiana statute authorizing an award of attorney’s fees for “the representative
parties ... when as a result of the class action a fund is made available, or recovery
or compromise is had which is beneficial, to the class.” Id. at 526 (quoting La.
Code Civ. Proc. art. 595).
Concluding that the statutory language indicated that the attorney’s fees
should be attributed only to the named plaintiffs, and not to every class member,
the court in Abbott held that the named plaintiffs had established the requisite
amount in controversy to support diversity jurisdiction over their claims. See id.
19
An affirmance by an equally divided Supreme Court has no precedential value. See
Rutledge v. United States, 517 U.S. 292, 304, 116 S. Ct. 1241, 1249 (1996).
41
526-527. The court then went on to hold that supplemental jurisdiction existed
over the rest of the class members, pursuant to 28 U.S.C. § 1367. See id. at 527-
29.
In this case, the parties liken § 627.428 to the Louisiana statute involved in
Abbott. Because § 627.428 awards attorney’s fees to “any named or omnibus
insured,” the parties contend that in a class action the attorney’s fees should be
attributed to the named plaintiffs. See Howard, 973 F. Supp. at 1421.
Consequently, the parties conclude, attributing the attorney’s fees in this case to the
nine named plaintiffs would establish the requisite amount in controversy as to
those plaintiffs and – assuming that § 1367 did overrule the Zahn decision –
supplemental jurisdiction would extend to the claims of the entire class.
We need not reach the supplemental jurisdiction question, however, because
we see no basis for attributing the attorney’s fees solely to the named plaintiffs.
The Louisiana statute in Abbott is readily distinguishable from § 627.428. The
Louisiana statute explicitly addressed class actions and provided for the award of
attorney’s fees to “the representative parties.” Abbott, 51 F.3d at 526 (quoting La.
Code Civ. Proc. art. 595). In contrast, section 627.428 does not specifically
address class actions, and it does not refer explicitly to class representatives.
42
Nor does § 647.428's language awarding attorney’s fees to “any named or
omnibus insured” implicitly refer to class representatives. The term “named
insured” clearly refers to the “person designated in an insurance policy as the one
covered by the policy,” Black’s Law Dictionary 811 (7th ed. 1999) (defining
“named insured”), not the person who is named as a class action plaintiff. Thus,
since every member of the Policyholder Class is a “named insured” under §
627.428, there is no basis for attributing the attorney’s fees only to the named
plaintiffs. For amount in controversy purposes, the amount of fees must be
attributed pro rata among all of the class members, resulting in a relatively small
sum for each member.
C. REMAND
On the record before us, the claims in this putative class action do not satisfy
the requisite amount in controversy requirement for diversity jurisdiction. Neither
the compensatory damages, potential punitive damages, attorney’s fees, or the
injunctive relief may be aggregated. In addition, it seems evident that none of the
named plaintiffs possesses an individual claim that approaches the $75,000
required for diversity jurisdiction.
However, the plaintiffs maintain that there are some class members who
have suffered substantial damages from uncompensated diminished value.
43
Because the amount in controversy issue was not raised until appeal, the plaintiffs
were not afforded the opportunity to determine whether such class members exist,
and if so, to present evidence of that fact to the district court. Thus, we remand the
case to grant the plaintiffs an opportunity to prove there are class members who
can make a “good faith” allegation that their claims for compensatory damages
approach or exceed $75,000.20
If the plaintiffs carry their burden of proof with respect to this jurisdictional
issue, see McNutt, 298 U.S. at 189, 56 S.Ct. at 785 (stating that jurisdictional facts
must be established by a preponderance of evidence), then the district court will
have diversity jurisdiction over the claims of those class members. It should then
address the plaintiffs’ argument that 28 U.S.C. § 1367 has overruled Zahn to
authorize supplemental jurisdiction over the class members whose claims do not
satisfy the requisite amount in controversy. If the court decides that Zahn is still
the law, only individuals with claims sufficient to satisfy the amount in controversy
20
While the district court may consider the class members’ pro rata share of attorney’s
fees and, if appropriate, punitive damages, we note again that these sums will be small and the
existence of a sufficient amount in controversy will substantially depend on the claim for
compensatory damages.
Also, because there is no joint liability between the defendants, the plaintiffs must
identify as to each defendant a class member who has a sufficient compensatory damages claim.
44
requirement may proceed as plaintiffs.21 If the plaintiffs do not prove that there are
class members whose individual claims satisfy the amount in controversy
requirement, the district court must dismiss the case for lack of jurisdiction.
One final note is in order. Because jurisdiction cannot be conferred by
consent, the district court should be leery of any stipulations the parties offer
concerning the facts related to jurisdiction. Given that the parties share the goal of
having this case decided in federal court, the district court should be especially
mindful of its independent obligation to ensure that jurisdiction exists before
federal judicial power is exercised over the merits of the case. 22
III. CONCLUSION
21
The district court has not yet reached any class certification issues. If the district court
decides that Zahn is still the law, the number of individuals, if any, with jurisdictionally
sufficient claims against a particular insurer may be so small that joinder of their claims under
Rule 20 of the Federal Rules of Civil Procedure is practicable, thereby precluding certification of
a class action. See Fed. R. Civ. P. 23(a)(1) (permitting class action procedure when “the class is
so numerous that joinder of all members is impracticable”). We leave that issue, if it arises, to
the district court to decide in the first instance.
22
The plaintiffs suggest that we certify the question of whether Florida law requires
compensation for diminished value to the Florida Supreme Court while remanding to the district
court to develop a factual record on the issue of jurisdiction. However, doubts regarding subject
matter jurisdiction must be resolved before taking any steps to address the merits of a case. See
Packard v.Provident Nat’l Bank, 994 F.2d 1039, 1049 (3d Cir. 1993) (“It is axiomatic that
federal courts are courts of limited jurisdiction, and as such are under a continuing duty to satisfy
themselves of their jurisdiction before proceeding to the merits of any case.”). If jurisdiction
does not exist in this case, we have no power to certify the state law question. “Simply put, once
a federal court determines that it is without subject matter jurisdiction, the court is powerless to
continue.” University of South Alabama,168 F.3d at 410.
45
The case is remanded to the district court for proceedings not inconsistent
with this opinion.
REMANDED.
46