Guerrero v. State Farm Mutual

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_________________________________
No. 98-50683
_________________________________
DIANA GUERRERO,
Plaintiff-Appellant,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, also known
as State Farm Insurance Company, also known as State Farm
Insurance Companies,
Defendant-Appellee.
---------------------------------
Appeal from the United States District Court
for the Western District of Texas
(SA-98-CV-234)
---------------------------------
May 20, 1999
Before GARWOOD, BARKSDALE, and BENAVIDES, Circuit Judges.
PER CURIAM:*
Diana Guerrero appeals from the judgment of the
district court dismissing her suit against State Farm Mutual
Automobile Insurance Co. (“State Farm”) seeking benefits
under an uninsured/underinsured motorists insurance policy
issued to Guerrero by State Farm. Guerrero contends that
the district court erred both in its refusal to remand the
case to the Texas state courts and in its application of
Texas state law in granting State Farm’s motion to dismiss.
Because the district court had no evidence before it showing
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
that the parties were diverse, we find that it erred by
asserting federal jurisdiction over this case.
On January 23, 1998, Guerrero filed a suit against
State Farm in a Texas district court in Bexar County. She
alleged that State Farm had improperly denied her
underinsured motorist benefits for injuries sustained during
a January 1994 automobile accident. On March 23, 1998,
State Farm filed a Notice of Removal in the United States
District Court for the Western District of Texas. State
Farm claimed that removal was proper under 28 U.S.C. § 1441
because the federal district court had original jurisdiction
over the case based on diversity of citizenship. State Farm
affirmatively alleged that Guerrero was a citizen of Texas,
that State Farm was incorporated and had its principal place
of business in Illinois, and that the amount in controversy
exceeded $75,000.
On April 23, 1998, Guerrero moved to have the case
remanded back to state court. She contended that removal
had been improper because State Farm’s principal place of
business was Texas and diversity was therefore lacking.1 In
1
In addition, Guerrero made two other jurisdictional
arguments in her motion to remand which she renews on
appeal: (1) that the amount in controversy did not satisfy
the $75,000 statutory requirement, and (2) that the parties
were not diverse because State Farm, as an insurance company
against which a “direct action” had been filed, must be
deemed a citizen of the state in which Guerrero is a
citizen. The district court did not reach these claims.
Although the resolution of these arguments is not necessary
to our decision here, as they relate to the court’s subject
2
support of this argument, Guerrero entered into evidence
copies of pages from Texas telephone books showing State
Farm’s extensive Texas telephone listings and an affidavit
from a legal assistant to Guerrero’s attorney describing his
matter jurisdiction, we have examined them and note that
neither is meritorious.
The amount in controversy did exceed the $75,000
statutory requirement contained in 28 U.S.C. 1332(a). “[I]n
addition to policy limits and potential attorney’s fees,
items to be considered in ascertaining the amount in
controversy when the insurer could be liable for those sums
under state law are inter alia penalties, statutory damages,
and punitive damages . . . .” St. Paul Reinsurance Co. v.
Greenberg, 134 F.3d 1250, 1253 (5th Cir. 1998). Here,
Guerrero’s original petition sought contractual damages
which could reach a maximum of $50,000, as well as
attorney’s fees, punitive damages, and penalties under both
the Texas Insurance Code and the Texas Deceptive Trade
Practices Act (“DPTA”). Because either the Insurance Code
or the DPTA could provide for trebling any contractual
damages awarded Guerrero, see Tex. Ins. Code Ann. Art. 21.21
§ 16(b)(1); Tex. Bus. & Com. Cod. Ann. § 17.50(b), the
$75,000 amount in controversy requirement was clearly met in
this case.
Neither does the language in § 1332(c)(1) which states
that “in any direct action against the insurer of a policy
or contract of liability insurance . . . such insurer shall
be deemed a citizen of the State of which the insured is a
citizen . . .” defeat diversity between State Farm and
Guerrero. The purpose of the “direct action” provision in
§ 1332(c)(1) was to prevent an injured party from gaining
diversity over a non-diverse tortfeasor by directly suing
the tortfeasor’s out-of-state insurance company instead of
the tortfeasor. See Evanston Insurance Co. v. Jimco, Inc.,
844 F.2d 1185, 1188 (5th Cir. 1988). The section was thus
not intended to thwart diversity in suits between an insured
and the insured’s own insurance company. See Myers v. State
Farm Ins. Co., 842 F.2d 705, 707 (3d Cir. 1988); Andrew M.
Campbell, Construction and Application of 28 USCS §
1332(c)(1), Establishing Citizenship of Insurer in Diversity
Action Against Such Insurer Where Insured Is Not Joined as
Party Defendent, 119 A.L.R. Fed. 135, 171-77 (1994).
Section 1332(c)(1)’s “direct action” provision is thus
inapplicable to this suit between Guerrero and her insurance
company, State Farm, and does not defeat diversity here.
3
research showing that State Farm has more offices and gross
revenues in Texas than in Illinois. In its response to
Guerrero’s motion to remand, State Farm again stated that
its principal place of business was Illinois but provided no
evidence relevant thereto.
On May 27, 1998, the district court entered an order
denying Guerrero’s motion to remand. Two sentences long,
the order made no legal or factual findings regarding any of
the arguments in Guerrero’s motion. On June 8, 1998, State
Farm filed a motion to have Guerrero’s claims dismissed on
the merits. On July 7, the court entered an order
dismissing Guerrero’s claims with prejudice. Guerrero
timely appealed.
On appeal, Guerrero argues that the district court
erred in denying her motion to remand this case back to
state court. She contends that, by asserting jurisdiction,
the district court necessarily and improperly found that
State Farm’s principal place of business was not Texas. We
review a district court’s determination of a corporation’s
principal place of business for clear error. See Village
Fair Shopping Center Co. v. Sam Broadhead Trust, 588 F.2d
431, 433-34 (5th Cir. 1979).
A federal court may assert jurisdiction under 28 U.S.C.
§ 1332 only when there is complete diversity, i.e., when no
plaintiff and defendant are citizens of the same state. A
corporation is deemed a citizen of any state in which it has
4
been incorporated and of the single state in which it has
its principal place of business. See 28 U.S.C.
§ 1332(c)(1). It is undisputed in the record that Guerrero
is a citizen of Texas. Therefore, unless State Farm neither
is incorporated nor has its principal place of business in
Texas, the district court could not assert jurisdiction over
this case.
“The burden of pleading diversity of citizenship is
upon the party invoking federal jurisdiction, and if
jurisdiction is properly challenged, that party also bears
the burden of proof.” See Ray v. Bird and Son and Asset
Realization Co., 519 F.2d 1081, 1082 (5th Cir. 1975). Here,
it was State Farm that invoked the district court’s
jurisdiction by removing the case from state to federal
court. See Getty Oil Corp. v. Insurance Company of North
America, 841 F.2d 1254, 1259 (5th Cir. 1988) (finding that
the party removing a case to federal court is invoking the
jurisdiction of the federal courts). Guerrero properly
challenged the district court’s jurisdiction by arguing in
her motion to remand that State Farm’s principal place of
business is Texas. It therefore was State Farm’s burden
both to plead and to prove that State Farm and Guerrero were
completely diverse parties.
Although State Farm alleged in its pleadings that its
principal place of business is Illinois, it did not supply
5
the court with any evidence in support of that allegation.2
When jurisdiction has been challenged, a mere allegation of
citizenship is insufficient to prove jurisdiction. See
Welsh v. American Surety Co., 186 F.2d 16, 17 (5th Cir.
1951). Moreover, when federal jurisdiction has been
challenged and no evidence in support of jurisdiction is
adduced by the party seeking to invoke it, a federal court
may not assert jurisdiction. See Roberts v. Lewis, 144 U.S.
653, 658 (1892) (holding that where diversity of citizenship
was properly alleged by the plaintiff and then challenged by
the defendant, the plaintiff’s failure to present any
evidence of citizenship required reversal for want of
jurisdiction); see also McNutt v. General Motors Acceptance
Corp., 298 U.S. 178, 189 (1936) (holding that jurisdiction
cannot be maintained by “mere averment” but instead must be
supported by “competent proof”); Tetco Metal Products, Inc.
v. Langham, 387 F.2d 721, 723 (5th Cir. 1968) (citing
McNutt). Thus, without State Farm having presented any
evidence regarding its principal place of business, it was
clear error for the district court to have asserted
2
In the Notice of Removal, State Farm stated: “STATE FARM
MUTUAL AUTOMOBILE INSURANCE COMPANY, was at that time, and
is now, a corporation incorporated under the laws of
Illinois, with its principal place of business in the State
of Illinois, and was not and is not a citizen of the State
of Texas wherein this action was brought.” In the reply to
Guerrero’s motion to remand, State Farm stated: “State Farm
was and is incorporated in Illinois and has its principal
place of business in Illinois.” There is no indication in
the record that State Farm provided any further discussion
or any evidence of its principal place of business.
6
jurisdiction in this case.
It is incumbent upon a district court to address any
jurisdictional issues before reaching a decision on the
merits. See B., Inc. v. Miller Brewing Company, 663 F.2d
545, 548-49 (5th Cir. 1981) (finding that a “trial court
must be certain of its jurisdiction before embarking upon a
safari in search of a judgment on the merits”). We
therefore reverse the judgment of the district court
dismissing Guerrero’s claims and remand this case back to
the district court. Upon remand, the district may in its
discretion either remand the case back to state court for
lack of federal jurisdiction or permit State Farm another
opportunity to provide evidence of its principal place of
business.
REVERSED and REMANDED.
7