Bailey v. US Fidelity & Guarnt

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________
No. 98-60582
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WILLIE L. BAILEY
and
JUSTIN BAILEY,
Plaintiffs-Appellants,
VERSUS
UNITED STATES FIDELITY AND GUARANTY COMPANY,
Defendant-Appellee.
_________________________
Appeal from the United States District Court
for the Northern District of Mississippi
(4:97-CV-133-S-B)
_________________________
May 10, 1999
Before JOLLY, SMITH, and WIENER, Circuit Judges.
JERRY E. SMITH, Circuit Judge:*
Willie and Justin Bailey (the “Baileys”) sued United
States Fidelity & Guaranty Company (“USF&G”) for $500,000 in
compensatory damages and $12 million in punitive damages each
following their discovery of a billing error by USF&G that caused
them to pay an extra $531 in insurance premiums over a three-year
period. The district court entered summary judgment for USF&G.
Because the claim for $25 million does not in good faith meet the
amount in controversy requirement of 28 U.S.C. § 1332, we vacate
*
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should not be published and is not precedent except under the limited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.
and remand for entry of a judgment of dismissal for want of
jurisdiction.
I.
On August 9, 1994, Eric Holloway was killed when his
motorcycle crashed into the rear of a truck that Justin Bailey was
driving. The Baileys’ insurer, USF&G, promptly settled any
potential claims that the Holloway heirs might have, via a $25,000
payment to those heirs.
The Baileys filed an uninsured motorist claim with USF&G for
approximately $1,000 to cover minor damage to their truck and the
cost of a rental vehicle. On September 26, USF&G offered to pay
the Baileys 80% of their uninsured motorist claim. The Baileys’
response to this offer was “thanks but no thanks,” because they did
not wish to be a part of any agreement that implied that Justin
Bailey was 20% at fault. Thereafter, the Baileys did not pursue
this claim.
Two years later, the Baileys noticed that their automobile
insurance bill had gone up, resulting from a surcharge stemming
from the accident. This surcharge was in contravention of the
terms of the policy, as USF&G discovered and acknowledged during
the discovery phase of this litigation. In response to this
discovery, USF&G refunded the $531 in surcharge it had collected
and even paid the entirety of the Baileys' 1994 uninsured motorist
claim, which USF&G was under no apparent legal obligation to do.
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II.
The Baileys did not drop their complaint against USF&G, but
rather continued full steam ahead, alleging a variety of harms
stemming from USF&G’s “negligence,” “gross negligence,” and
“reckless disregard.” As best the district court could discern,
the Baileys’ claims were for (1) USF&G’s initial denial of their
1994 uninsured motorist claim; (2) USF&G’s settlement of the
potential Holloway claim without the Baileys' permission;
(3) USF&G’s imputation of fault to Justin Bailey via the offer to
compensate the Bailey’s for only 80% of their uninsured motorist
claim; and (4) intentional or reckless imposition of a surcharge to
the Baileys’ insurance premiums in contravention to the terms of
the insurance policy, despite the subsequent refund.
III.
Given that the Baileys’ monetary damages stemming from the
mistaken surcharge ($531) and the original “denial” of their
uninsured motorist claim (approximately $1,000) total barely over
$1,500, and given that the Baileys already have been fully
compensated for these harms (even if they were not necessarily
entitled to such compensation), the Baileys cannot, in good faith,
claim damages totaling $25 million. Their presumable rationale for
their $25 million claim is that (1) USF&G’s decision to assume 20%
responsibility on the part of Justin Bailey amounted to
“defamation,” and (2) USF&G’s clerical error, resulting in a $531
premium surcharge over three years, constituted the intentional (or
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reckless) infliction of “emotional pain” and “mental anguish.”
These arguments are frivolous, and as such lack the good faith
basis needed to fulfill the amount in controversy requirement of
28 U.S.C. § 1332. See CHARLES A. WRIGHT, LAW OF FEDERAL COURTS § 33,
at 199 (5th ed. 1994).
Generally, in tort cases, “the plaintiff’s allegation of the
amount in controversy is entirely controlling for purposes of a
federal court’s subject matter jurisdiction under the diversity
statute.” Pupkar v. Tastaca, 999 F. Supp. 644, 645 (D. Md. 1998)
(citing Barbers, Hairstyling for Men & Women, Inc. v. Bishop,
132 F.3d 1203, 1205 (7th Cir. 1997)). The plaintiff’s allegation
will not control, however, in those instances in which it is not
made in good faith. Burns v. Anderson, 502 F.2d 970, 971 (5th Cir.
1974); Rosenboro v. Kim, 994 F.2d 13, 16 (D.C. Cir. 1993). And, as
one court observed, "Because the federal judiciary has been too
timid to execute the congressional mandate in [tort litigation], we
have all contributed to clogging dockets, monopolizing trial rooms,
and committing the expense and energies of our system to a plethora
of cases which do not belong in federal courts." Grady v. Dayton
Hudson Corp., 610 F. Supp. 258, 259 (E.D. Mich. 1985).
In Burns, we held “to a legal certainty” that a plaintiff’s
unliquidated damages tort claim based on a minor injury to his
thumb could not meet the amount in controversy requirement of
18 U.S.C. § 1332 (which was then only $10,000). See Burns,
502 F.2d at 972. The instant case is reminiscent of Burns, in that
the Baileys’ unliquidated tort damages claims are patently absurd
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and devoid of any potentially reasonable support on the limited
record before us. As such, the $75,000 amount in controversy of
18 U.S.C. § 1332 has not been met, so the district court was
without jurisdiction.
On remand, the district court may wish to consider, in its
discretion, the propriety of sanctions, for frivolous and
groundless pleadings, under FED. R. CIV. P. 11. A district court
can levy sanctions even if it is without subject matter
jurisdiction. See Willy v. Coastal Corp., 503 U.S. 131 (1992).
Because of the frivolous nature of these plaintiffs' invocation of
federal jurisdiction, we tax appellate costs against them.
VACATED and REMANDED.
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