Caseflicks

Court of Appeals for the Ninth Circuit • 1992

Frank D. Gaus v. Miles, Inc., an Indiana Corporation

980 F.2d 564 | 92 Cal. Daily Op. Serv. 9381 | 92 Daily Journal DAR 15712 | 1992 U.S. App. LEXIS 30733

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Takeaway

In short, this case requires a removing defendant to support the amount in controversy with facts, not merely recite the jurisdictional threshold.

Background

Frank D. Gaus sued Mobay Corporation in Nevada state court on May 25, 1990, alleging breach of contract, intentional interference with contractual relations, and intentional interference with prospective economic advantage. His complaint sought damages “in excess of $10,000,” consistent with Nevada Rule of Civil Procedure 8(a), which barred a more specific demand above that amount.

Mobay removed the action to federal district court under diversity jurisdiction, alleging only that the matter in controversy exceeded $50,000. The district court later granted summary judgment for Mobay. On appeal, the Ninth Circuit raised sua sponte whether federal subject-matter jurisdiction existed. Gaus asserted in supplemental briefing that his actual damages were in the millions, but he identified no operative pleading supporting that assertion. After a corporate merger, the appellee’s name was changed from Mobay Corporation to Miles, Inc.

Issues

Issue #1

Whether the $50,000 amount-in-controversy requirement governed this diversity action.

Holding

Yes. Because Gaus commenced the action after the statutory effective date, he had to satisfy the $50,000 jurisdictional threshold.

Reasoning

Congress raised the diversity-jurisdiction amount from $10,000 to $50,000 through the Judicial Improvements and Access to Justice Act. The amendment applied to civil actions commenced on or after May 18, 1989.

Gaus filed his complaint on May 25, 1990. Thus, the new $50,000 threshold, rather than the former $10,000 threshold, controlled whether the federal court had diversity jurisdiction. A complaint seeking merely “in excess of $10,000” did not itself establish the required amount.

Issue #2

Whether Mobay established by adequate factual allegations that the amount in controversy exceeded $50,000 and that removal was proper.

Holding

No. Mobay's conclusory assertion that the amount exceeded $50,000 did not carry its burden, so the federal courts lacked demonstrated subject-matter jurisdiction.

Reasoning

Removal statutes are strictly construed against removal, and any doubt about the right to remove requires rejection of federal jurisdiction. In a removed diversity case, the defendant bears the burden of establishing that removal is proper because a strong presumption weighs against removal jurisdiction.

When the complaint makes the amount sought unclear—as it did here because Nevada procedure prohibited a specific damages demand above $10,000—the removing defendant must prove the jurisdictional facts. A bare jurisdictional allegation is not enough; the party invoking federal jurisdiction must supply competent proof, and the court may require that proof even absent an adversary challenge.

Mobay's removal petition simply recited that the amount in controversy exceeded $50,000. It identified no facts, allegations in the complaint, or other evidence supporting that conclusion. Gaus's later unsupported statement that he sought millions of dollars could not cure Mobay's failure to set out the underlying jurisdictional facts in the removal petition. Accordingly, the Ninth Circuit vacated the summary judgment and directed the district court to remand the case to Nevada state court.