Commercial Litigation and Arbitration

Removal — No Discovery on Jurisdictional Prerequisites

The Eleventh Circuit's holding in Lowery v. Alabama Power Co., 2007 U.S. App. LEXIS 8289 (11th Cir. 2007), that no jurisdictional discovery is permissible on removal (see posting of May 10, 2007) is not limited to Class Action Fairness Act cases. This holding has potentially dramatic consequences for removal of even the most routine cases. In the words of District Judge William M. Acker, Jr., in Constant v. IHOP, 2007 U.S. Dist. LEXIS 33354 (N.D. Ala. April 30, 2007), ‛the day of the knee-jerk removal of diversity tort cases from state to federal court within the three states comprising the Eleventh Circuit came to an end on April 11, 2007, when Lowery v. Alabama Power Co., ___ F.3d ___, 2007 WL 1062769 (11th Cir., Apr. 11, 2007), was decided.“ Judge Acker observed that the absence of a quantified ad damnum clause is common in Alabama state practice, and he held that Lowery's preclusion of post-removal discovery is not limited to CAFA cases or to the question of citizenship but applies equally to the amount in controversy requirement.

The wrinkle in Constant was that the plaintiff attempted to settle the case for exactly $75,000 by letter (still beneath the jurisdictional threshhold). The defendant argued that this necessarily reflected a view on the part of the plaintiff that the case was worth more than $75,000. In rejecting this argument, the Court declared:

Even if this court should overlook the pointed words in Lowery that expressly limit the jurisdictional examination to what appears in the state-court complaint and in any other materials furnished by plaintiff after that complaint was filed, and should consider Constant's pre-filing letter as evidence, Constant has, even in her demand letter, conscientiously stayed under the jurisdictional amount. Who is to say that Constant's lawyer was not giving his honest assessment of the value of his client's case? This court is unwilling possibly to misjudge Constant's intent, especially under the constraints of Lowery and the overarching principle of limited federal jurisdiction. The court is not a mind reader. As explained in Lowery, it cannot indulge in speculation. It is, of course, not always easy to draw the line between deduction and speculation. Juries are routinely instructed that they are obligated to make this distinction. Deduction is allowed, even encouraged. Speculation is unreliable, even dangerous. Constant's demand letter was like any unsuccessful sales pitch. It did not obtain the result it sought, namely, IHOP's acceptance of the $ 75,000 offer, by which IHOP would have agreed with Constant that her claim is worth $ 75,000, which is less than the jurisdictional amount. If the court were going to speculate, it could just as easily speculate that IHOP believes Constant's claim to be worth less than $ 75,000 as to speculate that Constant believes it to be worth more than $ 75,000. The court is left with speculation as the only means by which it could conclude that the amount in controversy exceeds $ 75,000 in value.

As Constant makes clear, Lowery is a triumph for plaintiffs who wish to maintain their actions in state court. It also makes it clear that settlement letters should be written with care (even though Fed. R. Evid. 408 (2006) would clearly exclude them from consideration for this purpose).

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