## Facts

- Red Cab Company (Indiana) obtained a 30-day workers’ compensation insurance binder from St. Paul Mercury Indemnity Company (Minnesota) covering liability for employee injury claims under Indiana law.
- During the binder period, employees were injured and asserted compensation claims; St. Paul received notice and investigated.
- After the binder expired, St. Paul denied liability and refused to recognize the claims, leading Red Cab to incur costs for legal, investigative, medical, and compensation-related payments or obligations.
- Red Cab sued St. Paul (and its agent) in Indiana state court seeking $4,000 in damages, exceeding the then-$3,000 federal diversity jurisdictional minimum.
- St. Paul removed to federal district court on diversity and the amount demanded in the complaint.
- After removal, Red Cab filed a bill of particulars reducing the itemized total sought to about $1,380.89.
- The district court retained the case and entered judgment for Red Cab; the court of appeals ordered remand for lack of jurisdiction based on the reduced amount, and the case reached the Supreme Court.

## Issues

1. Whether a post-removal amendment reducing the amount claimed below the jurisdictional minimum requires remand when removal was proper on the face of the initial complaint.
2. What standard governs whether the amount in controversy alleged satisfies diversity jurisdiction, including the effect of later proof or recovery of a smaller sum.

## Decision

- The Supreme Court reversed the court of appeals and held federal jurisdiction was not lost after removal due to the plaintiff’s later reduction of the amount claimed.
- The amount in controversy is determined from the plaintiff’s complaint at the time of removal; later events reducing recoverable damages do not require remand.
- The case was remanded for further proceedings on the merits.

## Legal Principles

- In diversity cases, the plaintiff’s demanded sum controls if pleaded in good faith.
- Jurisdiction fails for insufficient amount in controversy only if it appears to a legal certainty that the plaintiff cannot recover the jurisdictional minimum.
- Events after filing or removal that reduce the amount recoverable below the statutory minimum do not divest jurisdiction once it has attached.
- In removal, the complaint as it exists at the time of removal controls because the defendant must decide removal before the answer deadline; post-removal reductions cannot be used to defeat the statutory right to remove.
- A later inability to prove damages above the jurisdictional threshold, or the presence of a strong merits defense, does not negate subject-matter jurisdiction; dismissal is warranted only where the claim was colorable or sham under the legal-certainty standard.

## Conclusion

The Court held that when removal is proper based on the amount alleged in the state-court complaint, subsequent reductions in the claimed damages do not defeat federal diversity jurisdiction; only a legal certainty of inadequate amount (or a colorable jurisdictional claim) permits dismissal or remand.


St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283 (1938)