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
- 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.
- 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.