The Sixth Circuit Court of Appeals has vacated a lower court’s dismissal of claims that were improperly removed from state court because the potential damages at issue were “one penny short of our jurisdictional minimum.”Freeland v. Liberty Mut. Fire Ins. Co., No. 10-3038 (6th Cir., decided February 4, 2011).
The matter involved insurance coverage for an uninsured motorist who was killed after running a red light in a minivan and striking a police cruiser at an intersection. The insurance company offered the minivan’s owners, who were the decedent’s parents, the $25,000 limit of their uninsured motorist coverage. The owners sued the insurer in state court, alleging that their uninsured motorist coverage violated state law because the form they signed lacked certain required disclosures. They claimed that their election of this coverage was invalid and that, by operation of law, they had acquired uninsured motorist coverage in an amount equal to their policy’s bodily injury coverage, or $100,000 per accident.
The insurer removed the case to federal court, alleging diversity jurisdiction. According to the insurer, the amount in controversy was $100,000, and the parties were completely diverse. Neither party challenged the district court’s jurisdiction, and that court granted the insurer’s motion for summary judgment. According to the appeals court, the amount in controversy is not $100,000, but is instead “$75,000 exactly—one penny short of the jurisdictional bar that Congress has set.” Because the amount in controversy “is measured by the value of the object of the litigation,” and is “not necessarily the money judgment sought or recovered, but rather the value of the consequences which may result from the litigation,” the court determined that the money consequences that would result from a victory for the minivan owners is the difference between $100,000 and $25,000—or $75,000.
Under 28 U.S.C. § 1332, federal courts have jurisdiction when “the matter in controversy” must “exceed the sum or value of $75,000.” The court opined that while “[t]he penny is easily the most neglected piece of U.S. currency [tending] to sit at the bottom of change jars or vanish into the cracks between couch cushions,” in this case, “the penny gets a rare moment in the spotlight.” Without addressing the claim’s merits, the appeals court vacated the district court’s summary judgment ruling and remanded with instructions to return it to state court.