Unreported / Non-Citable
Background
Holly DePalma sued Nationwide Property and Casualty Insurance Company in Texas state court over an insurance-coverage dispute. She alleged breach of contract and violations of Chapters 541 and 542 of the Texas Insurance Code, including bad-faith conduct.
DePalma’s complaint expressly stated that she sought less than $75,000, including all damages, penalties, costs, expenses, prejudgment interest, and attorney’s fees. Nationwide nevertheless removed the case to federal court, and DePalma moved to remand.
The Court’s Holding
The court granted DePalma’s motion and remanded the case to the 160th District Court of Hidalgo County, Texas. Because her complaint expressly and comprehensively limited recovery to less than $75,000, the amount-in-controversy requirement for diversity jurisdiction was not satisfied.
The court also ordered Nationwide to pay DePalma’s reasonable attorney’s fees and costs resulting from the removal. It found the removal objectively unreasonable because the complaint plainly and unambiguously capped DePalma’s recovery below the jurisdictional threshold. DePalma was directed to document her fees by affidavit within 21 days, after which Nationwide would have seven days to dispute the amount.
Key Takeaways
- A plaintiff may prevent diversity removal by expressly limiting total recovery in the state-court complaint to less than $75,000.
- The removing defendant bears the burden of establishing federal subject-matter jurisdiction, and doubts favor remand.
- Removing a case despite an unambiguous damages cap below the jurisdictional threshold can support an award of fees and costs under 28 U.S.C. § 1447(c).
Why It Matters
The decision illustrates that a carefully drafted damages limitation can conclusively defeat diversity jurisdiction when it encompasses every category of potential recovery, including statutory penalties, interest, costs, and attorney’s fees.
It also warns removing defendants to evaluate such limitations before removal. An objectively unreasonable removal may result not only in remand but also in liability for the plaintiff’s resulting fees and costs.