CAFA "Amount In Controversy" Met Unless $5 Million Recovery Is Legally Impossible
BACK DOCTORS LTD. V. METROPOLITAN PROPERTY AND CASUALTY INSURANCE CO. (April 1, 2011)
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Back Doctors Ltd., a medical service provider, believed that Metropolitan Property and Casualty Insurance Co. used software that resulted in medical providers being underpaid for their services. Back Doctors filed suit in Illinois state court, on behalf of a class, alleging that Metropolitan breached its contracts with its insurers and violated the Illinois Consumer Fraud and Deceptive Business Practices Act. The suit asks for $2.9 million in damages. Metropolitan removed the case to federal court pursuant to the Class Action Fairness Act. Back Doctors moved to remand on the ground that their $2.9 million demand did not meet CAFA’s $5 million amount in controversy requirement. Judge Reagan (S.D. Ill.) agreed, stating that removal is disfavored and that Metropolitan had not demonstrated a "reasonable probability" that the $5 million threshold had been met. Metropolitan petitioned to appeal.
In their opinion, Chief Judge Easterbrook and Judges Rovner and Evans granted the petition, vacated the remand order, and remanded. The Court first noted that the Supreme Court, in St. Paul Mercury, established the “amount in controversy” test in 1938 -- the threshold is met unless plaintiff cannot possibly recover the jurisdictional minimum. The Court then recited some of the history of the Circuit’s "reasonable probability" test in reference to the amount in controversy. It arose in 1993 in Shaw in reference to a plaintiff's burden to prove jurisdictional facts by a preponderance of the evidence. But the amount in controversy is not a jurisdictional fact, like where a company is incorporated or headquartered. After several years of misapplication, the Court tried to clarify the phrase in 2005 in Brill. When that failed, the Court eliminated the phrase entirely in 2006 in Sadowski. The Court even circulated the Sadowski opinion pursuant to Circuit Rule 40(e) so that it had the effect of an en banc decision. Unfortunately, there is obviously still some confusion. Having established the correct test, the Court asked whether a $5 million recovery was possible. It concluded that it was because of the possibility of punitive damages. Back Doctors, although it has not specifically asked for punitive damages, may still recover them. They have not disavowed them, they have cited no Illinois case disallowing punitive damage coverage when it is not pleaded, and they have a fiduciary duty to other class members to maximize the class recovery. The Court added that Illinois does have a procedure whereby a plaintiff can cap its relief. Back Doctors has not taking advantage of the procedure. Since a $5 million recovery is possible, removal was appropriate.
Michael Rigney practices in the law offices of GVC Ltd. in Chicago. In this blog, he reports on select