Addo v. Globe Life & Accident Insurance

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_______________________

No. 99-60277

_______________________

ALICE ADDO,

Plaintiff-Appellant,

versus

GLOBE LIFE AND ACCIDENT INSURANCE COMPANY,

Defendant-Appellee.

_________________________________________________________________

Appeal from the United States District Court

for the Southern District of Mississippi

_________________________________________________________________

October 16, 2000

Before JONES, DUHÉ, and WIENER, Circuit Judges.

EDITH H. JONES, Circuit Judge:

The determinative question before us is whether an

insurance company timely removed a case from state court over a

$5,000 life insurance policy when it received a letter, after the

case was filed, indicating that plaintiff would seek damages

exceeding the federal jurisdictional minimum. Finding that the

removal petition was untimely, we must vacate a summary judgment

for the insurer and remand with instructions to remand to state

court.

Plaintiff-appellant Alice Addo submitted a claim as the

beneficiary under her mother’s life insurance policy to defendant-

appellee Globe Life and Accident Insurance Company (“Globe”). Upon

investigation, Globe discovered that Addo’s mother misrepresented

a pre-existing condition on her policy application. Accordingly,

Globe denied the claim, rescinded the policy, and refunded Addo the

premiums that her mother paid for the policy.

Addo brought suit in state court, requesting $5,000 in

actual damages -- the face amount of the policy -- and punitive

damages “not to exceed $65,000.” A month later, she served a

demand letter on Globe, offering to settle the suit for an amount

in excess of $75,000.1 Several months passed before Globe served

interrogatories on Addo asking her to confirm that the amount in

controversy would not exceed $75,000. When she refused to confirm,

Globe removed this case to federal court and Addo moved to remand.

The district court denied Addo’s motion and later granted

Globe’s motion for summary judgment. Addo has appealed.

1

Whether the letter is properly characterized as a “demand

letter” or “statement letter” may be disputed, but is irrelevant to

our legal analysis. The letter states:

[To Globe]:

In our telephone conversation of August

21, 1997, it is my understanding that you

offered $5,000 to settle the above referenced

case. We counter offer with $250,000. This

offer will stand until Friday, September 5,

1997.

Very truly yours,

[Plaintiff’s counsel]

2

DISCUSSION

Globe removed on the basis of diversity jurisdiction.

The complaint stated an insufficient amount in controversy to

support diversity jurisdiction See 28 U.S.C. § 1332 (giving

district courts original jurisdiction over matters where there is

diversity of citizenship and where “the matter in controversy

exceeds the sum or value of $75,000"). However, under 28 U.S.C.

§ 1446(b):

If the case stated by the initial pleading is

not removable, a notice of removal may be

filed within thirty days after receipt by the

defendant . . . of a copy of an amended

pleading, motion order or other paper from

which it may first be ascertained that the

case is one which is or has become removable .

. .

Id. (emphasis added). The issue before us is what “other paper”

first gave Globe notice that the amount in controversy exceeded

$75,000 and whether Globe removed within thirty days after

receiving that paper. Addo argues that the demand letter was an

“other paper” and that Globe’s removal was untimely. Globe

counters that Addo has “waived” any removal argument based on the

letter, and alternatively, that it timely removed after receiving

the interrogatory answers. We need not reach Globe’s alternative

contention.

As an initial matter, Globe’s argument that this issue is

not properly before us lacks merit. First, although Addo did not

3

mention the remand ruling in her notice of appeal, the remand

ruling was encompassed within the final judgment she appealed such

that we may consider it on appeal. See Trust Co. of Louisiana v.

N.N.P. Inc., 104 F.3d 1478, 1485 (5th Cir. 1997) (an appeal from a

final judgment sufficiently preserves all prior orders intertwined

with the final judgment.).

Second, Addo has not “waived” her argument that the

letter was an “other paper” which gave Globe notice of the amount

in controversy. Globe concedes that Addo issued the letter after

filing her complaint, but it argues that she waived any remand

argument based on this post-complaint demand letter because she has

continuously, and erroneously, based her remand arguments here and

below on a pre-complaint demand letter. We read the record

differently. Despite some ambiguity in Addo’s trial court

briefing, neither the trial court nor this court has been

misinformed as to the timing of Addo’s letter or the legal

consequences for removal that followed from it.

Turning to the merits of the remand argument, an issue

this court reviews de novo, Rodriguez v. Sabatino, 120 F.3d 589,

591 (5th Cir. 1997), we have not previously determined whether a

post-complaint letter concerning settlement terms may constitute an

“other paper” under § 1446(b). See Chapman v. Powermatic, Inc.,

969 F.2d 160, 164-65 & 164 n.8 (5th Cir. 1992) (declining to reach

4

this question, but concluding for other reasons that a pre-

complaint demand letter does not constitute “other paper”).

However, we have held that similar documents can be “other paper,”

see S.W.S. Erectors, Inc. v. Infax, Inc., 72 F.3d 489, 494 (5th Cir.

1996) (a deposition answer constituted an “other paper”), and the

majority of lower courts to have considered this issue hold that a

post-complaint demand letter is “other paper” under § 1446(b), see

Stramel v. GE Capital Small Business Finance Corp., 955 F. Supp.

65, 67 (E.D. Tex. 1997); Sunburst Bank v. Summit Acceptance Corp.,

878 F. Supp. 77, 82 (S.D. Miss. 1995); Rodgers v. Northwestern Mut.

Life Ins. Co., 952 F. Supp. 325, 327 (W.D. Va. 1997); cf. 14C

Charles Alan Wright, et al., Federal Practice and Procedure § 3732

(1998) (“[C]orrespondence between the parties and their attorneys

or between the attorneys usually [is] accepted as [an] ‘other

paper’ source[] that initiate[s] a new thirty-day period of

removability.”). Additionally, the SWS case implicitly rejected

the most commonly advanced argument against treating a letter

between counsel as an “other paper,” namely, that a document must

actually be filed in the state court proceedings to be an “other

paper.” See S.W.S. Erectors, 72 F.3d at 494. Moreover, the letter

in this case complies with our rule that “other paper” must result

from the voluntary act of a plaintiff which gives the defendant

notice of the changed circumstances which now support federal

5

jurisdiction. See id. Holding that a post-complaint letter, which

is not plainly a sham,2 may be “other paper” under § 1446(b) is

consistent with the purpose of the removal statute to encourage

prompt resort to federal court when a defendant first learns that

the plaintiff’s demand exceeds the federal jurisdictional limit.

Further, this holding discourages disingenuous pleading by

plaintiffs in state court to avoid removal.

Accordingly, Addo’s post-complaint demand letter was an

“other paper” under § 1446(b) which gave Globe notice that the case

was removable. Because Globe did not, however, remove within

thirty days of receiving that letter, Globe’s subsequent removal

was improper, and Addo’s remand motion should have been granted.

Thus, we VACATE the district court’s judgment and REMAND with

instructions to remand the case to state court.

2

Globe has not argued that Addo’s demand letter was a sham. Although

the amount of punitive damages requested was high compared to the policy amount,

Mississippi law permits punitive damages for bad-faith refusal to pay a policy,

and if a punitive recovery was warranted, it could well have exceeded the federal

jurisdictional limit.

6

Wiener, Circuit Judge, DISSENTING.

By failing to consider the full context in which the August,

1997 letter from the plaintiff’s lawyer (the “Addo letter”) was

sent to Globe’s agent, and then by failing to recognize that letter

for what it really is, the majority opinion reaches the wrong legal

result, albeit under the right law. In the process, that opinion

both encourages disingenuous pleading rather than discouraging it

and sets a trap for the unwary. This is why I respectfully and

reluctantly —— but strenuously —— dissent.

I.

Context

In testing the Addo letter to see if it qualifies as an “other

paper” for purposes of opening § 1446(b)’s 30-day removal window,

we must examine that letter in the framework of all the

circumstances that existed at the time it was sent by Addo’s lawyer

and received by the defendant. Only by so doing can we properly

determine whether Addo’s lawsuit —— which was not removable when

filed —— “is one which is or has become removable”3 by virtue of

that letter.

Addo’s state court petition, filed less than a month before

the Addo letter was mailed, is artfully crafted to eschew

removability: In addition to demanding the $5000 proceeds of the

3

28 U.S.C. § 1446(b).

Globe policy, Addo asked for interest, punitive damages, attorneys’

fees and costs, not to exceed $65,000, thereby expressly capping

her aggregate recovery at $70,000. Within weeks after suit was

filed (and apparently before it was placed in the hands of defense

counsel), Globe’s agent phoned Addo’s lawyer and proposed to settle

the case by paying Addo $5000 in consideration for her dismissal of

the lawsuit. A few days after that phone call, the 2-sentence Addo

letter (reproduced in full in footnote 1 of the majority opinion)

rejected Globe’s $5000 settlement offer.

With settlement rejected, Addo’s lawyer prosecuted her case in

state court until, approximately six months later, defense counsel

endeavored to establish once and for all whether Addo genuinely

capped her claim at $70,000 or, despite her carefully crafted

pleadings, intended to seek more. This exercise took the form of

Globe’s written interrogatories, Addo’s answers to which were so

equivocal and noncommittal that they served as grounds for Globe’s

removing the case to federal court on the basis of diversity.

Given Mississippi’s open-ended law on punitive damages, Addo’s

answers to Globe’s interrogatories were sufficient —— at least in

the eyes of the district judge —— to meet the $75,000

jurisdictional amount for diversity purposes. Indeed, it was only

after this 1998 removal that Addo’s lawyer resurrected his August,

1997 letter and proffered it as a § 1446(b) “other paper,”

purportedly sufficient to have opened the 30-day removal window,

8

after the closing of which Globe’s removal efforts would be forever

barred. These are the circumstances that bracket the sending of

the Addo letter and provide the complete framework for testing it

as one that first established removability for purposes of §

1446(b).

II.

Proper Characterization of Addo Letter

The first sentence of the majority opinion describes the Addo

letter as one “indicating that plaintiff would seek damages

exceeding the federal jurisdictional minimum.” That, I submit, is

not an objective description of the letter; rather, it states the

majority’s legal conclusion of this entire appeal, the one with

which I take issue today. Next, in its second paragraph, the

majority opinion labels the Addo letter a “demand letter,” again a

legal conclusion with which I beg to differ. And, finally, in that

same sentence, the Addo letter is described as “offering to settle

a suit for an amount in excess of $75,000.” If, but only if, we

are willing to read the second and final sentence of the two-

sentence Addo letter “in a vacuum,” while wearing blinders, can we

say it is an offer to settle. I contend, however, that as a matter

of law the Addo letter can neither be read nor analyzed that way.

When read in pari materia with all the facts and circumstances of

the case —— as it must be —— the Addo letter is absolutely nothing

more than an emphatic rejection of Globe’s settlement offer. The

9

first sentence of the letter reiterates that offer; the second

sentence of the letter rejects that offer. It’s as simple as that.

To support its contrary conclusions —— that the Addo letter

was “a demand letter” or that it constituted a bona fide offer to

settle the suit for more than $75,000, thereby making it an

indicator of the plaintiff’s intent to seek damages exceeding the

federal jurisdictional minimum —— the majority relies on its

preliminary finding that the Addo letter is not a “sham.” Although

I agree wholeheartedly that the Addo letter is not a “sham” for its

obviously-intended purpose of rejecting Globe’s $5000 settlement

offer out of hand, I am convinced beyond peradventure that the Addo

letter is a “sham” of a settlement counteroffer. And, unlike most

shams, Addo’s sham counteroffer was not intended to fool or mislead

anyone!

Obviously irked by what he presumably perceived to be an

insultingly-low settlement offer from Globe, Addo’s lawyer

responded in kind, not with a simple, bland rejection but with one

couched in terms of an equally insulting, exaggerated

“counteroffer.” Stated differently, the second sentence of the

Addo letter is no counteroffer at all; it can only have been

intended to drive home the adamancy of her rejection by phrasing it

as a sarcastic and grossly hyperbolized “sham” counteroffer: a

quarter of a million dollars to settle a suit on a $5000 life

insurance claim, plus whatever punitive damages Addo might obtain

10

from a state court jury of her friends and neighbors? Sure!

I acknowledge that reasonable jurists can differ, but I can

discern no justification for characterizing the Addo letter as

anything other than an unconditional rejection of Globe’s proposal

to settle, despite its being dressed for dramatic effect in the

raiment of a faux settlement counteroffer. A counterproposal to

settle for fifty times the amount of the principal demand and more

than three-and-one-half times the capped amount —— even including

punitive damages —— is just not a demand or a settlement proposal,

much less a realistic one.

As proof of this pudding, one need only imagine how

vociferously Addo’s lawyer would be insisting on this very

interpretation had the shoe been on the other foot, i.e., had Globe

timely seized on the Addo letter as an “other paper” and removed

this case to federal court on the basis of the $250,000 figure in

that letter! I repeat, as a rejection of a settlement offer, the

Addo letter is certainly not a sham; as a settlement counteroffer

vel non, however, I cannot reasonably classify it as anything but

a sham. Therein lies the crucial difference between the majority

and me for purposes of § 1446(b).

The slight amount of jurisprudence on the subject confirms

that not every “other paper” exchanged between the parties, or

between counsel, or between counsel opposite and a party, will

start the running of § 1446(b)’s thirty-day removal clock. For

11

example, in Sfirakis v. Allstate Insurance Co.,4 a plaintiff’s

letter demanding $300,000 in damages when only $20,000 had been

sought in the pleadings was held to be “nothing more than posturing

by counsel seeking to stake out a position for settlement

purposes.”5 The court determined that the letter could not

“override the unamended verified complaint that unequivocally

states that the damages did not exceed $20,000.”6 I cannot read

Addo’s letter as even “stak[ing] out a position for settlement

purposes.” The Addo letter is the antithesis of a genuine

invitation to negotiate, much less her lawyer’s true evaluation of

his client’s maximum potential recovery. The district court

obviously reached the same conclusion, one that is certainly not

clearly erroneous.

Similarly, in Golden v. Dodge-Markham Co., Inc.,7 the court

rejected a true demand letter as nevertheless insufficient to

justify a finding of the jurisdictional amount requirement because

the court was “not persuaded . . . that Plaintiff’s settlement

demand was an honest assessment of damages.”8 In the same vein,

4

1991 WL 147482 (E.D. Pa.).

5

Id. at *3.

6

Id.

7

1 F.Supp.2d 1360 (M.D. Fla. 1998).

8

Id. at 1364.

12

the district court in Standridge v. Wal-Mart Stores, Inc.,9 held

that a $75,000 settlement letter, admittedly sent two weeks before

the filing of the complaint, was “nothing more than posturing by

plaintiff’s counsel for settlement purposes and cannot be

considered a reliable indicator of the damages plaintiff [was]

seeking.”10

That line of cases illustrates the appropriate analysis for a

case like this one, rejecting puffery and posturing and crediting

only those writings that are seriously meant to be a plaintiff’s

realistic assessment of the value of his case. To repeat, the Addo

letter was unquestionably intended by its author to serve one

purpose only —— to reject emphatically a low-ball settlement offer.

That, I submit, is the reason why he phrased his response as a sham

settlement counteroffer, underscoring the adamancy of that

rejection. Under the circumstances that existed at the time the

letter was confected, mailed, and received, it had to have been

obvious to all concerned —— especially counsel for Addo —— that

reference to the preposterous sum of $250,000 was neither a serious

settlement counteroffer nor a realistic appraisal of the judgment

value of his client’s lawsuit. Again, no one would have insisted

9

945 F.Supp. 252 (N.D. Ga. 1996).

10

Id. at 256.

13

on my characterization of the Addo letter more zealously than its

author had Globe tried to use it as grounds for removal.

III.

Future Effects

Finally, I must respectfully disagree with the prediction of

today’s panel majority that its holding will discourage

disingenuous pleading by those state court plaintiffs who seek to

avoid removal. On the contrary, what could be more encouraging of

such disingenuous pleading than the majority’s letting Addo get

away with her artfully drafted state court petition filed a few

weeks before her sham letter, and, months later, her craftily

evasive responses to Globe’s interrogatories, which sought only to

determine, one way or the other, whether or not Addo was seeking to

recover $75,000 or more.

Besides providing a blueprint for the drafting of such

duplicitous pleadings, today’s majority opinion also sets a trap

for the unwary. From now on, every scrap of paper sent by a

plaintiff or his lawyer to a defendant or his lawyer that,

irrespective of content or context, happens to mention any dollar

figure in excess of $75,000, can and likely shall be held by a

federal court to have started the running of § 1446(b)’s thirty-day

removal clock. Henceforth, every plaintiff will be free to amend

his state court complaint with impunity —— and with only the sky as

the limit —— as long as he does so more than thirty days after

14

having transmitted some “other paper” that happens to mention a

figure of at least $75,000.

As yet another consequence of what we do today, ultra-cautious

defense lawyers will undoubtedly file notices of removal virtually

every time any writing even obliquely referencing a figure of

$75,000 or more is received from the plaintiff or plaintiff’s

counsel. This will create a veritable ping pong game of removal

and remand between state and federal courts until remand eventually

“sticks.” Even more troubling is the realization that less jittery

lawyers —— whether plaintiff’s or defendant’s —— who are “merely”

diligent practitioners, will awaken one day to find that (1) the

plaintiff has inadvertently subjected himself to removal, or (2)

the defendant (like Globe today) has just as inadvertently lost

forever any opportunity to remove the case, solely because, more

than thirty days earlier, the plaintiff sent the defendant some

seemingly innocuous letter or fax or e-mail.

IV.

Conclusion

I remain convinced that, for purposes of opening § 1446(b)’s

thirty-day removal window, we must harken to the message of the

cases like those cited above and require the presence of a

realistic figure in a bona fide writing that demonstrates, in

context, a true and functional nexus between the dollars mentioned

and the content, context, and circumstances under which such “other

15

paper” is transmitted and received. If this would cause our trial

courts to test “other papers” for objective reasonableness and

functional nexus, so be it: They conduct such tests under other

circumstances on virtually a daily basis.

I certainly agree with the panel majority that removal should

be sought promptly when removability can reasonably be ascertained.

Removal should not be either triggered or forever precluded,

however, by any and every “other paper” that happens to mention a

high dollar figure; only by those writings that can be read

sensibly as first indicating removability. I respectfully dissent.

16